North Sea producer Chrysaor eyes 2021 output drop, muted Buzzard production

North Sea oil and gas producer Chrysaor expects a roughly 15% drop in its production next year due to heavy levels of maintenance and recent deferred drilling, while also reducing its expectations of the UK's highest-producing oil field, Buzzard, a Dec. 16 statement from potential merger partner Premier Oil showed.

The statement said Chrysaor was on track for full-year production this year of 174,000 b/d of oil equivalent, confirming it as one of the UK's largest producers, before the expected merger with London-listed Premier next year. The latter expects its full-year output this year to be in a range of 61,000-64,000 boe/d.

The merged entity will be named Harbour Energy, the name of Chrysaor's US private equity backer, with the bulked-up company being listed in London.

However, Chrysaor's production is expected to drop to 140,000-155,000 boe/d next year, after falling to 160,000 boe/d in H2 2020, as it anticipates "an unusually high level of asset shutdowns during 2021, driven by COVID-19-related 2020 maintenance deferrals," the statement said.

"The COVID-19 related suspension of some drilling activities in 2020 has also impacted the 2021 production forecast," it added.

Chrysaor will be one of many companies hit by the planned three-week shutdown of the UK's main crude artery, the Forties pipeline, which was deferred from the summer of 2020 until May 27, 2021, due to COVID-19.

Seven of the fields Chrysaor operates deliver oil through Forties, as does the Elgin-Franklin complex, in which Chrysaor and Premier both hold stakes, and Buzzard, which is operated by China's CNOOC International, with Chrysaor among the partners.

The statement noted strong performance from Elgin-Franklin this year, with output of more than 130,000 boe/d in the first 11 months thanks to "very high efficiency," infill drilling and well interventions.

But it also noted a drop in oil output this year of around 16% from the Buzzard field, with production for the first 11 months averaging 88,000 b/d. It also warned that a delayed expansion project, Buzzard Phase 2, had met with drilling results "towards the lower end of expectations," with the project now expected to come on stream in December 2021.

Drilling at Buzzard "has now been paused and further wells and side-track activity will wait until after the Phase 2 wells have been brought on to production, now expected in December 2021," the statement said.

Meanwhile production from Premier's Catcher field, which loads crude directly onto tankers, has recovered after a series of technical problems this year, including a fire in a storm room in November, and is now running at over 60,000 b/d, Premier said.

The statement reiterated that the merger of the two companies aimed to create a "strong UK independent oil and gas company of scale with a global footprint," the latter a reference to the inclusion of Premier's overseas footprint, including production in Indonesia and Vietnam, and exploration assets in Alaska, Brazil, Mexico and the Falkland Islands.

"Harbour Energy will be the largest London-listed independent oil and gas company by production and reserves. It will be a resilient business with competitive operating costs. The combined group will have a lower carbon intensity than the average UK oil and gas producer, with targets in place for further improvements, and a commitment to achieving 'Net Zero' greenhouse gas emissions by 2035," the statement said.