Premier Oil provided on Wednesday a Trading and Operations Update ahead of its 2015 Full Year Results which will be announced on Thursday 25 February 2016, which included an upbeat on its Falkland Islands operations mainly at the Sea Lion field.
”In the Falkland Islands, pre-FEED work on the Sea Lion Phase 1a development has been completed. The conceptual plan has been modified by the addition of the development of the far north west of the Sea Lion field. It is now envisaged that the scheme will utilize 18 wells to recover 220 mmbbls of oil during a 20 year period (a 37% increase on the 160 mmbbls previously announced). Despite the increase in scope, the estimate of pre-first oil capex requirement remains at US$1.8 billion, reflecting significant cost reductions in the current market, and total expected development capex per barrel has reduced from $14 to $11/bbl. The technical and cost improvements and efficiencies identified during pre-FEED, have resulted in a lower break-even oil price for the project and significantly improved the overall project economics.
”The designs of both the FPSO and the Subsea System have evolved, tendering exercises have been completed and contractors are being selected for the provision of these facilities. Premier has entered into contracts with SBM Offshore covering the FEED for the FPSO, and the subsequent provision of the FPSO on a lease and operate basis (contingent on project sanction being achieved). Contractors are close to being selected to provide the Subsea System and contracts are expected to be completed during Q1 2016. Premier and these contractors will work together during FEED to further optimize the designs and fabrication plans for the facilities. It is planned that the FEED program will last approximately 18 months and during this period contractors will also be selected for the provision of the drilling rig and associated well services. A draft Field Development Plan has been submitted to the Falkland Islands Government for comment. An application has also been made to FIG to extend the licence for the Sea Lion discovery area in PL032.
”In addition, Premier and Rockhopper have now executed an amendment to the 2012 Sale and Purchase Agreement (“SPA”) which supersedes the Heads of Agreement announced in November 2014. The key terms of this agreement are:
Rockhopper will be able to utilize the full $48 million of exploration carry under the original SPA during the current exploration program.
The development carry which Premier is to provide to Rockhopper will be split $337 million to the Phase 1a development and $337 million to the subsequent phase of development.
Rockhopper will pay a Guarantee Fee to Premier of $15.9 million per quarter for five years from first oil. Either party may renegotiate this amount at the time of project sanction if they believe it results in an apportionment of value that is significantly different from 50/50.
Premier will provide Rockhopper with a Standby Loan Facility of up $750 million (at 15% interest rate) instead of the financing arrangements in the original SPA, although it is anticipated that Rockhopper will continue to review alternative financing sources.
Regarding exploration and appraisal, last year Premier drilled significant discoveries in the Falkland Islands at Zebedee and Isobel Deep. Drilling continued in the Falklands post year-end and the re-drill of the Isobel/Elaine complex confirmed the results of the original Isobel Deep exploration well and discovered hydrocarbons in additional sandstones. The drilling rig will now move north to complete the drilling of the Chatham exploration well.
For more information, please visit : http://www.premier-oil.com