Premier Oil: H1 results

10:47 a.m. Fri 16 Sep 2005

Premier Oil announced a 60% increase in post tax profits for the half year ended June 2005. Post tax profits for the half year rose to $20.5m from $12.8m last year primarily due to higher realised oil and gas prices. The company's exploration programme yielded two successful wells resulting in a lower exploration write-off, which also helped boost the bottom line.

The company said that while production fell by 1 % (34,779 boepd v 35,200 boepd last year) due to lower production from the UK and Indonesia, it was ahead of expectations. The realised average oil price, post hedging was$38.08/bbl (1H2004: $31.45/bbl) and realised gas prices rose 2% to $3.38 per thousand standard cubic feet.

The company is planning a further seven exploration wells in 2005 and the Chinguetti development is on track to deliver first oil in early 2006. The Chinguetti field has proven and probable reserves estimated at around 120m barrels. Premier owns an 8.12% stake in the field which is expected to add 6,100 bopd net to Premier annually when full production is reached.

With increases in production expected next year and a firm outlook for oil prices, Premiers prospects look good. The share trades at 752.5p, on a prospective PE (2005 earnings) of 18x which is at the upper end of the sector range, although the relatively stronger growth prospects do justify a high PE.