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Financial Times: Premier Oil plans exploration drive

By Mark Odell
Published: September 22 2006 03:00 | Last updated: September 22 2006 03:00

Premier Oil is ramping up its exploration programme over the next year by targeting nine prospects that management believes have the potential to significantly boost reserves.

The oil and gas exploration and production company is planning to spend some $50m (£26m) in the next 12 months, drilling some of its most promising prospects spread across its four regions: Asia, West Africa, the Middle East and Pakistan, and the North Sea.

“It is shaping up to be our most active year on the exploration side in recent history,” said Simon Lockett, chief executive.

The company yesterday said the drilling of the first so-called “high impact” well in Vietnamese territorial waters in the South China Sea had struck oil and gas.

Premier is now production testing the Dua-5X well, which is targeting a reservoir that could hold reserves of up to 40m barrels. It has a 37.5 per cent interest in the licence and is the operator.

The company will then move the rig to drill another well in the nearby Blackbird prospect, with a pre-drill reserves estimate of 80m barrels, as well as starting an exploration well in the Peveril prospect – which has a 40m barrels reserve estimate – in the North Sea before the end of the year.

Two of the other wells, due to be drilled next year, in the exploration programme are targeting prospects off Guinea-Bissau that could hold combined reserves of 260m barrels.

Premier currently has booked reserves of 164m of barrels.

The excitement generated by the exploration programme sparked recent speculation that Shell was preparing a £1bn bid forPremier.

Production rates in the first six months of the year reached 33,521 barrels of oil equivalent per day, down from 34,779 boe/d in the first half of 2005.

But Mr Lockett insisted that the company was “still on target” to reach 50,000 boe/d over the medium term.

The Chinguetti field off Mauritania, which started production in February, failed to offset an expected decline in North Sea output.

Premier lifted pre-tax profit to $91.5m ($62m) in the first six months to the end of June. Revenues rose to $219.6m ($149.3m). Premier’s shares fell 32p to 987p.

FT Comment

*Company broker Oriel calculates Premier’s net asset value at 856p per share with an oil price pitched at $60 a barrel. The company trades on a 15 per cent premium to that valuation, helped by the recent Shell bid talk. Success in its ambitious exploration programme would drive the shares higher – and potentially spark more takeover talk.

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