Oilexco Inc.

The following post appeared on the StockHouse Board today abd it was posted by Jeff_Mtl 2 and I thought that it might be of interest to the members on this board:

Thanks to Joe Walmsley who dug up the Premier Oil web site and pointed me to the PDF of the SPA (whioch was already published on the LSE and referenced by MISFIT1 when it came out), I also found another document worthy of interest.

Here is a link to it. It is an analysts' slide presentation, made and / or published by Premier Oil, entitled 2008 Full Year Annual Results Proposed $505 million acquisition of Oilexco North Sea Limited and rights issue to raise approximately £171 million dated March 25, 2009. Note that, per Premier Oil's web site you must be oustide the following countries to access it: Australia, Canada, Dubai Internation Financial Center, New Zealand, Republic of South Africa, State of Israel, United States of America.

http://www.premier-oil.com/Asp/uploa...

The Oilexco acquisition proposal starts on page 21. The following elements are worthy of interest in my opinion:

1. On page 22, 23, 26 and 29 an explicit mention is made that "figures do not include Shelley". Interestingly enough, no other field receives this special treatment. Premier Oil is going out of its way to single out Shelley and explicitely exclude it from 2009 forecasts, possibly just to clarify the company's intentions versus the potential high expectations some may have had about this field. But then again, per Ms Pert's email to g1locas posted earlier today, one wonders why they should go to that extent if Shelley is, as per Premier's own evaluation, quite insignificant in production potential and reserves. It could also be a prudent move on their part to explicitely exclude an asset they do not intend to keep, as to leave no possibility misleading their investor.

2. On page 26, the right hand side pie chart suggests that Shelley would hold about 8 to 10% of the total combined Premier and ONSL reserves of 63 mmboe, which equates about 5 - 6 mmboe. This does not add up with Ms Pert's statement whereby Shelley would be forecast to produce about 5 kboepd for two years, which yields about 3.2 mmboe, when factoring in a reasonable amount of maintenance down days. That would be a surprisingly low recovery rate.

3. On pages 28 and on page 29, the bar charts indicate that ONSL's production is forecast by Premier to steadily decline from today's 13,000 or so boepd until 2012, at which point it would grow by approximately 7,000 boepd. Well, where does that leave Shelley? The way I see it, it is entirely out of their long term forecast (at least until 2012), which may reinforce the suggestion made earlier in point 1 that Premier may not intend to keep Shelley at all. While theoretically not impossible, it would be hard to understand why they would wait 3 - 4 years to bring this field online and let the asset sit there and just collect dust.

4. On page 31, the conditions stated for the acquisition of ONSL states a necessary approval by the unsecured creditors of ONSL, but do not include a necessary approval by Oilexco Inc., which contradicts this section of the Proposed Acquisition document, made public also on March 25th by Premier and available on the LSE:

"The Acquisition is expected to proceed by way of an acquisition of all the issued share capital of ONSL (the "Share Acquisition"). The Share Acquisition is conditional on the approval by ONSL's unsecured creditors and Oilexco Inc. of the terms of the Company Voluntary Arrangement and the passing of a 28 day objection period, and on the discharge by the court of the administration order over ONSL."

I am not sure how to interpret this discrepancy, and whether one or the other takes precedence. My take would be that of the latter (the official SPA signed between Premier Oil and the Administrators), but I might be wrong."