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KILLIK & Co MORNING NOTE - 1 April 2005
Premier Oil – free option on exploration
A busy fourth quarter at Icap


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Premier Oil – free option on exploration


Killik List

Price: 562 (+2p)

Risk rating: 7

p/e: 14.6

Net dividend yield: 0%

Market cap: £462m

(p/e and yield are prospective)

Crude oil (for May delivery) closed at $55.66 last night, the second consecutive day it has traded over $55, whilst shares in Premier Oil closed up 23p to 560p yesterday as the management team conducted a series of investor presentations. New CEO Simon Lockett intends to change very little having taken over from the retiring Charlie Jamieson. We believe the shares are excellent value, with estimates of core NAV, i.e. excluding potential exploration upside, of between 570p-600p.

The shares should trade at a premium to core NAV, given the team’s excellent exploration track record, and 2005 should be a good year for drilling newsflow with between 12 and 18 exploration and appraisal wells planned over the next 12 months.

Results are due from the Egyptian Al Amir-1 well over the next few weeks, however the bulk of this year’s newsflow should occur in the second half. Production from the Mauritanian Chinguetti field is ahead of original schedules and could begin as early as December of this year.