Following todays announcement regarding the recommended acquisition of EnCore for cash with a share alternative for a consideration of £221 million (approx. $340 million), Premier Oil has also provided a Trading and Operations update.
Simon Lockett, Chief Executive, commented:
‘Today marks a significant milestone for Premier. We continue to prove our ability to execute development projects and to identify acquisition opportunities which enhance our portfolio and growth profile.
First production will start Friday morning from the Chim Sáo oil field in Vietnam and is expected to commence shortly from the Gajah Baru gas field in Indonesia. These new fields will boost production to 60,000 boepd by year-end.
In addition to our organic growth, today’s recommended acquisition is an example of our ability to use our strong balance sheet to capitalize on opportunities. Together, these show that Premier is on track to deliver on its stated strategy and to realize its medium-term target of 100,000 boepd.’
Recommended acquisition of EnCore
As separately released today, Premier announces the acquisition of EnCore, an AIM-listed independent exploration and appraisal company. The board of EnCore are recommending the terms of the transaction. The acquisition of EnCore will increase Premier’s interest in the UK Catcher area to 50 per cent, provide Premier with the operatorship of the Catcher development and add to Premier’s exploration position in related Central North Sea plays. Details of the terms of the acquisition are provided in a separate joint release by both boards and can be found on both companies’ websites.
Chim Sáo first oil
Premier received yesterday the Ready for First Oil Certificate from the FPSO contractor. After final performance tests today, production is expected to commence from the Chim Sáo oil field in Block 12W on Friday morning. Premier has a 53.125 per cent operated interest in Block 12W in the Nam Con Son Basin.
The Chim Sáo field, discovered by Premier and its partners in November 2006, was approved for development by the Government of Vietnam in December 2009. The development comprises a FPSO, a well head platform and a subsea pipeline system to transport hydrocarbons, to export gas, and to provide water injection and gas lift.
Crude oil from the Chim Sáo field is transported to the FPSO Lewak Emas, which has a processing capacity of 50,000 barrels of oil per day (bopd), where it is processed, stored and exported via tankers. Gas will also be exported to shore for power generation to meet domestic demand. Output from Chim Sáo is expected to plateau at around 25,000 bopd at which time gas production will be approximately 25 million cubic feet per day.
The successful development of the Chim Sáo field, on budget, is a significant milestone for Premier, the field partners and the contractors.
In addition, the oil discovery in the fault terrace to the north west of the Chim Sáo field, made by the previously announced CS-N2P development well, has been successfully appraised by the CS-N1P development well. The CS-N1P well intersected an estimated 89 metres of net oil bearing sands within a stacked sequence of Upper Dua sandstones. This compares with an estimated 15 metres of net oil bearing sandstones intersected in the CS-N2P well.
Separately, the Chim Sáo development drilling programme has been extended with the inclusion of a production well to accelerate recovery from a shallow reservoir within the Middle Dua Sandstone section.
The Gajah Baru facilities, located in the Natuna Sea, are mechanically complete. We have yet to commence the export of gas from the field due to unexpected delays in the issuing of certain approvals by the Government of Indonesia.
Under a Gas Sale Agreement approved by the Government of Indonesia in 2008, Gajah Baru is contracted to ship approximately 100 BBTU/d to Singapore after a period of ramp-up of production. An additional 40 BBTU/d of production is dedicated to the Indonesian domestic market on Batam Island.
Premier, together with its partners, is working closely with the Indonesian authorities to finalise these approvals.
Premier is pleased to note that Teekay Corporation (Teekay) has agreed, in principle, to acquire three FPSOs from Sevan Marine ASA (Sevan). As part of that agreement, and as per Sevan’s announcement on 30 September 2011, Teekay will acquire from Sevan the Hummingbird, the Piranema and the Voyageur FPSOs, along with their existing charter contracts. Teekay will also finance the completion of the Voyageur upgrade project.
Teekay is a highly respected FPSO operator and its acquisition of the Voyageur provides us with greater confidence that first oil from the Huntington field will be achieved in the third quarter of 2012.
Premier continues to hold active discussions with both Teekay and Sevan regarding the potential deployment of additional vessels from the Sevan fleet on Premier’s future North Sea developments.
Premier has drilled 8 exploration wells and 5 appraisal wells to date this year with 15 wells planned for the remainder of 2011 and the first half of 2012. The acquisition of EnCore will add to this programme.
Currently, the 104-QMV-1X (Qua Mit Vang) well offshore Vietnam is at 3,665 metres depth. The (pre-Tertiary) primary target is at 3,730 metres and will be penetrated next week following the setting of 9 5/8″ casing.
Premier spudded its first operated well in Norway on 2 October, to drill the Gardrofa prospect (9/1-1S). This well is expected to reach the target depth in late October. In the UK, the (Eocene Tay) Erne prospect in PL1875 is expected to spud in the next three weeks using the WilPhoenix rig. Also in the Greater Fyne Area, the East Fyne appraisal well is planned to spud in early November, using the Sedco 704 rig, which will then move to drill the Bluebell prospect. In PL1430, the Catcher area licence, the 3D seismic acquisition programme is nearing completion and the next well on the licence (Carnaby) is due to spud in early 2012.
In Indonesia, the Anoa Deep well is expected to reach its target in December and the Biawak Besar well, also in the Natuna Sea Block A, will be spudded immediately thereafter.