Today’s results from Premier Oil (LSE: PMO) may appear to be hugely disappointing at first glance. After all, the oil producer recorded a wider loss in 2015 than in 2014, with its earlier pre-tax loss of $363m increasing to a loss of $830m in 2015. And with production falling to 57,600 barrels of oil equivalent per day (boepd) in 2015 from 63,600 boepd in 2014, it may seem as though the company is on the slide.

As well as lower production, Premier Oil was also hurt in 2015 by a significantly lower oil price. This was a key reason why its revenue declined and why it was forced to record impairment charges of over $1bn in 2015. This hurt profitability and looking ahead, further asset writedowns can’t be ruled out in the medium term.

As a result of the above, many investors may be feeling rather bearish about Premier Oil’s prospects following today’s results. However, those same results also offer a huge amount of hope and indicate that the company could begin to turn its fortunes around in 2016.

Brighter times ahead?

A key reason for this is a mix of higher production and lower costs that are forecast for 2016. With Premier Oil attempting to take advantage of discounted asset prices within the oil and gas space through the purchase of EON’s North Sea assets, it’s expected to increase production to up to 70,000 boepd in 2016. This figure is also being inflated by Premier Oil’s Solan project, which is expected to come onstream imminently.

Alongside increased production is further cost-cutting. Despite having already made significant progress in this space, Premier is due to continue to reduce its operating expenditure and will also make further cuts to its capex, too. This should help to stabilise its margins and with Premier Oil having up to 30% of its production for 2016 hedged at around $73 per barrel, it could deliver better results than many investors are anticipating – even if the price of oil remains low.

On that topic, the oil price will clearly have a major impact on Premier’s future share price performance. Unfortunately, it’s not possible for Premier (or any other individual oil and gas company) to impact directly on that price, but what it’s doing is attempting to adapt and take advantage of the current situation, mostly through M&A activity.

Although this won’t guarantee future success or a higher share price, it does at least offer the potential for both in the long run. With the company’s shares trading on a price-to-book value (P/B) ratio of just 0.4, they seem to offer considerable upside potential in the long run. However, in the short run things could prove challenging, since low oil prices look set to stay and Premier Oil is expected to remain in the red for the next two years.

Despite this, the company is likely to remain of interest to less risk-averse investors, with the expected raised production, reduced costs and M&A activity providing hope to its long-suffering investors.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.