Davy Research |
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Premier Oil
(PMO LN)
Issues IMS on first part of year
17 May 2012
Job Langbroek
| Closing Price: | 328p | Rating: | Outperform | 03/04/12 | Previous: | Neutral | 25/03/11 |
FACTS: Premier Oil has issued (May 17th) an IMS covering operations in the year to date.
ANALYSIS: The statement provides further evidence of Premier's solid foundations. Guidance covering production targets and performance, investment and capital expenditures was reiterated. Current-year production guidance remains at 60,000-65,000 boepd with a targeted exit rate of 75,000 boepd. The medium-term production target of 100,000 boepd remains in place too. Operations on the ground are supportive of this profile with steady progress on new developments in the North Sea (Hungtington, Rochelle and Solan) and in the Far East (Dua, Anoa Phase 4,Pelikan and Naga).
With regard to exploration and appraisal, circa 12 wells will be drilled in the remainder of 2012. At present, two high-equity wells are drilling: Carnaby in the North Sea (50% stake) and Benteng in Indonesia (30% equity stake) The North Sea well will be followed by the Coaster well in which it has a 50% equity stake.
New projects include a joint venture arrangement with the former management of Encore Oil which was acquired by Premier in late 2011. The Encore management team has set up a new company called Encounter Oil. Premier has also made applications for 15 licences in the UK's twenty-seventh licensing round. Applications were also submitted in the second Cyprus licensing round.
DAVY VIEW: The group's strategy is based around a full-cycle approach to the industry with support provided by a growing production profile, offsetting the high and lows of an overly exploration-focussed alternative. So far, its ability to execute and deliver supports the view that this can be achieved.
We believe that as confidence grows that the medium-term 100,000 b/d production target for Premier can be achieved, the current share price discount to NAV will wither. Our NAV at present is 474p per share, to which the stock is currently trading at a 31% discount. Unsurprisingly, we carry an 'outperform' rating.