Premier Oil to ramp up production by early 2013

FTSE 250 oil and gas group Premier Oil has said that output is expected to increase substantially over the next few months and cash flows should sharply increase helped by strong oil prices.

Production, which averaged 57.3 thousand barrels of oil equivalents per day (kboepd) in the first 10 months of the year (up from 40.4 kboepd in 2011), achieved a November average rate of 62.4 kboepd. Run rates are expected to rise to 75 kboepd once Premier's Huntington and Rochelle fields come onstream early next year.

"Average annual production for 2013, taking into account the planned shut-down periods next summer, is expected to be between 65-70 kboepd," the firm said.

The company said it anticipates sharply increasing cash flows for both 2012 and 2013 driven by the ramp-up in production and high oil prices. Meanwhile, new UK production is expected to result in a "disproportionate increase" in cash flows due to the company's UK tax position.

Premier reiterated its medium-term production target of 100 kboepd, saying that it is supported by the good progress that has been made on its operated projects, such as Dua in Vietnam, Pelikan and Naga in Indonesia, and Solan and Catcher in the UK.

The firm expects capital expenditure this year to total $1bn, including the cost of the $231m acquisition of Rockhopper's licence interests in the Falkland Islands announced in July.

Chief Executive Simon Lockett said: "Our producing fields are performing well and our development projects are moving forward.This will bring rising cash flows and strong financial returns.

"We have added material new plays to our exploration portfolio, particularly in Vietnam, the Falkland Islands and Iraq, and are looking to participate in an innovative project to access significant remaining reserves in the UK North Sea."

Shares were down 0.81% at 331.4p in early trading on Thursday.