Premier Oil (LSE:PMO) has announced its full-year results for 2017 this morning. There are no real surprises in the figures but they do confirm the company is now generating positive free cash flow with operational cash flow at $496m up 15% compared with 2016. Another key metric to keep an eye on with Premier is its net debt. That’s the chain around its ankle’s that once off, can unleash a multi-billion pound company. It stands at $2.7bn, but we already knew this as it was announced in the 11th January trading update.
Also in that January update, Premier stated that ‘Debt reduction will accelerate at current oil prices as Catcher production ramps up’. And that leads me on to the exciting part of today’s update from Premier, their latest producing asset. Catcher is expected to be producing at 60kbopd in April, 2 months ahead of schedule. This is great news, confirming the success of catcher, and increasing cash flow and debt reduction this year.
The share price has been flat on open this morning, but I believe this is because the oil price is reaching a point of decision regarding direction. With two consecutive weeks of Inventory, oil dropping 2% yesterday and a building concern over which way the commodity chooses to go from here, investors appear undecided.
The next trading updates from Premier are ones to watch out for. The company forecasts ‘Rising free cash flow, driving debt reduction through 2018 and 2019’ and confirmation of significant driving down of debt could power a re-rate in the share price.
Author: Stuart Langelaan
Disclosure: The author of this piece owns shares in the company written about above