Unlocking greater value 2019 Annual Report and Financial Statements Year to 31 December Our purpose To play our role in meeting the world’s energy needs through the safe, reliable and sustainable development of hydrocarbons whilst meeting the needs of society for effective governance and delivering value for our shareholders. Our strategy and P12 Sustainability review P24 business model A commitment to responsible and sustainable business Stakeholder P16 engagement premier-oil.com Premier Oil @PremierOilplc STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 01 – 57 58 – 116 117 – 174 175 – 184 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 01 Chairman’s foreword 58 Chairman’s introduction 117 Independent auditors’ report 175 UK Government payment reporting 02 CEO’s year in review 62 Board of Directors 126 Accounting policies 178 Five year summary 10 Market overview 66 Corporate governance report 134 Consolidated income statement 179 Oil and gas reserves 12 Our strategy and business model 74 Audit and Risk Committee report 135 Consolidated statement 180 Worldwide licence interests 14 Key performance indicators 77 Nomination Committee report of comprehensive income 182 Glossary 16 Stakeholder engagement 79 Directors’ remuneration report 136 Consolidated balance sheet 184 Shareholder information 18 Business units review 113 Directors’ report 137 Consolidated statement 24 Sustainability review 116 Statement of Directors’ of changes in equity 46 Financial review responsibilities 138 Consolidated cash flow statement 50 Risk management 139 Notes to the consolidated 54 Principal risks financial statements 171 Company balance sheet 172 Company statement of changes in equity 173 Notes to the Company financial statements Chairman’s foreword Premier is an independent upstream oil and gas company with a long history of operating and executing production and development projects. We maintain exposure to upside value from successful exploration and accretive acquisitions. Our strategy comprises four pillars all of which enable us to deliver our purpose: • To operate in a safe and responsible manner. ROY A FRANKLIN • To focus on high quality assets with commercially Chairman advantaged positions. • To secure access to capital and financial liquidity. “ I would like to thank all of our • To maintain an effective organisation sustained stakeholders for their work and by the right people. commitment to the Company, Premier again delivered a strong operational and financial performance in 2019, resulting in record and our shareholders for their free cash flows for the Group. We took material steps continued support.” to commercialise our reserve and resource base and added to our exploration acreage position. We have also strengthened our commitment to minimising our carbon footprint to ensure the future success of the business. Production Operating cash flow Net debt Reserves & resources 78.4kboepd US$1,080m US$1.99bn 847mmboe (2018: 80.5kboepd) (2018: US$976m) (2018: US$2.33bn) (2018: 867mmboe) Premier Oil plc 2019 Annual Report and Financial Statements 01 CEO’S YEAR IN REVIEW Exceeding our targets “ We are reducing our debt faster than anticipated and, at the same time, continue to invest selectively at the right level of participation in new projects and exploration for future growth.” TONY DURRANT Chief Executive Officer 02 Premier Oil plc 2019 Annual Report and Financial Statements STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION US$327m Record free cash flow generation Revenue by region m US$164 m US$1,597 Increased profitability 3 4 2 0 Recordable injuries at all Premier-operated offshore facilities 1 UK production 1. United Kingdom 76% (kboepd) 2. Vietnam 12% 54 3. Indonesia 11% 4. Pakistan 1% 47 40 2017 2018 2019 Activities during 2019 Introduction 2019 was another year of strong operational Full-year production of and financial delivery by Premier with 78.4 kboepd, underpinned by significant progress made against the Catcher outperformance and Company’s strategic objectives. high operating efficiency Commodity prices were slightly weaker BIG-P first gas achieved on during 2019 driven by global trade tensions schedule and below budget and ongoing concerns about the balance of supply and demand. Despite this, the Tolmount project on schedule; Group reported record free cash flows and Tolmount East appraisal success increased net profits. Production Heads of Terms agreed for Group production averaged 78.4 kboepd Sea Lion and Tuna farm out (2018: 80.5 kboepd), at the upper end of market guidance. This was driven by exceptionally Attractive acreage captured: high uptime across the portfolio and Andaman Sea position outperformance from Premier’s operated increased; entry into Alaska flagship Catcher Area in the UK, which reached cash payback in October. Net debt reduced by over US$300 million to less than Production by US$2 billion business unit (kboepd) 2019 2018 Indonesia 11.5 13.2 Strengthened commitment Pakistan1 1.3 5.3 to minimising the Group’s 54.2 carbon footprint United Kingdom 46.8 Vietnam 11.4 15.2 Total 78.4 80.5 Increased tax-advantaged production from the UK offset lower output from the Group’s Asian assets. This change in production mix, together with higher price realisations, continued tight cost control and prudent management of capital investment, resulted in increased cash margins year on year. 1 Sold on 26 March 2019. Premier Oil plc 2019 Annual Report and Financial Statements 03 CEO’S YEAR IN REVIEW CONTINUED Delivering in the right way In South East Asia and the UK, Premier’s two core producing areas, the teams have continued to mature and execute incremental investment opportunities to increase the reserves and field life of the Group’s assets. In December, Premier achieved first gas from its operated Bison, Iguana and Gajah Puteri (‘BIG-P’) fields, increasing deliverability from the Natuna Sea Block A Production sharing contract (‘PSC’) and enabling the Group to meet increased Singapore demand for its Indonesian gas. The safe and successful execution of BIG-P on schedule and below budget builds on Premier’s track record of project delivery. In the UK, a significant amount of activity is planned for 2020. This includes the GHG intensity of the drilling of a third producer on the Solan field West of Shetland, the development of Group’s operated assets two Catcher Area satellites in the Central materially reduced North Sea together with a Varadero infill This was driven by increased well, and infill drilling at Ravenspurn production from Catcher, which North in the Southern Gas Basin. These has a very low annual GHG investments have high returns and quick intensity, and a strengthened payback periods and will help boost commitment to minimising the production in the second half of 2020 Group’s carbon footprint. In and early 2021. 2019, the Group successfully Growth projects trialled the OPT PB3 PowerBuoy® The Premier-operated Tolmount (‘PB3’), a wave-powered intelligent development is on track for first gas monitoring system on the by the end of 2020 and underpins the Huntington field. The PB3 has Group’s medium-term production profile. demonstrated its ability to As a conventional platform serving four harness wave energy to wells tied back to an established onshore power site-monitoring systems, terminal, Tolmount requires modest capital designed for the protection of expenditure and will have low production subsea infrastructure following costs, ensuring the project’s robust FPSO sailaway. economics. Premier has also partnered with infrastructure group Kellas Midstream, who will partially fund and own the infrastructure element of the development. 19.5 kgCO2e/boe Record low Group GHG intensity 04 Premier Oil plc 2019 Annual Report and Financial Statements STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION The Group’s positive view of the upside within the Greater Tolmount Area was confirmed with the successful Tolmount East appraisal well in October which, as well as extending plateau production from the Tolmount Area, unlocks the potential development of the Mongour discovery to Improving our the north. Further potential exists at the nearby prospect, Tolmount Far East and to HSES performance the south and west of the Tolmount field. Premier is committed to continually Premier has continued to optimise its level seeking ways to improve its HSES of participation in its future development performance. projects. In the Falkland Islands, Premier has signed a Heads of Terms with Navitas In 2019, the Group conducted its first Petroleum to farm in for a 30 per cent Company-wide HSES survey to gather interest in the Group’s fully appraised feedback from its workforce and to help 250 mmbbls (gross) Sea Lion project. This shape the Group’s strategy. Premier also marks a significant step forward for the Sea held its second Global HSE Day, with Lion development with Navitas Petroleum coordinated visits by senior management sharing the pre-first oil funding and to every Premier location worldwide with bringing additional sources of senior the whole Company taking time out to debt financing to the project. In Indonesia, focus on HSES. Premier has signed a Heads of Terms with Zarubezhneft to farm in for a 50 per cent READ MORE P31 interest in its operated Tuna PSC. The new investor will carry Premier for its share of a two-well appraisal campaign targeted to commence in 2020. Exploration within a disciplined capital framework remains a key part of Premier’s Achieving industry-leading levels of business model and 2019 saw the Group operational efficiency, whilst adhering continue to capture highly-prospective international acreage in proven basins. to the highest health, safety and Premier deepened its position in the environmental standards. emerging Andaman Sea gas play, an area which has significant long-term potential, and also entered the Alaska North Slope. Premier’s first well in Alaska, which Tolmount project Improved operating spudded post period-end, is targeting an on schedule efficiency accumulation of over 1 billion barrels of oil-in-place (gross).