Bid hopes as Premier Oil quits Burma

PREMIER Oil is to quit its controversial operations in Myanmar, the old Burma, as part of an eagerly-awaited deal that will see peers Amerada Hess and Petronas offload their combined 50% stake in the company.

Shares in Premier rose 2 1/2p on today's news to a four-year high of 26 3/4p in the belief the restructuring will leave it ripe for a takeover by acquisitive competitors, such as Shell and ENI.

The asset-swap will also slash Premier's gearing from 98% to 39%, enabling it to become more leveraged to exploration while reducing the company's perceived political risk.

America's Amerada and Petronas, of Malaysia, took their respective 25% stakes in Premier to help relieve pressure on the group's cashflow while it built a base in Asia. But their holdings have been seen more recently as a barrier to a takeover, preventing Premier shareholders from taking part in the industry consolidation, which has led to independent petroleum groups being taken over by bigger rivals.

Today's deal, which will lead to the combined 50% stake being cancelled, involves Premier transferring its entire interest in Myanmar's Yetagun project to Petronas. It will also transfer a 15% stake in Indonesia's Natuna Sea Block A to Petronas and a further 23% interest in the block to Amerada, leaving Premier with a 23% stake and operatorship. Premier will receive £145m cash from the pair and offload a further £98m of debt associated with Yetagun to Petronas, cutting its net debt to £111m.

Average production is forecast to fall from 50,000 barrels of oil equivalent a day to between 30,000 and 35,000, though Premier estimates its underlying asset value will rise 20% to 40.6p a share.

Chief executive Charles Jamieson claimed political pressure and protests over Premier's involvement in Myanmar had nothing to do with the restructuring. He said: 'We have had opportunities to withdraw from Myanmar over a long period which we have resisted. This is a commercial reconstruction.'

Premier said it had acquired interests in India, West Africa and the North Sea as part of its renewed exploration push. The restructuring news came as Premier reported a 46% rise in pre-tax profits to £36.1m for the six months to 30 June. There is no dividend.