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Premier Oil (PMOIY) Achieves Production Target for 2017

Zacks Equity Research

Upstream company Premier Oil plc PMOIY recently provided an operational update. The company stated that its 2017 production came in line with the guidance of 75,000 barrels of oil equivalent per day (BOE/d). It increased 5% year over year from 71,400 BOE/d.

2017 Expectations

Total revenues for 2017 are expected to be around $1.1 billion, higher than $983 million in 2016 on the back of increased output and realized commodity prices.

Moreover, capital expenditure of $305 million was lower than its revised capital expenditure guidance of $325 million. Premier Oil generated enough positive free cash flow this year, which helped it to reduce net debt to $2.7 billion from $2.8 billion in 2016.

The company faced an obstacle in reaching its production target when its North Sea’s Forties pipeline system was shut down in December to fix a crack in the pipe. Although production was cut by 10,000 BOE/d due to the outage, the company managed to reach the lower end of its target range of 75,000-80,000 BOE/d. The new successful Catcher project came to its rescue with production of 20,000 BOE/d since Dec 23, 2017. It is one of North Sea’s most important new offshore projects, where the company plans to increase production to 60,000 BOE/d within the first six months of 2018. It is expected to accelerate the debt reduction process of the company.

2018 Guidance

Premier Oil expects 2018 output to be around 80,000-85,000 BOE/d. The year-over-year rise is expected to reflect increased production from the Catcher project. Capital expenditure in development and exploration for the year is expected to be about $300 million including $170 million for Catcher development. Operating expenditure per barrel for 2018 is expected to be in the range of $17-$18.  

About the Company

Premier Oil is engaged in oil and gas exploration, development and production with its operations in the Falkland Islands, Indonesia, Pakistan, Vietnam and other places. The company seeks to grow through organic production growth, high impact exploration, and acquisitions in its areas of expertise. Premier Oil was founded in 1934 and is based in London, United Kingdom.

Price Performance

Premier Oil has gained 37.5% in the last year compared with 13.5% growth of its industry.

Zacks Rank and Stocks to Consider

Premier Oil carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Cabot Oil & Gas Corporation COG, Royal Dutch Shell plc RDS.A and Denbury Resources Inc. DNR.  All these companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX -based Cabot is an independent energy company. Its sales for the fourth quarter of 2017 are expected to grow 39% year over year. Earnings for the year 2017 are expected to be up 357.14%.

Shell, based in The Hague, the Netherlands, is an integrated energy company. Its earnings for 2017 are expected to increase 99.5% year over year. The company delivered a positive earnings surprise of 18.1% in the third quarter of 2017.

Plano, TX -based Denbury Resources is an integrated energy company. Its sales for the fourth quarter of 2017 are expected to increase 11.2% year over year. The company delivered a positive average earnings surprise of 125% in the last four quarters.

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