Premier Oil : Trading and Operations Update

Premier Oil plc

('Premier' or 'the Group')

Trading and Operations Update

15 November 2018

Premier today provides a Trading and Operations Update for the period to 15 November 2018.

Highlights

· Year-to-date production of 78.4 kboepd, up from 76.2 kboepd in the first half; forecast full-year production at around 80 kboepd

· Record Catcher Area production rates of over 70 kboepd (gross) frequently achieved; contractual oil production rate expected to increase from 60 kbopd (gross) to 66 kbopd (gross) shortly

· Tolmount Main gas project progressing to plan with platform construction to start in December; high value Tolmount East appraisal well scheduled to spud mid-2019

· Zama discovery (Mexico): pre-unitisation agreement approved; delivery of rig taken with first appraisal well to spud later this month

· 3D seismic acquisition across Andaman II (Indonesia) to commence by year-end; 3D seismic across Block 30 (Mexico) and the Greater Tolmount Area (UK) planned for 2019 1H

· Babbage Area (UK) disposal on track to complete by year-end; Pakistan sale also expected to complete around year-end with government approval now received

· Forecast 2018 operating costs unchanged at $17-$18/boe; forecast development, exploration and abandonment expenditure now $365 million, reduced from previous guidance of $380 million

· Net debt reduced to $2.52 billion at 31 October; year-end net debt forecast at around $2.4 billion with covenant leverage ratio forecast to fall to 3x EBITDA, in line with guidance

Tony Durrant, Chief Executive, commented:

'Premier is now generating significant free cash flow. Our portfolio is currently producing 85-90 kboepd, our low cost base has been maintained and our capital spend is tightly controlled. We are on track to deliver material debt reduction in 2018 through 2019, substantially improving our balance sheet. We look forward to the appraisal of our world class Zama discovery, starting later this month, and the commencement of construction activities for our high value Tolmount gas project in December.'

Enquiries
Premier Oil plc		Tel: [phone]
Tony Durrant, Chief Executive
Richard Rose, Finance Director
Camarco		Tel: [phone]
Billy Clegg Georgia Edmonds

Production and development operations

Group production year-to-date has averaged 78.4 kboepd, compared to 76.2 kboepd for the first half. Current production is running at 85-90 kboepd, driven by higher Catcher Area production and outperformance from the Chim Sáo field.

Forecast full-year production is around 80 kboepd in line with guidance of 80-85 kboepd, previously revised to include a full year of production from Pakistan.

Current production from the previously announced UK and Pakistan disposals is c. 8 kboepd.

kboepd	1 January - 13 November 2018	1 January - 13 November 2017
Indonesia	13.3	14.0
Pakistan	5.2	6.61
UK	44.3	41.0
Vietnam	15.6	15.0
Total	78.4	76.6

¹Includes 274 boepd from the Chinguetti field in Mauritania which ceased production in December 2017

UK

Premier's operated Catcher Area averaged 19.4 kboepd (net) for the period and 26.5 kboepd since June reflecting strong reservoir performance offset by lower than anticipated operating efficiency as commissioning of the facilities was completed.

The 18^th well, a Burgman producer, was completed in October concluding a highly successful three-year drilling programme with well productivity significantly higher than forecast. In addition, dynamic data continues to demonstrate good connectivity within the high quality reservoirs and strong pressure support provided by the aquifer and injector wells.

Operating efficiency from the Catcher FPSO has improved with the plant producing on every day over the last month at an average rate of around 65 kboepd (gross). Premier expects to reach agreement with the FPSO provider to increase the contractual oil production rate from 60 kbopd (gross) to 66 kbopd (gross) shortly.

Production from the Elgin Franklin Area exceeded expectations averaging over 7 kboepd year-to-date driven by outperformance from the new wells, successful remedial work on existing wells and continued high operating efficiency.

Elsewhere in the UK, the Huntington field averaged 5.4 kboepd, lower than forecast due to an extended summer maintenance programme and a subsequent shutdown due to issues with the dehydration system which have now been resolved. The offshore plant was successfully modified to facilitate gas import which, together with the recent conversion of a former production well to a water injector, is expected to improve plant stability and reservoir deliverability. The field is currently producing over 7 kboepd.

Premier's other UK assets have performed broadly in line with expectations.

Asia

In Vietnam, Premier's operated Chim Sáo field continues to outperform with production averaging 15.6 kboepd, up on the prior corresponding period and above budget. This strong performance was driven by high operating efficiency of around 95 per cent and on-going well intervention programmes offsetting natural decline.

Premier's Indonesian gas fields delivered 13.3 kboepd, in line with budget but a reduction on the prior corresponding period due to the sale of the Group's interest in the Kakap field in April.

Developments

On Natuna Sea Block A, in Indonesia, the development of the Premier-operated Bison, Iguana and Gajah-Puteri (BIG-P) gas fields continues within budget and on schedule. Installation of the Naga and Pelikan deck extensions was completed at the end of September while the fabrication of the subsea structures commenced in October. Drilling of the BIG-P development wells is expected to start in early 2019 ahead of first gas later in the year.

The development of the Tolmount Main gas field is progressing to plan. Rosetti Marino has completed the award of the main long lead packages for the platform and first steel is on track to be cut in December. The drilling contract was awarded to Ensco in September with the first of the four development wells scheduled to come on-stream during Q4 2020.

In the Falkland Islands, the focus remains on securing funding for the Sea Lion project, ahead of a final investment decision. In parallel, Premier continues to work with its selected contractors to complete FEED and to progress from Letters of Intent to fully termed contacts, which will be executed at project sanction.

Exploration and appraisal

In September, the Mexican authorities approved the Zama pre-unitisation agreement between Pemex and the Block 7 partners as well as the Block 7 Zama appraisal programme.

The first Zama appraisal well is on track to spud at the end of November and will be drilled to the north of the Zama discovery well to confirm the oil water contact. The well will be deepened to test the Marte prospect and also side tracked, with the side track being flow tested. The second appraisal well will evaluate the southern part of the Zama oil field and will complete the Block 7 appraisal programme during Q3 2019. It is anticipated that Pemex will spud the Asab-1 well in Q1 2019 to test the extension of the Zama structure onto their block.

Elsewhere in Mexico, Premier plans to acquire 3D seismic across Block 30, which contains the high impact Wahoo prospect, and to reprocess the existing 3D seismic over Blocks 11 and 13 in the Burgos basin in 2019.

In Indonesia, on the Premier-operated Andaman II licence, the acquisition of an extensive 3D seismic survey is scheduled to commence by the end of the year.

In the UK, preparatory work is underway ahead of drilling the high value Tolmount East appraisal well scheduled for mid-2019. In addition, Premier plans to acquire 3D seismic across the Greater Tolmount Area in the first half of 2019 to enable maturation of the Tolmount Far East well location.

Portfolio management

During the period, Premier completed the previously announced sales of its interests in the Kakap field and its 30 per cent non-operated interest in the Esmond Transportation System for total cash proceeds of $22.9 million (after working capital adjustments). Premier also received $2.5m from Dyas, triggered by the approval of the Arran field development plan by the OGA in October.

Premier continues to expect the previously announced sale of its interests in the Babbage Area to complete before year-end and to receive net cash proceeds of U$64.3 million, before customary working capital adjustments.

In November, the Pakistan government approved the $65.6 million sale of Premier's Pakistan interests to Al-Haj. Further deposits have been paid by the buyer and completion of the transaction is now expected around year end.

Finance

Premier has taken advantage of the improved oil price environment to increase its hedging position in 2019 to protect future free cash flows and covenant compliance. The Group's current hedge position to the end of 2019, representing over 30 per cent of forecast oil entitlement production, is as follows:

Oil swaps / forwards	2019 1H	2019 2H
Volume (mmbbls)	3.5	2.8
Average price ($/bbl)	69.1	72.0

Premier has also sold forward 40 million therms of its 2019 UK gas volumes at an average price of 60 pence/therm. In addition, Premier has hedged part of its 2019 and 2020 Indonesian gas production through the sale of 150,000 MT and 105,000 MT of HSFO Sing 180 at an average price of $394/MT and $387/MT respectively.

Over the period operating costs averaged $17.1/boe. Full-year guidance for operating cost per barrel of oil equivalent of $17-$18 is maintained. Forecast 2018 full year development, exploration and abandonment spend is now $365 million, reduced from previous guidance of $380 million, due to phasing of appraisal and abandonment expenditure.

Net debt reduced from $2.72 billion at the end of 2017 to $2.52 billion as at 31 October. Premier continues to forecast year-end net debt of around $2.4 billion, with covenant leverage ratio expected to fall to 3x by year-end 2018 and reducing further in 2019, in line with guidance.