Time to get greedy with Premier Oil plc and Empyrean Energy plc?

Premier oil rig
Premier oil rig

Today's trading and operations update from mid-cap exploration company Premier Oil(LSE: PMO) was fairly positive. Production averaged 76,600 boepd (barrels of oil equivalent per day) between the start of the 2017 and the end of October, falling within the 75,000-80,000 range predicted by Premier for the full-year. With final tests "imminent", its Catcher project in the North Sea -- a key revenue-generator for the company going forward -- is also on schedule for first oil next month.

Elsewhere, the company has reached an agreement to export gas from its Tuna field in Indonesia to Vietnam and continues to engage with Mexico's Pemex with regard to its discovery at the Zama prospect, with a "likely 4 well appraisal programme" due to start late next year. A Head of Terms agreement has also been signed for an FPSO lease extension on the firm's Huntington oil field in the North Sea, extending the life of the latter.

Having said this, the most important details of today's statement arguably related to the progress Premier is making at getting its finances in order.

Positively, operating costs of c$16/bbl remained in line with previous guidance and below budget. Premier is also continuing to slash its development, exploration and abandonment expenditure. At between $300m-£310m, this is now expected to be as much as $25m lower than that previously estimated in July, making today the third time in 2017 that the company has revised this figure. Aside from this, the $200m disposal of the Wytch Farm field is "ongoing" with more news expected to be issued to shareholders "imminently".

While remaining a high-risk investment, things appear to be slowly turning around at Premier. Whether prospective investors will regard today's price as a suitable entry point really depends on how much faith they have in Chief Executive Tony Durrant and his belief that recent progress and a more favourable oil price will help to "accelerate debt reduction" over the next year. With $2.8bn of debt still on its balance sheet, that can't come soon enough.

Volatility ahead?

A few weeks ago, holders of £78m cap exploration firm Empyrean Energy(LSE: EME) could be forgiven for feeling rather smug. The shares soared to almost 28p in September on the back of encouraging updates relating to the company's Dempsey 1-15 gas well in the Sacramento Basin in California. Given that the very same shares changed hands for just 1p each 12 months earlier, that is a quite incredible return for those who got in early.

Since then, they have come off the boil somewhat. In addition to a likely spate of profit-taking, the price fell heavily on Tuesday following a disappointing statement from the company.

Despite announcing that flow-testing and completion of the well was "continuing as planned", it was revealed that the natural gas found at the lowest zone was flowing at "sub-commercial" rates based on current market prices. Seeking to reassure its owners, Empyrean stated that the analysis of the zone and its potential remained "at an early stage" with CEO Tom Kelly adding that the company remained "optimistic" on the well's potential based on the "significant gas shows" found while drilling.

With the company now preparing to target the next shallower zone, I can see further volatility ahead. As such, I remain wary of the shares at the current time.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.