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Falklands' Sea Lion project outstands in Premier Oil exploration opportunities

CEO Lockett: Premier considering an increase in Falklands’ project stake but no decision until next year

Premier Oil, the British North Sea's oldest company outside the oil majors, is turning away from the region for future exploration opportunities such as the Catcher and the Sea Lion project in the Falkland Islands, according to a report published by Reuters.

Premier CEO Simon Lockett also revealed the company is considering an increase in the company’s stake in the Falklands project where it is partnered with Rockhopper, but no decision would be made “until the company had made its final investment decision on the project next year”.

Big falls in UK oil production, in decline since 1999, have in recent years acted as a drag on economic growth and the British government has sought to inject new life into the industry through tax breaks and by launching a review.

However Premier Oil believes this is not enough and thus its diversification to new emerging oil areas.

“The UK is a very mature province and if we are to find more oil and gas...then we need to go to other places,” said CEO Lockett in the interview.

Premier, whose North Sea history dates back to 1971, is involved in several new developments off the UK coast including Catcher, one of the largest recent discoveries, but Lockett believes the North Sea's biggest fields have already been found.

With current production split fairly equally between the UK, Vietnam, Indonesia and Pakistan, Premier has headed to the Norwegian North Sea as part of its drive for new exploration opportunities, as well as Brazil and Iraq, and emerging oil areas in the Falkland Islands and Kenya.

“I think the general conversation is, it's still quite tough in the UK North Sea, and therefore, generally, there are some better returns to be had in other places,” he said.

Lockett said the British government should think about bringing in an incentive for enhanced oil recovery -a process where gases are injected into a field to get barrels out that would otherwise be left in the ground- to focus on making the most of infrastructure before it starts to be taken down.

Exposure to diverse and oil-attractive geographies combined with the cash to fund drilling should help the FTSE 250, 1.9 billion pound Premier to continue to grow - it aims to up oil output to 100,000 barrels of oil equivalent per day (boepd) in the next three to four years from an estimated 63,000 this year - potentially moving it into the league of larger UK oil firms.

Premier's current focus is on getting the engineering right for two big future projects, Catcher, and the Sea Lion project in the Falklands, he said.

An active acquirer itself, having bought North Sea-focused Encore Oil and a 60% stake in a Falkland Islands oil development project in 2012, Lockett said he was happy with Premier's current shape, but would not rule out further deals.

“I wouldn't say we wouldn't do a biggish deal. Joint venture partners in our existing projects have always been a big theme for us,” he said when asked about M&A plans.