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Daily Telegraph: Stable oil price ‘will bring consolidation’

By Russell Hotten
Last Updated: 3:36am GMT 23/03/2007

The chief executive of Premier Oil has predicted that the industry is ripe for consolidation as some of the “big boys” of the sector struggle to meet their production growth targets.

Simon Lockett, whose FTSE 250 company was in takeover talks last year, said the industry was entering a period of stability which should encourage deals.

Mr Lockett said: “We are starting to see a more stable oil price, which provides the conditions for investment and consolidation.” He would not name names, but he said: “I can see more deals being done by the big boys because they need to deliver the numbers in terms of growth.”

Meeting production targets has been a problem for some oil majors, especially BP. Speculation that the company could be forced to seek a merger with Royal Dutch Shell refuses to die.

Mr Lockett said Premier’s own production was “going like crazy”. The oil and gas company, which posted strong annual profit figures yesterday, saw production fall slightly last year to 33,000 barrels of oil equivalent a day because of a disappointing performance from assets in Mauritania.

However, output for the group this year is predicted to be above 35,000 barrels a day, and Mr Lockett said he was “increasingly confident” that production will exceed the medium-term target level of 50,000 barrels, with the company hitting 70,000 barrels from about 2011.

Premier saw pre-tax profits rise 75pc to $67.6m (£34m) on the back of strong oil and gas prices. Premier got an average of $64.90 a barrel of oil in 2006, from $48.38 in 2005. Mr Lockett predicts that the oil price will hover around $55 to $58 a barrel in the near term.

Premier has operations in the North Sea, southern Asia, and north and west Africa. Its shares fell 20p to £12.32p. There is no dividend.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/03/23/cnoil23.xml

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