PREMIER Oil has written another $1billion (£715m) off the value of its North Sea assets as problems with a giant field off Shetland compound the challenges posed by the tumbling oil price.

London-based Premier revealed the start of production from the Solan field has been delayed again, to March from this month, following bad weather off Shetland.

The company said unprecedented weather conditions West of Shetlands have continued to hamper work on offshore production facilities.

First oil is expected shortly, more than 18 months later than the original expected start date.

Announcing a big increase in annual losses, Premier said it had written $998m off the value of the company’s North Sea portfolio in 2015, mainly related to Solan.

The company said the impairment reflected increased costs on Solan and the impact of the sharp fall in oil prices on the UK portfolio.

Chief executive Tony Durrant warned: “As we move into 2016 there remains considerable uncertainty over the direction of oil prices.”

Brent crude has fallen to around $35 per barrel, compared with $115/bbl in June 2014.

But Mr Durrant said cuts in North Sea tax rates would make little difference to the sector given how few firms are making chargeable profits.

He said giants would get most of the benefit of any such cuts. Ministers should provide tax relief on investment.

Mr Durrant said Solan has been a challenging project for Premier with the commissioning of the production platform taking longer than planned “largely due to significantly worse than anticipated weather conditions”.

However, Premier said work on the giant Catcher field off Aberdeen is under budget and on schedule with first oil expected next year.

Mr Durrant said: “Once fully on-stream, both the Solan and Catcher projects will contribute materially to our cash flows, given our tax advantaged position in the UK.”

He defended Premier’s decision to increase its exposure to the North Sea through the $135m acquisition of the portfolio amassed by Germany’s E.ON.

“The proposed acquisition significantly enhances our core UK business by adding both cash generative production and reserves and resources at a compelling valuation,” said Mr Durrant.

The acquisition offers the potential to squeeze costs out of the enlarged North Sea business and to use the tax losses the company has built up.

Premier will drill two UK North Sea exploration wells this year. It did not drill any in 2015.

Mr Durrant said Premier had been able to reduce underlying production costs to $16 per barrel oil equivalent in 2015 from $18.5/boe the preceding year, saving $100m over the year.

Cost reduction initiatives have included reducing discretionary spend and re-negotiating contracts with existing suppliers.

Premier aims to cut costs by up to a further 10 per cent this year.

The company, which also has assets in Asia and off the Falkland Islands saw pre-tax losses spiral to $829m in 2015 from $363m the preceding year.

While average production fell around ten per cent revenues plunged by 60 per cent, to $1bn from $1.6bn.

The start of production from Solan was originally targeted for the final quarter of 2014 but was delayed amid poor weather conditions and low productivity off Shetland over last winter.

Premier cut the book value of a group of UK fields including Solan by $730m in 2014 citing the impact of the sharp fall in the oil price.

Petrofac the oil services giant hit problems on Shetland where it lost more than $600 million on a contract to build the Laggan Tormore gas terminal on Shetland. The firm said it was plagued by low productivity and bad weather.

Premier produced an average 57,600 barrels oil equivalent daily in 2015, down from 63,600 boed.