Premier Oil Sees Impairment Charge and Job Cuts Due to Crashing Oil Prices
LONDON, Jan 14 (Reuters) – Oil producer Premier Oil expects to book a $300 million impairment charge due to the plunge in oil prices and plans to cut jobs and investment to rein in costs, it said on Wednesday.
Oil companies across the globe are scrambling to deal with a 60 percent drop in crude prices in seven months, putting them under pressure to find cost savings.
“As a result of the low Brent crude oil spot and forward curve price at year end 2014, there will be a material impairment charge in the second half on certain of our assets,” the company said in a trading update covering last year.
Shares in the oil producer were down 6 percent at 0858 GMT.
Premier Oil, whose operations stretch from the Falklands to Vietnam, also said it was reducing investments to develop fields by 40 percent to around $600 million and that it was renegotiating rates with suppliers to its top 25 projects.
“As the oil prices continue to remain low we are looking at all our budgets so we do expect those cuts to continue,” Chief Executive Tony Durrant told Reuters.
The London-listed oil firm has already cut pay and headcount among some of its contractors and employees and reductions are expected to continue this year, he added.
“The entire industry is doing this, I don’t think there’s a single joint venture in the world where people aren’t looking at budgets.”
On Tuesday, sources close to the matter said fellow North Sea oil producer Tullow was also planning job cuts.
Another consequence of Premier Oil’s cost cuts is a decision not to commit to any new exploration work beyond a portfolio of eight key projects, including four in the Falkland Islands.
Premier Oil also said it expected production to fall to 55,000 barrels of oil equivalent per day (boepd) this year, excluding contribution from its North Sea Solan project that is expected to come on stream this year.
Last year, Premier Oil exceeded the upper end of its production target, reaching 63,600 boepd.
Despite the expected impairment charge, analysts said the company was well placed to deal with low oil prices.
“Premier Oil looks well positioned to weather the current weak oil price environment given its hedged production and focus on operating and capital cost control,” said Mark Henderson at Westhouse Securities.
Premier Oil has sold forward around 40 percent of its 2015 base production. (Editing by Paul Sandle and Mark Potter)
(c) 2015 Thomson Reuters, All Rights Reserved
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