Zama resource increase

Talos and Premier Oil have announced the successful appraisal of Zama in Block 7 offshore Mexico under the Zama-3 well. Premier has indicated a P90-P10 resource range of 670-970mmboe with P50 of 810mmboe. This further reaffirms the resource base and provides an upgrade to the previous 600mmbbl (oil) estimate.

The Zama-3 well follows:

• The initial Zama-1 discovery in 2017
• Zama-2 appraisal in January 2019
• Zama-2ST1 sidetrack well in April 2019

Zama-3 was drilled 2.4km from Zama-1 and logged 228m of gross pay. The net-to-gross was consistent with prior penetrations. The Zama-3 well was completed 9 days ahead of schedule and on budget.

The entire 3 appraisal well programme finished 39 days ahead of schedule and under budget.

The Zama field is planned to be developed from a single drill centre with drilling from the platform. Three production platforms are envisaged, each with capacity of up to 100mbopd. Produced oil is planned to be transported via a pipeline to the Dos Bocas terminal located onshore, c.70km away from the field.

The Zama partners are: Talos (35% operator), DEA (40%) and Premier Oil (25%).

Premier Oil also has a non-operated interest in Block 30 which could see Mexico transform into another important leg of its portfolio.

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Further positive momentum at Zama

The Zama-2ST1 well (side-track well son Zama-2) encountered 873ft of gross oil bearing column with a net-to-gross ratio of c.70%. The well flowed at 7.9mboepd of which 94% was light 26-30 API oil. The well results indicated a prolific reservoir and potential to achieve significant plateau rates at the field. The operator estimates that a peak production of 150-175mboe/d is achievable.

This news is positive for the recoverable reserves of the field and could tighten the current estimates range of 400-800mmboe upwards.

The rig will now move to drill the Zama-3 well, the last in the 2019 campaign, and should confirm the extent of the field to the south. The drilling programme remains ahead of schedule with the Zama-2ST1 completed 9 days ahead of schedule and 16% below budget.

The Zama field is planned to be developed from a single drill centre with drilling from the platform. Three production platforms are envisaged, each with capacity of up to 100mbopd. Produced oil is planned to be transported via a pipeline to the Dos Bocas terminal located onshore, c.70km away from the field.

The Zama partners are: Talos (35% operator), DEA (40%) and Premier Oil (25%).

For Premier Oil, this development could overtake the Sea Lion development in the Falklands (another large resource optionality for the company), adding visibility to additional near-term production growth.

Premier Oil also has a non-operated interest in Block 30 which could see Mexico transform into another important leg of its portfolio.

Block 30 is operated by DEA 40% with partners Premier Oil 30% and Sapura Energy 30%.

See also Premier success at Zama on the Zama-2 result in January 2019.

Premier Oil Camarco RBC Capital Markets

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Premier success at Zama

Premier and operator Talos have announced the successful appraisal of Zama-2 offshore Mexico. This is the second well on the Zama field, following the initial discovery at Zama-1 in 2017, and reaffirms the massive 600mmbbl oil discovery.

The well penetrated 152m of net pay with a high net-to-gross of 73% (vs. Zama-1 of 63%). This suggests potential resource upside and could see resource estimates being upgraded as the appraisal campaign continues.

Zama-2 will now be sidetracked to penetrate the reservoir vertically to aid coring and testing. The upcoming Zama-3 well will appraise the southern portion of the accumulation. With good confidence on the underlying resources, the Zama partners should now be thinking ahead on development plans.

The Zama field is planned to be developed from a single drill centre with drilling from the platform. Three production platforms are envisaged, each with capacity of up to 100mbopd. Produced oil is planned to be transported via a pipeline to the Dos Bocas terminal located onshore, c.70km away from the field.

For Premier Oil, this development could overtake the Sea Lion development in the Falklands (another large resource optionality for the company), adding visibility to additional near-term production growth.

The Zama partners are: Talos (35% operator), Sierra Oil & Gas (40%), Premier Oil (25%).
Sierra Oil & Gas was recently acquired by DEA.

#Premier #Zama #Mexico #Block7 #Talos #Sierra #Wintershall #DEA

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DEA acquires Sierra Oil & Gas

DEA has expanded its international footprint into the Americas by acquiring Sierra Oil & Gas from Riverstone Energy.

The Sierra portfolio includes the prized Zama discovery (Sierra Oil & Gas 40%, Talos Energy 35%, Premier Oil 25%) and an extensive exploration acreage position offshore Mexico.

The value of the deal is reported  at ~USD500 million which provides a positive read-through for Zama of over USD300 million net to Premier.

The acquisition further bolsters the Wintershall DEA portfolio ahead of its planned IPO in 2019-2020 and adds prospective acreage in what is otherwise a production (but stable) weighted profile.

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Premier's Christmas present

Premier Oil announced today that the Catcher field achieved first oil on 23^rd December, on schedule and almost 30% below budget. Initial production will be c.10mbopd as gas processing and water injection modules are commissioned. Production will be ramped up in phases through H1 2018 as the Varadero and Burgman fields are brought onstream increasing production to 60,000mboepd (gross).

The Catcher partners are Premier Oil (50% operator), Cairn Energy (20%), MOL (20%) and Dyas (10%). For Premier Oil, Catcher will account for c.25% of 2018 production with successful ramp up of the field important to deleveraging the balance sheet next year. For Cairn, this will diversify the production base following first oil at Kraken (29.5% interest) earlier this year.

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Catcher if you can

The Catcher FPSO has arrived on schedule into the North Sea. The vessel is currently at Nigg performing crew changes and resupply ahead of moving to the Catcher field location.

The field remains on track to come onstream by the end of the year. Tweleve wells have been completed ahead of first oil and drilling has been better than expected, encountering 30% more net pay with 40% better well deliverability. As a result, expected plateau production has increased by 20% to 60mboepd. There is potential for a reserves upgrades above the existing 96mmboe 2P. The well results also reduce the total wells required from 20 to 18.

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Sail-away to Catcher

The Catcher FPSO sailed away on 26th August from Singapore. It will take around 45 days to reach the UK North Sea, following which it will be connected and commissioned, a process expected to take 60-65 days with first oil targeting December.

The project is on schedule and c.30% below budget. Development drilling results have been promising with 30% more net pay and 40% better well deliverability. Expected plateau will now increase by 20% to 60mboepd with a potential for reserves upgrade from the 96mboe 2P at sanction.
The Catcher field partners are: Premier 50% operator, Cairn Energy 20%, MOL 20% and Dyas 10%.

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Premier sells out of Pakistan

Premier has announced the disposal of its Pakistan business for USD65.6 million to Al-Haj General Trading Co. The sale process for these assets was initiated in 2015 after an unsolicited approach and culminates with today's announcement.The Pakistan assets comprise six non-operated producing gas fields which produced c.47mmcfpd and generated c.USD41 million in 2016.

Premier has been present in Pakistan since 1988 and in 1990, made the Qadirpur discovery. Since then, the company has acquired interests in five other fields, all located onshore. The fields are long-life assets with low operating costs. All production is sold to the government-owned gas utilities, SSGCL and SNGPL.

This disposal is in line with Premier's strategy to dispose of non-core assets to reduce net debt. The deal is expected to close at the end of the year and is pending government and regulatory approvals. The effective date of the transaction is 1st January 2017.

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Premier refinancing terms agreed

Following an extensive negotiation process, the terms around the refinancing of Premier Oil’s debt have been agreed. This will be followed by “lock-ups” with lenders in February and final implementation by the end of May.

On 3rd February, Premier Oil announced that it had agreed with key members of the “Private Lending” group on the refinancing terms. The terms include:

• Retaining the existing USD3.9 billion facilities with maturity extended to May 2021
• Covenants relaxed to 7.5x in 2017, 5x by end 2018 and returning to 3x by 2019
• Covenant net debt (including Letter-of-Credit) to be less than USD2.95 billion by end 2018

This terms will now be circulated to credit committees for approval, including RCF, term loan, Schuldschein and private placement noteholders), with lock-up agreements expected by the end of the month. The amended terms will also be presented to the public bondholders, with negotiations with convertible bondholders also close to a conclusion.

As a way to reduce increased interest payments under the new terms, Premier Oil will issue equity warrants for up to 90 million new shares (15% of issued shares) at 42.75p/share. This could be worth around USD50 million, although there is an option for lenders to take up synthetic warrants as a deferred fee of comparable value, reducing warrants issued.

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Premier Oil exits Norway

Premier Oil Norwegian operation
Source: Premier Oil

On 16 November 2015, Premier Oil announced that it had agreed to sell its Norwegian business to Det Norske for USD120 million. The Norwegian business consists of the Premier Oil Norges subsidiary and includes the Vette development, adjacent Mackerel and Herring discoveries, a non-operated stake in Froy and seven exploration licences.

The transaction is expected to close before year end and proceeds will be used pay down debt. The exit of the business will give rise to a G&A saving of c.USD20 million p.a. as well as remove capital requirements for the Vette development that was progressing towards sanction.

For Premier Oil, the sale is in line with the company’s ongoing portfolio management strategy and is an important step to managing the high debt levels.

For Det Norske, the acquired business will bolster its Norwegian portfolio and Det Norske will be able to offset its production against the tax losses in Premier Oil Norges (from spend on Vette and Froy) which stood at USD146 million as at mid-2015. Det Norske will fund the acquisition from internal cash resources.

Tony Durrant, CEO of Premier Oil commented:

“We are pleased to have reached agreement to sell our Norwegian business to Det norske, one of our long term partners in Norway. Our team in Norway has done an excellent job in bringing the Vette project close to a sanction decision in a low oil price environment. The transaction will realise immediate value from the project as part of our strategy of active management of our portfolio.”

Karl Johnny Hersvik, CEO of Det Norske commented:

“Following the recent closing of the Svenska transaction, the acquisition of Premier is another bolt-on acquisition that further underlines our firm belief in and commitment to the Norwegian Continental Shelf.”

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