Premier Oil: trading statement

8:57 a.m. Wed 18 Jan 2006

Following a strong first half, Premier Oil looks set to report strong results for the year to December 2005. Year end production was ahead of expectations at 33,300 boepd (comprising 69% gas, oil makes up the remainder) and realised prices were said to be “strong�.

The company’s development programme is on track, with 20 new wells coming on stream in 2006. Overall production volumes are expected to increase by around 10% next year. In the medium term the company hopes to achieve a production level of 50,000 boepd, which, given the reasonably successful exploration and production programme to date, does not look unfeasible.

Premier’s production mix is weighted towards gas, and unfortunately, gas prices have not performed as well as oil prices in the recent past. After a recent strengthening of gas prices the outlook has improved further. In broad terms, the medium term outlook for the sector is good and prospects for growth look good. The share trades at 871p, on a prospective PE (2006 earnings) of 21x, which is at the top end of the sector range. The company is not expected to pay a dividend.