Premier Oil released its FY 2013 Trading Statement earlier today. FY 2013 production was in line with revised guidance with the FY 2013 exit production rate encouragingly higher than expected. The company’s operations and development projects are on track. However, it has somewhat lowered its FY 2014 guidance to a range of 58 to 63 kboepd vs our initial forecast of 70 kboepd. <p>

<B>Production</b> – FY 2013 production at 58.2 kboepd was in line with the revised guidance. Encouragingly, production during December 2013 averaged at 69 kboepd with a peak weekly average rate above 75 kboepd. However, the company stated that even though production capacity is in excess of 75k boepd, FY 2014 output after taking into account production efficiency and planned maintenance periods, is expected to be in the region of 58-63 kboepd. <p>

<B>Development</b> – there are no significant changes to the company’s development projects with the Dua project in Vietnam and Solan in the North Sea expected to commence production in the current year and Catcher and Sea Lion progressing towards project sanction. <p>

<B>Exploration</b> – Premier Oil is scheduled to drill 13 exploration wells in FY 2014 including six exploration wells, two appraisal well and five near-field wells. The most of these is the Luno II appraisal well (Q2 2014) and the wild cat Pear 1 well onshore Kenya (Q4 2014).<p>

<b>Financial</b> – The FY 2013 revenue forecast at $1.5bn, net net at $1.5bn and capex at $850m were in line with our forecasts. <p>

The lower than expected production guidance will be a s light disappointment and may affect short term performance. As a result of this, we have lowered our FY 2013 revenue forecast from $1.7bn to $1.6bn and out FY 2014 EPS forecast from 54Usc per share to 47Usc per share. However, our investment case for Premier Oil remains compelling. At current levels, it is trading at a 28% discount to our core NAV valuation of 425p per share. This excludes the company’s inventory of undeveloped discoveries which add a further 38p per share to valuation.
<p><h5>Muna Muleya</h5>


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