Premier Oil bid battle looms

PREMIER Oil is being put on the auction block by bankers eager to cash in on the North Sea explorer's new-found independence and kick-start a potential £360m takeover battle.

Lazard and Lehman Brothers are understood to be among those trying to attract buyers for the group, which bought back 50% of its shares from former partners Amerada Hess and Petronas a fortnight ago.

Premier ditched its controversial interests in Myanmar, formerly Burma, as part of the restructuring and analysts believe the group is the prime takeover target in a sector reaping profits from the high price of oil.

While Premier says it wants to grow as an independent, City insiders believe a bid of 400p-450p per share would win the board over. BG Group, Italy's ENI and Canada's Talisman are all seen as potential bidders.

The shares have climbed 60% since February and rose 7p today to 359 1/2p, valuing Premier at £286m.

One analyst said: 'Until two weeks ago, Premier was virtually bid proof. It is the best value play in the sector with assets of a high enough quality to be of interest to a major.'

Premier pumps out the equivalent of about 35,000 barrels of oil a day from fields in the North Sea, Pakistan and the lucrative West Natuna gas development in Indonesia. Recent interim results showed pre-tax profits jumped 97% to £71.2m in the first half-year, but this included contributions from operations in Myanmar and Indonesia that were sold in the share restructuring.

Amerada Hess and Petronas effectively bailed out Premier in the 1990s when taking up the combined 50% stake after the UK firm ran up massive debts through an expansion drive. The group has also been dogged by a recent poor exploration record - two wells in Indonesia this year failed to result in commercial discoveries.

One industry expert said: 'There is definitely a value opportunity but there's uncertainty about whether the synergies would be big enough and prospective bidders will also have to get their heads round Pakistan from a risk point of view.'

Reporting interim results 10 days ago, chief executive Charles Jamieson pinned his hopes on an exploration programme for West Africa, where the group wants to drill the bulk of up to 14 new wells over the next 15 months.

He said: 'We want to create shareholder value by finding some oil and gas. If there were to be an approach then obviously we would have to deal with that on its own merits.'

Attractions for a suitor

Daily output of 35,000 barrels split between Britain, Pakistan and Indonesia.

Onshore oilfield project at Wytch Farm, Dorset.

Stake in West Natuna gas development in Indonesia.

Concessions and gasfields in Pakistan.

Two exploration licences in Guinea-Bissau, West Africa.

Interests in Gabon and Mauritania.