London-based Premier said production from Solan is limited to 13,000 barrels oil equivalent a day due to technical issues, compared with the rate of 20,000 boed plus the company had planned to produce in the third quarter.

The production shortfall reflects technical challenges on the Solan field, which Premier brought onstream in April around 18 months later than originally hoped.

Premier previously highlighted the impact of low productivity and bad weather on the development programme for the field.

Yesterday the oil and gas company underlined the challenges it has faced in attempting to refinance its huge debts with a big group of lenders ranging from banks to private investors who own bonds it issued.

After amassing $2.8bn (£2.2bn) debts following heavy investment in areas such as the North Sea, Premier said in May it had started talking to lenders about possibly relaxing the terms of its borrowings. It cited weak oil prices in the year to date.

The stock exchange-listed company went on to say it expected to agree a deal by the end of September.

Yesterday, chief executive Tony Durrant said: “Refinancing of the Group’s debt has taken longer than anticipated.”

Premier said some of the lenders concerned had proposed revised terms which will give the company headroom before the start of production from the big Catcher field off Scotland, which is expected next year.

The lenders represent around 85 per cent of Premier’s debts. They appear to be driving a hard bargain.

The terms will provide enhanced economics for lenders while Premier will have to accept “certain governance controls including in respect of the sanctioning of new development projects”.

The company said it will now engage with bond holders, who include private investors, with the aim of agreeing a refinancing by the end of the year.

Mr Durrant said Premier expects the refinancing will put the company in good shape to reinvest in the business while, at the same, time paying down debt.

Premier said work on Catcher remains on schedule with the development costs now expected to come in at $1.7 billion, around 25 per cent lower than original expected.

The company has benefited from the fall in the cost of services in the North Sea seen in the area, where many firms have cut spending in response to the slump in crude prices from $115 per barrel in 2014 to around $46/bbl.

The fall in the pound since the Brexit vote has boosted the sterling value of oil sales priced in dollars.

Mr Durrant said: “Against a challenging commodity price backdrop, Premier continues to deliver operationally. The company is benefitting from a step change in production with a significantly lower cost base while excellent progress has been made on the Catcher project.”

Premier said production has averaged around 68,000 boed in the ten months to October, compared with 57,500 boed in the same period, helped by the start of production from Solan.

The company is on course to meet full year guidance of 68,000 to 73,000 boed.

Regarding Solan, it noted: “Production is currently constrained at 10-13 kbopd.”

Premier said one of the production wells has been underperforming while it tries to increase the pressure in the relevant reservoir by injecting water to help flush out the oil.

However, production from the assets that the company acquired through the $120m purchase of the North Sea portfolio of German utility E.ON earlier this year has continued to exceed expectations.

Premier sees increasing potential in the Tolmount gas finds in the Southern North Sea.

The company is working on plans to develop the Sea Lion find in the Falklands.

The company said the exclusivity period agreed with a firm that is interested in buying its assets in Pakistan had ended without a deal being concluded. It has reopened the process to potential buyers, with an offer deadline early in the New Year.

Shares in Premier Oil closed down 0.5p at 54p.

Source: Herald Scotland