ANNUAL RESULTS PRESENTATION // 27 February 2014 Forward looking - - PowerPoint PPT Presentation

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2013 ANNUAL RESULTS PRESENTATION // 27 February 2014 Forward looking statements This presentation may contain forward-looking statements and information that both represents management's current expectations or beliefs concerning future

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2013 ANNUAL RESULTS PRESENTATION //

27 February 2014

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Forward looking statements

This presentation may contain forward-looking statements and information that both represents management's current expectations or beliefs concerning future events and are subject to known and unknown risks and uncertainties. A number of factors could cause actual results, performance or events to differ materially from those expressed or implied by these forward-looking statements.

27 February 2014 // Page 1

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Agenda

Introduction, Highlights, Production Business Units review Exploration update 2013 financial results Summary / Outlook Simon Lockett Robin Allan Andrew Lodge Tony Durrant Simon Lockett

27 February 2014 // Page 2

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Introduction

Premier today

  • Robust cash flow and profitability
  • 800 mmboe reserves and resources
  • Key exploration campaigns in

Indonesia, Norway and Falklands

  • NAV >£5 per share (broker

consensus)

  • Production increased to 68 kboepd

year to date

  • Cash dividend and buyback

programme

Going forward

The Board will:

  • Give priority to balance sheet strength
  • Focus investments on our highest

return projects

  • Reduce capital exposure to the Sea

Lion project

“...our strategy is to invest in high-quality developments whilst maintaining balance sheet strength...”

27 February 2014 // Page 3

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Highlights

  • Strong and rising cash flows of

$833m ($808m*)

  • Cash of $449m ($187m*)
  • Facilities increased to $1.2bn

($900m*) – extended maturities at attractive rates

  • Recommended dividend of 5p/sh
  • Up to £75m buyback
  • Successful asset sales in 2013 –

further disposals planned in 2014

*2012

27 February 2014 // Page 4

  • Production currently 4 kboepd ahead
  • f budget
  • Dua, Pelikan and Naga expected

in 2014

  • Solan – progressing towards

sail-away

  • Catcher – final sanction imminent
  • Sea Lion – TLP and phased

development concept selected

  • 6 discoveries from 7 exploration wells
  • Focusing on emergent exploration

plays

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Production

Delivery capacity is the lower of field well capacity, facilities capacity or the expected market demand for output Operating efficiency is the actual production rate divided by the delivery capacity

27 February 2014 // Page 5

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Business Units review

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North Sea

Production

  • 14.9 kboepd (2012: 12.1 kboepd)
  • Strong production from Wytch Farm and

Scott/Telford

  • Huntington production reached 35 kboepd

Development

  • Solan, Catcher and Bream
  • Kyle redevelopment due on-stream in Q3

2014 – $55m insurance claim settled Exploration

  • Discoveries at Luno and Bonneville
  • Farmed into Bagpuss/Blofeld
  • Increased position on Mandal High
  • 23 licences divested

27 February 2014 // Page 7

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North Sea – Solan

Development drilling

  • Reservoir reached on prognosis
  • Pressure data indicates good reservoir

connectivity

  • 2nd phase of drilling to start in April 2014

Platform and subsea

  • Tank, topsides and jacket over 80% complete

Key milestones

  • Installation planned July & August 2014
  • First oil Q4 2014

Project metrics

  • 24 kbopd gross post ramp up
  • Capex $26/bbl; Opex $18/bbl
  • 60% equity – rapid project payback from

75% of cash flows

27 February 2014 // Page 8

Topsides in Methil, Scotland Subsea tank in Dubai, UAE Jacket in Methil, Scotland

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North Sea – Catcher

  • First oil 2017
  • Capex ~$24/bbl
  • 2P reserves of 92 mmboe

– Upside of 140 mmboe

  • Development drilling starts 2015
  • Rig and well systems contracts awarded

Update

  • Field Development Plan submitted to

DECC, project budget to partners

  • Negotiations with FPSO provider

concluding

Catcher area development scheme

27 February 2014 // Page 9

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North Sea – Bream Area

Development concept

  • 2C resource estimate: 70 mmboe
  • Mackerel – 17km tie-back to

Bream FPSO

  • Herring prospect – upside potential

Key milestone

  • Year-end partner

sanction decision

Bream Mackerel Herring 27 February 2014 // Page 10

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North Sea – looking forward

  • Optimise levels of operating efficiency
  • Rising cash flow from new developments returning >20% IRR
  • Maximize the benefit of our UK CT losses and allowances of $2.3bn
  • Exploration reduced to a smaller number of key wells
  • Current disposal programme of non-core assets

– Includes Luno and Scott area

27 February 2014 // Page 11

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Pakistan

Production

  • 14.9 kboepd (2012: 15.6 kboepd)
  • Gas demand and cash flows remain strong
  • Improving recovery

– Infill wells established new zones in Badhra, Bhit and Kadanwari – Adding compression at Badhra, Bhit and Qadirpur Exploration

  • Success at K-32 and Badhra B North-2

– 8 consecutive E&A successes

  • 5 E&A wells planned in 2014

27 February 2014 // Page 12

Kadanwari Bhit

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Vietnam

Production and development

  • 2 year payback
  • 14.1 kboepd (2012: 15.2 kboepd)

– Reduced due to gas export pipeline damaged by 3rd party

  • Year to date production of 18 kboepd (net)
  • ~$6/bbl premium to Brent oil price
  • Dua on-stream mid-2014

– Subsea development tied back to FPSO – Development drilling underway Exploration

  • Block 121 – 2D seismic planned for 2014

Portfolio management

  • Sale of Block 07/03 for $45m cash

– $55m contingent upside

27 February 2014 // Page 13

West Telesto on Dua Dua template installation

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Indonesia

Production

  • Singapore demand remains above

minimum contract volumes

  • 13.7 kboepd (2012: 14.2 kboepd)
  • Average price of $17/mcf achieved

(GSA1) – Contractual share increased to 39.4% – Year to date actual ~47% Development

  • Anoa Phase 4 successfully completed
  • Pelikan and Naga onstream 2014 2H

– Platforms loaded out and installed – Development drilling to commence shortly Exploration

  • Matang gas discovery in 2013
  • Kuda/Singa Laut results 2014 1H
  • Follow-up drilling to Lama play discovery at

Anoa Deep

27 February 2014 // Page 14

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Concept selection highlights

  • Tension leg platform with permanent drilling rig selected

– Minimal subsea infrastructure – Better economics than a new build FPSO scheme

  • Phased development

– Phase 1 recovers 293 mmstb over 25 years from 32 wells – Phase 2 development plan will incorporate results from exploration Schedule

  • Award of FEED Contracts in Q2 2014
  • Farm down process prior to sanction

Falkland Islands – Sea Lion

27 February 2014 // Page 15

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Exploration

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2013 exploration results

  • 6 discoveries from 7 exploration

wells – Luno II and Matang – 40 mmboe of resources added – Finding costs $5.3/boe (pre-tax)

  • >800 mmboe unrisked prospective

resources added – Brazil and onshore Kenya – North Falklands Basin – Bagpuss/Blofeld, UK – Mandal High, Norway

  • Portfolio management

– 25 licences divested

2013 drilling success rate of >80%

27 February 2014 // Page 17

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2014 indicative exploration drilling programme

27 February 2014 // Page 18

5 high impact wells planned

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Indonesia – Kuda/Singa Laut

  • 2 wells planned to drill the

Kuda/Singa Laut prospect

  • Kuda Laut is a four way dip

closure targeting Miocene sands

  • Singa Laut is the adjoining

three-way structure with reservoirs in the lower Miocene and Oligocene

  • Low risk for gas, high risk for

commercial oil

  • Gross prospective resource:

10-37-99 mmbbls

NW

Belut Laut-1

TD 4977m

MMU L.Terumbu Arang Gabus

27 February 2014 // Page 19

Chim Sáo analogue

SE

Kuda Laut Singa Laut

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Indonesia – Lama play

27 February 2014 // Page 20

  • Proven by Premier’s Anoa Deep

in 2012 – 17mmscfd

  • Identified look-a-like
  • pportunities from shows in

existing wells

  • 5 prospects and leads

– Ratu Gajah Q1 2014 – Anoa Deep appraisal Q4 2014

  • Gross prospective resource
  • n block ~2 TCF

Kuskus lead Ratu Gajah East prospect Ratu Gajah prospect Anoa North

High impact potential from the “missed” gas pay zones

Anoa West

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Indonesia – Ratu Gajah well

  • Gross prospective resource:

60-225-700 bcf

  • Follow up potential at Ratu Gajah

East

  • Originally drilled in 1984 – not flow tested

– Gas readings, high resistivity and mud losses, same as Anoa Deep – Similar in Babar-1 and Koko-1 wells

Raja Gajah-1

Ratu Gajah

Top Sand A (Top Lama) depth map

Babar-1 Koko-1 Ratu Gajah-1 proposed location

Ratu Gajah East prospect

Re-drilling an existing gas discovery

27 February 2014 // Page 21

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Norway – Luno II

  • First oil discovery on south west margin
  • f Utsira High
  • Luno II Central segment to be

appraised in Q2 2014

  • Further exploration potential remains on

PL 359 – including Luno II North

Central 1 Discovery North 2 North 1

Johan Sverdrup Luno/Apollo Ragnarrock

PL 359

BCU Time Map

C.I. 100ms

10km

Luno II discovery 16/4-6 16/5-5 Luno II appraisal

Luno II Central Luno II S. Luno II North (Prospect)

BCU Top Chalk Balder Basement

27 February 2014 // Page 22

Appraising a material discovery

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Norway – Mandal High

  • Built on acreage position around Mandal High

– 20% equity in PL663 – 2013 – 70% and 50% in PL725 and PL726 – 2014 – Drill or drop options

  • >500 mmboe of gross unrisked prospective

resources

  • Myrhauk

– Rig contracted; spud Q4 2014 – Gross prospective resource: 10-50-135 mmboe – Critical risk: reservoir presence

27 February 2014 // Page 23

Myrhauk Prospect

MANDAL HIGH

3 way dip closure with up-dip pinch-out trap

NE SW

Play opening test

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27 February 2014 // Page 24

  • Over 9 bnbbls discovered in the

Muglad, Albertine and Lokichar Basins

  • Look-a-like plays identified in the

Anza Basin

  • Farmed into Block 2B to drill the

Badada prospect – 55% equity

  • Targeting Tertiary reservoirs similar

to Albertine and Lokichar Basins

  • Gross unrisked prospective

resource on block >1.5 bnbbls

  • Badada prospect

– Robust closure confirmed by new 2D – Critical risk: source maturity and charge

Kenya – Southern Anza Basin

Source: Taipan Resources

Play opening test of the South Anza Basin

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  • Under-explored, emerging plays in

proven deep water basins offshore NE Brazil – Plays targeted are above and within Cretaceous rifts – Access to >1 bnbbls unrisked gross resources

  • Awarded 3 blocks in Brazil’s 11th Bid Round

– 5 year exploration periods – 3D seismic being acquired in 2014/15 in each block

  • Cost mitigation by multi-client seismic

acquisition and future rig share

  • Potential pre-drill farm down to

manage capital exposure

  • Earliest well late 2016

Brazil exploration – new country entry

Exposure to high impact emerging plays

27 February 2014 // Page 25

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  • High quality dataset
  • Unrisked mean gross prospective

resource of 1bn bbls (250 mmbbls risked)

  • Four E&A wells to be completed by

end of 2015 – Upside in Sea Lion west flank/Chatham – Development-changing potential in Zebedee and Jayne East – Large fan complex – Elaine/Isobel area

  • Rig tenders being evaluated

– Follow-up exploration and appraisal wells possible through options

Lower F2 amplitude extraction F3G amplitude extraction

Jayne East Elaine- Isobel Orinoco Zebedee

Sea Lion fan outline

30km

Falklands – high impact drilling in 2015

27 February 2014 // Page 26

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  • Reducing E&A investment in the UK North Sea

Reducing exposure to mature basins

  • Active disposal and relinquishment programme of

assets that do not meet internal metrics

  • Management of equity exposures pre-drill

Capital efficiency

  • Drilling in Indonesia, Kenya and Norway in 2014
  • Maturing prospects across Brazil, Kenya, Iraq, Vietnam

and Norway for drilling in 2015/2016

  • Falklands matured for drilling in 2015

Exploration business model

Focus on high impact

  • pportunities in

emerging plays

27 February 2014 // Page 27

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2013 Financial Results

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Income Statement

12 months to 31 Dec 2012 Operating costs (US$/bbl) 2013 2012 UK $43.3 $41.9 Indonesia $10.9 $11.2 Pakistan $2.5 $2.3 Vietnam $20.9 $13.7 Group $19.7 $16.2 Highlights 12 months to 31 Dec 2013 Working Interest production (kboepd) Entitlement production (kboepd) Realised oil price (US$/bbl) - pre hedge Realised gas price (US$/mcf) - pre hedge Sales and other operating revenues Cost of sales Gross profit Exploration/New Business General and administration costs Operating profit Financial items Profit before taxation Tax credit/(charge) Profit after taxation 57.7 51.6 111.4 8.3 US$m 1,409 (742) 666 (187) (24) 455 (95) 360 (108) 252 58.2 52.4 109.0 8.3 US$m 1,540 (1,035) 505 (133) (20) 352 (67) 285 (51) 234

  • 32% of 2014 production sold forward

at average equivalent of US$104/boe

  • Currently unhedged for 2015

Hedging Includes impairment charges of US$179m (pre-tax) Effective tax rates (%) 2013 2012 Overseas 38 42 Group 18 30

27 February 2014 // Page 29

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Cash Flow Statement

Cash flow from operations Taxation Operating cash flow Capital expenditure Partner funding (Solan) (Acquisitions)/disposals, net Finance and other charges, net Dividends Pre-licence expenditure Net cash out flow 12 months to 31 Dec 2012 $m 1,041 (233) 808 (772)

  • (211)

(163)

  • (29)

(366) 12 months to 31 Dec 2013 $m 1,061 (228) 833 (878) (186) 61 (91) (40) (30) (331)

2013 2012 Exploration $207 $187 Development $658 $569 Other $14 $16 Total $878 $772 Capital expenditure ($m)

Highlights

Development costs include pre development projects

  • 2014 guidance of $1bn of development

and $180m of exploration (pre-tax)

27 February 2014 // Page 30

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Cash Bank debt Bonds and loan notes Convertibles Net debt position Gearing Cash and undrawn facilities 187 (500) (578) (220) (1,110) 36% 1,100 449 (686) (992) (224) (1,453) 41% 1,600

  • Average interests costs are 4.7% (fixed)

and 1.9% over LIBOR (floating)

  • Split 75/25 between fixed/floating
  • Continue to switch to longer maturity

bond market instruments

1 Maturity value of US$245 million

At 31 Dec 2012 US$m At 31 Dec 2013 US$m

1

2 Net debt/net debt plus equity

2

Liquidity and balance sheet position

3 Excludes uncommitted letter of credit facilities of $275 million

Repayment of drawn facilities and committed LCs

3

27 February 2014 // Page 31

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Forward Financial Profile

27 February 2014 // Page 32

  • The business is managed using $85/bbl base case

–Asset cash flows supplemented by disposal programme –Discretion around exploration spend / unsanctioned projects –Self-imposed covenant headroom / maximum gearing levels

  • At current oil prices, substantial capacity for:

–Debt reduction –Enhanced shareholder distributions –Incremental investment projects

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Outlook

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Outlook

  • Maintaining financial strength, flexibility

and growing cash flows

  • Dua, Pelikan, Naga and Solan on-stream
  • Catcher JV sanction; Bream sanction

decision

  • Sea Lion partner prior to sanction
  • Key wells: Tuna block, Kenya, Norway,

Falklands

  • Disposal programme ongoing
  • Commencing buyback

2013 2014 Post Solan Post Catcher

Cash Flows (Current Oil Prices)

27 February 2014 // Page 34

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Appendix

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End 2013 2P reserves and contingent resources

Falkland Islands Indonesia Norway Pakistan & Mauritania UK Vietnam Total 2P Reserves On production

  • 34.5
  • 19.6

37.4 24.3 115.9 Approved for development

  • 22.7
  • 2.6

30.0 9.1 64.5 Justified for development

  • 24.5
  • 1.1

53.5

  • 79.0

Total Reserves

  • 81.7
  • 23.3

121.0 33.4 259.4 2C Contingent Resources Development pending 230.5

  • 72.7

3.8 4.2

  • 311.3

Development un- clarified / on hold 41.5 78.9 23.6 8.7 21.0 7.4 180.9 Development not currently viable

  • 4.5

2.3 5.5 27.7 2.2 42.1 Total Contingent Resources 272.0 83.3 98.6 18.0 52.8 9.6 534.4 Total Reserves & Contingent Resources 272.0 165.0 98.6 41.4 173.8 43.0 793.8

27 February 2014 // Page 36

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www.premier-oil.com

27 February 2014