Premier Oil plc is a leading independent oil and gas company with producing interests in the UK, Indonesia and Pakistan. Exploration and appraisal is ongoing in the UK, South and South East Asia and Africa.

            Red = 25 day moving average.           Green = 200 day moving average.

The Times - October 24, 2006

Bid approach gives Premier investors platform for exit - Robert Cole


SHARES in Premier Oil shot to the top of the FTSE leader board yesterday as it admitted that it had received a tentative takeover approach. Stock rose the best part of 8 per cent, more than twice as far as any other large or medium-sized London-listed company.

For all the caveats in yesterdays statement there appears to be more than a racing certainty that a deal will be agreed. It is, according to the company, a preliminary and conditional proposal. It said that discussions are at an extremely early stage and that there can be no certainty that an offer will be made. But by the same token there was nothing in the statement suggesting that the approach was unwelcome or opportunistic. If and it remains a big if the bidders can lay the right price on the table, it seems likely that the Premier board will recommend that shareholders accept.

A quick glance at the Premier share price graph provides some evidence of the difficulty of turning down an offer. Not only did shares rise 8 per cent yesterday, they have doubled over the past year and risen from 200p to 13 in the past five years. If ever there was a case to take profits, it is surely in circumstances such as these.

The recent weakness in the oil price heightens the temptation to look for the exit. Premier shares have risen steadily in spite of the fact that Brent crude is trading 25 per cent below the peaks seen earlier in the year. Meanwhile, the current 13 share price more than reflects current estimates of Premiers asset value. Evolution Securities, the brokerage, reckons that the core NAV is 11.21p Merrill Lynch, a broker retained by Premier, thinks the NAV is 12.12p Premier does not pay dividends, preferring to plough all its resources into improving the asset base. A takeover may be the only logical outcome for a company which does not distribute income.

But Premier shareholders should not be in too much of a rush to take whatever shilling is offered. The company has credible plans to double its production from 33,000 to 60,000 barrels of oil equivalent per day over the next four years. It also has good looking exploration projects in Asia, Pakistan and West Africa. Some of the potential is built into the current share price. But it is only if a bidder offers 15 or more that shareholders should think of capitulation. Oil, notwithstanding the current dips in price, has enduring value.