Premier Oil Updates Operations Ahead of Results

Premier provides an operational and trading update ahead of its 2007 Interim Results, which will be announced on September 20, 2007.

Simon Lockett, Chief Executive, commented:

"The first half of 2007 has seen material steps taken to deliver our mid-term targets. We completed two acquisitions of complementary assets, secured funding for our development activities on attractive terms and made significant progress in Vietnam. We are on track to deliver 50,000 boepd of production by the end of 2010, and continue to build our pipeline of high impact exploration activity".


Working interest production for the first half of the year averaged 34,000 boepd (2006 FY - 33,000 boepd).

The acquisition of an additional 20.05 percent interest in the Scott field from Hess was completed on May 17, 2007 following the payment of $52.6 million in adjusted consideration. Premier's working interest in the Scott field is now 21.83 per cent. Additional Scott production of approximately 5,000 boepd has been consolidated into Premier's production from May 18, 2007. Current run-rate for group production is in excess of 38,000 boepd. Cash receipts of $42.1 million from our first Scott cargo following the acquisition were recorded on July 3, 2007.


Cash flows for 1H 2007 benefited from strong oil and gas prices with oil production sold at an average of $65 per barrel, (1H 2006: $66) a 3% premium to Brent.

Average realizations for our Indonesian gas sold into the Singapore market for 1H 2007 were $9.6 per mmscf (1H 2006 $9.9 per mmscf).

Development capex for the full year is expected to be around $200 million including $89 million for the acquisitions of an additional 25% interest in North Sumatra Block A ($36 million) and an additional 20.05 per cent interest in the Scott field ($52.6 million). Exploration capex for the year is on target at less than $100 million before tax and recoveries.

At June 30, 2007, Premier had an estimated net debt position of $25 million compared to a net cash position of $41 million at December 31, 2006. This takes into account the proceeds of a $250 million convertible bond, completed on June 27, 2007. Approximately $50 million of the bond issue will be treated as equity in the group balance sheet. Proceeds of the issue have been used to repay existing borrowings and will fund Premier's forward development requirements. The 7-year convertible bond carries a fixed rate coupon of 2.875 percent per annum.


Premier is on course to exceed its production target of 50,000 boepd by the end of 2010.

Block 12W

Blocks 12E and 12W have been merged according to the PSC terms prevailing in Block 12W. The 3D seismic acquisition over Block 12W completed in June 2007 is being processed and interpreted. Early results suggest confirmation of the initial estimate of 80 mmboe of recoverable reserves at Dua/Blackbird. Reservoir and facilities development studies are underway with concept selection expected by end 2007, and project sanction in 1H 2008. An expression of interest document is being prepared for potential FPSO suppliers. First oil is expected in 2010.

Natuna Sea Block A

Following successful completion of the four-well West Lobe development drilling program, it was decided not to drill a fifth development well. The Seadrill-5 rig has been released to dry dock for repairs. The Central Lobe oil development well and the remaining exploration program for the second half has been deferred.

Discussions regarding the commercial framework for further gas sales into Singapore and Batam Island continue. We await formal Indonesian government approval of the terms.

North Sumatra Block A

Premier's purchase of an increased equity stake in North Sumatra Block A was completed in January 2007 for $36 million. Medco Energi assumed operatorship and has been pursuing gas sales negotiations and a plan of development for the Alur Siwah, Alur Rambong, and Julu Rayeu fields. A gas sales MOU has been signed and in accordance with the draft development plan, first gas from this project is on schedule for 2010. Initial studies have been completed on the potential to recover additional oil reserves elsewhere on the block.


As announced separately today, Premier has entered into an agreement with Kuwait Foreign Petroleum Exploration Company KSC ("Kufpec") to de-merge their respective interests in Pakistan from the Premier Kufpec Pakistan joint venture. The demerged field portfolios will be run as separately owned businesses by Premier and Kufpec.

Premier's development asset program in Pakistan continues apace. Zamzama Phase II is proceeding according to plan and an additional 150 mmscfd (gross) is expected to be available from August 2007. Bhit/Badhra Phase II is progressing well, with plant capacity being expanded to 315 mmscfd. First gas from this expansion is expected by the end of 2007. Further plant expansion at Qadirpur is proceeding to increase capacity to 600 mmscfd from 500 mmscfd. First gas is anticipated by the end of Q1 2008. Successful completion of these incremental projects will add 15 mmscfd to Premier's net production.


Extensive redevelopment studies have been progressing well with plans to submit an application for development approval early in 2008. The operator has issued an Invitation to Tender (ITT) for the Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) contract for the provision of a Mobile Drilling and Production Unit on schedule for first production in 2010. The operator estimates recoverable reserves of 62 mmboe (Premier net share 31 mmboe).



On July 5, 2007, Premier provided a status report on the operated Masimpur-3 well which is drilling in Assam, India. At a measured depth of 4002m, a sandstone formation was encountered with good hydrocarbon shows and high formation pressure. The mechanical difficulties referred to in the press release have been resolved without the need to sidetrack the well. 7 inch casing has been set and the well will shortly drill ahead to target depth. Premier will provide a further update in due course. Following completion of operations on Masimpur-3, the rig is available for two further wells on the Cachar block for the second half of 2007. Premier holds a 14.5% interest in the Cachar Block.


The Pancing-1 well on the Kakap Block in Indonesia was spudded on June 28th by the Frontier Duchess rig. The well is expected to reach target depth by end-August and is targeting a 100 bcf gas prospect. Premier holds an 18.75% interest in the Kakap Block.


The Anne-1 well is expected to spud in late August 2007. This prospect could contain up to 300 mmbbls is the first well to be drilled in the deep water (1,300 meters) of the Indus Tertiary delta. Premier holds a 12.5% interest in the Block.


The Monte Cristo well is expected to spud in late Q3 2007 and is targeting a 20 mmbbl gross oil prospect. This well will test a prospective trend in the Panaon Limestone Formation. Premier has previously announced the farmout of half its interest in the SC-43 license in the Ragay Gulf to Pearl Energy and PNOC in return for a full carry on the Monte Cristo well. Premier now holds a 21% interest in the SC-43 license.


The Themis Admiral Marin-1 well is expected to spud in late 2007. Premier will operate the well and holds an 18% share in this oil prospect.

Future Exploration Program


A 3D seismic acquisition program was completed over Block 12W in June 2007, preparatory to a full drilling program anticipated for March 2008. Rig tenders have been received and are currently under evaluation. Potential targets include high impact exploration wells on the Peacock, Falcon and Chim Dau prospects. Chim Dau is located immediately south of Premier's 2006 Dua discovery. Premier holds a 37.5% interest in Block 12W. Further exploration is planned on adjoining acreage in Vietnam and Indonesia in 2009.


Premier is planning to spud its first well in Congo on the Marine IX Block in late 2008. A 3D seismic survey and interpretation are being conducted over the Frida and Ida prospects in 2007. Each prospect is targeting approximately 270 mmbbls gross of oil. Premier holds a 58.5% operated interest in the block.


Premier plans to spud its first Norwegian well in Q1 2008 on the Bream discovery. Bream is an undeveloped oil field discovered in 1971. Premier was awarded a 20% interest in the PL407 Bream Appraisal block in January 2007. It is expected that this will be followed by Premier's first operated well on the neighboring PL406 Bream Exploration block in 2009 where Premier holds a 40% interest.