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Financial Times: Premier ‘in talks’ with unnamed bidder

By Rebecca Bream and Mark Odell: Published: October 24 2006 03:00 | Last updated: October 24 2006 03:00

Premier Oil is in takeover talks with an unnamed bidder, following months of speculation about the future of the UK oil group.

Shares in Premier Oil rose 98p, or 8 per cent, to £13.03p, valuing the company at about £1bn.

The stock has risen strongly, from under £10 a share two months ago, on rumours suggesting that oil majors including Royal Dutch Shell and Pemex of Mexico wanted to buy Premier. However, last month Premier chief executive Simon Lockett denied having received an offer from Shell.

Analysts said last night that an oil company from the Middle East or Asia was a more likely bidder, attracted by its wide portfolio of oil and gas assets in Asia, West Africa and the North Sea.

India Oil Corp, which is 82 per cent owned by the Indian government, has been linked with Premier in the past, and there was also speculation that Kufpec of Kuwait, Petronas of Malaysia and Medco of Indonesia could be courting the company.

A person close to Premier Oil said the company was open to the idea of securing a deal, but that investors were expecting an offer of between £14 and £15 a share.

The oil industry has seen a surge in merger and acquisition activity in recent years on strong crude oil prices following growing demand due to the rapid industrialisation of China and India. However, the average price of crude oil has fallen back by about 25 per cent since the record high of over $78 per barrel in August.

In a statement prompted by the takeover panel, Premier said yesterday that it had “received a preliminary and conditional proposal regarding a possible offer for the company”.

It warned: “The proposal is subject to a number of conditions, including due diligence and financing. Discussions are at an extremely early stage and, consequently, there can be no certainty that an offer will be made nor as to the terms on which any offer might be made.”

Premier plans to expand its exploration programme over the next year by targeting nine prospects that management believes have the potential to significantly boost reserves.

The group has said it will spend about $50m drilling some of its most promising prospects.

This month Premier said it had found multiple oil and gas reservoirs at its Block 12E project off the coast of Vietnam, and would start preparing a report about the commercial prospects for the block.

The group is to drill another well in the nearby Blackbird prospect soon, and is due to start drilling an exploration well at the Peveril prospect in the North Sea before the end of the year.

Premier has booked reserves of 164m barrels, and next year plans to drill targets off Guinea-Bissau, West Africa, which the company has said could hold combined reserves of 260m barrels.

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