Premier Oil Updates UK Asset Portfolio

Premier has signed an agreement with Reach Exploration Limited to acquire a 50% interest in license P1048 in the Moray Firth blocks 20/10b, 21/6a, 20/15a and 21/11b. The license is on trend with the Buzzard discovery. Reach will retain a 5% carried interest having also farmed out a 30% interest to Intrepid Energy North Sea Ltd and a 15% interest to First Oil Expro Ltd on the same terms. The DTI has approved the assignment of this license and it has been agreed that Premier will become operator.

The license was originally awarded to Reach in the 20th Round under a 4 year drill or drop obligation. Farminees are under an obligation to reprocess 400 sq km of 3D seismic and to drill a well on the license in order to retain their equity. The joint venture plans to drill a well in Q2 2004 following seismic reprocessing and selection of a well location by the end of 2003.

This is a significant milestone for the DTI's 'Promote' initiative which aims to stimulate increased levels of exploration investment by facilitating wider access to seismic data.

Premier Oil has sold a package of non-core UK assets to Atlantic Petroleum UK Limited for £8.2 million in cash, £3 million of which will be made up of deferred payments linked to first oil from the discoveries.

The package includes a 3.75% interest in the Rob Roy, Ivanhoe and Hamish fields, a 3.75% interest in the Perth discovery in block 15/21 near the Scott and Telford fields, a 15% interest in the Chestnut field and an 11.03% interest in block 20/2 which includes Premier's 8.27% interest in the Ettrick field. Premier has retained a right to buy back into a 5.5% interest in block 20/2 (excluding the Ettrick field) should there be further exploration success in the block. These interests represent Premier's entire interest in each of these assets.

All sales are subject to DTI and joint venture partner approval, and pre-emption for the interests in Rob Roy, Ivanhoe, and Hamish and Perth.

With the sale of shares in Australian Worldwide Exploration announced on June 11, 2003, Premier has reduced net debt this year by £18 million through the sale of non-core assets. As at 31 December 2002, Premier reported proforma net debt of £47.1 million. Taking the benefit of these sales into account, proforma net debt and gearing falls to £29 million and 11% respectively.

Charles Jamieson, Chief Executive of Premier, said: 'The Buzzard discovery has stimulated new interest in the Moray Firth area of the North Sea. Entry into this licence is an important step in the rejuvenation of Premier's UK exploration portfolio and is consistent with our strategy of accessing high quality exploration in our core areas. Together with the sale of non-core assets, this demonstrates Premier's intention to extract value from its portfolio and concentrate resources where we believe we can add most value.'