premier oil plc
23 lower belgrave street
london sw1w 0nr
telephone 44 020 7730 1111
facsimile 44 020 7730 4696
wwwpremieroilcom
annual report and financial statements
year to 31 december 2008
premier oil plc 2008 annual report and financial statements  performance governance financial statements additional information
highlights 01
chairman’s statement 02
section 1 performance
chief executive’s review 04
financial review 12
social performance review 15
section 2 governance
board of directors 20
corporate governance report 22
audit and risk committee report 27
company risk factors 29
nomination committee report 31
report of the directors 32
remuneration report 35
statement of directors’ responsibilities 45
accounting policies 46
section 3 financial statements
independent auditors’ report – group 52
consolidated income statement 53
consolidated statement of t otal recognised income and expense 53
consolidated balance sheet 54
consolidated cash flow statement 55
notes to the consolidated financial statements 56
independent auditors’ report – parent company 78
parent company financial statements 79
section 4 additional information
five year summary 91
shareholder information 92
oil and gas reserves 93
worldwide licence interests 94
contents 
premier is a leading ftse 250 independent exploration and
production company with gas and oil interests in asia middle
east pakistan the north sea and west africa our strategy is
to add significant value through exploration and appraisal
success astute commercial deals and asset management  01
premier oil plc 2008 annual report and financial statements
highlights 
operational
• production increased to 365 kboepd 2007 358 kboepd
• reserves increased by 75 per cent to 228 mmboe 2007 212 mmboe reserves
and resources increased to 382 mmboe 2007 369 mmboe reserves replacement
of 223 per cent
• material progress on major development projects commercialising past
exploration successes and acquisitions
• seven successful out of 14 exploration and appraisal wells drilled
• new exploration acreage awarded in norway and vietnam
financial
• operating cash flow up 31 per cent to us3523 million 2007 us2695 million
• operating profit up 19 per cent to us2617 million 2007 us2194 million
• record profit after tax of us983 million 2007 us390 million after
deducting a noncash write down of us319 million on the chinguetti field
• financing in place to fund development programme of us800 million in
20092011
• strong balance sheet with cash resources of us3237 million 2007 us3320
million and net cash of us1173 million 2007 us790 million undrawn cash
facilities at yearend were us275 million 2007 us222 million
2009 outlook
• premier announced the proposed acquisition of oilexco north sea ltd and
a rights issue of new ordinary shares to raise approximately £171 million
• stable production from existing assets supported by hedging floors at
us40bbl in 2009 and us50bbl in 2010 and 2011
• continuing substantial progress on three major projects expected to add
25000 boepd over the next two to three years
• capturing capex savings in major projects
• forthcoming key wells in vietnam congo and norway as part of our extensive
exploration and appraisal programme
• premier announced that andrew lodge will join premier’ s board on 20 april 2009
as exploration director robin allan currently director of business development
will transfer to singapore as director – asia with effect from 1 june 2009 02
premier oil plc 2008 annual report and financial statements
chairman’s statement 
the quality of our producing assets underpinned by our
financial position secures our forward cash flows and
allows us to progress our exploration and development
programmes that could bring very significant upside
financial and operating performance
strong oil and gas prices notably in the first half of the year generated sales revenues of
us6552 million in 2008 2007 us5782 million supported by high levels of demand from
our gas customers in singapore and pakistan average production for the year rose 2 per
cent to 36500 barrels of oil equivalent per day boepd 2007 35750 boepd with good
production performance across our fields in the uk pakistan and indonesia
operating cash flow after tax was us3523 million 2007 us2695 million more than
sufficient to fund our investments in exploration and development projects during the year
and repay our bank borrowings as a result our cash resources at 31 december 2008 were
us3237 million 2007 us3320 million and our cash facilities undrawn at us2750 million
2007 us2220 million operating profit rose for the fourth year running to us2617 million
2007 us2194 million profit before tax for the year was us2776 million an 89 per cent
increase on the previous year 2007 us1470 million resulting in a 152 per cent increase
in profit after tax to us983 million 2007 us390 million
oil and gas proven and probable booked reserves increased to 228 million barrels of oil
equivalent mmboe 2007 212 mmboe contingent resources representing potential
reserves not yet booked are 154 mmboe so that total reserves and resources have
increased in the year by 3 per cent to 382 mmboe significant reserve additions included
the booking of reserves from the chim sáo oil and gas field in vietnam and an increase in
our indonesian anoa field reserves of around 60 billion cubic feet bcf net to premier
following strong production performance
considerable progress was made in advancing our three major development project
approvals in the second half of 2008 our project teams in indonesia and vietnam are now
intensively engaged in the execution phase of these development plans together these
three development projects are expected to add 25000 boepd of production to premier
over the next two to three years
sir david john kcmg
chairman 03
premier oil plc 2008 annual report and financial statements
“considerable progress was made in advancing
our three major development project approvals
in the second half of 2008 together these three
development projects are expected to add
25000 boepd of production to premier over
the next two to three years”
our exploration programme in 2008 delivered seven successes from 14 exploration and appraisal
wells notable successes included appraisal wells on chim sáo in vietnam and on the banda gas
field in mauritania there have also been a series of successful wells on the nw gemsa permit in
egypt where first production of oil commenced during february
in 2009 we will return to our programmes in vietnam and indonesia drill our first wells in norway
and congo and continue to exploit our existing acreage in pakistan and egypt
our efforts to maintain the highest levels of health safety and environmental performance standards
have been successful and have seen us exceed expectations in several areas judged across a
range of industry accepted metrics premier’s 2008 operations recorded our best safety performance
to date received an hse award from petro vietnam for operational excellence in vietnam and had
our environmental compliance performance rating upgraded to ‘green’ by the ministry of the
environment for its operations in indonesia we continue our drive for continuous performance
improvement in these areas
shareholder returns
in the face of falling stock markets and the sharp decline in the price of oil premiers share price
dropped by 25 per cent in 2008 nevertheless outperforming the price of brent which fell 64 per
cent from us97 per barrel bbl at the beginning of the year to end the year at us35bbl we
continued with our policy of selectively utilising cash resources to buyback shares where justified
on valuation grounds and where this has a favourable impact on market valuation during the
second half of the year we acquired a total of 28 million shares at an average cost of £904 per
share over the five year period to 31 december 2008 premier shares increased in value by
116 per cent
outlook
despite volatile markets and the sharp downturn in economic activity the group is in a strong
position to maintain its growth profile already in 2009 we have progressed a number of critical
contracts which are now at the centre of our development projects we are about to embark on an
extensive exploration and appraisal campaign which has the potential to have a material impact on
the group
the quality of our producing assets underpinned by our financial position secures our forward
cash flows and allows us to progress our exploration and development programmes that could
bring very significant upside
sir david john kcmg
chairman 04
premier oil plc 2008 annual report and financial statements
chief executive’s review 
premier’ s record profits for 2008 reflect strong production
and high oil and gas prices despite volatile markets the
group is extremely well placed to fund the forthcoming
capital expenditures and deliver mediumterm growth
production and reserves
significant progress has been achieved during 2008 in all our major development projects
project approvals at partner and government levels have been secured together with
negotiation of gas and transportation agreements and key supplier contracts this activity
has positioned the group for success in the completion of our three projects in indonesia and
vietnam these together with an ongoing programme of infill drilling and debottlenecking
on our existing production portfolio are expected to increase premier’s production beyond
its stated target of 50000 boepd
average production for the full year 2008 was 36500 boepd 2007 35750 boepd in line
with previous guidance in the uk production performance from the scott field was
affected by maintenance work in the fourth quarter but the wytch farm and kyle fields
performed strongly in addition both pakistani and indonesian fields saw strong demand
from gas customers coupled with good production performance
working interest entitlement
production boepd 2008 2007 2008 2007
asia 11700 12000 7100 7900
middle eastpakistan 14550 12700 14550 12700
north sea 9300 9850 9300 9850
west africa 950 1200 800 1000
total 36500 35750 31750 31450
as at 31 december 2008 proven and probable reserves on a working interest basis based
on premier and operator estimates were 228 mmboe 2007 212 mmboe
proven and 2p reserves
probable reserves and 2c contingent
mmboe resources mmboe
start of 2008 212 369
production 13 13
net additions and revisions 29 26
end of 2008 228 382
simon lockett
chief executive
proven and
probable reserves
0
100
50
150
200
250
2006 2007 2008
mmboe 05
premier oil plc 2008 annual report and financial statements
“as at 31 december 2008 proven and probable
reserves on a working interest basis based on
premier and operator estimates were 228 mmboe
2007 212 mmboe”
at yearend reserves comprised 22 per cent liquids and 78 per cent gas the equivalent volume on
an entitlement basis amounted to 198 mmboe 2007 188 mmboe based on a price assumption of
us60bbl brent 2007 us60bbl brent
booked reserve additions and revisions include the vietnamese chim sáo field where all joint
venture and government approvals were achieved in late 2008 and construction work on the first
wellhead platform has commenced this has resulted in the booking of reserves for this asset for
the first time this year in addition there has been an increase in the indonesian natuna sea block
a reserves resulting from a comprehensive subsurface reevaluation of the strong and consistent
production performance from the anoa field other reserve additions include an increase to our
pakistan portfolio in response to integrated reservoir studies conducted during the year
contingent resources at yearend remained steady at 154 mmboe 2007 157 mmboe the
successful commercialisation of the chim sáo field being offset mainly by improved definition of
undeveloped assets in indonesia
exploration and appraisal
premier participated in 14 exploration and appraisal wells in 2008 of which seven were successful
successes included appraising the reserves base in the chim sáo discovery vietnam appraising
the gas volumes in the banda field mauritania stepout drilling adding reserves to the kadanwari
field pakistan and making a new oil discovery at al amir se egypt we acquired over 4250km of
new 2d seismic and 600km² of 3d to advance our exploration interpretations in preparation for
20092010 drilling we have also acquired new licences in vietnam and norway
our exploration cash spend on drilling and seismic activities in 2008 totalled us905 million on a
pretax basis 2007 us1047 million estimated posttax expenditure was us639 million
in vietnam our chim sáo north appraisal well 12wcs2x in the block 12w production sharing
contract psc confirmed the northern extension of the chim sáo field allowing development
sanction to proceed further south in the block we drilled two exploration wells and an exploration
sidetrack the chim ung well and the chim công well were both oil discoveries confirming the
southward extension of the exploration play but are currently considered subcommercial in
premier’s adjacent operated block the block 0703 psc a 1525km 2d survey has been acquired
and a rig contracted for 2009 drilling
premier also had an active year in indonesia acquiring 2d seismic in the tuna and buton pscs
2400km and 300km respectively and reprocessing data in our north sumatra block a acreage
these data are being interpreted and work is progressing towards drilling in all licences
in pakistan we started testing in the successful qadirpur deep1 well flowing 45 million standard
cubic feet per day mmscfd of high quality gas from hitherto undrilled reservoir zones below the
qadirpur field production from this zone is expected onstream during 2009 in the kadanwari
licence the k17 well made a discovery in a fault block to the south west of the main field the well
is being placed on production at an expected rate of up to 25 mmscfd
a new discovery al amir se in the nw gemsa licence in egypt tested over 3000 barrels of oil per
day bopd from kareem sandstones and an appraisal well drilled at yearend tested 5785 bopd
both wells were completed and production has already commenced
premier farmed out part of its licence equity for a full carry of our drilling costs on a high risk
prospect in our uk north sea 2322b block the well was dry but fulfilled the licence’s exploration
commitment this allows us to retain the block and evaluate the possibility that the moth condensate
discovery made in 2008 in the adjacent 2321 block extends into our licence we have been
granted the contiguous licence block 77 across the border in norway
performance 06
premier oil plc 2008 annual report and financial statements
chief executive’s review continued 
looking ahead to 2009 the exploration focus in south east asia is in vietnam where we
plan to drill in block 0703 commencing in the second quarter if that programme is
successful it will highgrade a large number of followon prospects on this block and on
adjacent acreage held by premier in the indonesian adjacent tuna block we are working up
interpretations of the newly acquired 2d ready for drilling in late 2009 or 2010 we are also
planning to drill a deep lama sandstone reservoir target beneath the anoa field in the
natuna sea block a psc this follows encouragement from our 2007 pancing discovery in
this poorlyexplored reservoir in the adjacent kakap block in pakistan following the success
of the qadirpur deep well we are drilling similar deep reservoirs below the badhra field with
the bado jabal well this has the potential for several trillion cubic feet tcf of gas we are
also drilling another new fault block in the kadanwari licence where we have drilled similar
opportunities that were successful in the recent past
a potentially highimpact well is being drilled in west africa where we have farmed out equity
in the congo marine block ix permit and are spudding a well on the large frida prospect in
mid2009 in norway the delayed appraisal well on the bream oil discovery is on course to
be drilled in the third quarter of 2009 the grosbeak north prospect is also scheduled to be
drilled in the second quarter we have farmed out equity in this licence pl378 to reduce
financial exposure but retain a 20 per cent equity interest later in the year the greater
luno well will target a possible extension of lundin’s luno field into our block
asia
indonesia
during 2008 premier’s operated natuna sea block a gas sales amounted to 142 billion
british thermal units per day bbtud gross whilst the nonoperated kakap field contributed
a further 60 bbtud gross liquids production from anoa averaged 2212 bopd gross and
from kakap 6000 bopd gross overall net production from indonesia amounted to 11700
boepd 2007 12000 boepd
following the signing of three gas sales agreements gsas with sembcorp gas pte ltd
sembgas in singapore and pt perusahaan listrik negara pln and pt universal batam
energy ube in batam indonesia in april the gas transportation and associated
agreements required to enable delivery of gas to sembgas were executed in october 2008
negotiation of the associated transportation agreements for batam sales are ongoing and
are expected to be signed in the second half of 2009 the government of indonesia has
approved the plan of development for three fields gajah baru naga and iguana long
lead item orders for steel compressors turbines and other critical equipment were placed
at the yearend a second tender for the engineering procurement and construction
contract was completed on 16 march 2009 it resulted in gross cost savings of
approximately us100 million with reductions in expected drilling costs total capex for the
whole project is now forecast at around us920 million gross maximum routine gas sales
will be in the order of 140 mmscfd and recoverable reserves from the three fields are
expected to exceed 500 bcf first gas is now expected before october 2011 and is still in
advance of the contractual obligation under the gsa with sembgas
on north sumatra block a commercialisation of the alur siwah alur rambong and julu
rayeu fields continued with signature in april 2008 of a second gsa with pln the state
electricity company for the longterm supply of 15 bbtud of gas the psc terms for
extension are being amended in line with the new standard psc for indonesia and are
awaiting government approval to compensate for changes in psc terms an amendment to
the first gsa with pt pupuk iskandar muda pim has been signed the resulting increased
gas sales price will have a floor of us650 per million british thermal units mmbtu
indonesia
philippines
vietnam
india 07
premier oil plc 2008 annual report and financial statements
approval for the plan of development for the gas fields was received in january and front end
engineering design feed commenced in july and is currently nearing completion early gas from
alur rambong is targeted for 2010 whilst first gas from the main development of alur siwah is
expected in 2011 a heads of agreement was signed with exxonmobil in november for use of
their facilities for transportation and a fully termed agreement is expected to be finalised in the first
half of 2009 drilling is expected to begin on alur rambong by early 2010
work on the reactivation of the tualang and lee tabue oil fields started in late 2008 and is
continuing up to six wells may be worked over and tested and subsurface studies have indicated
that there is potential to restart production from fields previously abandoned in 2001 plans for a
larger scale reactivation will be based on the results of this initial programme
exploration activities during 2009 will focus on the drilling of the anoa deep well expected in the
third quarter and maturing of other licences for further exploration in 2010
on the buton block a 2d seismic programme began in early 2008 and processing is nearing
completion during 2009 the operator will finalise studies to determine a location to be drilled in 2010
on the tuna block the acquisition of 2400km of 2d seismic was completed in october
interpretation focused on maturing and high grading the current prospect inventory in parallel with
the work programme in premier’s vietnam block 0703 immediately to the north it is now
anticipated that two wells on the tuna block will be drilled in early 2010
in partnership with the government authority migas premier has been awarded joint study
participation for three blocks in north sumatra east asahan east kalimantan east benjkanai and
offshore nw java north merak studies include reprocessing of seismic data and acquisition of
gravity data
vietnam
following the interpretation of the 2007 3d data over block 12w premier drilled a successful
appraisal well in the chim sáo field in 2008 which tested two zones at a combined rate of 4330
bopd plus 35 mmscfd all joint venture and government approvals for the project were achieved in
late 2008 as a result of the changing cost environment the development plan is being reengineered
to a single platform development with resultant cost reductions construction work on the wellhead
platform has commenced in vietnam discussions are ongoing with potential providers of a floating
production storage and offtake vessel fpso for leasing to the field owners and final execution
of both the fpso lease agreement and the epci contract await conclusion of this process
during 2008 premier drilled three further exploration prospects in block 12w the chim ung1
well intersected 15 metres of net oil pay in a good quality reservoir a sidetrack was drilled into
the adjacent chim boi fault block which did not encounter hydrocarbons the chim công1 well
tested oil at subcommercial rates with seven metres of net oil pay premier continues to evaluate
these well results ahead of the expiry of the psc exploration period late in 2009
premier became operator of block 0703 in late 2007 and in 2008 we acquired a 2d seismic
programme to define the location of two exploration wells the first of which is planned for may
2009 the second well will follow at yearend the exact schedule is dependent on the duration of
intervening wells drilled by the rigshare consortium which premier is leading in february 2008
premier was awarded block 10410905 and has since begun geological studies and geophysical
reprocessing of seismic data to better understand the exploration potential of this acreage
offshore northern vietnam
performance 08
premier oil plc 2008 annual report and financial statements
chief executive’s review continued 
philippines
the monte cristo1 exploration well on the sc43 licence proved to be dry and the well was
plugged and abandoned premier’s costs for the well were carried under a farmout
agreement premier and its partners are currently carrying out exploration activities over a
prospective trend in the panaon limestone formation found with new seismic data obtained
in early 2008
india
premier is maintaining a limited presence in india pending resolution of the signature of the
ratna licence with the government of india
middle eastpakistan
pakistan
production net to premier in 2008 was 14550 boepd an increase of about 15 per cent as
compared to the 12700 boepd in 2007 surpassing previous records this additional
volume was due to increased gas demand which was primarily met through additional
supplies from the zamzama and bhitbadhra gas fields
the qadirpur field produced an average of 4060 boepd from premier’s working interest of
475 per cent 2007 3980 boepd the qadirpur plant capacity enhancement project was
completed in 2008 with first gas achieved by the end of january 2009 a gsa was signed
with sui northern gas pipelines ltd for the supply of 75 mmscfd permeate gas equivalent
to 40 mmscfd processed gas with first gas expected in 2010 six new production wells were
drilled and tiedin to optimise increased processed gas sales the qadirpur deep1 well
was tested flowing 45 mmscfd of high quality gas from hitherto undrilled reservoir zones
below the qadirpur field production from this zone is expected onstream during 2009
the kadanwari field produced an average of 1225 boepd in 2008 2007 1260 boepd from
premier’s 1579 per cent working interest despite natural production decline field production
was maintained at 2007 levels largely due to tiein of the new k18 well a new production
well k17 was drilled and tiedin to the gas plant ahead of schedule on 30 december 2008
to maintain and increase the production levels of the field k14st is currently being drilled
with further wells planned in 2009
the zamzama field produced an average of 6075 boepd in 2008 2007 4620 boepd from
premier’s 9375 per cent working interest the zamzama phase2 development project was
commissioned in 2008 for production of high calorific value hcv gas this resulted in a
production increase in 2008 of 32 per cent over 2007 levels
bhitbadhra production was 3190 boepd in 2008 2007 2840 boepd from premier’s 6 per
cent working interest an increase of 12 per cent over last year the increase was due to the
completion of the phase 2 development which enhanced plant capacity from 270 mmscfd
to 320 mmscfd facilitating first gas from the badhra field and accelerated production from
the bhit field
in zarghun south feed is currently in progress and first gas is expected in 2010 premier’s
costs pertaining to its 375 per cent interest in zarghun south are substantially carried by
the operator
egypt
pakistan 09
premier oil plc 2008 annual report and financial statements
egypt
the al amir se1 well drilled in october 2008 encountered oil in the kareem formation opening
up a new play in the area the well tested over 3000 bopd and 425 mmscfd of associated gas
an appraisal well was then drilled on the discovery at yearend encountering two kareem sandstones
with 42ft of net pay this second well tested 5785 bopd of 42° api with 78 mmscfd of gas from
one of the two 20ft zones – the second zone will be perforated at a later date
in addition the 2005 al amir discovery was reevaluated and the original al amir1 well was reentered
and sidetracked in december in order to reappraise the well as a potential producer the sidetrack
confirmed the lateral extension of the original reservoir and also encountered deeper pay the upper
zone was tested with a sustained rate of 416 bopd of 16° api the lower pay will be tested at a
future date
development plans to bring the al amir and al amir se wells into early production were submitted
to egyptian general petroleum corporation egpc and production on al amir se commenced in
february 2009 flow rates had risen to over 3000 bopd gross by early march the oil is being
produced from the discovery well al amir se1x and the first appraisal well al amir se2x a 7km
pipeline has been laid between these two wells and the gazwarina facilities to which the oil is
being transported the al amir1 well is intended to be brought onto production shortly
abu dhabi
the joint venture continues to pursue the acquisition of upstream oil and gas assets across the middle
east and north africa with a particular focus on future projects in abu dhabi and iraq an office has
opened in abu dhabi and is staffed by a small team of secondees from premier and emirates
international investment company llc eiic
north sea
uk and norway
production in the uk amounted to 9300 boepd 2007 9850 boepd representing 25 per cent of
the group total 28 per cent in 2007 operational difficulties on the scott field particularly in the
fourth quarter were offset by successful programmes of infill drilling on other fields
the wytch farm oil field contributed 2965 boepd production net to premier similar to 2007 a strong
underlying production performance was maintained by a proactive wellwork campaign and minimal
production interruptions at the start of the year the m20 injection well was brought on line and
together with other water handling improvements has helped to restore reservoir pressure the
b41 rig was then mobilised to furzey island to drill the k08 and l13 infill wells and three workovers
a subsequent a12 sidetrack well has exceeded expectations and will be brought on line shortly
the wareham field is also back in production and the infield pipeline replacement project has been
completed with testing and commissioning completed in early 2009
production from the scott and telford fields was lower than expected at 3525 boepd net 2007
3700 boepd work on facility projects designed to improve reliability and extend facility life was
ongoing during the second half of the year two power generator units have now been upgraded
modifications to the sage export pipeline to import gas have been rescheduled to 2009 in october
2008 a three to four well infill drilling programme commenced
net production from kyle was 2500 boepd an increase on 2007 as a consequence of improved
operational performance and a full year under gas lift production performance during the second
half of 2008 was more reliable due to facility modifications to the banff fpso compressor system
during september work continues to optimise the operation of the three producing wells
norway
united kingdom
performance 10
premier oil plc 2008 annual report and financial statements
chief executive’s review continued 
the fife area where the planned suspension of production occurred on 2 may accounted
for the remainder of uk net production subsea facilities were made safe and the fpso unit
departed the field in september removal of remaining risers is scheduled for 2009 after
which the field will be suspended pending redevelopment or future abandonment
discussions have been held with a number of parties interested in participating in further
appraisal and redevelopment of the fields
on the frøy field in norway pl364 a plan of development was submitted to the authorities
in september recent events in the banking markets however have impacted the planned
contractor financing of the jackup production unit and development planning is now
progressing for first oil in 2013 the pl364 licence owners have agreed to use the delay to
implement cost reduction measures and to investigate opportunities for third party tieins
in addition to existing discoveries in the area surrounding frøy several new wells in the area
are planned by operators during 2009 having satisfied the initial licence work commitment
the frøy field partners have been granted a 10year licence extension by the authorities
exploration activities in the north sea focused on remaining potential in the uk portfolio
and moving towards drilling up the norwegian acreage
on block 2322b in the uk the sparrow well was farmed out to oilexco and bg the well
was drilled in march to a depth of 10598ft 50ft into the ekofisk formation fulfilling licence
commitments good reservoir sands were penetrated but unfortunately these were water
wet the well was drilled at zero cost to premier
subsequently oilexco and bg announced the discovery of oil in the deeper moth prospect
on the adjacent block 2321 this discovery has encouraging implications for the block 2322b
licence and the deeper jurassic prospectivity bg has farmin rights to the deeper prospect
on block 2322b under which premier would receive a partial carry whilst reducing equity
premier was awarded the operatorship of block 77 on the norwegian side of the median
line in the apa 2008 licence round this block adjoins the 2322b licence and provides
premier with complete coverage of the jurassic prospectivity identified adjacent to the
moth discovery
in norway on pl407 failure by the operator to obtain approval to bring the contracted rig
into norwegian waters has resulted in the bream appraisal well slipping to the third quarter
of 2009 this well will now be drilled with an alternative rig a 12month extension to the
licence deadline has been granted by the norwegian ministry of petroleum and energy
on the premieroperated licence pl406 the 3d seismic acquisition was completed as
planned in april processing of the new data commenced and initial fast track volumes were
received ahead of schedule site surveys and leg cores for the well are planned for the
second and third quarters of 2009 respectively a rig has been contracted to drill the
gardrofa prospect expected to spud in the third quarter of 2010
the recent jordbaer discovery has significantly enhanced the potential of our adjacent
licence pl374s and the decision has been taken to enter the drilling phase of this licence
with an expected well in 2010 in the pl359 licence immediately south of the 2007 luno
discovery a well is planned for the fourth quarter of 2009
the pl378 licence has been successfully farmed down with premier retaining an equity
position of 20 per cent in the licence the carried well is planned on the grosbeak north
prospect and will spud in the second quarter of 2009
premier has exited the pl419 licence disposing of its 25 per cent interest to nexen
the operator 11
premier oil plc 2008 annual report and financial statements
west africa
mauritania
in mauritania chinguetti production averaged 11700 bopd 950 bopd net to premier in 2008
the chinguetti phase 2b development programme comprising three workovers and two new
production wells was completed in the fourth quarter of 2008 increasing gross production from
10000 bopd to 17100 bopd by yearend production performance will be carefully monitored
during 2009 the operator continues to review and assess remaining potential within the field for
a future drilling campaign
evaluation of opportunities and development options on psc a and psc b are progressing in 2008
the joint venture drilled the bandanw well and sidetrack and the banda east well with the objective
of defining the banda gas and oil resources and commercial viability both wells were suspended as
potential future producers the operator continues working on the field development plan with
target completion by mid2009 for an investment decision
the operator is reevaluating the tiof field and proposing to reprocess the seismic data to assist in
better defining the subsurface and progressing this discovery to a development decision
the joint venture partnerships are currently in discussions with the mauritanian government to
extend the existing pscs
congo
in congo a farmout of 27 per cent of our equity was completed providing significant funding for a
possible twowell programme on the marine ix licence following the farmdown premier retains a
315 per cent equity and anticipates spudding the first of the albian raft prospects frida in july
2009 the transocean aleutian key semisubmersible rig has been contracted to drill the frida well
and preparations for the drilling operation are well advanced with the environmental impact study
completed and long lead items acquired further progress has also been made in the evaluation of
our deep water exploration block focusing on the tertiary channel sands that have proven
productive in the adjacent blocks
the frida prospect is a large untested albian raft with multiple stacked reservoir seal pairs and
potential reserves of 170 mmboe
sadr
the company’s exploration rights in the saharawi arab democratic republic sadr remain under
force majeure awaiting resolution of sovereignty under a united nations mandated process
mauritania
sadr
congo
performance 12
premier oil plc 2008 annual report and financial statements
financial review 
net cash at 31 december 2008 amounted to us1173
million 2007 net cash of us790 million together with
our undrawn cash facilities of us2750 million this will
contribute substantially towards the financing of
premier’s significant development programme over
the next three years
economic environment
2008 was a turbulent year for the world economy and for oil and gas prices in particular
brent opened the year at us97bbl reached a peak of us147bbl in july 2008 before
falling back to end the year at us35bbl the early part of 2009 has seen continued
volatility but prices have recovered to around us45bbl on average
the deterioration in the oil price environment has led to downward pressure on operating
and development costs which had increased during the recent period of sustained rising
commodity pricing and increasing activity levels premier is capturing the benefits of falling
costs in rig rates and development costs
income statement
production levels in 2008 on a working interest basis averaged 36500 boepd compared
to 35750 boepd in 2007 on an entitlement basis which allows for additional government
take under the terms of our pscs production was 31750 boepd 2007 31450 boepd
realised oil prices averaged us945bbl compared with us723bbl in the previous year
gas production averaged 148 mmscfd 25300 boepd during the year or approximately
69 per cent of total production average gas prices for the group were us657 per
thousand standard cubic feet mscf 2007 us560mscf gas prices in singapore which
are linked to high sulphur fuel oil hsfo pricing which in turn is closely linked to crude
oil averaged us152mscf 2007 us113mscf during the year
total sales revenue from all operations was 13 per cent higher than 2007 at us6552 million
2007 us5782 million as a result of higher production and commodity prices this figure
includes a reduction of us159 million arising from the price ceilings in our hedging contracts
cost of sales was us3176 million 2007 us2675 million excluding the effect of inventory
movements underlying unit operating costs were higher at us95 per barrel of oil equivalent
boe 2007 us90boe due to a full year of increased production from the scott field in
the north sea amortisation includes the effect of an impairment charge of us319 million in
respect of the chinguetti field in mauritania underlying unit amortisation excluding impairment
fell marginally to us80boe 2007 us82boe exploration expense and prelicence
exploration costs amounted to us429 million 2007 us653 million and us158 million
2007 us83 million respectively following deferral of the bream appraisal well in norway
to 2009 administrative costs were stable at us172 million 2007 us177 million
operating profits were us2617 million a 19 per cent increase over the prior year finance
costs net of interest revenue totalled us124 million 2007 us75 million pretax profits
were us2776 million 2007 us1470 million this included a noncash gain relating to
mark to market revaluation of the group’ s gas hedges totalling us215 million 2007 noncash
tony durrant
finance director
operating profit
0
100
50
150
200
250
300
2006 2007 2008
 million 13
premier oil plc 2008 annual report and financial statements
“profit after tax reached a record
us983 million 2007 us390 million
basic earnings per share were 1208 cents
2007 476 cents”
cash flow from
operating activities
0
100
50
150
200
250
300
350
400
2006 2007 2008
 million
net cash
0
40
20
60
80
100
120
140
2006 2007 2008
 million
loss of us249 million the taxation charge totalled us1793 million 2007 us1080 million
due to underlying higher taxable profits profit after tax reached a record us983 million
2007 us390 million basic earnings per share were 1208 cents 2007 476 cents
cash flow
cash flow from operating activities before movements in working capital amounted to us4781
million 2007 us4081 million after working capital items and tax payments cash flow from
operating activities rose 31 per cent to us3523 million 2007 us2695 million capital expenditure
was us2173 million 2007 us2612 million
2008 2007
capital expenditure  million  million
fieldsdevelopments 1240 657
exploration 905 1047
acquisitions – 886
other 28 22
total 2173 2612
the principal development projects were the qadirpur plant capacity enhancement project
kadanwari development wells zamzama phase 2 project bhitbadhra phase 2 project wytch farm
infill programme scott infill programme and upgrade of the power generation units chinguetti
phase 2b development and long lead equipment and interim work for wellhead platforms
pipelines and fpso on the chim sáo field in vietnam
net cash position
net cash at 31 december 2008 amounted to us1173 million 2007 net cash of us790 million
together with our undrawn cash facilities of us2750 million this will contribute substantially
towards the financing of premiers significant development programme over the next three years
2008 2007
net cash  million  million
cash and cash equivalents 3237 3320
convertible bonds 2064 2000
other longterm debt – 530
net cash 1173 790
 excluding unamortised issue costs and allocation to equity
 excluding unamortised issue costs
hedging and risk management
the board’s policy continues to be to lock in oil and gas price floors for a portion of expected
future production at a level which protects the cash flow of the group and the business plan such
floors are purchased for cash or funded by selling calls at a ceiling price when market conditions are
considered favourable all transactions are matched as closely as possible with expected cash flows
to the group no speculative transactions are undertaken
during 2008 oil hedges for 18 million barrels mmbbls matured for which a payment under the
terms of the hedges arose during the year of us81 million at the end of 2008 a total of 72 mmbbls
was hedged approximately 18 mmbbls per annum under a physical offtake agreement representing
approximately one half of uk oil production until december 2012 with an average floor price of
us39bbl and a cap of us100bbl in early 2009 further hedging was undertaken which for the
same volumes of 18 mmbbls a year lifted the floor to us50bbl for 2010 and 2011 in return for a
cap reduction to us80bbl and a cash premium of us58 million
during 2008 gas hedges for 120000 metric tonnes mt expired for which payments of us78 million
were made during the year at the end of 2008 a total of 522000 mt of hsfo was hedged
approximately 120000 mt per annum representing one third of indonesian gas production until
june 2013 with a floor price of us250mt and a cap of us500mt
performance 14
premier oil plc 2008 annual report and financial statements
financial review continued 
premier’ s gas hedging is required to be marked to market at the balance sheet date the aggregate valuation is a us29 million
liability 2007 us244 million liability generating a us215 million noncash gain in the 2008 income statement from
1 july 2008 oil hedges were incorporated within the pricing terms of physical offtake agreements for the underlying oil
production mark to market revaluations are not therefore applied to the new oil hedges at yearend liabilities accrued
under the old hedges will be amortised to the income statement over the life of the new hedges and the resulting gain
is included in total gains for the year in respect of oil hedges of us68 million
as the group reports in us dollars exchange rate exposures relate only to sterling receipts and expenditures which are
hedged in dollar terms on a shortterm basis the group recorded a loss of us25 million on such hedging at yearend
2007 us04 million
cash balances are invested in shortterm bank deposits aaa rated liquidity funds and a1p1 commercial paper subject
to board approved limits
the group undertakes an insurance programme to reduce the potential impact of the physical risks associated with its
exploration and production activities in addition business interruption cover is purchased for a proportion of the cash
flow from producing fields
going concern
the group monitors its capital position and its liquidity risk regularly throughout the year to ensure that it has sufficient
funds to meet forecast cash requirements sensitivities are run to reflect latest expectations of expenditures forecast oil
prices and other factors to manage the risk of funds shortfalls or covenant breaches in order to ensure the group’s ability
to continue as a going concern further details of the group funding facilities and liquidity position are included in the
financial statements and related notes
although the world economic crisis has created uncertainty at the current time the directors consider that the headroom
provided by the available borrowing facilities gives them confidence that it has adequate resources including taking
into account the subsequent event in note 26 in the notes to the consolidated financial statements to continue as a going
concern as a result they continue to adopt the going concern basis in preparing the 2008 annual report and financial
statements
business risks
premier is an international business which has to face a variety of strategic operational financial and external risks under
these distinct classes the company has identified certain risks pertinent to its business including exploration and reserve
risks loss of key human resources drilling and operating risks security risk in area of operations costs and availability of
materials and services economic and sovereign risks market risk foreign currency risk loss of or changes to production
sharing or concession agreements joint venture or related agreements and volatility of future oil and gas prices
effective risk management is critical to achieving our strategic objectives and protecting our assets personnel and
reputation premier manages its risks by maintaining a balanced portfolio through compliance with the terms of its
agreements and application of appropriate policies and procedures and through the recruitment and retention of skilled
individuals throughout the organisation further the company has focused its activities mainly in known hydrocarbon
basins in jurisdictions that have previously established longterm oil and gas ventures with foreign oil and gas companies
existing infrastructure of services and oil and gas transportation facilities and reasonable proximity to markets
a summary of the principal risks facing the company and the way in which these risks are mitigated is provided in this
report and also on the company’s website wwwpremieroilcom
key performance indicators
change
improvement
2008 2007 deterioration
lti and rwdc frequency 040 186 78
production kboepd 365 358 2
cash flow from operations  million 3523 2695 31
operating cost per boe  95 90 6
gearing 0 0 –
realised oil price per barrel  945 723 31
realised gas price per mscf  657 560 17
 lost time injuries lti and restricted work day cases rwdc per million manhours worked
 gearing is net debt divided by net assets for 2008 and 2007 the group had a net cash position 15
premier oil plc 2008 annual report and financial statements
social performance review 
introduction
premier is committed to applying the high ethical standards necessary to maintain our reputation
as an employer and operator of choice to deliver this goal our investment and operational
decisions take appropriate account of the social health safety and environmental impacts that may
arise during our activities in a year that saw dramatic changes in the global financial and energy
markets we remained committed to investing in the countries and communities in which we
operate refused to cut corners on maintaining excellence in hse management and stayed on
track in implementing our plans to reach our aspiration of being an industry leader in social
performance our project teams in vietnam and indonesia have remained committed to safe
design and have shown tenacity in balancing environmental protection considerations with the
economic viability of options in the rapidly changing financial conditions
social performance reporting
we publish a social performance report every two years and in the intermediate years prepare a
communication on progress our social performance report for 20067 was published early in
2008 and can be found on our website wwwpremieroilcom for 2008 we are publishing a
communication on progress in accordance with the requirements of the united nations global
compact principles
social responsibility
in 2008 premier saw success and recognition for health safety environmental and social
performance and in many areas we exceeded expectations in addition to recording our best safety
performance to date we received an hse award for operational excellence from petro vietnam for
our drilling operations and in indonesia were awarded a higher level environmental performance
rating by the ministry of environment for our anoa field production operations only seven out of
55 exploration and production companies achieved this
we remain keenly aware of our responsibilities as a corporate citizen backed by a strong board
level commitment this year we have enhanced and implemented a coherent set of policies that lay
down the principles by which we manage human rights relationships with communities employment
practices business ethics the health and safety of people working in our operations and our
impact on the environment during 2008 we continued to work closely with local communities
employee representatives business partners and regulatory authorities to deliver our policies and
to make a positive difference within the localities where we operate
community and society
we continue to actively support social and community projects in the areas in which we work
around the world the nature of our presence varies in terms of size and duration and our
involvement in the community is designed to be consistent with the nature of that work
in indonesia our community development audit by the national upstream oil and gas regulator
bpmigas received the ‘green’ award the second highest possible certification we have
maintained our longterm community programmes which are predominantly designed to deliver
sustainable skills within the communities of the natuna islands which are closest to our offshore
activities our programmes include support for education organisational structures resources and
relationship building for local and village level officials support for local fishermen and training for
community health services
our deepening relationship with local communities was acknowledged by local government
officials in several speeches we consulted with local communities in order to identify their needs
correctly we responded by supporting training to improve local maternity infancy and elderly
health services moreover medicine and medical equipment was also supplied to improve public
health services in matak
in the education sector premier developed its commitment to early childhood education we
established a kindergarten in terbang village refurbished alquran and pertiwi kindergartens in
terempa village and revitalised kindergarten playgrounds we supported 33 kindergarten teachers
of the anambas district to pursue higher education focusing on the open university early
childhood education supplied books for libraries and also facilitated a local youth conference
performance 16
premier oil plc 2008 annual report and financial statements
social performance review continued 
in jakarta we distributed books to libraries for deprived students in cooperation with
university students who by distributing these books are encouraged to start assisting the
less fortunate students
premier also assisted an association for fishermen in putik village to nurture fisheries
ongoing projects include building a public health centre in candi village a public library in
jemaja and a kindergarten in rintis village
in vietnam we have been focusing on education and infrastructure our first projects delivered
buildings for the tan hung elementary school in binh phuoc province in 2006 we also
supported an upgrade to the elementary school in the thanh an commune can gio district
of ho chi minh and improved facilities for tan nghia elementary school in binh thuan
province we provided scholarships to allow 28 of the poorest children in the community
to attend the school
premier has invested in the construction of six bridges in the mekong delta providing safe
and reliable access to the nearest town for 28000 people careful consideration is given to
the location of each bridge to ensure that those in the poorest areas benefit
in pakistan we worked with our joint venture operators to develop and implement
community development projects in the areas of operation the main activities are
education and health where the projects are designed to be sustainable and include clinics
schools and water supply schemes in addition to promote higher education in the field of
oil and gas a premier oil chair is being funded in the petroleum engineering department
of the university of engineering and technology
during 2008 we reduced the scale of our operations in india following our lack of drilling
success in assam but were pleased to provide the villagers of phaneng in the tinsukia
district with a tourist ecocentre silchar town our restored drilling site has become an
established island site it is now protected from the endemic severe flooding and may be
used for the benefit of the community
human rights
we support the fundamental rights articulated in the universal declaration of human rights
and regularly review our policies and practices we have updated our human rights policy to
explicitly recognise our responsibility to respect the rights of indigenous peoples in the
countries in which we operate
employment practices
our policy is to ensure equal opportunities in career development promotion training and
reward for all of our employees we continually monitor the skills required to manage our
activities and ensure there is a balance of skilled experienced expatriate and local employees
in our overseas offices we seek to avoid discrimination in the workplace in support of our
aim to attract develop and retain talented and committed people to deliver our business
goals and objectives we have instigated a new individual development pathway model
which will make more visible to employees seeking promotion and individual growth the
necessary competence requirements in late 2008 we also began a programme of specific
training in leadership to enhance communication relationships business behaviour
teamwork coaching change management and strategic leadership all employees in asia
have participated in the initial foundation phase of this programme
following feedback from last year’s employee satisfaction survey we have embarked on a
programme of actively promoting and revising our key policy statements procedures and
standards throughout the company together with enhancing the business management system 17
premier oil plc 2008 annual report and financial statements
an ethical approach to business
integrity honesty and fairness are fundamental to the way we conduct our business we recognise
the value in fostering a culture of transparency honesty and accountability both internally and in
dealings with third parties our objective is to ensure the highest ethical standards and anticorruption
measures are applied within all of our operated entities and external business relationships
we are a signatory to the united nations global compact and have given an undertaking to help
realise the secretary general’s vision of a more sustainable and inclusive global economy
health and safety performance
premier is committed to providing a safe healthy and secure working environment for all of our
employees and contractors in 2008 we delivered the best safety performance in our history
recording only one lost time injury in 24 million manhours worked during this period we
maintained our production operations in the anoa field in indonesia conducted offshore drilling
operations in vietnam and gabon onshore drilling in india offshore seismic surveys in vietnam and
indonesia and project construction work in vietnam
we continue to enhance our approach to process safety requiring that ukstyle safety cases are in
place for all our current and future production operations and that our maintenance systems are
independently verified we introduced asset integrity protocols for assessing new business
opportunities as part of our due diligence process
occupational health and safety
in 2008 we incurred only one significant injury one lost time injury and recorded a combined
ltirwdc frequency of 040 down from 186 in the previous year
2008 2007 2006 2005 2004
number of lost time injuries lti 1 34 25
number of restricted work day cases rwdc – 4– 1 2
target ltirwdc frequency
per million manhours worked 172 190 210 260 290
actual ltirwdc frequency
per million manhours worked 040 186 127 110 142
premier underwent a number of ohsas 18001 surveillance audits on our drilling and production
operations around the world ohsas 18001 is a standard to which a company’s health and safety
management system may be certified certification demonstrates that an accredited body has
independently verified that premier’s management systems fully comply with the standard
successful certification and ongoing surveillance audits confirm that premier continues to meet the
highest standards wherever we drill or operate we have held this prestigious award since 2004 for
drilling and 2006 for production we are pleased to report that both our drilling and production
functions retained their ohsas 18001 certification in 2008
we are continuing with our programme to ensure that all employees and longterm consultants
and contractors undertake thorough fitness for work health examinations before working offshore
or in remote areas our travel risk assessment process ensures that business travellers are made
fully aware of the inoculations necessary for their destination of any specific or new health risks and
of appropriate contingency measures
performance 18
premier oil plc 2008 annual report and financial statements
social performance review continued 
process safety performance
premier follows best industry practice wherever we operate in indonesia although not
mandatory we prepared a ‘safety case’ to uk standards for our operated production
facilities and in 2008 conducted a thorough review to ensure that all changes to the
facilities manning levels operating procedures and risk assumptions were captured we are
pleased to report that this exercise has been completed and that risks remain below the
industry average this process will be continued in our development projects in both
indonesia and vietnam
our maintenance management system was enhanced to identify and capture safety critical
equipment performance in 2008 we moved closer to a full verification scheme and are in
the process of contracting an independent verification body to confirm that equipment
performance is meeting the expectations in the safety case
one area of focus is staff competence we now have new initiatives to provide international
vocational qualifications using best oil industry training standards the first stage of this
process is the preparation of training and competency matrices for each job description
and the identification of training courses and on the job assessment to international
standards we are committed to the full implementation of these initiatives recognising that
delivery of the full process will take some time
in line with our desire for a robust process safety management system for our production
facilities we have revised our drilling management system to include the requirement for a
full independent assessment of the condition functionality and maintenance regime of all
safety critical equipment on the rigs this was implemented throughout 2008 and helped us
realise our best ever safety performance
environmental performance
our environmental strategy is to reduce our environmental emissions and discharges to as
low a level as is reasonably practicable alarp this is in line with our corporate hse policy
based on this approach we have been conducting an alarp assessment for each operated
project as part of its environmental aspects analysis and have also encouraged our non
operated joint venture partners to adopt this approach
we have developed a formal premier oil environmental monitoring system to capture all
our emissions discharges and chemical use from source drilling and production report data
we expect this system to compare data by environmental aspect thereby enabling us to
demonstrate achievement of alarp  and helping us with performance improvements the
pilot system is being trialled before being rolled out to all business units
we believe formalised and integrated management systems are a key driver in sustaining
operations and reducing environmental impacts premier has been iso 14001 certified since
2004 for drilling operations and we have been working to achieve compliance in production
operations in 2006 we achieved certification for production but this was suspended in 2007
when we lost a little of our impetus for improvement we are pleased to report that in 2008
we retained our drilling certification and regained our production certification 19
premier oil plc 2008 annual report and financial statements
environmental indicators
we report environmental performance in line with the international petroleum industry
environmental conservation association ipieca oil and gas industry guidance on voluntary
sustainability reporting 2005 in the following four core areas as detailed below
2008 2007
greenhouse gases ghg tonnes per thousand tonnes of production 167 171
oil spills tonnes – 137
oil in produced water parts per million 23 20
energy use gigajoules per tonne of production 20 18
emissions
we calculate our greenhouse gas co
2
equivalent emissions both in tonnes emitted and in tonnes
per thousand tonnes of production for our production and drilling operations across our global
portfolio in 2008 we emitted approximately 202755 tonnes of greenhouse gas in total this
equates to 167 tonnes per thousand tonnes of production down from 171 in 2007 this shows we
are continuing to improve our performance year on year
midway through 2008 we assessed the main impacts on emissions in the anoa field in indonesia
and adopted new well management strategies and spare parts availability to improve reliability and
emissions in 2009 we plan to evaluate options for process and technology enhancements to
reduce emissions in this field
we benchmark our environmental performance by contributing our data to an industry database
compiled and published by the association of oil and gas producers ogp our greenhouse gas
emissions performance has been broadly in line with the ogp average of 162
spills and discharges
in 2008 there were no reported environmental incidents worldwide down from 15 in 2007 this
significant improvement was as a result of our continued focus on pollution prevention and the
implementation of more stringent drilling rig acceptance criteria which now includes containment
surveys
there was no significant change in the volume of produced water discharged from our anoa
production facilities from 2007 to 2008 the average concentration of oil in produced water of
23 parts per million remains well within the limits set by the indonesian government
resource use
the main sources of energy that power our facilities are fuel gas and diesel our energy use has
been consistent over the last five years and remains within the range of 18 to 20 gigajoules per
tonne of production
additional indicators
we also collate data categorised by ipieca as ‘additional’ including solid waste and fresh water
use we are continuing to refine our data collection and internal auditing procedures for these
additional indicators to improve accuracy
performance board of directors 
sir david john 70 became nonexecutive
chairman in march 1998 he was non
executive chairman of the boc group plc
from january 1996 until january 2002 and
the nonexecutive chairman of balfour
beatty plc from may 2003 to may 2008 sir
david is currently the chairman of the british
standards institution and was appointed
chairman of the royal society for asian
affairs in january 2009 he is an advisor to
the calor gas board and a member of the
cbi’s international advisory board sir david
is the chairman of premier’s nomination
committee
robin allan 49 joined premier from
burmah oil in july 1986 working initially as
a geologist after technical and new venture
roles he spent six years in south east asia
initially managing premier’s asian existing
and new venture business and later
becoming premier’s country manager in
indonesia he became a member of the
premier board in december 2003 as director
of business development
joe darby 60 joined premier’s board as a
nonexecutive director in september 2007
mr darby has over 35 years of experience in
the energy sector including eight years with
shell petroleum before becoming managing
director of thomson north sea ltd he has
held a number of senior roles including
chief executive with lasmo plc mr darby
has held nonexecutive roles at british
nuclear fuels plc mowlem plc and centurion
energy inc and was chairman of mowlem plc
20052006 and faroe petroleum plc
20032007 mr darby is a member of
premier’s audit and risk remuneration and
nomination committees
t ony durrant 50 joined premier in june 2005
after qualifying as a chartered accountant
with arthur andersen he joined lehman
brothers in london initially as an oil sector
analyst he joined the investment banking
division of lehman in 1987 and from 1997
was a managing director and head of the
european natural resources group in this
role he managed both client relationships
and numerous transactions for a variety
of european and north american clients
he is a nonexecutive director of clipper
windpower plc he joined the premier board
in july 2005 as finance director
neil hawkings 47 joined premier in
may 2005 after more than 20 years with
conocophillips where he worked in a variety
of engineering commercial and management
roles around the world undertaking
assignments in the uk dubai and indonesia
he joined the premier board in march 2006
as operations director
david lindsell 61 joined premier’s board
in january 2008 as a nonexecutive director
he was a partner at ernst  young llp for
nearly 30 years and has extensive experience
across a range of industry sectors with a
strong knowledge of the oil and gas sector
mr lindsell is currently a nonexecutive
director of drax group plc and deputy
chairman of the financial reporting review
panel he is a member of the supervisory
board of the european financial reporting
advisory group mr lindsell is the chairman
of premier’s audit and risk committee and
a member of the remuneration committee
simon lockett 44 chief executive joined
premier in january 1994 from shell and has
worked in a variety of roles for premier
including the management of investor
relations as commercial manager in
indonesia and as country manager in
albania he became a member of the premier
board in december 2003 as operations
director he was appointed chief executive
in march 2005 mr lockett is a member of
premier’s nomination committee
john orange 66 joined premier’s board as
a nonexecutive director in february 1997
he held a variety of senior international
management and legal posts during his
30 years with the bp group mr orange is
currently a nonexecutive director of exile
resources inc he is premier’s senior
independent nonexecutive director
chairman of the remuneration committee
and a member of the audit and risk and
nomination committees
professor david roberts 65 joined premier
in june 2006 as a nonexecutive director
professor roberts has over 30 years
experience in all aspects of exploration
worldwide and extensive knowledge of deep
water areas sedimentary basins stratigraphy
and prospect assessment he spent 22 years
with bp in a number of technical roles
including global exploration adviser and
distinguished exploration adviser professor
roberts is a nonexecutive director of
getech plc and has established his own
geoscience consultancy he is a visiting
professor and fellow of royal holloway
university of london the university of
southampton and ifp school in paris
professor roberts is a member of premier’s
remuneration and nomination committees
michel romieu 69 joined premier’s board
as a nonexecutive director in january 2008
mr romieu has over 30 years experience in
the international energy sector including
25 years with the elf group where he held
several senior positions including chief
executive of elf uk and the group’s gas
division he was elected president of the uk
offshore operator’s association for the year
1995 and held the position of director for
gas of cre the french energy regulator
from 2000 to 2003 he has established his
own consultancy specialising in providing
advice to the gas industry and is a lecturer
at the french petroleum institute mr romieu
is also president of uprigaz he is a member
of premier’s audit and risk committee
premier oil plc 2008 annual report and financial statements
20 david lindsell tony durrant joe darby
simon lockett professor david roberts
robin allan neil hawkings john orange
michel romieu sir david john
governance
premier oil plc 2008 annual report and financial statements
21 22
corporate governance report 
compliance and the role of our board
the company has established procedures and policies to ensure compliance with the code provisions set out in section 1 of the
combined code on corporate governance the code as recommended by the code we report below on how the main and
supporting principles of the code have been applied throughout the year and explain any areas where we have not complied with
any of the code’s provisions while this is an important exercise the board does not believe that good governance can be defined
merely in terms of compliance with a set of rules the overall purpose of the board is to represent the company’s owners ensure that
the company’s strategic objectives are properly pursued and the major business risks are actively monitored and managed this goes
beyond regulatory compliance and puts the interests of our shareholders as the board’s primary focus
the board considers that the company has complied with the provisions of the code throughout the year under review and
subsequently up to the date of this report except in those areas mentioned below
the board
the board of directors currently comprises the chairman the chief executive three other executive directors and five independent
nonexecutive directors brief biographical details of each director and a note of their board committee memberships are set out in
the board of directors section details of the executive directors’ service contracts and the nonexecutive directors’ letters of
appointment are laid out in the remuneration report
premier is an international business which has to manage a variety of political technical and commercial risks it is therefore important
that the board contains the appropriate mix of skills and experience to meet these challenges premier’ s board has such a mix given the
diverse business backgrounds of the nonexecutive directors they are encouraged to have direct contact with the company’ s senior
executives between board meetings and also encouraged to visit the company’ s operations abroad in order to familiarise themselves
with its activities and to meet local management the board visited the company’ s operations in norway in december 2008
the board is responsible for overall group strategy acquisition and divestment policy approval of major capital expenditure projects
the overall group debt and equity structure and consideration of significant financing matters the board has continued to focus its
efforts in 2008 on strategic issues which will create shareholder value monitoring performance against agreed objectives and
discussing future business opportunities
matters reserved for board decision are laid down in writing including the appointment of the company secretary who is
responsible for ensuring that board procedures and rules are applied a copy of the matters reserved for board decision can be
found on the company’s website wwwpremieroilcom formal procedures are in place to enable individual board members to take
independent advice where appropriate
the formal agenda for each board meeting is set by the chairman in consultation with the chief executive and the company
secretary formal board and board committee minutes are circulated to all directors at the next board meeting board members
receive a monthly report of the company’s activities which incorporates an update on the annual budget and progress against major
objectives in accordance with the authority given under the company’s articles of association the company has established a
standing committee of the board consisting of any two directors to carry out routine business the minutes of all meetings of this
committee are circulated to the board
in accordance with the company’s articles of association the board is allowed to authorise conflicts and potential conflicts of
directors where appropriate formal procedures are in place to ensure the board’s powers of authorisation of conflicts are operated
effectively and the procedures are followed the board determined that during 2008 these procedures were enforced and adhered
to accordingly
the chairman
the chairman’s role is parttime and he is a nonexecutive director his key responsibility is the leadership of the board ensuring its
effectiveness on all aspects of its role and setting its agenda between board meetings the chairman is responsible for ensuring the
integrity and effectiveness of the boardexecutive relationship this requires regular contact with the chief executive between board
meetings as well as contact with other board members shareholders joint venture partners and host governments in 2008 the
chairman visited several of the company’s overseas operations to meet senior industry and government representatives the
chairman and the nonexecutive directors meet periodically without the executive directors present and the nonexecutive directors
meet once a year without the chairman
the roles of chairman and chief executive are separate and their responsibilities are clearly established set out in writing and agreed
by the board
senior independent director
mr j r w orange who is chairman of the remuneration committee is the company’s senior independent nonexecutive director
in this role he is available to shareholders who have concerns that cannot be resolved through discussion with the chairman or
chief executive
premier oil plc 2008 annual report and financial statements 23
nonexecutive directors
the nonexecutive directors bring independent judgement to bear on issues of strategy performance and resources including key
appointments and standards of conduct nonexecutive directors comprise over one half of the board selection of suitable non
executive directors is a matter for board approval following recommendations made by the nomination committee
we require that our nonexecutive directors are free from any relationship or circumstances that could materially interfere with the
exercise of their independent judgement the board has determined that each of the nonexecutive directors with the exception
of the chairman is independent
at the time of his original appointment on 1 march 1998 the chairman was also considered independent by the board however
in accordance with the combined code the ongoing test of independence for the chairman is not appropriate sir david john
completed 11 years of service in march 2009 and in accordance with code provisions he will be considered for reelection at the
annual general meeting agm
mr j r w orange was appointed to the board in 1997 whilst his service exceeds the term referred to in the code the board
considers that his experience and longterm perspective of premier’s business continues to provide a most valuable contribution and
that it benefits from his input to the board’s deliberations
the board is strongly of the view that the important qualities when considering the issue of independence of nonexecutive directors
are independence of spirit and objectivity of mind and therefore regards mr j r w orange as an independent director in
accordance with code provisions he will be considered for reelection at the agm
induction training and development
new directors to the company receive a full induction to the company this consists of a ‘bible’ of information covering such items as
the most recent minutes terms of reference of board committees and matters reserved for board decision as well as meetings with
the board chief executive and other executive directors
the company has directors’ and officers’ liability insurance in place and details of the policy are given to new directors on appointment
reelection of directors
in accordance with the company’s articles of association one third of directors retire each year with their reappointment being
subject to the approval of shareholders this requires directors to submit themselves for reelection at least every three years in
addition any nonexecutive director having held office for more than nine years will be subject to reelection on an annual basis
board performance evaluation
the board and its directors are subject to regular appraisal the aim is to improve both individual contributions and group achievement
the board carried out a questionnairebased evaluation process in 2008 while it is not a fixed policy the current view of the board
is that alternation between internal and external reviews has significant merits not least in keeping the exercise fresh amongst
board members
the evaluation covered the performance of the board its principal committees the individual nonexecutive directors and the
chairman the results of the evaluation were reviewed by the chairman and discussed in detail by the board the directors have
concluded that following this evaluation the board and its committees operate effectively and also consider that each director is
contributing effectively and demonstrates commitment to the role
board committees
the board has established an audit and risk committee a remuneration committee and a nomination committee each of which
has formal terms of reference approved by the board the terms of reference for each committee can be found on the company’s
website wwwpremieroilcom the company secretary provides advice and support to the board and all board committees board
committees are authorised to engage the services of external advisers as they deem necessary in the furtherance of their duties at the
company’s expense the remuneration report provides details on the role and activities of the remuneration committee an audit
and risk committee report and a nomination committee report are also provided in this annual report
premier oil plc 2008 annual report and financial statements
governance 24
corporate governance report continued 
board committees continued
the number of meetings of the board and its committees during 2008 and individual attendance by directors is shown below
audit
board and risk remuneration nomination
number of meetings 82 7
1
1
attendance
sir david john 88 22 57 11
r a allan 88 12 ––
j darby 88 22 67 11
s j dobbie
2 3
33 11 12 11
a r c durrant 88 22 ––
r v emerson
2
33 11 33 11
n hawkings 88 12 ––
d c lindsell
4
78 22 56 –
s c lockett 88 22 57 11
j r w orange
5
78 12 77 11
professor d g roberts 88 – 67 11
m romieu
6
88 22 ––
notes
1 there were six scheduled meetings of the remuneration committee during the year the remaining meeting only attended by messrs r v emerson and
j r w orange was called to approve the detail of arrangements approved in principle by a prior scheduled meeting of the committee
2 messrs s j dobbie and r v emerson retired from the board and its committees on 6 june 2008
3 mr s j dobbie missed one remuneration committee meeting due to the rescheduling of the meeting
4 mr d c lindsell was appointed to the audit and risk committee on 17 january 2008 and the remuneration committee on 11 march 2008
5 mr j r w orange missed one board and audit and risk committee meeting due to the rescheduling of these meetings
6 mr m romieu was appointed to the audit and risk committee on 11 march 2008 he attended one meeting by invitation prior to his appointment
as a member of the committee
 by invitation
executive committee
the board has delegated the daytoday running of the group to the chief executive who has established an executive committee
to assist him in this role the committee is made up of each of the executive directors and the company secretary the executive
committee is chaired by the chief executive
the responsibilities of the executive committee include the development of group strategy for approval by the board portfolio
management and the monitoring of performance against the targets set by the board at its weekly meetings it also reviews health
safety environmental and security performance and operational business performance reports the executive committee is also
responsible for reviewing the information provided to the board
three regional business units – north sea and west africa middle eastpakistan and asia – manage the geographical spread of
business in the group each business unit is headed by a regional business manager who delivers against specific strategies and
performance targets set by the executive committee
internal control
the directors are responsible for establishing and maintaining the group’s system of internal control the internal control system is
regularly reviewed by the board internal control systems in any group are designed to meet the particular needs of that group and
the risks to which it is exposed and by their nature can only provide reasonable but not absolute assurance against material
misstatement or loss the key procedures which the directors have established with a view to providing effective internal control are
described below these procedures have been in place for the year under review and up to the date of approval of the annual report
and financial statements
management of business risks – this is an ongoing process in accordance with the turnbull guidance and has been established for
identifying evaluating and managing risks faced by the group this is based on each business unit and corporate function producing
a risk matrix which identifies the key business risks – strategic operational financial and external – the probability of those risks
occurring their impact if they do occur and the actions being taken to manage those risks to the desired level risk acceptance and
reduction objectives are defined with particular attention given to safety and environmental factors and applied to ensure that the
risks are at a level that is as low as reasonably practicable
the directors receive assurance directly from the business units and functional management through the completion of annual
declarations confirming compliance with the group’s policies procedures and risk management processes these processes are
designed to manage rather than eliminate risk of failure to achieve business objectives
premier oil plc 2008 annual report and financial statements 25
internal control continued
the company has adopted a framework model for application across the group and an annual report is produced in compliance with
that model and with the group risk management process the report is presented to the audit and risk committee
monitoring – a business management system bms is in force which regulates a wide range of daytoday activities both in the uk
and overseas offices including environmental controls health and safety regulations and political risks part of this bms is a
documented review and assurance activity which deals with the risk review and audit processes the purpose of the audit process is
to ensure that the policies and procedures within the bms are being adhered to the purpose of the risk review process is to identify
the significant risks to the business rate them consistently and ensure we have mitigating measures in place to manage them the
group health safety environment and security manager is accountable for the overall running of the process with the group
financial controller specifically responsible for the financial aspects
the effective operation of internal control procedures is reviewed during visits to the overseas offices by head office staff audits
of joint venture operations are carried out by joint venture partners on a regular basis
a process of business control reviews has been developed and implemented across the group this process is designed inter alia
to provide assurance to the board that the company is embedding effective risk management into its operations the report of each
review is presented to the audit and risk committee a rolling threeyear plan to cover all business units has been put in place
during 2008 a number of financial control reviews were carried out
vietnam finance and procurement control gap analysis
pakistan policy and procedures review
indonesia procurement practices review
all recommended actions following these reviews are being implemented
in addition a number of operational reviews took place in 2008
vietnam chim sáo project safety
indonesia gajah baru project safety
anoa production competency assurance
anoa production safety case
congo frida well environmental impact assessment
these operational reviews all produced satisfactory results
during 2008 the key business risks and internal control weaknesses identified were formally discussed by the executive committee
and the board on a periodic basis this process will continue during 2009
the board will receive regular reports on any major problems that have occurred and how the risks have changed over the period
under review
management structure – the board has overall responsibility for the group and there is a formal schedule of matters specifically
reserved for decision by the board each executive director has been given responsibility for specific aspects of the group’s affairs
the executive directors together with the company secretary constitute the executive committee which normally meets weekly
corporate accounting – responsibility levels are communicated throughout the group as part of corporate accounting and an
authorisation manual which sets out inter alia delegated authority levels segregation of duties and other control procedures
this manual was updated during the year to reflect the group’s focus on development projects in the mediumterm
quality and integrity of personnel – the integrity and competence of personnel is ensured through high recruitment standards and
subsequent training
budgetary process – there is a comprehensive budgeting system with an annual budget approved by the board covering capital
expenditure cash flow the income statement and balance sheet monthly results are reported against budget and revised forecasts
for the year are prepared regularly separate approval processes and limits are in place for unbudgeted expenditure items
investment appraisal – the group has clearly defined procedures for capital expenditure these include authority levels commitment
records and reporting annual budget and detailed appraisal and review procedures the authority of the directors is required for key
treasury matters including changes to equity and loan financing interest rate and foreign currency policy including foreign currency
hedging oil price hedging cheque signatories and opening of bank accounts comprehensive due diligence work is carried out
if a business or an asset is to be acquired
during 2008 the board reviewed the group’s system of internal control and is satisfied that all the controls in place are appropriate
to provide reasonable assurance against any material misstatement or loss the review is conducted on a regular basis and changes
are made to internal control systems to address any new risks or exposures arising as a result of changes to the business or the
business environment
premier oil plc 2008 annual report and financial statements
governance 26
corporate governance report continued 
going concern
after making enquiries and in light of the group’s available loan facilities the group budget for 2009 and the mediumterm plans
including those described in note 26 in the notes to the consolidated financial statements the directors have reasonable
expectation that the group has adequate resources to continue operations for the foreseeable future the going concern basis for
the financial statements has therefore continued to be adopted further details are set out in the financial review
communication with shareholders
communication with shareholders is given significant attention extensive information about the group’s activities is provided in the
annual report and financial statements and in the interim report which are made available to shareholders the company has also
produced a summary review document in each of the last six years highlighting premier’s capabilities and operations these
documents are available to all shareholders the company’s website wwwpremieroilcom also provides detailed information
on the group’s activities
in accordance with companies act 2006 provisions and the company’s articles of association the company uses its website as its
default method of publication for statutory documents the company operates a process of deemed consent shareholders are given
28 days to indicate whether they wish to continue receiving hard copies of all statutory documents by post before being deemed as
consenting to webbased communications consenting shareholders are sent notification in the post each time the company places
a statutory document on its website
the last ‘deemed consent’ process took place in 2007 all new shareholders will receive hard copies of statutory documents until the
next process is undertaken
shareholders are reminded that they have the right to request – at any time – all future communications to be sent by post or to
request a hard copy of a particular document which has been published on the company’s website
the company believes that the reduction in the number of unwanted communications printed and sent by post following this
‘deemed consent’ process not only results in cost savings to the company but also reduces the impact that the unnecessary printing
and distribution of reports has on the environment
the company continues to promote the premier oil plc share portal at wwwpremieroilsharescom by registering on the website
shareholders are able to access their shareholding online at their convenience and have the ability to update their shareholding
account eg change their address and submit queries on their account directly to the company’s registrars shareholders will also
have the ability to vote online prior to the 2009 agm the share portal also encourages shareholders to register to receive
communications by email rather than by post thus further reducing the number of documents printed and distributed shareholders
who have registered for this service will receive an email notifying them when the company has added a statutory document to its
website ensuring the prompt and efficient delivery of information for each new registration processed the company will donate
£1 to pure the clean planet trust a uk charity dedicated to combating climate change
the company has posted on its website guidelines advising shareholders of how to deal with potential boiler room scams where
shareholders may have received unsolicited phone calls concerning investment matters often where callers have stated they work for
a subsidiary of or on behalf of the company shareholders are advised to be wary of any unsolicited advice offers to buy shares at
discount or offers of free analysis reports as the company does not retain the services of any such business for these purposes
there is regular dialogue with institutional investors and the chairman chief executive and finance director who are the directors
responsible for dealing with shareholders ensure that other members of the board receive full reports of shareholder meetings
enquiries from individuals on matters relating to their shareholding and the business of the group are welcomed and are dealt with
in a timely manner all shareholders are encouraged to attend the agm to discuss the progress of the group
by order of the board
s c huddle
company secretary
25 march 2009
premier oil plc 2008 annual report and financial statements 27
audit and risk committee report 
the audit and risk committee comprising only nonexecutive directors normally meets at least three times a year for a detailed
review of the group’s accounts and its internal controls the members of the audit and risk committee are messrs d c lindsell
chairman j darby j r w orange and m romieu messrs s j dobbie and r v emerson retired from the committee on 6 june 2008
the company secretary acts as secretary to the committee the board considers mr d c lindsell and the other members of the
committee to have the relevant commercial financial and accounting experience to assess effectively the complex financial
reporting risk and internal control issues relevant to the company messrs s c lockett a r c durrant and n hawkings normally
attend by invitation all meetings of the committee
the committee is authorised to engage the services of external advisers as they deem necessary in the furtherance of their duties
at the company’s expense no external advisers materially assisted the committee during the year
minutes of the meetings of the committee are distributed to all board members all of whom are invited to attend meetings of the
committee as observers since the board believes that the work of the committee particularly in the areas of risk management and
internal control is increasingly important for all board members the committee is satisfied that it receives sufficient reliable and
timely information from management in order to enable it to fulfil its responsibilities
the audit and risk committee is mainly responsible for
• monitoring the integrity of the financial statements of the company and formal announcements relating to the company’s financial
performance and reviewing any significant financial reporting judgements contained therein
• reviewing the company’s internal financial and operational control and risk management systems full details of which are given
in the corporate governance report
• reviewing accounting policies accounting treatments and disclosures in financial statements to ensure clarity and completeness
• overseeing the company’s relationship with its external auditors including making recommendations as to the appointment or
reappointment of the external auditors reviewing their terms of engagement and monitoring their independence and
• reviewing the company’s whistleblowing procedures and ensuring these are adequately published within the organisation that
the committee chairman is promptly informed of any issues and that there are arrangements in place for the investigation of any
alleged improprieties
the committee met twice in 2008 and has four meetings scheduled for 2009 the march meeting reviewed the fullyear results and
the annual corporate governance report for the previous calendar year and the august meeting reviewed the results for the six
month period ending on 30 june the issues which would normally have been covered in the january meeting had been dealt with
in an ad hoc meeting in december 2007
more specifically the responsibilities of the committee were discharged as follows
• the committee reviewed the risk management process designed to identify the key risks facing the group and how these risks were
being managed it also reviewed the effectiveness of the group’s internal controls and disclosures made in the annual report and
financial statements
• the committee reviewed the papers prepared by the external auditor for the 2007 yearend process the 2008 interim review and
the audit plans and strategy for the 2008 final audit the fee proposals for the final audit and interim review were also reviewed
and agreed
• the committee met with the finance director and external auditors as part of the interim and final financial statements approval
process the committee considered assumptions about the future and other sources of estimation uncertainty as well as the most
appropriate treatment and disclosure of any new or judgemental matters that may have a significant effect on amounts in the
financial statements and
• the performance and effectiveness of the committee was reviewed as part of the board performance evaluation process the
committee was considered to be operating effectively and in accordance with the smith committee guidance within the combined
code the committee also reviewed and updated its terms of reference
internal audit
the audit and risk committee also carried out its annual review into whether it is appropriate for the company to establish an
internal audit function the committee places great emphasis on the importance of imbuing a culture of risk management and
control at all operating levels in the business and is confident that this culture is in place the committee took account of the fact
that the company obtains independent confirmation of its internal controls from a variety of sources these include joint venture and
government audits and the use of specific reviews using thirdparty specialists the committee also took account of the business
controls reviews and risk management process more fully described in the corporate governance report the committee
concluded that at this time there was no need for a dedicated internal audit resource but this will be kept under review
premier oil plc 2008 annual report and financial statements
governance 28
audit and risk committee report continued 
external auditor
deloitte llp deloitte was appointed external auditor of the company in 2004 the audit and risk committee monitor the external
auditors’ performance on an ongoing basis including an assessment following the yearend results carried out by the finance
director and other key members of the finance team
the audit and risk committee regularly reviews the issue of the independence of our external auditors in light of the fact that they
provide tax advice to the group in all services tendered the group aims to select the provider who is best placed to deliver the
service in terms of quality and cost the committee does not believe that the provision of tax advice to the group by the external
auditor creates a threat to the independence of the audit process this is principally because neither the nature nor the scale of the
nonaudit service could or could be seen to impair the objectivity of the external auditors’ opinion on the financial statements
deloitte are required to confirm to the committee that they have both the appropriate independence and objectivity to allow them
to continue to serve the members of the company the committee also requires the external auditor to confirm that in providing
nonaudit services it complies with ethical standards of the uk auditing practices board this confirmation was received for 2008
the company will pay us07 million to deloitte for audit services in 2008 2007 us06 million relating to the statutory audit of the
company financial statements and the audit of group subsidiaries and associates pursuant to legislation
the fees for the provision of other services to the company and its subsidiaries which include advice on tax planning and accounting
and regulatory matters were us11 million 2007 us11 million giving a total fee to deloitte of us18 million 2007 us17 million
further details are provided in note 3 of the notes to the consolidated financial statements
by order of the board
d c lindsell
chairman of the audit and risk committee
25 march 2009
premier oil plc 2008 annual report and financial statements 29
company risk factors 
risk factors
premier is an international business which has to face a variety of strategic operational financial and external risks
premier’s business financial standing results and reputation may be impacted by various risks not all of these risks are within the
company’s control and the company may be affected by risks other than those listed below
clear responsibility
the board is responsible for overall group strategy acquisition and divestment policy approval of major capital expenditure projects
corporate costs and significant financing matters and the management of risks the board recognises that risk is inherent across
premier’s operations and all activities are subject to an appropriate review to ensure that risks are identified monitored and if
possible managed
risk management process
premier has an established business management system which includes an integrated risk management process for identifying
evaluating and managing risks faced by the group this is based on each business unit and corporate function producing a risk matrix
which identifies the key business risks – strategic operational financial and external – the probability of those risks occurring their
impact if they do occur and the actions being taken to manage those risks to the desired level risk acceptance and reduction
objectives are defined with particular attention given to reducing them to as low as reasonably practicable these risk matrices are
updated on a regular basis and made available to the executive committee
key risks facing premier their potential impacts and our responses are outlined below effective risk management is critical to
achieving our strategic objectives and protecting our assets personnel and reputation premier manages its risks by maintaining
a balanced portfolio through compliance with the terms of its agreements and application of appropriate policies and procedures
and through the recruitment and retention of skilled individuals throughout the organisation
key business risks
reserve replacement
future oil and gas production will depend on our access to new reserves through exploration negotiations with governments and
other owners of reserves and acquisitions failures in exploration or in identifying and finalising transactions to access potential
reserves could slow our oil and gas production and replacement of reserves premier manages these risks by proactive project
planning and milestone driven performance criteria for exploration effective peer reviews and thorough diligence on new areas
allow us to mitigate risk of failure
competition
premier operates in a very challenging business environment and faces competition on access to exploration acreage gas markets
oil services and rigs technology and processes and human resources
production
the delivery of premier’s production depends on the successful development of its key projects in developing these projects we
face numerous challenges these include uncertain geology availability of technology and engineering capacity availability of skilled
resources maintaining project schedules and managing costs as well as technical fiscal regulatory political and other conditions
such potential obstacles may impair our delivery of these projects and in turn our operational performance and financial position
including the financial impact from failure to fulfil contractual commitments related to project delivery
health safety environment and security hses
given the range of premier’s operated and joint venture production operations globally our hses risks cover a wide spectrum these
risks include major process safety incidents failure to comply with approved policies effects of natural disasters and pandemics
social unrest civil war and terrorism exposure to general operational hazards personal health and safety and crime the consequences
of such risks materialising can be injuries loss of life environmental harm and disruption to business activities depending on their
cause and severity they can affect premier’s reputation operational performance and financial position premier has an effective and
comprehensive hses management system to mitigate this risk and support safe and secure execution of all critical operating activities
reputation
premier strives to be a good corporate citizen globally and has strong and positive relationships with the governments and
communities in the countries where we do business this is important for maintaining our licence to operate and our ability to secure
new resources our business principles govern how premier conducts its affairs failure – real or perceived – to follow these principles
or any of the risk factors materialising could harm our reputation which could impact our licence to operate financing and access to
new opportunities
human resources
premier’s key human resources are essential for the successful delivery of its projects and continuing operations loss of personnel to
competitors or our inability to attract quality human resources could affect our operational performance and growth strategy premier
has created salary bonus and longterm incentive plan processes designed to incentivise loyalty and good performance
premier oil plc 2008 annual report and financial statements
governance 30
company risk factors continued 
commodity prices
oil and gas prices are affected by global supply of and demand for these commodities factors that influence these include
operational issues natural disasters weather political instability or conflicts and economic conditions or actions by major oil
exporting countries price fluctuations can affect our business assumptions and can impact investment decisions and financial
position premier manages this risk with an oil and gas hedging programme to underpin our financial strength and capacity to
fund our future development and operations
financial discipline
premier has established financial policies and processes to ensure that it is able to maintain an appropriate level of liquidity and
financial capacity and to manage the level of assessed risk associated with the financial instruments a financial control framework
and a detailed delegation of authority manual are also in place to reasonably protect against risk of financial fraud in the group
all major investment decisions taken consider an appropriate financial benchmark to secure against downside risk of such
investments the group also undertakes an insurance programme to reduce the potential impact of the physical risks associated with
exploration and production activities in addition business interruption cover is purchased for a proportion of the cash flow from
producing fields cash balances are invested in shortterm deposits aaa managed liquidity funds and a1p1 commercial paper
subject to board approved limits
further information on financial instruments and financial risk factors can be found in note 17 in the notes to the consolidated
financial statements
host government – political and fiscal risks
premier operates in some countries where political economic and social transition is taking place developments in politics laws and
regulations can affect our operations and earnings potential developments include forced divestment of assets limits on production
import and export restrictions international conflicts including war civil unrest and local security concerns that threaten the safe
operation of company facilities price controls tax increases and other retroactive tax claims expropriation of property cancellation
of contract rights and environmental regulations it is difficult to predict the timing or severity of these occurrences or their potential
effect if such risks materialise they could affect the employees reputation operational performance and financial position of the group
joint ventures and partners
inherently oil and gas operations globally are conducted in a joint venture environment many of our major projects are operated by
our partners our ability to influence our partners is sometimes limited due to our small shares in major nonoperated development
and production operations nonalignment on various strategic decisions in joint ventures may result in operational or production
inefficiencies or delay premier mitigates this risk by continuous and regular engagement of its partners in operated and non
operated projects
premier oil plc 2008 annual report and financial statements 31
nomination committee report 
the nomination committee meets as and when required and comprises sir david john chairman messrs j darby s c lockett
j r w orange and professor d g roberts the board considers the membership of the nomination committee to be in compliance
with the combined code
the committee met once in 2008 formal meetings are held to consider standing items of business there is also a significant level
of ad hoc discussion between members of the committee particularly when a recruitment exercise is taking place
the role of the nomination committee includes
• reviewing the structure size and composition of the board and to make recommendations to the board with regard to any
adjustments that are deemed necessary this requires an ongoing assessment of the appropriate skillsmix required at board level
in light of the strategy of the company in the mediumterm
• responsibility for identifying and nominating candidates subject to board approval to fill board vacancies as and when they arise
and to prepare a description of the role and capabilities required for a particular appointment and
• the assessment of time required to fulfil the role of chairman senior independent director and nonexecutive director ensuring
that current members of the board have devoted sufficient time to their duties and that any candidates have sufficient time to
undertake the roles
the nomination committee together with the board addresses the company’s succession plans the board also considers
succession planning for senior corporate executives with the nomination committee focusing more specifically on succession
planning for members of the board the appointment of messrs d c lindsell and m romieu to the board in january 2008 helped
to maintain the balance of the board ahead of the retirement of messrs s j dobbie and r v emerson in june
by order of the board
sir david john kcmg
chairman
25 march 2009
premier oil plc 2008 annual report and financial statements
governance 32
report of the directors 
the directors submit their report and the audited group financial statements for the year ended 31 december 2008
results and dividends
the group’ s net profit for the year amounted to us983 million 2007 profit of us390 million a dividend is not proposed 2007 usnil
principal activities
the principal activities of the group are oil and gas exploration development and production the group operates through subsidiary
undertakings and joint ventures details of which are shown in notes 10 and 11 in the notes to the consolidated financial statements
business review
the company is required by the companies act to set out in this report a fair review of the business of the group during the financial
year ended 31 december 2008 and of the position of the group at the end of the year the business review the information that
fulfils the requirements of the business review can be found in the following sections of the annual report and financial statements
• chief executive’s review
• financial review
• company risk factors
• key performance indicators within the financial review
• environmental employee social and community matters within the social performance review
the chairman’s statement and financial review also include details of expected future developments in the business of the group
annual general meeting agm
the company’s 7th agm will be held on friday 29 may 2009 at 1100am the notice of the meeting accompanies this report
share capital
the company’s authorised share capital is £157612282 comprising 315224564 ordinary shares of 50 pence each representing 100
per cent of the total authorised share capital the rights attached to the company’s authorised share capital can be found in note 19
in the notes to the consolidated financial statements no person has any special rights of control over the company’s share capital
and all issued shares are fully paid
there are no specific restrictions on the size of a holding nor on the transfer of shares which are both governed by the general
provisions of the articles of association and prevailing legislation the directors are not aware of any agreements between holders of
the company’s shares that may result in restrictions on the transfer of securities or on voting rights
the authority given to the directors to allot shares at the 2008 agm was granted for a period of one year there were 66411 ordinary
shares issued under the group’s share option schemes during the year a resolution will be put to the forthcoming agm to renew
this authority
at the 2008 agm authority was also given to the directors for one year to allot shares for cash either in connection with a rights issue
or of up to 5 per cent of the then issued share capital as if statutory preemption rights did not apply a similar resolution will be put
to the impending agm to renew this authority
at the end of the year 233054104 shares in the authorised ordinary share capital of the company were unissued
the agm held in 2008 authorised the purchase by the company of up to 12317770 shares and the balance of this authority will
remain available until the forthcoming agm when the granting of a similar authority will be proposed during 2008 the company
purchased 2798186 ordinary shares with a nominal value of £139909300 and representing 34 per cent of the company’s issued
share capital for a consideration excluding commission of £2530863240 us4674605652 the shares were held by the company
as treasury shares at yearend and were cancelled by the company on 23 march 2009
directors
the directors who served throughout the year except as noted were as follows
• sir david john chairman
• mr robin allan
• mr joe darby
• mr scott dobbie resigned 6 june 2008
• mr tony durrant
• mr ron emerson resigned 6 june 2008
• mr neil hawkings
• mr david lindsell appointed 17 january 2008
• mr simon lockett chief executive
• mr john orange senior independent nonexecutive director
• professor david roberts
• mr michel romieu appointed 17 january 2008
biographical details of all directors can be found in the board of directors section of this report
premier oil plc 2008 annual report and financial statements 33
directors’ election and rotation
• mr hawkings is retiring by rotation and being eligible will offer himself for reelection at the forthcoming agm and
• sir david john and mr j r w orange as nonexecutive directors with more than nine years service will retire under the provisions
of the combined code and being eligible will offer themselves for reelection at the forthcoming agm
with regard to the appointment and replacement of directors the company is governed by its articles of association the combined
code the companies acts and related legislation the powers of directors are described in the corporate governance report and in
the matters reserved for board decision a copy of which can be found on the company’s website wwwpremieroilcom
directors’ interests
beneficial interests of directors holding office at the yearend and of their families in ordinary shares of the company are set out below
1 january 2008
or date of 31 december at 24 march
name appointment 2008 2009
sir david john
1 3
16700 16700 16700
r a allan
2
11881 18992 19068
j darby
3
– 4000 4000
a r c durrant
2
30380 30622 30699
n hawkings
2
380 622 699
d c lindsell
3
– 3000 3000
s c lockett
2
35969 50760 50836
j r w orange
3 4
5000 8500 8500
professor d g roberts –––
m romieu –––
notes
1 this includes 1700 ordinary shares held by sir david john’s wife
2 the beneficial interests of the executive directors include personal shareholdings together with share incentive plan partnership shares and any matching
shares held for more than three years
3 the beneficial interests of the nonexecutive directors comprise personal shareholdings
4 this includes 1000 ordinary shares held by mr j r w orange’s wife
directors’ interests in share options deferred bonus shares deferred and matching share awards under the asset and equity plan and
deferred share incentive plan entitlements are shown in the remuneration report together with details of the remuneration of all
directors who served during the year
directors’ indemnities
the company has granted an indemnity to all its directors under which the company will to the fullest extent permitted by law and to
the extent provided by the articles of association indemnify them against all costs charges losses and liabilities incurred by them in
the execution of their duties
substantial shareholders
at 24 march 2009 the company had received notification from the following institutions in accordance with chapter 5 of the
disclosure and transparency rules of interests in excess of 3 per cent of the company’s issued ordinary shares with voting rights
notified notified
number of percentage of nature of
name of shareholder voting rights voting rights holding
1
ameriprise financial inc 4028672 5076 indirect
aviva plc and subsidiaries direct interests 3371792 410 direct
axa sa and group companies 7498283 913 indirect
bear stearns international trading ltd 2552847 3109 direct
schroders plc 8094087 9876 indirect
notes
1 where the nature of the holding is both direct and indirect the larger holding has been quoted
payment policy
the group’s policy in respect of its suppliers is to establish terms of payment when agreeing the terms of business transactions and to
abide by the terms of payment at 31 december 2008 the group had trade creditors totalling us503 million 2007 us515 million
hedging and risk management
details of the group’s policy on hedging and risk management are provided in the financial review a further disclosure has been
made in note 17 of the notes to the consolidated financial statements related to various financial instruments and exposure of the
group to price credit liquidity and cash flow risk
premier oil plc 2008 annual report and financial statements
governance 34
report of the directors continued 
subsequent events
post balance sheet events are disclosed in note 26 of the notes to the consolidated financial statements
donations
during the year the company made charitable contributions amounting to us41578 2007 us66688 no political contributions
were made during the year 2007 usnil
significant agreements – change of control
there are a number of agreements that take effect alter or terminate upon a change of control of the company such as commercial
contracts bank loan agreements property lease arrangements and employees’ share plans none of these are considered to be
significant in terms of their likely impact on the business of the group as a whole
furthermore the directors are not aware of any agreements between the company and its directors or employees that provide for
compensation for loss of office or employment that occurs because of a takeover bid
going concern
after making enquiries and in light of the group’s available loan facilities the group budget for 2009 and the mediumterm plans
including those described in note 26 in the notes to the consolidated financial statements the directors have reasonable
expectation that the group has adequate resources to continue operations for the foreseeable future the going concern basis for
the financial statements has therefore continued to be adopted further details are set out in the financial review
auditors
each of the persons who is a director at the date of approval of this annual report confirms that
• so far as the director is aware there is no relevant audit information of which the company’s auditors are unaware and
• the director has taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant
audit information and to establish that the company’s auditors are aware of that information
this confirmation is given and should be interpreted in accordance with the provisions of s234za of the companies act 1985
a resolution to reappoint deloitte llp as auditors will be put to shareholders at the forthcoming agm
by order of the board
s c huddle
company secretary
25 march 2009
premier oil plc 2008 annual report and financial statements 35
remuneration report 
compliance
this report has been prepared in accordance with the companies act 1985 as amended by the directors’ remuneration report
regulations 2002 as required this report is being put to shareholders at the forthcoming agm for an advisory vote
the sections within this report that have been audited by deloitte llp are indicated
throughout 2008 the company complied with schedule a of the combined code on corporate governance the code regarding
best practice on the design of performancerelated remuneration
remuneration committee
the remuneration committee the committee normally meets at least four times a year and determines the remuneration of the executive
directors and senior employees the committee is composed entirely of nonexecutive directors and comprises mr j r w orange
who chairs the committee and is the company’ s senior nonexecutive independent director messrs j darby d c lindsell and professor
d g roberts messrs s j dobbie and r v emerson retired from the committee on 6 june 2008 the board considers that the membership
of the committee is in compliance with the code recommendation on the basis that it considers mr j r w orange to be independent
notwithstanding his length of service sir david john the company’ s chairman is not a member of the committee but attends by
invitation mr s c lockett is not a member of the committee but usually attends meetings by invitation except when his own remuneration
is being discussed as the company considers it important that the chief executive is fully aware of discussions concerning remuneration
policy and the remuneration packages of its most senior employees
no director of the company is involved in determining his own remuneration the determination of the remuneration of the non
executive directors is a matter reserved for board decision
the committee acts within its agreed written terms of reference and complies with the relevant provisions of the code in
implementing its remuneration policy the terms of reference are published on the company’s website wwwpremieroilcom
the role of the committee includes
• considering and determining the remuneration policy for executive directors
• within this agreed policy considering and determining the total compensation package of each executive director of the company
• considering and advising on the general principles under which remuneration is applied to employees of the company
• determining the awards to be made under the company’s longterm incentive schemes and
• determining the policy for pension arrangements service agreements and termination payments to directors
as in previous years the principal focus of the committee in 2008 has been to ensure that the remuneration packages of the senior
executives are set at levels which are sufficient to retain and attract highquality individuals in what remains a competitive market
the committee takes independent advice from hewitt new bridge street a leading firm of remuneration consultants which is
appointed as an advisor to the committee hewitt new bridge street do not provide any other services to the company no other
person or company materially assisted the committee during the year
remuneration policy
the company’s remuneration policy is to provide remuneration packages which ensure that directors and senior management are
fairly and responsibly rewarded for their contributions the aim is to provide remuneration packages which are sufficiently competitive
to attract retain and motivate individuals of the quality required to achieve the group’s objectives and thereby enhance shareholder
value the committee takes account of the level of remuneration paid to executive directors and senior managers of comparable
public companies as well as pay and conditions throughout the remainder of the group
the main components of executive directors’ remuneration are basic salary an annual performancerelated cash and share bonus
scheme with a deferred element benefits longterm incentives and pension provision each element is discussed in detail below
the remuneration therefore contains a suitable balance of direct performancerelated remuneration which links both the shortterm
financial performance of the group and the longterm shareholder return with the executive’s total remuneration the remuneration
package is weighted so that the majority of reward may potentially come from the performancerelated elements of the package
the committee endorses the principle of mitigation of damages on early termination of a service contract
it is the committee’s current intention to continue with the above remuneration approach for 2009 and subsequent years although
the committee will keep the matter under review the committee’s current intention with regard to share options is that they will
continue to be awarded only in special circumstances shareholders approved the adoption of the asset and equity plan aep at
the agm in 2004 together with a matching shares element approved at the agm in 2006 and awards have continued to be granted
thereunder however the aep expires in may 2009 and so a new long term incentive plan ltip based in part on the aep  will be
proposed at the forthcoming agm and subject to shareholder approval being received future longterm incentive awards will be
granted under that plan summary details of the ltip are set out in the asset and equity plan audited section of this report and full
details of its principal terms are contained in the notice of agm accompanying this document
the company’s articles of association provide that the remuneration paid to nonexecutive directors is to be determined by the
board within the limits set by the shareholders
premier oil plc 2008 annual report and financial statements
governance 36
remuneration report continued 
performance chart
the chart below shows the company’s total shareholder return tsr defined as the increase in the value of a share including
reinvested dividends over the last five financial years compared with the equivalent information in respect of the ftse all share
oil  gas producers index which the committee considers to be the most relevant equity market index
total shareholder return
contracts of service
save for automatic termination when each executive director becomes 60 years of age the executive directors have rolling service
contracts and are subject to reelection by shareholders under the company’s articles of association and the provisions of the code
the service contract of each executive director may be terminated on 12 months’ notice in writing by either side in accordance with
current market practice in such event the compensation commitments in respect of their contracts could amount to one year’s
remuneration based on base salary annual bonus and longterm incentive scheme entitlement benefits in kind and pension rights
during the notice period there are provisions for earlier termination by the company in certain circumstances if such circumstances
were to arise the executive director concerned would have no claim against the company for damages or any other remedy in
respect of the termination there are no other provisions such as liquidated damages clauses which expressly provide for compensation
in the event of early termination the committee would apply general principles of mitigation to any payment made to a departing
executive director and would consider each case on an individual basis messrs s c lockett and r a allan have service contracts
dated 9 december 2003 mr a r c durrant has a service contract dated 1 july 2005 and mr n hawkings’ service contract is dated
23 march 2006
nonexecutive directors have letters of appointment which are all effective for a period of three years subject to reappointment
by the members in general meeting all of which have a notice period of three months sir david john and mr j r w orange have
letters of appointment issued on 28 july 2006 professor d g roberts has a letter of appointment dated 30 june 2006 and mr j darby
has a letter of appointment dated 1 september 2007 messrs d c lindsell and m romieu have letters of appointment dated 17 january
2008 following their appointment to the board on that date
external appointments
executive directors are entitled to accept nonexecutive appointments outside the company providing that the board’s approval is
sought mr a r c durrant currently holds one external nonexecutive directorship with clipper windpower plc and is entitled to retain
the fees earned connected therewith 2008 us76300 and 2007 us43500
remuneration structure
the remuneration package for the executive directors comprises base salary bonus benefits entitlement to participate in the
company’s longterm incentive schemes and allemployee share schemes and pension
base salary
base salary is reviewed each year against other comparable companies in the oil and gas sector and general market data on the basis
of companies in similar industries and those of a similar size the objective is to ensure that the base salary when taken together with
the rest of the package provides a competitive but performancedriven remuneration package the policy of the committee has
been to position base salaries between the median and upper quartile
premier oil plc 2008 annual report and financial statements
value £
31 dec 03
premier oil plc
this graph looks at the value at 31 december 2008 of £100 invested in premier oil plc on 31 december 2003
compared with the value of £100 invested in the ftse all share oil  gas producers index
31 dec 04 31 dec 05 31 dec 06 31 dec 07 31 dec 08
£21648
£16447
ftse all share oil  gas producers index
0
50
100
150
200
250
300 37
base salary continued
the salaries of the executive directors as at 1 january 2009 are as follows
percentage
increase
salary from 2008
£
s c lockett 435000 101
r a allan 300000 53
a r c durrant 320000 103
n hawkings 300000 154
for all the executive directors these increases which in some cases are somewhat larger than normal were determined after
considering a range of factors such as company performance the development of the executive and the positioning of his salary
in relative terms in addition account was taken of the recommendations of hewitt new bridge street that these levels represent
salaries between the median and upper quartile for executives in similar roles in companies of similar size in the oil and gas sector
and in general industry companies excluding financial services also of a similar size
while salary is reviewed by reference to market conditions the performance of the company and the performance of the individual
the committee would not regard this element of remuneration as directly performancerelated
annual bonus scheme
the total annual bonus potential which is nonpensionable is 100 per cent of base salary half of any bonus earned is payable
immediately in cash and the remaining half is payable in shares and deferred for three years the deferred element of the bonus
is contingent upon the relevant beneficiary remaining in employment for the three years from the date of the award but is not
dependent on any further performancerelated measures
performance measures for 2008 are explained in the table below
maximum bonus
performance measures potential conditions
exploration portfolio management 70 various milestones identified for the year to achieve the mediumterm
and strategic development production target in excess of 50000 boepd including the drilling and
success of exploration wells and the development of strategic
investmentdivestment opportunities
production 10 to achieve the production number contained in the 2008 budget
approved by the board
operating cost per barrel 10 to achieve the operating cost per barrel number contained in the 2008
budget approved by the board
health safety environment and security 10 combined frequencies of lost time injuries and restricted work day
cases of or below 17 cases per million manhours worked
following a review of the 2008 targets the committee agreed that the production and operating cost per barrel targets and the
health safety environment and security target had been achieved the committee agreed a 25 per cent award out of the maximum
70 per cent in relation to the exploration portfolio management and strategic development targets this resulted in a total award of
55 per cent of salary 275 per cent paid as cash and 275 per cent deferred in shares as indicated above for performance against the
above targets 2007 65 per cent of salary paid as 325 per cent cash and 325 per cent deferred shares
the annual bonus scheme for the 2009 financial year has a similar structure and the same maximum award level the performance
metrics have been changed to include amongst other things specific targets relating to funding and management of the exploration
portfolio this reflects the current difficult market conditions and the priorities of the business performance measures for 2009 are
explained in the table below
maximum bonus
performance measures potential conditions
finance and organisation 30 to ensure funding is in place to facilitate the investment programme
to manage hedging and commitments to meet funding covenants
at conservative oil prices
production and development 20 various targets including progressing the major new field development
projects on time and on budget
exploration 20 various targets including portfolio management and exploration success
new business 20 the delivery of various strategic investmentdivestment opportunities
health safety environment and security 10 combined frequencies of lost time injuries and restricted work day
cases of or below 155 cases per million manhours worked
premier oil plc 2008 annual report and financial statements
governance 38
remuneration report continued 
benefits
messrs s c lockett r a allan a r c durrant and n hawkings each received the benefit of a car allowance and medical insurance
mr r a allan also received a gym membership subsidy
longterm incentive arrangements
the company currently operates the aep  two executive share option schemes and an allemployee share incentive plan and save
as you earn scheme details of the executive share option schemes and the allemployee share plans are set out in the share option
schemes audited section of this report
the aep is currently the company’s main longterm incentive arrangement and details of the awards granted to executive directors
under this plan are set out in the asset and equity plan audited section of this report the life of the aep will expire in may 2009
accordingly it is proposed that a replacement the 2009 long term incentive plan ltip be introduced to replace it subject to
shareholder approval for the ltip being received going forward the ltip will have two primary elements the first will be an equity
bonus pool created by reference to the increase in the equity value per share of the company over a threeyear period the second
will involve the grant of performance shares with an anticipated value on grant of 150 per cent of salary in the case of the chief
executive and 125 per cent of salary in the case of all other executive directors subject to a total shareholder return tsr
performance condition measured relative to other oil companies
as to vesting criteria an equity bonus pool will not be created where the compound growth per annum in share price is below 10 per
cent at 10 per cent compound growth per annum 1 per cent of the growth will become the pool at 20 per cent compound growth
per annum 25 per cent of the growth will become the pool the size of the pool will increase on a straightline basis between these
two points individuals’ rights to the proceeds from the pool are based on a predetermined allocation in the event that the value of an
individual entitlement exceeds 100 per cent of salary the committee must be satisfied that there has been longterm improvement in
the underlying financial performance of the company performance shares will not vest if the company’ s tsr performance is below the
median of a comparator group comprising approximately 35 companies at the median they will vest as to 25 per cent and at upper
quartile or above as to 100 per cent with proportionate vesting on a straightline basis between those two points
half of any executive director’ s vested award will be received in shares and the other half in the form of an award of deferred shares
which will vest three years later ie six years after the initial grant any such deferred shares shall also attract the grant of a matching
award over further shares with such matching award being subject to a tsr performance condition on the same terms as currently apply
to matching awards granted under the aep as described in more detail in the asset and equity plan audited section of this report
these two elements have been chosen to ensure that there will be continued alignment between the interests of shareholders and
executives via share price performance as well as providing an important incentive to management to outperform the company’s
most relevant competitors via the tsr performance condition
pension
details of the executive director’s pension arrangements are set out in the pension schemes audited section of this report
summary of actual remuneration audited
salary benefits annual pension pension
and fees in kind cash bonus total total contributions contributions
2008 2008 2008 2008 2007 2008 2007
£’000 £’000 £’000 £’000 £’000 £’000 £’000
executive directors
s c lockett
1
chief executive 3950 170 1086 5206 5479 500 157
r a allan 2850 170 784 3804 3732 579 544
a r c durrant
2
3417 202 798 4417 4254 ––
n hawkings
3
2600 165 715 3480 3395 529 494
nonexecutive directors
4

sir david john chairman 1300 –– 1300 1150 ––
j r w orange
5
senior independent director 500 –– 500 460 ––
j darby
6
400 –– 400 117 ––
s j dobbie
7
153 –– 153 350 ––
r v emerson
7
210 –– 210 410 ––
d c lindsell
8
427 –– 427 –––
professor d g roberts 400 –– 400 350 ––
m romieu
8
382 –– 382 –––
total 16589 707 3383 20679 19697 1608 1195
premier oil plc 2008 annual report and financial statements 39
summary of actual remuneration audited continued
notes
1 a contribution of £50040 was paid in 2008 to mr s c lockett’s personal money purchase pension scheme in 2007 £35672 was paid as a salary supplement
and £15684 was paid into his personal money purchase pension scheme as part of his pension arrangements
2 £51716 of mr a r c durrant’s remuneration relates to a salary supplement as part of his pension arrangements
3 mr n hawkings sacrificed £50000 of his 2008 bonus into his personal money purchase pension scheme
4 the basic fee for each of the nonexecutive directors excluding the chairman at the end of 2008 was £40000 per annum an additional fee of £8000 per
annum was paid per committee chairmanship
5 mr j r w orange is provided with an additional set fee of £2000 per annum in respect of his position as senior independent nonexecutive director
6 mr j darby’s total remuneration in 2007 is calculated from 1 september 2007 being the date of his appointment to the board
7 messrs s j dobbie and r v emerson retired from the board on 6 june 2008
8 messrs d c lindsell and m romieu’s total remuneration in 2008 is calculated from 17 january 2008 being the date of their appointments to the board
 benefits in kind represent gym membership car allowance and medical insurance
on 22 july 2006 the company entered into an advisory service agreement with former nonexecutive director mr m a k alizai under
which he provided services as an advisor to the board mr alizai was paid us87500 for the year to 21 july 2008 when the agreement
terminated
shares held in trust in respect of the deferred element of the annual bonus for directors are as follows
awarded on awarded on awarded on awarded on
21 march 2006 at 888p
1
17 january 2007 at 1128p
1
11 january 2008 at 1317p
1
22 january 2009 at 7415p
1
and earliest vesting and earliest vesting and earliest vesting and earliest vesting
on 21 march 2009 on 17 january 2010 on 11 january 2011 on 22 january 2012
s c lockett 5631 9973 9229 14649
r a allan 4730 7812 6638 10569
a r c durrant 2956 7812 6662 10755
n hawkings 3604 7812 6021 9642
notes
1 midmarket closing price on date of award
pension schemes audited
mr s c lockett is a member of the premier oil plc retirement and death benefits plan the scheme subject to the earnings cap
the scheme is a funded registered final salary scheme which provides a pension on broadly a fiftieths accrual basis of up to two
thirds salary at the normal pension age of 60 benefits are actuarially reduced on early retirement before age 60 and pensions in
payment increase in line with the lower of inflation or 5 per cent per annum
the company has decided to continue to operate its own cap on pensionable earnings beyond april 2006 when the external cap
was removed for the year to 31 december 2008 this was set at £112800 increasing to £117600 for the year to 31 december 2009
the company has agreed to provide messrs s c lockett r a allan a r c durrant and n hawkings with a pension substantially as if
they were contributing members of the scheme and in regard to service completed subsequent to their appointment as directors
not subject to the earnings cap the additional value of this target pension provision relative to the standard terms applied to staff
is made available at the directors’ option in the form of either an enhanced scale of pension contributions or a nonpensionable salary
supplement as at the yearend messrs s c lockett r a allan and n hawkings had elected the former and mr a r c durrant had
elected the latter
messrs r a allan and n hawkings are members of a money purchase pension arrangement to which during 2008 the company
contributed £57917 and £52912 respectively these amounts include £34637 and £29632 respectively in regard to the enhanced
pension contributions referred to above mr s c lockett is a member of a money purchase pension arrangement to which during
2008 the company contributed £50040 in regards to the enhanced pension contributions referred to above
premier oil plc 2008 annual report and financial statements
governance 40
remuneration report continued 
pension schemes audited continued
the accrued pension entitlements of the directors who were members or deemed members of the scheme during 2008 are as follows
b d f
a transfer value c transfer value increase from e increase
accrued in respect accrued in respect d to b less transfer value in accrued
pension as at of a as at pension as at of c as at contributions of increase pension
31 december 31 december 31 december 31 december by director in accrued excluding
2008 2008 2007 2007 during 2008 benefit inflation
£000 pa £000 £000 pa £000 £000 £000 £’000
s c lockett 540 3932 427 2908 798 699 96
r a allan 248 2366 179 1668 538 592 62
a r c durrant 185 1877 119 1173 541 619 61
n hawkings 134 1201 80 689 367 457 51
notes
– the amounts of accrued pension under a and c represent the accrued pension entitlements of the director as at the stated dates
– the transfer value under d has been calculated on the basis of actuarial advice in accordance with the guidance note ‘gn11 retirement benefit schemes –
transfer values’ issued by the board for actuarial standards under the financial reporting council this guidance note was replaced by the occupational
pension schemes transfer values amendment regulations 2008 si 20081050 with effect from 1 october 2008
– the transfer values under b and e have been calculated in line with the occupational pension schemes transfer values amendment regulations 2008
si 20081050
– the amounts under e represent the increase in value of the directors’ benefits in terms of the value on the transfer value basis in force at the end of the year
of the excess of the endyear accrued benefits over the startyear accrued benefits as revalued by price inflation less contributions by the directors
– the values stated above correspond with the target level of final salary pension provision in practice the pension benefits for these directors are principally
established through individual money purchase arrangements and salary supplements thus in the case of mr a r c durrant who has elected not to receive
enhanced pension contributions the company’s pension obligation will be met entirely by the payment of salary supplements
– in addition to the current provision noted above mr r a allan is entitled to a deferred pension under the scheme in respect of a prior service period with the
company between september 1986 and november 1999
– members of the scheme have the option to pay additional voluntary contributions none of the directors have elected to do so
the following payments were made to a former director of the company in respect of unfunded pension liabilities
amount of unfunded amount of unfunded
pension paid during 2008 pension paid during 2007
££
j a heath 32526 31275
asset and equity plan audited
the aep is designed to reward an improvement in the asset value of the business and the market value of the company over a
threeyear period the plan therefore has two bonus pools – an asset bonus pool and an equity bonus pool the asset bonus pool is
created by reference to the increase in the net asset value per share of the company over a threeyear period and the equity bonus
pool is created by reference to the increase in the equity value per share of the company over a threeyear period in both cases no
bonus pool is created where the compound growth per annum in the relevant measure asset value or share price is below 10 per
cent at 10 per cent compound growth per annum 1 per cent of the growth becomes the pool at 20 per cent compound growth
per annum 25 per cent of the growth becomes the pool the size of the pool increases on a straightline basis between these two
points in addition the vesting of awards is subject to the committee being satisfied that there has been satisfactory improvement
in the performance of the company
under this plan awards have been made annually and will mature on the third anniversary of grant they are not pensionable the
aep is a broadlybased plan with participation points being awarded to eligible employees including executive directors throughout
the group new employees who join the company part of the way through the duration of a threeyear award are awarded
participation points in that award on a timeapportioned basis in addition employees who receive a significant promotion during
an award period are eligible to receive an increased participation also on a timeapportioned basis the maximum benefit that an
individual may receive will normally be limited to twice his or her base salary per annum except where the compound growth rate
exceeds 20 per cent per annum in either the asset or equity bonus pool in which case the committee may increase the limit on such
a proportionate basis as it determines to be fair and reasonable
at the time of vesting 50 per cent of an award is payable in cash and 50 per cent is payable in the form of an award of deferred shares
awards granted in 2007 and 2008 will however be payable entirely in shares with 50 per cent payable in the form of deferred shares
the matching award scheme is an amendment to the plan approved by shareholders at the 2006 agm which gives participants the
option to increase the sixmonth deferral of the share element of the scheme to three years this extended deferral is mandatory
for the executive directors and senior management but voluntary for other staff the shares deferred for the extended period will
participate in a matching award the release of this part of the award will therefore be six years following the initial grant of the award
under the plan
premier oil plc 2008 annual report and financial statements 41
asset and equity plan audited continued
matching awards are subject to performance criteria related to comparative tsr over a threeyear period the comparator group
consists of about thirty five listed companies in the oil and gas sector tsr will be measured as the percentage increase in a return
index of the comparator group between the beginning and end of the performance period which begins on the first day of the
financial year in which the matching award is granted the return index at the beginning of the performance period is the average
of the return index on each weekday in the threemonth period prior to the start of the performance period in order to ascertain the
return index at the end of the performance period the same averaging method will be used for the three months prior to the end of
the performance period if the company’s tsr is at the median against the comparator group then matching awards vest on a 051
basis and where comparative performance is at or above the upper decile matching awards vest on a 251 basis with proportionate
vesting on a straightline basis between these two points independent external advice will be taken to assess whether the company
has met the tsr performance condition and to confirm that the companies which made up the index and the measurement of the
company’s performance are both in accordance with the rules of the aep 
details of deferred shares and matching awards granted to directors under the asset and equity plan are set out below
no of no of
deferred matching market
awards shares awards shares awards price of
held at granted granted lapsed held at 31 shares on earliest
date of type of 1 january during during during december day of performance vesting
grant award 2008 2008
1
2008
2
2008 2008 award period date
s c lockett 170107 deferred 42268 –– – 42268 1127p – 010110
share
270307 matching 105670 –– – 105670 1235p 010107 – 010110
award 311209
110108 deferred – 33706 –– 33706 1317p – 010111
share
130308 matching –– 84265 – 84265 1343p 010108 – 010111
award 311210
147938 33706 84265 – 265909
r a allan 170107 deferred 29600 –– – 29600 1127p – 010110
share
270307 matching 74000 –– – 74000 1235p 010107 – 010110
award 311209
110108 deferred – 20114 –– 20114 1317p – 010111
share
130308 matching –– 50285 – 50285 1343p 010108 – 010111
award 311210
103600 20114 50285 – 173999
a r c durrant 170107 deferred 15574 –– – 15574 1127p – 010110
share
270307 matching 38935 –– – 38935 1235p 010107 – 010110
award 311209
110108 deferred – 20114 –– 20114 1317p – 010111
share
130308 matching –– 50285 – 50285 1343p 010108 – 010111
award 311210
54509 20114 50285 – 124908
n hawkings 170107 deferred 13206 –– – 13206 1127p – 010110
share
270307 matching 33015 –– – 33015 1235p 010107 – 010110
award 311209
110108 deferred – 17658 –– 17658 1317p – 010111
share
130308 matching –– 44145 – 44145 1343p 010108 – 010111
award 311210
46221 17658 44145 – 108024
notes
1 there are no performance criteria for the deferred shares
2 matching awards granted are the maximum award possible under the matching award scheme subject to performance criteria
premier oil plc 2008 annual report and financial statements
governance 42
remuneration report continued 
outstanding asset and equity plan awards
as at 31 december 2008 a total of 125455 participation points have been allocated under the 2006 award 117125 participation
points were awarded in 2006 on the date of grant and 20480 have been awarded since then as timeapportioned compensatory
awards to employees other than executive directors who have joined the company during the threeyear performance period
12150 participation points have been forfeited due to participants leaving the employment of the company the directors have been
allocated the following points under the 2006 award
number of participation points
s c lockett 62
r a allan 45
a r c durrant 45
n hawkings 45
the equity bonus pool of the 2006 award was calculated by comparing the market value calculated by reference to the average share
price for the three months prior to the date of award 1 january 2006 with the market value similarly calculated to 31 december 2008
the minimum vesting threshold for the equity bonus pool was not achieved resulting in this part of the award lapsing
an independent external valuation of the asset bonus pool of the 2006 award will take place following the publication of the yearend
results if it is determined that the minimum vesting threshold has been achieved 50 per cent of the awards will be released in cash
and 50 per cent will be in deferred shares
as at 31 december 2008 a total of 601570
1
participation points have been allocated under the 2007 award 45050 participation
points have been awarded since the date of grant as timeapportioned compensatory awards to employees other than executive
directors who have joined the company during the threeyear performance period and 3430 participation points have been forfeited
due to participants leaving the employment of the company the increase in aggregate participation points reflects the decision to
extend the award to all global employees the directors have been allocated the following points under the 2007 award
number of participation points
s c lockett 320
r a allan 210
a r c durrant 210
n hawkings 210
notes
1 the figure of 626620 published in the 2007 annual report regarding the 2007 award included 50960 participation points allocated for approved vacant
positions not all of these vacancies have been filled and therefore the points have not been awarded
as at 31 december 2008 a total of 725260 participation points have been allocated under the 2008 award the directors have been
allocated the following points under the 2008 award
number of participation points
s c lockett 310
r a allan 205
a r c durrant 205
n hawkings 205
2009 awards
the 2009 awards will be granted under the ltip  subject to its approval at the 2009 agm
premier oil plc 2008 annual report and financial statements 43
share option schemes audited
executive share option scheme 1995
options granted under the 1995 scheme are normally exercisable at the acquisition price not less than three years after their date of
grant and will lapse unless previously exercised on their tenth anniversary no payment is made for the grant of an option options
cannot be exercised until predetermined performance conditions have been achieved for options granted prior to 2000 the
performance requirement was that the share price plus the value of dividends paid must as measured at the end of any consecutive
threeyear period have grown at a rate equal to or greater than the ftse all share oil  gas producers index over the same period
options granted during and after 2000 are dependent upon growth in the company’s earnings per share of at least 3 per cent per
annum compound above the retail price index over a threeyear period
mr s c lockett held options under this scheme during the financial year the options are listed in the table below
options midmarket options
acquisition held at price on held at
price per 1 january date of 31 december
date of grant exercisable dates share £ 2008 event exercise £ 2008
s c lockett 160498 160403 – 160408 3725 7680 exercised
1
1374 –
notes
1 the midmarket closing price on the date of exercise 8 january 2008 was £1374 resulting in a gain on exercise of £1002 per share
executive share option scheme 2003
this scheme replaced the 1995 scheme on completion of the company’s scheme of arrangement in 2003 options granted under the
scheme are normally exercisable not less than three years after their date of grant and will lapse unless previously exercised on their
tenth anniversary no payment is made for the grant of an option options cannot normally be exercised until predetermined
performance conditions have been achieved in the case of certain employees the performance condition is growth in earnings per
share of at least 3 per cent per annum compound above the retail price index over a threeyear period in other cases including
grants made to mr a r c durrant under the scheme in 2005 the performance condition is based on the company’s tsr in
comparison with a group of eight companies as follows burren energy cairn energy dana petroleum paladin resources tullow oil
venture production soco international and jkx oil  gas measured between 1 june 2005 and 31 may 2008 options will vest as to
30 per cent in the event that median performance is achieved with proportionate vesting on a straightline basis up to 100 per cent
if upper quartile performance is achieved tsr was selected as the performance measure for this plan as it aligns the interests of
directors with shareholders by requiring superior tsr compared to competitor companies
directors’ interests under this scheme are shown below
options midmarket options
acquisition held at price on held at
price per 1 january date of 31 december
date of grant exercisable dates share £ 2008 event exercise £ 2008
a r c durrant
1 2
010605 010608 – 310515 587 100000 lapsed ––
n hawkings
3
160505 160508 – 150515 535 20000 –– 20000
notes
1 the grant to mr a r c durrant was made as part of his recruitment terms to compensate him for the value loss he suffered on leaving his previous employer
2 on the completion of the performance period it was established that performance conditions had not been achieved and therefore the options lapsed with
effect from 11 july 2008
3 the grant to mr n hawkings was made as part of his recruitment terms where it was agreed that the grant would not be subject to any prevesting
performance conditions
premier oil plc 2008 annual report and financial statements
governance 44
remuneration report continued 
savings related share option scheme 2003
under this scheme employees including executive directors with six months or more continuous service are invited within a period
of 42 days of the announcement of the annual results to join the scheme employees may save between £5 and £250 per month
through payroll deduction for a period of three or five years after which time they can acquire shares at a market value set at the time
of invitation discounted by up to 20 per cent
directors’ interests under this scheme are shown below
options midmarket options
acquisition held at price on held at
price per 1 january date of 31 december
date of grant exercisable dates share £ 2008 event exercise £ 2008
s c lockett 030507 010610 – 301110 996 948 –– 948
r a allan 030507 010612 – 301112 996 1644 –– 1644
a r c durrant 040506 010611 – 301111 816 1973 –– 1973
n hawkings 040506 010611 – 301111 816 1973 –– 1973
the midmarket closing price of the company’s shares at 31 december 2008 was £985 31 december 2007 £1310 the intraday
trading price of the company’s shares during 2008 was between £569 and £1850
share incentive plan audited
under this plan employees including executive directors may make contributions to acquire shares in the company partnership
shares if an employee agrees to buy partnership shares the company currently matches the number of partnership shares bought
with an award of shares matching shares on a oneforone basis should an employee leave the sip scheme before the end of the
threeyear holding period they will lose the right to the matching shares unless heshe leaves due to injury redundancy tupe
transfer retirement death or the sale of the company
in the case of the award of matching shares the company has not required performance criteria to be fulfilled as the purpose of the
plan is to encourage all employees to become shareholders in the company
the company invites all company employees to make contributions to acquire partnership shares on a monthly basis during 2008
messrs s c lockett r a allan a r c durrant and n hawkings contributed the maximum monthly amount of £125 to the plan
shares held beneficially in this plan by the directors during the financial year were as follows
total total matching partnership
partnership shares and matching
shares awarded in shares
purchased in 2008 at prices shares acquired
2008 at prices between 742p held on between
shares held on between 742p and 1710p 31 december 1 january and
1 january 2008 and 1710p vesting in 2011 2008 24 march 2009
s c lockett 3309 126 126 3561 96
r a allan 3300 126 126 3552 96
a r c durrant 760 127 127 1014 96
n hawkings 760 127 127 1014 96
sourcing of shares and dilution limits
the company uses the premier oil plc employee benefit trust to satisfy the obligations of the executive share option schemes
the aep and the directors’ deferred bonus shares the employee benefit trust currently holds sufficient shares to meet shortterm
requirements and future obligations will be met using a combination of market purchases financed by the company and newly
issued shares the number of shares held by the employee benefit trust as at 31 december 2008 was 863339 31 december 2007
205152
the rules of each of the company’s sharebased incentive schemes contain limitations on the total number of options and awards
over new shares that can be awarded in accordance with the association of british insurers’ guidelines
by order of the board
j r w orange
chairman of the remuneration committee
25 march 2009
premier oil plc 2008 annual report and financial statements 45
statement of directors’ responsibilities 
the directors are responsible for preparing the annual report remuneration report and the financial statements in accordance with
applicable law and regulations
group financial statements
company law requires the directors to prepare financial statements for each financial year the directors are required by the
international accounting standard ias regulation to prepare the group financial statements under international financial reporting
standards ifrss as adopted by the european union the group financial statements are also required by law to be properly
prepared in accordance with the companies act 1985 and article 4 of the ias regulation
ias 1 requires that ifrs financial statements present fairly for each financial year the group’s financial position financial performance
and cash flows this requires the faithful representation of the effects of transactions other events and conditions in accordance with
the definitions and recognition criteria for assets liabilities income and expenses set out in the international accounting standards
board’s ‘framework for the preparation and presentation of financial statements’ in virtually all circumstances a fair presentation will
be achieved by compliance with all applicable ifrss however directors are also required to
• properly select and apply accounting policies
• present information including accounting policies in a manner that provides relevant reliable comparable and understandable
information and
• provide additional disclosures when compliance with the specific requirements in ifrss is insufficient to enable users to understand
the impact of particular transactions other events and conditions on the group’s financial position and financial performance
parent company financial statements
the directors have elected to prepare the parent company financial statements in accordance with united kingdom generally
accepted accounting practice united kingdom accounting standards and applicable law the parent company financial statements
are required by law to give a true and fair view of the state of affairs of the company in preparing these financial statements the
directors are required to
• select suitable accounting policies and then apply them consistently
• make judgments and estimates that are reasonable and prudent
• state whether applicable united kingdom accounting standards have been followed subject to any material departures disclosed
and explained in the financial statements and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue
in business
the directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial
position of the company and enable them to ensure that the parent company financial statements comply with the companies act
1985 they are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities
the directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website legislation in the united kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions
directors’ responsibility statement
we confirm to the best of our knowledge
1 the financial statements prepared in accordance with international financial reporting standards as adopted by the eu for the
group and uk gaap for the company give a true and fair view of the assets liabilities financial position and profit or loss of the
group and company respectively and the undertakings included in the consolidation taken as a whole and
2 the business review which is incorporated into the report of the directors includes a fair review of the development and
performance of the business and the position of the group and company and the undertakings included in the consolidation
taken as a whole together with a description of the principal risks and uncertainties they face
by order of the board
s c lockett a r c durrant
chief executive finance director
25 march 2009 25 march 2009
premier oil plc 2008 annual report and financial statements
governance 46
accounting policies 
general information
premier oil plc is a limited company incorporated in scotland and listed on the london stock exchange the address of the registered
office is premier oil plc 4th floor saltire court 20 castle t errace edinburgh eh1 2en the principal activities of the company and its
subsidiaries the group are oil and gas exploration and production in the north sea middle eastpakistan west africa and asia
these financial statements are presented in us dollars since that is the currency in which the majority of the group’s transactions are
denominated
adoption of new and revised standards
in the current year two interpretations issued by the international financial reporting interpretations committee ifric are effective
for the current period these are ifric 11 ifrs 2 – ‘group and treasury share transactions’ and ifric 14 ias 19 – ‘the limit on a
defined benefit asset minimum funding requirements and their interaction’ the adoption of these interpretations has not led to
any changes in the group’s accounting policies and has had no impact on the financial statements of the group
at the date of approval of these financial statements the group has not applied the following standards and interpretations which are
in issue but not yet effective
• amendments to ifrs 1ias 27 – ‘cost of an investment in a subsidiary jointly controlled entity or associate’
• amendments to ifrs 2 – ‘sharebased payment – vesting conditions and cancellations’
• amendments to ifrs 3 – ‘business combinations’
• ifrs 8 – ‘operating segments’
• amendments to ias 1 – ‘presentation of financial statements’
• amendments to ias 23 – ‘borrowing costs’
• amendments to ias 27 – ‘consolidated and separate financial statements’
• amendments to ias 32ias 1 – ‘puttable financial instruments and obligations arising on liquidation’
• ifric 12 ‘service concession arrangements’
• ifric 15 ‘agreements for the construction of real estate’
• ifric 16 ‘hedges of a net investment in a foreign operation’
• ifric 17 ‘distributions of noncash assets to owners’
the directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the
financial statements of the group except for additional segment disclosures when ifrs 8 – ‘operating segments’ comes into effect
for periods commencing on or after 1 january 2009
basis of accounting
the financial statements have been prepared in accordance with international financial reporting standards ifrss as endorsed
by the council of the european union
the financial statements are prepared under the historical cost convention except for the revaluation of financial instruments and
certain oil and gas properties at the transition date to ifrs
the financial statements have been prepared on a going concern basis further information relating to the going concern assumption
is provided in the report of the directors
the principle accounting policies adopted are set out below
basis of consolidation
the consolidated financial statements incorporate the financial statements of the company and entities controlled by the company
its subsidiaries made up to 31 december each year control is achieved where the company has the power to govern the financial
and operating policies of an investee entity so as to obtain benefits from its activities
on acquisition the assets liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition
any excessdeficiency of the cost of acquisition overbelow the fair values of the identifiable net assets acquired is recognised as
goodwillnegative goodwill the interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets
and liabilities recognised
the results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of
acquisition or up to the effective date of disposal as appropriate
where necessary adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with
those used by other members of the group
all significant intercompany transactions and balances between group entities are eliminated on consolidation
premier oil plc 2008 annual report and financial statements 47
interest in associates
an associate is an entity in which the group has a longterm equity interest and over which it has significant influence but not control
through participation in the financial and operating policy decisions of the investee
the results assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting
interests in associates are carried in the balance sheet at cost as adjusted by postacquisition changes in the group’s share of the net
assets of the associate less any impairment in the value of individual investments any excessdeficiency of the cost of acquisition
overbelow the group’s share of the net fair values of the identifiable assets liabilities and contingent liabilities of the associate at the
date of acquisition is recognised as goodwillnegative goodwill
where a group entity transacts with an associate of the group unrealised profits and losses are eliminated to the extent of the group’s
interest in the relevant associate
interest in joint ventures
a joint venture is a contractual arrangement whereby the group and other parties undertake an economic activity that is subject
to joint control
where a group company undertakes its activities under joint venture arrangements directly the group’s share of jointly controlled
assets and any liabilities incurred jointly with other venturers are recognised in the financial statements of the relevant company and
classified according to their nature
liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis
income from the sale or use of the group’s share of the output of jointly controlled assets and its share of joint venture expenses
are recognised when it is probable that the economic benefits associated with the transactions will flow tofrom the group and their
amount can be measured reliably
joint venture arrangements which involve the establishment of a separate entity in which each venturer has an interest are referred
to as jointly controlled entities the group reports its interests in jointly controlled entities using proportionate consolidation – the
group’s share of the assets liabilities income and expenses of jointly controlled entities are combined with the equivalent items in the
consolidated financial statements on a linebyline basis
where the group transacts with its jointly controlled entities unrealised profits and losses are eliminated to the extent of the group’s
interest in the joint venture
sales revenue and other income
sales of petroleum production are recognised when goods are delivered or the title has passed to the customer
interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable
dividend income from investments is recognised when the shareholders’ rights to receive payment have been established
oil and gas assets
the company applies the successful efforts method of accounting for exploration and evaluation ee costs having regard to the
requirements of ifrs 6 – ’exploration for and evaluation of mineral resources’
a exploration and evaluation assets
under the successful efforts method of accounting all licence acquisition exploration and appraisal costs are initially capitalised
in well field or specific exploration cost centres as appropriate pending determination expenditure incurred during the various
exploration and appraisal phases is then written off unless commercial reserves have been established or the determination
process has not been completed
prelicence costs
costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income statement as they
are incurred
exploration and evaluation costs
costs of ee are initially capitalised as ee assets payments to acquire the legal right to explore costs of technical services and
studies seismic acquisition exploratory drilling and testing are capitalised as intangible ee assets
tangible assets used in ee activities such as the company’s vehicles drilling rigs seismic equipment and other property plant
and equipment used by the company’s exploration function are classified as property plant and equipment however to the
extent that such a tangible asset is consumed in developing an intangible ee asset the amount reflecting that consumption is
recorded as part of the cost of the intangible asset such intangible costs include directly attributable overhead including the
depreciation of property plant and equipment utilised in ee activities together with the cost of other materials consumed
during the exploration and evaluation phases
ee costs are not amortised prior to the conclusion of appraisal activities
premier oil plc 2008 annual report and financial statements
governance 48
accounting policies continued 
oil and gas assets continued
a exploration and evaluation assets continued
treatment of ee assets at conclusion of appraisal activities
intangible ee assets related to each exploration licenceprospect are carried forward until the existence or otherwise
of commercial reserves has been determined subject to certain limitations including review for indications of impairment
if commercial reserves have been discovered the carrying value after any impairment loss of the relevant ee assets
is then reclassified as development and production assets if however commercial reserves have not been found the
capitalised costs are charged to expense after conclusion of appraisal activities
b development and production assets
development and production assets are accumulated generally on a fieldbyfield basis and represent the cost of developing
the commercial reserves discovered and bringing them into production together with the ee expenditures incurred in finding
commercial reserves transferred from intangible ee assets as outlined in accounting policy a above
the cost of development and production assets also includes the cost of acquisitions and purchases of such assets directly
attributable overheads finance costs capitalised and the cost of recognising provisions for future restoration and
decommissioning
depreciation of producing assets
the net book values of producing assets are depreciated generally on a fieldbyfield basis using the unitofproduction method
by reference to the ratio of production in the year and the related commercial reserves of the field taking into account future
development expenditures necessary to bring those reserves into production
producing assets are generally grouped with other assets that are dedicated to serving the same reserves for depreciation
purposes but are depreciated separately from producing assets that serve other reserves
pipelines are depreciated on a unitofthroughput basis
c impairment of development and production assets
an impairment test is performed whenever events and circumstances arising during the development or production phase
indicate that the carrying value of a development or production asset may exceed its recoverable amount
the carrying value is compared against the expected recoverable amount of the asset generally by reference to the present
value of the future net cash flows expected to be derived from production of commercial reserves the cash generating unit
applied for impairment test purposes is generally the field except that a number of field interests may be grouped as a single
cash generating unit where the cash flows of each field are interdependent
any impairment identified is charged to the income statement as additional depreciation where conditions giving rise to
impairment subsequently reverse the effect of the impairment charge is also reversed as a credit to the income statement
net of any depreciation that would have been charged since the impairment
d acquisitions asset purchases and disposals
acquisitions of oil and gas properties are accounted for under the purchase method where the transaction meets the definition
of a business combination
transactions involving the purchase of an individual field interest or a group of field interests that do not qualify as a business
combination are treated as asset purchases irrespective of whether the specific transactions involved the transfer of the field
interests directly or the transfer of an incorporated entity accordingly no goodwill and no deferred tax gross up arises and the
consideration is allocated to the assets and liabilities purchased on an appropriate basis
proceeds on disposal are applied to the carrying amount of the specific intangible asset or development and production assets
disposed of and any surplus is recorded as a gain on disposal in the income statement
inventories
inventories except for petroleum products are valued at the lower of cost and net realisable value petroleum products and under
and overlifts of crude oil are recorded at net realisable value under inventories and other debtors or creditors respectively
tax
income tax expense represents the sum of the tax currently payable and deferred tax the tax currently payable is based on taxable
profit for the year t axable profit differs from net profit as reported in the income statement because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible the group’ s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date
premier oil plc 2008 annual report and financial statements 49
tax continued
deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the
balance sheet liability method deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised such assets and liabilities are not recognised if the temporary difference arises from goodwillnegative
goodwill or from the initial recognition other than in a business combination of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit
deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates and
interests in joint ventures except where the group is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future
the carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered
deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised
deferred tax is charged or credited in the income statement except when it relates to items charged or credited directly to equity in
which case the deferred tax is also dealt with in equity deferred tax assets and liabilities are offset when there is a legally enforceable
right to set off corporation tax assets against corporation tax liabilities and when they relate to income taxes levied by the same tax
authority and the group intends to settle its current tax assets and liabilities on a net basis
translation of foreign currencies
in the accounts of individual companies transactions denominated in foreign currencies being currencies other than the functional
currency are recorded in the local currency at actual exchange rates as of the dates of the transactions monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at the balance sheet
date nonmonetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined nonmonetary assets held at historic cost are translated at the date of
purchase and are not retranslated any gain or loss arising from a change in exchange rate subsequent to the dates of the
transactions is included as an exchange gain or loss in the income statement
on consolidation the assets and liabilities of the group’s overseas operations are translated at exchange rates prevailing on the
balance sheet date income and expense items are generally translated at the average exchange rates for the year exchange
differences arising if any are classified as equity and transferred to the group’s translation reserve such translation differences
are recognised as income or as expenses in the year in which the operation is disposed of
group retirement benefits
payments to defined contribution retirement benefit plans are charged as an expense as they fall due payments made to state
managed retirement benefit schemes are dealt with as payments to defined contribution plans where the group’s obligations under
the schemes are equivalent to those arising in a defined contribution retirement benefit plan
the group operates a defined benefit pension scheme which requires contributions to be made to a separately administered fund
the cost of providing benefits is determined using the projected unit credit method with actuarial valuations being carried out at
each balance sheet date actuarial gains and losses are recognised immediately in the statement of total recognised income and
expense past service cost is also recognised immediately to the extent that the benefits are already vested and otherwise is
amortised on a straightline basis over the average period until the benefits become vested
the retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation
as adjusted for unrecognised past service cost and as reduced by the fair value of plan assets any asset resulting from this
calculation is limited to unrecognised past service cost plus the present value of available refunds and reductions in future
contributions to the plan
royalties
royalties are charged as production costs to the income statement in the year in which the related production is recognised
as income
leasing
rentals payable for assets under operating leases are charged to the income statement on a straightline basis over the lease term
premier oil plc 2008 annual report and financial statements
governance 50
accounting policies continued 
financial instruments
financial assets and financial liabilities are recognised on the group’s balance sheet when the group becomes a party to the
contractual provisions of the instrument
trade receivables
trade receivables are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts
bank borrowings
interestbearing bank loans and overdrafts are recorded at the proceeds received net of direct issue costs finance charges
including premiums payable on settlement or redemption and direct issue costs are accounted for on an accrual basis to the income
statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not
settled in the year in which they arise
trade payables
trade payables are stated at their nominal value
derivative financial instruments
the group uses derivative financial instruments derivatives to manage its exposure to changes in foreign currency exchange rates
interest rates and oil price fluctuations
all derivative financial instruments are initially recorded at cost including transaction costs derivatives are subsequently carried at fair
value apart from those derivatives designated as qualifying cash flow hedging instruments all changes in fair value are recorded as
financial income or expense in the year in which they arise
for the purposes of hedge accounting hedging relationships may be of three types fair value hedges are hedges of particular risks
that may change the fair value of a recognised asset or liability cash flow hedges are hedges of particular risks that may change the
amount or timing of future cash flows hedges of net investment in a foreign entity are hedges of particular risks that may change the
carrying value of the net assets of a foreign entity
to qualify for hedge accounting the hedging relationship must meet several strict conditions on documentation probability of
occurrence hedge effectiveness and reliability of measurement if these conditions are not met then the relationship does not
qualify for hedge accounting in this case the hedging instrument and the hedged item are reported independently as if there were
no hedging relationship in particular any derivatives are reported at fair value with changes in fair value included in financial income
or expense
for qualifying fair value hedges the hedging instrument is recorded at fair value and the hedged item is recorded at its previous
carrying value adjusted for any changes in fair value that are attributable to the hedged risk any changes in the fair values are
reported in financial income or expense
for qualifying cash flow hedges the hedging instrument is recorded at fair value the portion of any change in fair value that
is an effective hedge is included in equity and any remaining ineffective portion is reported in financial income if the hedging
relationship is the hedge of a firm commitment or highly probable forecasted transaction the cumulative changes of fair value
of the hedging instrument that have been recorded in equity are included in the initial carrying value of the asset or liability at the
time it is recognised for all other qualifying cash flow hedges the cumulative changes of fair value of the hedging instrument that
have been recorded in equity are included in financial income at the time when the forecasted transaction affects net income
for qualifying hedges of net investment in a foreign entity the hedging instrument is recorded at fair value the portion of any
change in fair value that is an effective hedge is included in equity
any remaining ineffective portion is recorded in financial income or expense where the hedging instrument is a derivative and
in equity in other cases if the entity is disposed of then the cumulative changes of fair value of the hedging instrument that have
been recorded in equity are included in financial income at the time of the disposal
derivatives embedded in other financial instruments or nonderivative host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with
unrealised gains or losses reported in the income statement embedded derivatives which are closely related to host contracts
including in particular price caps and floors within the group’s oil sales contracts are not separated and are not carried at fair value
fair value is the amount for which a financial asset liability or instrument could be exchanged between knowledgeable and willing
parties in an arm’s length transaction it is determined by reference to quoted market prices adjusted for estimated transaction costs
that would be incurred in an actual transaction or by the use of established estimation techniques such as option pricing models and
estimated discounted values of cash flows
premier oil plc 2008 annual report and financial statements 51
cash and cash equivalents
cash comprises cash in hand and deposits repayable on demand less overdrafts payable on demand
cash equivalents comprise funds held in term deposit accounts with a maturity not exceeding three months
sharebased payments
the group has applied the requirements of ifrs 2 – ‘sharebased payment’ in accordance with the transitional provisions
ifrs 2 has been applied to all grants of equity instruments after 7 november 2002 that were unvested at 1 january 2005
the group issues equitysettled and cashsettled sharebased payments to certain employees equitysettled sharebased payments
are measured at fair value excluding the effect of non marketbased vesting conditions at the date of grant the fair value
determined at the grant date of the equitysettled sharebased payments is expensed on a straightline basis over the vesting period
based on the group’s estimate of shares that will eventually vest and adjusted for the effect of non marketbased vesting conditions
fair value is measured by use of the monte carlo simulation the main assumptions are provided in note 19
a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each balance
sheet date for cashsettled sharebased payments
convertible bonds
the net proceeds received from the issue of convertible bonds are split between a liability element and an equity component
at the date of issue the fair value of the liability component is estimated using the prevailing market interest rate for similar
nonconvertible debt the difference between the proceeds of issue of the convertible bonds and the fair value assigned to the
liability component representing the embedded option to convert the liability into equity of the group is included in equity and
is not remeasured the liability component is carried at amortised cost
issue costs are apportioned between the liability and equity components of the convertible bonds based on their relative carrying
amounts at the date of issue the portion relating to the equity component is charged directly against equity
the interest expense on the liability component is calculated by applying the prevailing market interest rate at the time of issue
for similar nonconvertible debt to the liability component of the instrument the difference between this amount and the interest
paid is added to the carrying amount of the convertible bonds
critical accounting judgements and key sources of estimation uncertainty
details of the group’s significant accounting judgements and critical accounting estimates are set out in these financial statements
and include
• carrying value of intangible exploration and evaluation assets note 8
• carrying value of property plant and equipment note 9
• proved and probable reserves estimates note 9
• decommissioning costs note 16 and
• derivative financial instruments note 17
premier oil plc 2008 annual report and financial statements
governance 52
independent auditors’ report to the members
of premier oil plc 
we have audited the group financial statements of premier oil plc for the year ended 31 december 2008 which comprise the
consolidated income statement the consolidated balance sheet the consolidated cash flow statement the consolidated
statement of total recognised income and expense and the related notes 1 to 26 these group financial statements have been
prepared under the accounting policies set out therein we have also audited the information in the remuneration report that
is described as having been audited
we have reported separately on the parent company financial statements of premier oil plc for the year ended 31 december 2008
this report is made solely to the company’ s members as a body in accordance with section 235 of the companies act 1985 our audit
work has been undertaken so that we might state to the company’ s members those matters we are required to state to them in an
auditors’ report and for no other purpose t o the fullest extent permitted by law we do not accept or assume responsibility to anyone
other than the company and the company’ s members as a body for our audit work for this report or for the opinions we have formed
respective responsibilities of directors and auditors
the directors’ responsibilities for preparing the annual report the remuneration report and the group financial statements in
accordance with applicable law and international financial reporting standards ifrss as adopted by the european union are set
out in the statement of directors’ responsibilities
our responsibility is to audit the group financial statements in accordance with relevant legal and regulatory requirements and
international standards on auditing uk and ireland
we report to you our opinion as to whether the group financial statements give a true and fair view whether the group financial
statements have been properly prepared in accordance with the companies act 1985 and article 4 of the ias regulation and
whether the part of the remuneration report described as having been audited has been properly prepared in accordance with the
companies act 1985 we also report to you whether in our opinion the information given in the report of the directors is consistent
with the group financial statements the information given in the report of the directors includes that specific information presented
in the chief executive’s and financial reviews that is cross referred from the business review section of the report of the directors
in addition we report to you if in our opinion we have not received all the information and explanations we require for our audit
or if information specified by law regarding director’s remuneration and other transactions is not disclosed
we review whether the corporate governance report reflects the company’s compliance with the nine provisions of the 2006
combined code specified for our review by the listing rules of the financial services authority and we report if it does not we are
not required to consider whether the board’s statements on internal control cover all risks and controls or form an opinion on the
effectiveness of the group’s corporate governance procedures or its risk and control procedures
we read the other information contained in the annual report and consider whether it is consistent with the audited group financial
statements we consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies
with the group financial statements our responsibilities do not extend to any further information outside the annual report
basis of audit opinion
we conducted our audit in accordance with international standards on auditing uk and ireland issued by the auditing practices
board an audit includes examination on a test basis of evidence relevant to the amounts and disclosures in the group financial
statements and the part of the remuneration report to be audited it also includes an assessment of the significant estimates and
judgments made by the directors in the preparation of the group financial statements and of whether the accounting policies are
appropriate to the group’s circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the group financial statements and the part of the remuneration
report to be audited are free from material misstatement whether caused by fraud or other irregularity or error in forming our
opinion we also evaluated the overall adequacy of the presentation of information in the group financial statements and the part
of the remuneration report to be audited
opinion
in our opinion
• the group financial statements give a true and fair view in accordance with ifrss as adopted by the european union of the state
of the group’s affairs as at 31 december 2008 and of its profit for the year then ended
• the group financial statements have been properly prepared in accordance with the companies act 1985 and article 4 of the
ias regulation
• the part of the remuneration report described as having been audited has been properly prepared in accordance with the
companies act 1985 and
• the information given in the report of the directors is consistent with the group financial statements
deloitte llp
chartered accountants and registered auditors
london
united kingdom
25 march 2009
premier oil plc 2008 annual report and financial statements 53
consolidated income statement 
for the year ended 31 december 2008
2008 2007
note  million  million
sales revenues 1 6552 5782
cost of sales 2 3176 2675
exploration expense 429 653
prelicence exploration costs 158 83
general and administration costs 172 177
operating profit 2617 2194
interest revenue finance and other gains 5 146 107
finance costs and other finance expenses 5 270 182
mark to market revaluation of commodity hedges 17 283 649
profit before tax 2776 1470
tax 6 1793 1080
profit after tax 983 390
earnings per share cents
basic 7 1208 476
diluted 7 1196 469
the results relate entirely to continuing operations
consolidated statement of total recognised
income and expense 
for the year ended 31 december 2008
2008 2007
note  million  million
currency translation differences 56 41
pension costs – actuarial lossesgains 24 21 01
net lossesgains recognised directly in equity 77 42
profit for the year 983 390
total recognised income 906 432
premier oil plc 2008 annual report and financial statements
financial statements 54
consolidated balance sheet 
as at 31 december 2008
2008 2007
note  million  million
noncurrent assets
intangible exploration and evaluation assets 8 1579 1533
property plant and equipment 9 7674 7395
investments in associates 10 – 01
deferred tax asset 18 58 –
9311 8929
current assets
inventories 146 225
trade and other receivables 12 1812 2667
cash and cash equivalents 17 3237 3320
5195 6212
total assets 14506 15141
current liabilities
trade and other payables 13 2028 2526
current tax payable 738 731
2766 3257
net current assets 2429 2955
noncurrent liabilities
convertible bonds 14 2027 1956
other longterm debt 14 – 521
deferred tax liabilities 18 1888 1945
longterm provisions 16 1432 1472
longterm employee benefit plan deficit 24 68 82
deferred revenue 17 336 379
5751 6355
total liabilities 8517 9612
net assets 5989 5529
equity and reserves
share capital 19 736 735
share premium account 20 97 94
retained earnings 20 4729 4155
capital redemption reserve 20 17 17
translation reserves 20 16 40
equity reserve 20 426 488
5989 5529
the financial statements were approved by the board of directors and authorised for issue on 25 march 2009
they were signed on its behalf by
s c lockett
a r c durrant
directors
premier oil plc 2008 annual report and financial statements 55
consolidated cash flow statement 
for the year ended 31 december 2008
2008 2007
note  million  million
net cash from operating activities 22 3523 2695
investing activities
capital expenditure 2173 2612
prelicence exploration costs 158 83
proceeds from disposal of intangible exploration and evaluation assets 31 10
net cash used in investing activities 2300 2685
financing activities
issue of ordinary shares 04 10
purchase of shares for esop trust 179 –
purchase of own shares 472 –
issue of convertible bonds – 2500
issue costs for the convertible bonds – 59
loan drawdowns – 530
repayment of longterm financing 530 –
interest paid 109 93
net cash used infrom financing activities 1286 2888
currency translation differences relating to cash and cash equivalents 20 13
net decreaseincrease in cash and cash equivalents 83 2911
cash and cash equivalents at the beginning of the year 3320 409
cash and cash equivalents at the end of the year 22 3237 3320
premier oil plc 2008 annual report and financial statements
financial statements 56
notes to the consolidated financial statements 
for the year ended 31 december 2008
1 geographical segments
the group’s operations are located in the north sea asia middle eastpakistan and west africa these geographical segments
are the basis on which the group reports its primary segmental information sales revenue represents amounts invoiced
exclusive of salesrelated taxes for the group’s share of oil and gas sales
2008 2007
 million  million
revenue
north sea 3022 2805
asia 2036 1802
middle eastpakistan 1271 918
west africa 223 257
total group sales revenue 6552 5782
interest and other finance revenue 125 100
total group revenue 6677 5882
group operating profitloss
north sea 1356 1052
asia 1020 1016
middle eastpakistan 860 471
west africa 462 265
unallocated 157 80
group operating profit 2617 2194
interest revenue finance and other gains 146 107
finance costs and other finance expenses 270 182
mark to market revaluation of commodity hedges 283 649
profit before tax 2776 1470
tax 1793 1080
profit after tax 983 390
balance sheet
segment assets
north sea 3656 4044
asia 5278 5148
middle eastpakistan 1463 1234
west africa 765 1015
unallocated 3344 3699
investments in associates
west africa – 01
total assets 14506 15141
liabilities
north sea 2814 2826
asia 1660 1879
middle eastpakistan 602 463
west africa 200 204
unallocated 3241 4240
total liabilities 8517 9612
premier oil plc 2008 annual report and financial statements 57
1 geographical segments continued
2008 2007
 million  million
other information
capital additions
north sea 566 2031
asia 1052 1077
middle eastpakistan 296 199
west africa 326 378
total capital additions 2240 3685
depreciation depletion amortisation and impairment
north sea 522 532
asia 278 303
middle eastpakistan 175 123
west africa 431 121
total depreciation depletion amortisation and impairment 1406 1079
 unallocated expenditure assets and liabilities include amounts of a corporate nature and not specifically attributable to a geographical segment these
items include cash mark to market valuations of commodity hedges tax convertible bonds and other longterm debt
2 cost of sales
2008 2007
note  million  million
operating costs 1271 1168
stock overliftunderlift movement 331 273
royalties 168 155
amortisation and depreciation of property plant and equipment
oil and gas properties 9 1072 1069
other fixed assets 9 15 10
impairment of property plant and equipment 9 319 –
3176 2675
3 auditors’ remuneration
2008 2007
 million  million
audit fees
fees payable to the company’s auditors for the company’s annual report 05 05
audit of the company’s subsidiaries pursuant to legislation 02 01
07 06
nonaudit fees
other services pursuant to legislation – interim review 01 01
tax services 07 08
other services 03 02
11 11
premier oil plc 2008 annual report and financial statements
financial statements 58
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
4 staff costs
2008 2007
 million  million
staff costs including executive directors
wages and salaries 623 544
social security costs 27 44
pension costs
defined contribution 20 14
defined benefit 15 17
685 619
a portion of the group’s staff costs above are recharged to the joint venture partners or capitalised where they are directly
attributable to capital projects the above costs include sharebased payments to employees as disclosed in note 19
2008 2007
average number of employees during the year
technical and operations 206 205
management and administration 172 155
378 360
 staff numbers include executive directors the 2007 employee numbers have been restated to reflect a reclassification of employee categories during 2008
5 interest revenue and finance costs
2008 2007
note  million  million
interest revenue finance and other gains
shortterm deposits 109 79
others 16 21
exchange differences 21 07
146 107
finance costs and other finance expenses
bank loans and overdrafts 30 52
payable in respect of convertible bonds 14 142 70
unwinding of discount on decommissioning provision 58 46
longterm debt arrangement fees 08 05
mark to market valuation of foreign exchange contracts 25 04
others 07 05
270 182
premier oil plc 2008 annual report and financial statements 59
6 tax
2008 2007
 million  million
current tax
uk corporation tax on profits 475 272
uk petroleum revenue tax 340 292
overseas tax 1116 701
adjustments in respect of previous periods 02 02
total current tax 1929 1263
deferred tax
uk corporation tax 09 47
uk petroleum revenue tax 76 94
overseas tax 69 42
total deferred tax 136 183
tax on profit on ordinary activities 1793 1080
the tax charge for the year can be reconciled to the profit per the income statement as follows
2008 2007
 million  million
group profit on ordinary activities before tax 2776 1470
group profit on ordinary activities before tax at 610 weighted average rate 2007 776 1693 1141
tax effects of
incomeexpenses that are not taxabledeductible in determining taxable profit 55 64
tax and tax credits not related to profit before tax including uk petroleum revenue tax 43 116
unrecognised tax losses 87 –
utilisation and recognition of tax losses not previously recognised 15 16
adjustments in respect of previous periods 16 07
tax expense for the year 1793 1080
effective tax rate for the year 646 735
the weighted average rate is calculated based on the tax rates weighted according to the profit or loss before tax earned by the
group in each jurisdiction the change in the weighted average rate year on year relates to the mix of profit and loss in each
jurisdiction the effective tax rate for uk ring fence profits is 50 per cent
there are no significant unrecognised temporary differences associated with undistributed profits of subsidiaries associates and
joint ventures the amount of unused tax losses for which no deferred tax asset is recognised in the balance sheet in the absence
of suitable forecast profits is us68 million in the uk 2007 us127 million this gives rise to a potential deferred tax asset of
us19 million 2007 us38 million
premier oil plc 2008 annual report and financial statements
financial statements 60
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
7 earnings per share
the calculation of basic earnings per share is based on the profit after tax and on the weighted average number of ordinary
shares in issue during the year
basic and diluted earnings per share are calculated as follows
weighted average
profit after tax number of shares earnings per share
2008 2007 2008 2007 2008 2007
 million  million million million cents cents
basic 983 390 814 820 1208 476
outstanding share options – – 08 12  
diluted 983 390 822 832 1196 469
 the inclusion of the outstanding share options in the 2008 and 2007 calculations produces a diluted earnings per share the outstanding share options
number includes any expected additional share issues due to future sharebased payments at 31 december 2008 8003434 2007 8003434 potential
ordinary shares in the company that are underlying the company’s convertible bonds and that may dilute earnings per share in the future have not been
included in the calculation of diluted earnings per share because they are antidilutive for the year to 31 december 2008
8 intangible exploration and evaluation ee assets
oil and gas properties
middle west
north sea asia eastpakistan africa total
 million  million  million  million  million
cost
at 1 january 2007 107 845 63 132 1147
reclassified as no longer held for sale ––– 162 162
exchange movements 10 ––– 10
additions during the year 311 902 68 283 1564
disposals ––– 25 25
transfer to tangible fixed assets – 672 –– 672
exploration expenditure written off 66 185 131 271 653
at 1 january 2008 362 890 – 281 1533
exchange movements 76 ––– 76
additions during the year 352 428 25 173 978
transfer to tangible fixed assets – 408 19 – 427
exploration expenditure written off 57 272 06 94 429
at 31 december 2008 581 638 – 360 1579
the amounts for intangible ee assets represent costs incurred on active exploration projects these amounts are written off to
the income statement as exploration expense unless commercial reserves are established or the determination process is not
completed and there are no indications of impairment the outcome of ongoing exploration and therefore whether the carrying
value of ee assets will ultimately be recovered is inherently uncertain
premier oil plc 2008 annual report and financial statements 61
9 property plant and equipment
oil and gas properties
middle west other
north sea asia eastpakistan africa fixed assets total
 million  million  million  million  million  million
cost
at 1 january 2007 2755 3403 1339 – 68 7565
reclassified as no longer held for sale ––– 970 – 970
exchange movements ––– – 01 01
additions during the year 1704 171 129 95 22 2121
disposals ––– – 01 01
transfer from intangible fixed assets – 672 ––– 672
at 1 january 2008 4459 4246 1468 1065 90 11328
exchange movements ––– – 13 13
additions during the year 189 621 270 153 29 1262
disposals ––– – 09 09
transfer from intangible fixed assets – 408 19 –– 427
at 31 december 2008 4648 5275 1757 1218 97 12995
amortisation and depreciation
at 1 january 2007 1095 720 671 – 53 2539
reclassified as no longer held for sale ––– 317 – 317
exchange movements ––– – 01 01
charge for the year 524 301 123 121 10 1079
disposals ––– – 01 01
at 1 january 2008 1619 1021 794 438 61 3933
exchange movements ––– – 11 11
charge for the year 512 274 174 112 15 1087
impairment loss ––– 319 – 319
disposals ––– – 07 07
at 31 december 2008 2131 1295 968 869 58 5321
net book value
at 31 december 2007 2840 3225 674 627 29 7395
at 31 december 2008 2517 3980 789 349 39 7674
other fixed assets include items such as leasehold improvements motor vehicles and office equipment
the impairment loss relates to the chinguetti field in mauritania the impairment charge was calculated by reference to an
assessment of the future discounted cash flows expected to be derived from production of commercial reserves measured
against the carrying value of the asset the future cash flows are discounted using a pretax discount rate estimates involved in
impairment measurement include estimates of commercial reserves future oil and gas prices costs and timing which are
inherently uncertain
amortisation and depreciation for oil and gas properties is calculated on a unitofproduction basis using the ratio of oil and gas
production in the period to the estimated quantities of proved and probable reserves at the end of the period plus production in
the period on a fieldbyfield basis proved and probable reserve estimates are based on a number of underlying assumptions
including oil and gas prices future costs oil and gas in place and reservoir performance which are inherently uncertain
management uses established industry techniques to generate its estimates and regularly references its estimates against those
of joint venture partners or external consultants however the amount of reserves that will ultimately be recovered from any field
cannot be known with certainty until the end of the field’s life
premier oil plc 2008 annual report and financial statements
financial statements 62
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
10 investments and associates
associates
details of the group’s associates as at 31 december 2007 were as follows
country of incorporation interest voting
associate business and area of operation or registration power held
premier oil exploration mauritania ltd
formerly fusion mauritania a ltd exploration mauritania jersey 299
fp mauritania a bv exploration mauritania netherlands 299
the following aggregated amounts relating to associates were disclosed in the 2007 consolidated financial statements
2007
 million
total assets 16
total liabilities 15
at 31 december 01
the two associated companies have a combined 462 per cent share of the psc a area offshore mauritania in december 2008
they became 100 per cent subsidiaries of the premier oil group for usnil consideration following a waiver of the preemption
rights from the other partners in the venture their 2008 results have been fully consolidated in these financial statements
subsidiaries
the company has investments in the following 100 per cent owned subsidiaries which principally affected the profits or net assets
of the group to avoid a statement of excessive length details of investments which are not significant have been omitted
country of incorporation
name of company business and area of operation or registration
premier oil group ltd intermediate holding company uk scotland
premier oil finance jersey ltd convertible bond issuing company jersey jersey
premier oil exploration ltd exploration production and development uk scotland
premier pict petroleum ltd exploration production and development uk scotland
premier oil kakap bv exploration production and development indonesia netherlands
premier oil natuna sea bv exploration production and development indonesia netherlands
premier oil holdings ltd intermediate holding company uk england and wales
fp mauritania b bv exploration production and development mauritania netherlands
premier oil mauritania b ltd exploration production and development mauritania jersey
premier oil vietnam offshore bv exploration production and development vietnam netherlands
premier oil sumatra north bv exploration production and development indonesia netherlands
pkp exploration ltd exploration production and development pakistan england and wales
pkp kadanwari 2 ltd exploration production and development pakistan cayman islands
pkp kirthar 2 bv exploration production and development pakistan netherlands
 held directly by premier oil plc all other companies are held through subsidiary undertakings
premier oil plc 2008 annual report and financial statements 63
11 investments in joint ventures
during the year the group announced the execution of shareholder agreements with emirates international investment
company llc eiic to form two new joint venture companies to pursue the acquisition of upstream oil and gas assets across
the middle east and north africa region
premco energy projects company llc premco is owned 49 per cent by the group and 51 per cent by eiic premco energy
projects bv prembv is owned 50 per cent by the group and 50 per cent by eiic
at the formation of the joint ventures there were no assets or profits attributable to these new entities future acquisitions
of new assets by each joint venture will be funded by premier and eiic in accordance with their relevant percentage holding
of that joint venture
summarised financial information for the group’s share of jointly controlled entities is shown below
2008
 million
current assets
cash and cash equivalents 02
current liabilities
trade and other payables 20
net liabilities 18
included in the consolidated income statement for 2008 are the results for the group’s share of jointly controlled entities with
prelicence exploration costs at us20 million loss before tax us20 million tax charge usnil and loss after tax us20 million
12 trade and other receivables
2008 2007
note  million  million
trade receivables 965 1155
other receivables 272 758
mark to market valuation of commodity hedges 17 107 379
prepayments 122 113
tax recoverable 346 262
1812 2667
 the recoverable tax balance includes advance payments of overseas corporation taxes totalling us188 million 2007 us138 million
the carrying values of the trade and other receivables are equal to their fair value as at the balance sheet date
13 trade and other payables
2008 2007
note  million  million
trade payables 503 515
accrued expenses 1001 965
other payables 345 367
mark to market valuation of commodity hedges 17 140 652
shortterm provisions 39 27
2028 2526
the carrying values of the trade and other payables are equal to their fair value as at the balance sheet date
premier oil plc 2008 annual report and financial statements
financial statements 64
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
14 borrowings
2008 2007
note  million  million
amounts falling due in two to five years
other longterm debt – bank loans 17 – 530
amounts falling due over five years
convertible bonds 2064 2000
total borrowings 2064 2530
cash
cash at bank and in hand 115 76
shortterm deposits 3122 3244
total cash 3237 3320
 the carrying values of the convertible bonds and the other longterm debt on the balance sheet are stated net of the unamortised portion of the issue costs
of us37 million 2007 us44 million and debt arrangements fees of usnil 2007 us09 million respectively
the borrowings are repayable as follows
2008 2007
 million  million
borrowings analysed by maturity
bank loans – in the third year – 530
convertible bonds – in the sixth year 2007 seventh year 2064 2000
total borrowings 2064 2530
the group’s principal bank facilities are us275 million and £53 million 2007 us275 million and £53 million the original facility
was taken out on 13 september 2005 and amended in april 2007 and will continue until 31 july 2010 the facilities are unsecured
and bear a floating interest rate based on libor
convertible bonds
in june 2007 the group issued bonds at a par value of us250 million which are convertible into ordinary shares of the company
at any time from 6 august 2007 until six days before their maturity date of 27 june 2014 at the initial conversion price of £1582
per share there are 8003434 ordinary shares of the company underlying the bonds if the bonds have not been previously
purchased and cancelled redeemed or converted they will be redeemed at par value on 27 june 2014 interest of 2875 per
cent per annum will be paid semiannually in arrears up to that date
the net proceeds received from the issue of the convertible bonds were split between a liability element and an equity
component at the date of issue the fair value of the liability component was estimated using the prevailing market interest
rate for similar nonconvertible debt the difference between the proceeds of issue of the convertible bonds and the fair value
assigned to the liability component representing the embedded option to convert the liability into equity of the group was
included in equity reserves
issue costs were apportioned between the liability and equity components of the convertible bonds based on their relative
carrying amounts at the date of issue the portion relating to the equity component was charged directly against equity
2008 2007
 million  million
liability component at 1 january 1956 –
nominal value of convertible bonds issued net of issue costs – 2440
equity component – 518
liability component at date of issue 1956 1922
interest charged 142 70
interest paid 71 36
total liability component as at 31 december 2027 1956
premier oil plc 2008 annual report and financial statements 65
14 borrowings continued
the total interest charged for the year has been calculated by applying an effective annual interest rate of 673 per cent
2007 673 per cent to the liability component for the period since the bonds were issued the noncash accrual of interest
will increase the liability component as the cash interest is only paid at 2875 per cent to us250 million at maturity
there is no material difference between the carrying amount of the liability component of the convertible bonds and their fair
value this fair value is calculated by discounting the future cash flows at the market rate
15 obligations under leases
2008 2007
 million  million
minimum lease payments under operating leases recognised as an expense in the year 84 76
outstanding commitments for future minimum lease payments under noncancellable
operating leases which fall due as follows
within one year 49 71
in two to five years 151 125
over five years 09 10
209 206
operating lease payments represent the group’s share of rentals payable by the group for fpsos and for certain of its office
properties office equipment and motor vehicles
16 longterm provisions
2008 2007
 million  million
asset and equity plan
at 1 january 58 125
provision in the year 33 19
reclassification of provision to creditors falling due within one year 58 86
at 31 december 33 58
decommissioning costs
at 1 january 1414 371
on assets reclassified as no longer held for sale – 72
on asset acquisitions – 577
revision arising from
change in estimates of future decommissioning costs 321 343
exchange differences 394 05
unwinding of discount on decommissioning provision 58 46
at 31 december 1399 1414
total provisions 1432 1472
the company currently operates an asset and equity plan to reward employees for improvement in the asset value of the
business and the market value of the company over a threeyear period further details of this plan are disclosed in note 19
the decommissioning provision represents the present value of decommissioning costs relating to the uk west africa and
pakistan oil and gas interests which are expected to be incurred up to 2032 these provisions have been created based on
premier’s internal estimates and where available operator’s estimates based on the current economic environment
assumptions have been made which the management believe are a reasonable basis upon which to estimate the future
liability these estimates are reviewed regularly to take into account any material changes to the assumptions however actual
decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning works required
which will reflect market conditions at the relevant time furthermore the timing of decommissioning is likely to depend on
when the fields cease to produce at economically viable rates this in turn will depend upon future oil and gas prices which
are inherently uncertain
premier oil plc 2008 annual report and financial statements
financial statements 66
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
17 financial instruments
hedging instruments
the group’s activities expose it to financial risks of changes primarily in oil and gas prices but also foreign currency exchange
and interest rates the group uses derivative financial instruments to hedge certain of these risk exposures the use of financial
derivatives is governed by the group’s policies and approved by the board of directors which provide written principles on the
use of financial derivatives
it is group policy that all transactions involving derivatives must be directly related to the underlying business of the group
the group does not use derivative financial instruments for speculative exposures premier undertakes oil and gas price hedging
periodically within board limits to protect operating cash flow against weak prices
oil and gas hedging is undertaken with collar options oil is hedged using dated brent oil price options indonesian gas
is hedged using hsfo singapore 180cst which is the variable component of the gas price
oil production
a production from 2009 to 2012 is now 60 per cent hedged for the years 2009 and 2012 production is now hedged with
an average floor of us393bbl and a cap of us1000bbl
b at the end of 2007 an offtake agreement was agreed in which the parameters of the above hedges were embedded this
agreement is for four and a half years effective from 1 july 2008 and replaces the financiallysettled hedges for that period
c a further option agreement which has the effect of closing out the floor and cap in the original financiallysettled hedges
previously in place
d the value at 31 december 2008 of the option agreement is us336 million 2007 us379 million this represents deferred
income which will be amortised over the life of the offtake agreement for the year ended 31 december 2008 a total of
us43 million was released to the income statement 2007 usnil in respect of this deferred income
indonesian gas production
production from 2009 to midyear 2013 is now 34 per cent hedged with a floor of us2500mt and a cap of us5000mt
during the year gas hedges matured generating a cash cost of us78 million 2007 us42300 and oil hedges matured
generating a cash cost of us81 million 2007 usnil while all hedges were assessed to be effective all movements in the fair
values have been recognised in the income statement as all such movements relate to the timevalue portion of hedges under
ias 39
fair value of hedges
oil gas total
assetliability  million  million  million
at 1 january 2007 08 05 03
charge to income statement for 2007 400 249 649
at 1 january 2008 408 244 652
charge to income statement for 2008 297 215 512
at 31 december 2008 111 29 140
fair value of option
oil gas total
assetliability  million  million  million
at 1 january 2008 379 – 379
charge to income statement for 2008 272 – 272
at 31 december 2008 107 – 107
premier oil plc 2008 annual report and financial statements 67
17 financial instruments continued
deferred revenue
oil gas total
assetliability  million  million  million
at 1 january 2008 379 – 379
charge to income statement for 2008 43 – 43
at 31 december 2008 336 – 336
the fair values which have been determined from counterparties with whom the trades have been concluded have been
recognised in the balance sheet in trade and other receivables and trade and other payables
the key variable which affects the fair value of the group’s hedge instruments is market expectations about future commodity
prices the following illustrates the sensitivity of net income and equity to a ten per cent increase and a ten per cent decrease
in this variable
oil gas total
increasedecrease in mark to market value  million  million  million
ten per cent increase 180 144 324
ten per cent decrease 62 60 122
interest rate risk profile of financial liabilities
the interest rate profile of the financial liabilities of the group as at 31 december was
fixed rate
weighted
average
fixed rate floating rate total interest rate
 million  million  million 
2008
convertible bonds 2500 – 2500 2875
total 2500 – 2500 –
2007
bank loans – 530 530 –
convertible bonds 2500 – 2500 2875
total 2500 530 3030 –
the us530 million of bank loans that were outstanding at 31 december 2007 were repaid during 2008
the carrying values on the balance sheet of the bank loans and the convertible bonds which are stated net of debt arrangement
fees and issue costs are as follows
2008 2007
 million  million
bank loans – 521
convertible bonds
liability component 2027 1956
equity component 426 488
the floating rate financial liabilities at 31 december 2007 comprised bank borrowings bearing interest at rates set by reference
to us libor exposing the group to a cash flow interest rate risk
premier oil plc 2008 annual report and financial statements
financial statements 68
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
17 financial instruments continued
interest rate risk profile of financial assets
the interest rate profile of the financial assets of the group as at 31 december was
floating rate interest free total
 million  million  million
2008
cash and shortterm deposits
sterling 01 – 01
us 2900 65 2965
other 221 50 271
total 3122 115 3237
2007
cash and shortterm deposits
sterling 03 – 03
us 3131 53 3184
other 110 23 133
total 3244 76 3320
the floating rate cash and shortterm deposits consist of cash held in interestbearing current accounts and deposits placed
on the money markets for periods ranging from overnight to three months
the impact of an interest rate sensitivity analysis is immaterial to the group’s results
borrowing facilities
the group has committed borrowing facilities of us275 million and £53 million in addition to the convertible bonds the undrawn
cash balance as at 31 december was
2008 2007
 million  million
expiring in more than one year but not more than two years 2750 –
expiring in more than two years but not more than five years – 2220
fair value of financial assets and financial liabilities
the fair values of the financial assets and financial liabilities are
2008 2008 2007 2007
carrying estimated carrying estimated
amount fair value amount fair value
 million  million  million  million
primary financial instruments held or issued to finance
the group’s operations
cash and shortterm deposits 3237 3237 3320 3320
bank loans –– 530 530
liability component of convertible bonds 2064 2064 2000 2000
derivative financial instruments held or issued to hedge the
group’s exposure on expected future sales
forward foreign exchange contracts – net 29 29 04 04
premier oil plc 2008 annual report and financial statements 69
17 financial instruments continued
fair value is the amount at which a financial instrument could be exchanged in an arm’s length transaction other than in a forced
or liquidated sale where available market values have been used to determine fair values the estimated fair values have been
determined using market information and appropriate valuation methodologies values recorded are as at the balance sheet
date and will not necessarily be realised noninterest bearing financial instruments which include amounts receivable from
customers and accounts payable are recorded materially at fair value reflecting their shortterm maturity and are not shown in
the above table
credit risk
the group’s credit risk is attributable to its trade receivables and its bank deposits the amounts of receivables presented in
the balance sheet are net of allowances for doubtful receivables which were immaterial in 2008 and 2007 the group does not
require collateral or other security to support receivables from customers or related parties the credit risk on liquid funds and
derivative financial instruments is limited because the counterparties are banks with at least single a credit ratings assigned by
international credit rating agencies
the group has no significant concentration of credit risk
the maturity profile of the group’s trade and other receivables and trade and other payables as at 31 december including the
related interest amounts was
less than 2 to 3 3 months 1 to 5 over 5
1 month months to 1 year years years total
 million  million  million  million  million  million
2008
trade and other receivables 887 298 52 –– 1237
trade and other payables 755 47 46 –– 848
convertible bonds –– 72 288 2536 2896
total 132 251 66 288 2536 2507
2007
trade and other receivables 1399 263 251 –– 1913
trade and other payables 649 87 146 –– 882
convertible bonds –– 72 288 2608 2968
total 750 176 33 288 2608 1937
currency risk
t o cover sterling exposures an amount of £1050 million was purchased with forward contracts during the year 2007 £571 million
premier’s activities are largely conducted in us dollars all borrowings at yearend were denominated in us dollars to match the
currency of the assets
liquidity risk
ultimate responsibility for liquidity risk management rests with the board of directors which has built an appropriate liquidity risk
management framework for the management of the group’s short medium and longterm funding and liquidity management
requirements the group manages liquidity risk by maintaining adequate reserves banking facilities and borrowing facilities by
continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities and
future capital and operating commitments
premier oil plc 2008 annual report and financial statements
financial statements 70
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
18 deferred tax
2008 2007
 million  million
deferred tax liabilities 1888 1945
deferred tax assets 58 –
1830 1945
uk uk
corporation petroleum
tax revenue tax overseas tax total
 million  million  million  million
at 1 january 2007 74 522 1345 1941
on assets reclassified as no longer held for sale –– 16 16
charged to income statement 47 94 42 183
other movement –– 171 171
at 31 december 2007 27 428 1490 1945
charged to income statement 09 76 69 136
other movement –– 21 21
at 31 december 2008 36 352 1442 1830
deferred corporation tax included us81 million of deferred uk petroleum revenue tax 2007 us62 million and us290 million
of deferred uk corporation tax 2007 us335 million related to decommissioning provisions in the uk the majority of the
remaining deferred tax balances arose as a result of temporary differences between the carrying values and tax bases of fixed
assets the other movement relates to the deferred effect of norwegian tax rebates including exchange differences
19 share capital
2008 2007
 million  million
balance at 1 january 735 733
shares issued 01 02
balance at 31 december 736 735
2008 2008 2007 2007
50p shares £ 50p shares £
ordinary shares
authorised 315224564 157612282 311904002 155952001
calledup issued and fully paid 82170460 41085230 82104049 41052025
2008 2008 2007 2007
175p shares £ 175p shares £
nonvoting convertible shares
authorised –– 9487317 1660280
calledup issued and fully paid –– ––
at the agm of the company held on 6 june 2008 the company’s authorised share capital was increased by £0525 by the
creation of three nonvoting convertible shares of 175 pence each following the increase in share capital the 9487320
authorised but unissued nonvoting convertible shares of 175 pence each were consolidated and redesignated as 3320562
ordinary shares of 50 pence each in the capital of the company carrying the rights and being subject to the restrictions set out
in the articles of association of the company
premier oil plc 2008 annual report and financial statements 71
19 share capital continued
sharebased payments
shares issued relate to the company’s share option plans there has been no new issue of shares in relation to the asset and
equity plan
share option plans
the company has share option schemes under which options to subscribe for the company’s shares have been granted to
certain executives and employees options granted are normally exercisable not less than three years after their grant and will
lapse on their tenth anniversary options cannot be exercised until predetermined performance conditions have been achieved
under the savings related share option scheme eligible employees with six months or more continuous service can join the
scheme employees can save to a maximum of £250 per month through payroll deductions for a period of three or five years
after which time they can acquire shares at up to a 20 per cent discount
under the share incentive plan employees are invited to make contributions to buy partnership shares if an employee agrees
to buy partnership shares the company currently matches the number of partnership shares bought with an award of shares
matching shares on a oneforone basis
2008 2007
weighted weighted
average average
options exercise price options exercise price
outstanding at the beginning of the year 418392 £385 566161 £331
granted during the year 18292 £1084 24497 £996
lapsed during the year 105202 £584 5689 £536
exercised during the year 141760 £215 166577 £288
outstanding at the end of the year 189722 £469 418392 £385
exercisable at the end of the year 111750 £220 214660 £167
 there were 66411 ordinary shares issued under the group’s share option schemes during the year 2007 166577 the remaining 75349 ordinary shares
were issued from the premier oil plc employee benefit trust 2007 nil
the weighted average share price at the date of exercise for share options exercised during the year was £215 the options
outstanding at 31 december 2008 had a weighted average exercise price of £469 and a weighted average remaining
contractual life of 26 years
the fair value of the options granted during the year was determined using the blackscholes valuation model and is not material
the group recognised a cost of us201 million and us78 million related to equitysettled sharebased payment transactions
in 2008 and 2007 respectively
asset and equity plan
the asset and equity plan is designed to reward employees for improvement in the asset value of the business and the market
value of the company over a threeyear period and is operated by reference to two bonus pools – an equity bonus pool and an
asset bonus pool the asset bonus pool is created by reference to the increase in the net asset value per share of the company
over a threeyear period and the equity bonus pool is created by reference to the increase in the equity market value per share
of the company over a threeyear period
full details about this plan have been provided in the remuneration report
the company uses a monte carlo simulation model to calculate the value of the equity bonus pool of the plan
the main assumptions used for the calculations are as follows
volatility 290 to 315
risk free rate of interest 41 to 49
historic market value growth factor 990 to 1090
premier oil plc 2008 annual report and financial statements
financial statements 72
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
19 share capital continued
for the asset bonus pool a discounted cash flow model based on the average oil price over the period is used to calculate the
final value of the pool and to estimate the value of future asset bonus pools
for the year ended 31 december 2008 the total cost recognised by the company for sharebased payments is us256 million
2007 us157 million with a cumulative liability on the balance sheet of us163 million 2007 us183 million a credit of
us201 million has been recorded in equity 2007 us78 million for all equitysettled payments for the group like other
elements of remuneration this charge is processed through the timewriting system which allocates cost based on time spent
by individuals to various entities within the premier oil group part of this cost is therefore capitalised as directly attributable to
capital projects and part is charged to the income statement as exploration expense operating costs prelicence exploration
costs or general and administration costs
ordinary shares
the rights and restrictions attached to the ordinary shares are as follows
dividend rights
the rights of the holders of ordinary shares shall rank pari passu in all respects with each other in relation to dividends
winding up or reduction of capital
on a return of capital on a winding up or otherwise other than on conversion redemption or purchase of shares the rights of
the holders of ordinary shares to participate in the distribution of the assets of the company available for distribution shall rank
pari passu in all respects with each other
voting rights
the holders of ordinary shares shall be entitled to receive notice of attend vote and speak at any general meeting of the company
20 consolidated statement of changes in equity
share capital translation
share premium retained redemption and hedging equity
capital account earnings reserve reserves reserve total
note  million  million  million  million  million  million  million
at 1 january 2007 733 86 3656 17 01 – 4491
issue of ordinary shares 19 02 08 –– –– 10
provision for share
based payments 19 –– 78 –– – 78
equity component of
convertible bonds issued 14 –– ––– 518 518
transfer between reserves –– 30 –– 30 –
total recognised income –– 391 – 41 – 432
at 31 december 2007 735 94 4155 17 40 488 5529
issue of ordinary shares 19 01 03 –– –– 04
purchase of shares for
esop trust 21 –– 179 –– – 179
purchase of own shares 21 –– 472 –– – 472
provision for share
based payments 19 –– 201 –– – 201
transfer between reserves –– 62 –– 62 –
total recognised income –– 962 – 56 – 906
at 31 december 2008 736 97 4729 17 16 426 5989
 the transfer between reserves relates to the noncash interest on the convertible bond less the amortisation of the issue costs that were charged directly
against equity
premier oil plc 2008 annual report and financial statements 73
21 own shares
treasury esop
shares trust total
 million  million  million
at 1 january 2007 – 85 85
release of shares for longterm incentive plan – 49 49
at 31 december 2007 – 36 36
release of shares for longterm incentive plan – 50 50
acquired in the period 472 179 651
disposed of on exercise of options – 01 01
at 31 december 2008 472 164 636
the own shares reserve represents the cost of shares in premier oil plc purchased in the market
the treasury shares are held by the company the number of ordinary shares held by the company at 31 december 2008 was
2798186 2007 nil on 23 march 2009 the 2798186 treasury shares were cancelled by the company
the esop trust shares are held by the premier oil plc employee benefit trust to satisfy options under the group’s share option
schemes the number of ordinary shares held by the premier oil plc employee benefit trust at 31 december 2008 was 863339
2007 205152
22 notes to the cash flow statement
2008 2007
 million  million
profit before tax for the year 2776 1470
adjustments for
depreciation depletion amortisation and impairment 1406 1079
exploration expense 429 653
prelicence exploration costs 158 83
net operating charge for longterm employee benefit plans less contributions 30 06
provision for sharebased payments 201 78
interest revenue finance and other gains 146 107
finance costs and other finance expenses 270 182
mark to market revaluation of commodity hedges 283 649
operating cash flows before movements in working capital 4781 4081
decreaseincrease in inventories 79 71
decreaseincrease in receivables 345 437
increasedecrease in payables 217 45
cash generated by operations 5422 3528
income taxes paid 2031 903
interest income received 132 70
net cash from operating activities 3523 2695
premier oil plc 2008 annual report and financial statements
financial statements 74
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
22 notes to the cash flow statement continued
analysis of changes in net cash
2008 2007
note  million  million
a reconciliation of net cash flow to movement in net cash
movement in cash and cash equivalents 83 2911
proceeds from longterm loans – 530
repayment of longterm loans 530 –
proceeds of issue of convertible bonds – debt component – 1969
noncash movements on debt and cash balances 64 31
increase in net cash in the period 383 381
opening net cash 790 409
closing net cash 1173 790
b analysis of net cash
cash and cash equivalents 17 3237 3320
longterm debt 17 2064 2530
total net cash 1173 790
 the carrying values of the convertible bonds and other longterm debt on the balance sheet are stated net of the unamortised portion of the issue costs
of us37 million 2007 us44 million and debt arrangement fees of usnil 2007 us09 million respectively
23 capital commitments and guarantees
at 31 december 2008 the group had capital commitments on exploration and development licences totalling us1180 million
2007 us858 million us01 million as retainer fees for its alliance partners 2007 us01 million performance guarantees of
us95 million 2007 us126 million and customs guarantees of us03 million 2007 us09 million
24 group pension schemes
2008 2007
 million  million
uk funded pension scheme 20 26
uk unfunded pension scheme 08 11
indonesia unfunded termination benefit scheme 40 45
total liability in balance sheet 68 82
funded benefit schemes
the group operates a defined benefit pension scheme in the uk – the premier oil plc retirement and death benefits plan
the scheme the scheme was closed to new members aside from the provision of insured death in service benefits in 1997
and a new scheme providing benefits on a defined contribution basis was started both schemes are funded by the payment
of contributions to separately administered trust funds as a consequence of being closed to new entrants the current service
costs of the scheme under the ias 19 – ‘employee benefits’ valuation will increase as the members approach retirement
the pension costs for the scheme are determined with the advice of an independent qualified actuary the most recent formal
valuation was undertaken as at 1 january 2008 using the attained age method and a marketrelated funding basis of which the
principal financial assumptions were investment return 59 per cent pa salary growth 54 per cent pa and pension increases
34 per cent pa the market value of the scheme’s assets was £149 million and on the specific method and assumptions
adopted the assets covered 91 per cent of the members’ accrued benefits based on projected pensionable salaries until
october 2008 the employer contributed to the scheme at the rate of 19 per cent of pensionable salaries together with an
additional £28000 paid per month in october a new schedule of contributions was put in place at this point the employer
paid a oneoff lump sum contribution of £13 million and started to contribute at a rate of 25 per cent of pensionable salaries
with no additional monthly amounts the employer expects to contribute £95000 to the scheme in 2009
premier oil plc 2008 annual report and financial statements 75
24 group pension schemes continued
the following figures have been prepared in compliance with ias 19 – ‘employee benefits’ by an independent actuary on the
basis of membership data current as at 31 december 2008 but taking account of pension increases effected on 1 january 2009
the benefit obligations and service cost have been measured using the projected unit credit method and the pension expense
has been assessed on the basis that the group adopts the policy of fully recognising actuarial gains and losses during the period
in which they arise
the principal actuarial assumptions used were as follows
at 31 at 31
december december
2008 2007
 pa  pa
discount rate 60 59
salary growth 50 54
return on assets 58 67
price inflation 30 34
pension increases 30 34
defined benefit obligations and assets
at 31 at 31
december december
2008 2007
 million  million
value of funded benefit obligations 227 319
less fair value of scheme assets 207 293
liability in balance sheet 20 26
changes in the present value of benefit obligations
2008 2007
 million  million
benefit obligation at 1 january 319 314
service costs excluding employee contributions 02 03
interest cost 17 17
benefits paid 10 12
actuarial gains 21 05
currency translation effects 80 02
benefit obligation at 31 december 227 319
changes in the fair value of scheme assets
2008 2007
 million  million
assets at 1 january 293 280
employer contributions 30 08
actual return on scheme assets 32 13
benefits paid 10 12
currency translation effects 74 04
assets at 31 december 207 293
premier oil plc 2008 annual report and financial statements
financial statements 76
notes to the consolidated financial statements continued 
for the year ended 31 december 2008
24 group pension schemes continued
portfolio distribution and expected returns
2008 2007
expected expected
rate of return fair value rate of return fair value
 pa  million  pa  million
equities 84 67 79 126
bonds 64 80 59 110
cash 20 60 55 57
total at 31 december 58 207 67 293
pension expense
2008 2007
 million  million
service cost 02 03
interest cost 17 17
expected return on scheme assets 19 17
investment losses 51 04
actuarial gains 21 06
total pension expense for the year 30 01
a total loss of us24 million 2007 gain of us02 million was recognised directly in equity during the year
reconciliation of balance sheet liability
2008 2007
 million  million
at 1 january 26 34
pension expense for the year 30 01
contributions paid 30 09
currency translation effects 06 –
at 31 december 20 26
five year history of experience adjustments at 31 december
2008 2007 2006 2005 2004
 million  million  million  million  million
value of defined benefit obligation 227 319 314 281 251
fair value of scheme assets 207 293 280 211 189
deficit in the scheme 20 26 34 70 62
experience adjustments on scheme liabilities
amount – gainloss 01 – 06 01 07
percentage of scheme liabilities 0 0 2 0 3
experience adjustments on scheme assets
amount – lossgain 51 04 02 16 02
percentage of scheme assets 25 1 1 8 1
unfunded benefit schemes
in indonesia the group operates a service severance and compensation pay scheme under a collective labour agreement with
the local workforce this is an unfunded postemployment defined benefit scheme in nature
in addition the group is paying an unfunded pension to a former director of the company in regard to which annual increases
and a reversionary spouse’s pension apply on the same basis as to pensions paid under the scheme
on the same actuarial basis as used to assess the scheme’s pension costs the present value as at 31 december 2008 of the
future payments projected to be made in respect of uk unfunded pensions is us08 million 2007 us11 million
a total gain of us03 million 2007 loss of us01 million was recognised directly in equity during the year
premier oil plc 2008 annual report and financial statements 77
24 group pension schemes continued
defined contribution benefit scheme
the group operates a defined contribution retirement benefit scheme the only obligation of the group with respect to the
retirement benefit scheme is to make specified contributions payments to the defined contribution scheme are charged as
an expense as they fall due the total cost charged to income of us20 million 2007 us14 million represents contributions
payable to these schemes by the group at rates specified in the rules of the scheme
25 related party transactions
transactions between the company and its subsidiaries associates and joint ventures which are related parties have been
eliminated on consolidation and are not disclosed in this note
directors and executive remuneration
the remuneration of directors and other key members of management during the year is highlighted below further information
regarding the remuneration of individual directors is provided in the audited part of the remuneration report
2008 2007
 million  million
shortterm employee benefits 47 48
postemployment benefits 05 05
other longterm benefits 06 28
58 81
26 events after the balance sheet date
acquisition
the group has reached a conditional agreement on 25 march 2009 with oilexco incorporated oilexco north sea ltd onsl
and its administrators to acquire either
i onsl’s entire issued share capital or
ii the principal operating assets of onsl and oilexco north sea exploration ltd for a maximum consideration of
approximately us505 million
the group proposes to fund the acquisition and associated costs by way of
• a 4 for 9 rights issue of new ordinary shares at a price of 485 pence per share to raise gross proceeds of approximately
£171 million
• new credit facilities comprising a us175 million 18month acquisition bridge facility a us225 million threeyear revolving
credit facility and us63 million and £60 million threeyear letter of credit facilities and
• the group’s existing cash resources
onsl is an oil and gas exploration and production company active in the uk with its producing properties located in the uk
central north sea onsl is a whollyowned subsidiary of oilexco inc and began operating in the north sea in 2003 onsl was
placed into administration by its lending banks on 7 january 2009 since that date onsl’s administrators ernst  young have
continued to operate the business which has continued to generate positive current cash flow from ongoing operations onsl’s
total production in the year ended 31 december 2008 was approximately 15500 boepd as at 31 december 2008 onsl had
total 2p reserves and contingent resources of approximately 60 mmboe of which 40 mmboe were bookable as 2p reserves by
the group
treasury shares
on 23 march 2009 the company cancelled the 2798186 treasury shares that it had acquired in 2008
premier oil plc 2008 annual report and financial statements
financial statements 78
independent auditors’ report to the members
of premier oil plc 
we have audited the parent company financial statements of premier oil plc for the year ended 31 december 2008 which comprise
the balance sheet statement of total recognised gains and losses and the related notes 1 to 16 these parent company financial
statements have been prepared under the accounting policies set out therein
we have reported separately on the group financial statements of premier oil plc for the year ended 31 december 2008 and on the
information in the remuneration report that is described as having been audited
this report is made solely to the company’s members as a body in accordance with section 235 of the companies act 1985 our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditors’ report and for no other purpose to the fullest extent permitted by law we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body for our audit work for this report or for the opinions
we have formed
respective responsibilities of directors and auditors
the directors’ responsibilities for preparing the annual report and the parent company financial statements in accordance with
applicable law and united kingdom accounting standards united kingdom generally accepted accounting practice are set out
in the statement of directors’ responsibilities
our responsibility is to audit the parent company financial statements in accordance with relevant legal and regulatory requirements
and international standards on auditing uk and ireland
we report to you our opinion as to whether the parent company financial statements give a true and fair view and whether the parent
company financial statements have been properly prepared in accordance with the companies act 1985 we also report to you
whether in our opinion the report of the directors is consistent with the parent company financial statements the information given
in the report of the directors includes that specific information presented in the chief executive’s and financial reviews that is cross
referred from the business review section of the report of the directors
in addition we report to you if in our opinion the company has not kept proper accounting records if we have not received all the
information and explanations we require for our audit or if information specified by law regarding directors’ remuneration and other
transactions is not disclosed
we read the other information contained in the annual report and consider whether it is consistent with the audited parent company
financial statements the other information comprises only the report of the directors the chairman’s statement and the chief
executive’s and financial reviews we consider the implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the parent company financial statements our responsibilities do not extend to any further information
outside the annual report
basis of audit opinion
we conducted our audit in accordance with international standards on auditing uk and ireland issued by the auditing practices
board an audit includes examination on a test basis of evidence relevant to the amounts and disclosures in the parent company
financial statements it also includes an assessment of the significant estimates and judgments made by the directors in the
preparation of the parent company financial statements and of whether the accounting policies are appropriate to the company’s
circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the parent company financial statements are free from material
misstatement whether caused by fraud or other irregularity or error in forming our opinion we also evaluated the overall adequacy
of the presentation of information in the parent company financial statements
opinion
in our opinion
• the parent company financial statements give a true and fair view in accordance with united kingdom generally accepted
accounting practice of the state of the company’s affairs as at 31 december 2008
• the parent company financial statements have been properly prepared in accordance with the companies act 1985 and
• the information given in the report of the directors is consistent with the parent company financial statements
deloitte llp
chartered accountants and registered auditors
london
united kingdom
25 march 2009
premier oil plc 2008 annual report and financial statements 79
parent company financial statements balance sheet 
as at 31 december 2008
2008 2007
note  million  million
fixed assets
property plant and equipment 3 661 792
investments in subsidiaries 4 5532 5532
total fixed assets 6193 6324
current assets
debtors – due within one year 5 90 87
deferred tax asset – due after one year 5 86 162
total current assets 176 249
creditors amounts falling due within one year 6 256 363
net current liabilities 80 114
total assets less current liabilities 6113 6210
creditors amounts falling due after one year 7 3496 3960
net assets excluding pension liability 2617 2250
provision for liabilities 8 99 126
pension liability 9 28 37
net assets including pension liability 2490 2087
capital and reserves
calledup share capital 11 736 735
share premium account 12 97 94
profit and loss account 12 1122 723
capital redemption reserve 12 17 17
equity reserve 12 518 518
total equity shareholders’ funds 13 2490 2087
the financial statements were approved by the board of directors and authorised for issue on 25 march 2009
they were signed on its behalf by
s c lockett
a r c durrant
directors
premier oil plc 2008 annual report and financial statements
financial statements
statement of total recognised gains and losses 
for the year ended 31 december 2008
2008 2007
note  million  million
profit for the financial year 870 742
pension costs – actuarial lossesgains 9 21 01
total recognised gains and losses relating to the year 849 743 80
premier oil plc 2008 annual report and financial statements
notes to the parent company financial statements 
for the year ended 31 december 2008
1 significant accounting policies
basis of accounting
the separate financial statements of the company are presented as required by the companies act 1985 they have been prepared
under the historical cost convention and in accordance with applicable united kingdom accounting standards and law
the principal accounting policies are summarised below they have all been applied consistently throughout the year and the
preceding year
investments
fixed asset investments in subsidiaries and associates are shown at cost less provision for impairment
pension costs
the company operates a defined benefit pension scheme which requires contributions to be made to a separately administered
fund the scheme was closed to new members aside from the provision of insured death in service benefits in 1997 the
company accounts for pension costs in line with financial reporting standard frs 17 – ‘retirement benefits’
the amounts charged to operating profit regarding the defined benefit scheme are the current service costs and gains and
losses on settlements and curtailments past service costs are recognised immediately in the profit and loss account if the
benefits have vested if the benefits do not vest immediately the costs are recognised over the period until vesting occurs
the interest costs and the expected return on the assets are shown as a net amount of other financial costs or credits adjacent
to interest actuarial gains and losses are recognised immediately in the statement of total recognised gains and losses
pension scheme assets are measured at fair values and liabilities are measured on an actuarial basis using the projected unit
credit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent
currency and term to the scheme liabilities
the actuarial valuations are obtained at least triennially and are updated at each balance sheet date the resulting defined
benefit asset or liability net of related deferred tax is presented separately after other net assets on the face of the balance sheet
foreign exchange
transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates as of the dates of
the transactions monetary assets and liabilities denominated in foreign currencies at the yearend are reported at the rates
of exchange prevailing at the yearend any gain or loss arising from a change in exchange rate subsequent to the dates of
the transactions is included as an exchange gain or loss in the profit and loss account
cash flow statement
no cash flow statement is prepared for the company under frs 1 – ‘cash flow statements’ as the cash flows of the company
have been included in the group cash flow statement of premier oil plc
related party transactions
the company has taken advantage of the exemption available under frs 8 – ‘related party disclosures’ with regard to the non
disclosure of transactions between group companies
sharebased payments
the company has applied the requirements of frs 20 – ‘sharebased payment’ in accordance with the transitional provisions
frs 20 has been applied to all grants of equity instruments after 7 november 2002 that were unvested as of 1 january 2005
the company issues equitysettled and cashsettled sharebased payments to certain employees equitysettled sharebased
payments are measured at fair value at the date of grant the fair value determined at the grant date of the equitysettled share
based payments is expensed on a straightline basis over the vesting period based on the company’s estimate of shares that will
eventually vest
fair value is measured by use of the binomial model the expected life used in the model has been adjusted based on
management’s best estimate for the effects of nontransferability exercise restrictions and behavioural considerations
a liability equal to the portion of the goods or services received is recognised as the current fair value determined at each
balance sheet date for cashsettled sharebased payments 81
premier oil plc 2008 annual report and financial statements
financial statements
1 significant accounting policies continued
sales revenue
sales of petroleum production are recognised when goods are delivered or the title has passed to the customer
tax
current tax including uk corporation tax and foreign tax is provided at amounts expected to be paid or recovered using the
tax rates and laws that have been enacted or substantively enacted by the balance sheet date
deferred tax
deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date
where transactions or events have occurred at that date that will result in an obligation to pay more or a right to pay less or to
receive more tax with the following exceptions
• provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries associates
and joint ventures only to the extent that at the balance sheet date dividends have been accrued as receivable and
• deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be
suitable taxable profits from which the future reversal of the underlying timing differences can be deducted
deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing
differences reverse based on tax rates and laws enacted or substantively enacted at the balance sheet date
fixed assets
oil and gas assets
a development and production assets
development and production assets are accumulated generally on a fieldbyfield basis and represent the cost of
developing the commercial reserves discovered and bringing them into production
the cost of development and production assets also includes the cost of acquisitions and purchases of such assets directly
attributable overheads finance costs capitalised and the cost of recognising provisions for future restoration and
decommissioning
depreciation of producing assets
the net book values of producing assets are depreciated generally on a fieldbyfield basis using the unitofproduction
method by reference to the ratio of production in the period and the related commercial reserves of the field taking into
account future development expenditures necessary to bring those reserves into production
producing assets are generally grouped with other assets that are dedicated to serving the same reserves for depreciation
purposes but are depreciated separately from producing assets that serve other reserves
pipelines are depreciated on a unitofthroughput basis
b impairment of development and production assets
an impairment test is performed whenever events and circumstances arising during the development or production phase
indicate that the carrying value of a development or production asset may exceed its recoverable amount
the carrying amount is compared against the expected recoverable amount of the asset generally by reference to the
present value of the future net cash flows expected to be derived from production of commercial reserves the cash
generating unit applied for impairment test purposes is generally the field except that a number of field interests may
be grouped as a single cash generating unit where the cash flows of each field are interdependent
c decommissioning
provision for decommissioning is recognised in full at the commencement of oil and gas production the amount recognised
is the present value of the estimated future expenditure a corresponding tangible fixed asset is also created at an amount
equal to the provision this is subsequently depreciated as part of the capital costs of the production facilities any change
in the present value of the estimated expenditure is reflected as an adjustment to the provision and the fixed asset
stock and underlift
nonproduction related stocks are valued at the lower of cost or net realisable value under and overlifts of crude oil are
recorded at market value 82
premier oil plc 2008 annual report and financial statements
notes to the parent company financial statements continued 
for the year ended 31 december 2008
1 significant accounting policies continued
derivative financial instruments
the company accounts for derivative financial instruments in line with frs 25 – ‘financial instruments disclosure and
presentation’ and frs 26 – ‘financial instruments recognition and measurement’
the company uses derivative financial instruments derivatives to manage its exposure to oil price fluctuations all derivatives are
initially recorded at cost including transaction costs derivatives are subsequently carried at fair value all changes in fair value
are recorded as financial income or expense in the year in which they arise
fair value is the amount for which a financial asset liability or instrument could be exchanged between knowledgeable and
willing parties in an arm’s length transaction it is determined by reference to quoted market prices adjusted for estimated
transaction costs that would be incurred in an actual transaction or by the use of established estimation techniques such
as option pricing models and estimated discounted values of cash flows
2 profit for the year
as permitted by section 230 of the companies act 1985 the company has elected not to present its own profit and loss account
for the year premier oil plc reported a profit for the financial year ended 31 december 2008 of us870 million 2007 profit of
us742 million
the auditors’ remuneration for audit services to the company was us10000 2007 us10000
3 property plant and equipment
oil and gas
properties
north sea
 million
cost
at 1 january 2007 822
additions during the year 153
at 1 january 2008 975
additions during the year 15
at 31 december 2008 960
amortisation and depreciation
at 1 january 2007 66
charge for the year 117
at 1 january 2008 183
charge for the year 116
at 31 december 2008 299
net book value
at 31 december 2007 792
at 31 december 2008 661
amortisation and depreciation for oil and gas properties is calculated on a unitofproduction basis using the ratio of oil and
gas production in the period to the estimated quantities of proved and probable reserves at the end of the period plus
production in the period on a fieldbyfield basis proved and probable reserve estimates are based on a number of underlying
assumptions including oil and gas prices future costs oil and gas in place and reservoir performance which are inherently
uncertain management uses established industry techniques to generate its estimates and regularly references its estimates
against those of joint venture partners or external consultants however the amount of reserves that will ultimately be recovered
from any field cannot be known with certainty until the end of the field’s life 83
premier oil plc 2008 annual report and financial statements
financial statements
4 fixed asset investments
2008 2007
 million  million
cost and net book value
subsidiary undertakings 5532 5014
additions in the year – 518
5532 5532
the company has investments in the following 100 per cent owned subsidiaries which principally affected the profits or net assets
of the group to avoid a statement of excessive length details of investments which are not significant have been omitted
country of incorporation
name of company business and area of operation or registration
premier oil group ltd intermediate holding company uk scotland
premier oil finance jersey ltd convertible bond issuing company jersey jersey
premier oil exploration ltd exploration production and development uk scotland
premier pict petroleum ltd exploration production and development uk scotland
premier oil kakap bv exploration production and development indonesia netherlands
premier oil natuna sea bv exploration production and development indonesia netherlands
premier oil holdings ltd intermediate holding company uk england and wales
fp mauritania b bv exploration production and development mauritania netherlands
premier oil mauritania b ltd exploration production and development mauritania jersey
premier oil vietnam offshore bv exploration production and development vietnam netherlands
premier oil sumatra north bv exploration production and development indonesia netherlands
pkp exploration ltd exploration production and development pakistan england and wales
pkp kadanwari 2 ltd exploration production and development pakistan cayman islands
pkp kirthar 2 bv exploration production and development pakistan netherlands
 held directly by premier oil plc all other companies are held through subsidiary undertakings
5 debtors amounts falling due within one year
2008 2007
 million  million
trade debtors 49 –
vat – 02
other debtors 37 82
prepayments and accrued income 04 03
90 87
deferred tax due after one year
the deferred tax asset of us86 million 2007 us162 million is considered to be recoverable on the basis that it is more likely
than not that there will be suitable taxable profits in the future from which the losses giving rise to the asset can be deducted
6 creditors amounts falling due within one year
2008 2007
 million  million
other taxation and social security 144 145
other creditors 23 107
accruals and deferred income 89 111
256 363 84
notes to the parent company financial statements continued 
for the year ended 31 december 2008
premier oil plc 2008 annual report and financial statements
7 creditors amounts falling due after one year
2008 2007
 million  million
amounts owed to subsidiary undertakings 3496 3960
the amounts owed to subsidiary undertakings relate to a balance which bears interest based on libor and is not secured this
is repayable on 31 december 2012
8 provision for liabilities
2008 2007
 million  million
asset and equity plan
at 1 january 36 87
provision in the year 33 19
reclassification of provision to creditors falling due within one year 36 70
at 31 december 33 36
decommissioning costs
at 1 january 90 75
provision for abandonment 03 10
unwinding of discount on decommissioning provision 03 04
exchange differences 24 01
at 31 december 66 90
total provisions 99 126
the company currently operates an asset and equity plan to reward employees for improvement in the asset value of the
business and the market value of the company over a threeyear period further details of this plan are disclosed in note 11
the decommissioning provision represents the present value of decommissioning costs relating to the uk oil and gas interests
which are expected to be incurred between 2009 and 2017 these provisions have been created based on premier’s internal
estimates and where available operator’s estimates based on the current economic environment assumptions have been
made which management believe are a reasonable basis upon which to estimate the future liability these estimates are
reviewed regularly to take into account any material changes to the assumptions however actual decommissioning costs
will ultimately depend upon future market prices for the necessary decommissioning works required which will reflect market
conditions at the relevant time furthermore the timing of decommissioning is likely to depend on when the fields cease to
produce at economically viable rates this in turn will depend upon future oil and gas prices which are inherently uncertain
9 pension liability
2008 2007
 million  million
uk funded pension scheme 20 26
uk unfunded pension scheme 08 11
total liability in balance sheet 28 37
the company operates a defined benefit pension scheme in the uk – the premier oil plc retirement and death benefits plan
the scheme the scheme was closed to new members aside from the provision of insured death in service benefits in 1997
and a new scheme providing benefits on a defined contribution basis was started both schemes are funded by the payment
of contributions to separately administered trust funds as a consequence of being closed to new entrants the current service
costs of the scheme under the frs 17 – ‘retirement benefits’ valuation will increase as the members approach retirement 85
premier oil plc 2008 annual report and financial statements
financial statements
9 pension liability continued
the pension costs for the scheme are determined with the advice of an independent qualified actuary the most recent formal
valuation was undertaken as at 1 january 2008 using the attained age method and a marketrelated funding basis of which the
principal financial assumptions were investment return 59 per cent pa salary growth 54 per cent pa and pension increases 34
per cent pa the market value of the scheme’s assets was £149 million and on the specific method and assumptions adopted
the assets covered 91 per cent of the members’ accrued benefits based on projected pensionable salaries until october 2008
the employer contributed to the scheme at the rate of 19 per cent of pensionable salaries together with an additional £28000
paid per month in october a new schedule of contributions was put in place at this point the employer paid a oneoff lump
sum contribution of £13 million and started to contribute at a rate of 25 per cent of pensionable salaries with no additional
monthly amounts the employer expects to contribute £95000 to the scheme in 2009
the following figures have been prepared in compliance with frs 17 – ‘retirement benefits’ incorporating the amendment
announced in december 2006 by an independent actuary on the basis of membership data current as at 31 december 2008 but
taking account of pension increases effected on 1 january 2009 the benefit obligations and service cost have been measured
using the projected unit credit method
the principal financial assumptions adopted for this actuarial valuation were
rate of investment return 59 pa
rate of salary increases 54 pa
rate of pension increases 34 pa
employee benefit obligations
the amounts recognised in the balance sheet are as follows
at 31 at 31
december december
2008 2007
 million  million
present value of funded obligations 227 319
fair value of scheme assets 207 293
deficit before allowing for deferred tax 20 26
the amounts recognised in profit and loss are as follows
2008 2007
 million  million
current service cost 02 03
interest on obligation 17 17
expected return on scheme assets 19 17
total – 03
actual return on scheme assets 32 13
a total loss of us24 million 2007 gain of us02 million was recognised directly in equity during the year
changes to the present value of the defined benefit obligations are as follows
at 31 at 31
december december
2008 2007
 million  million
opening defined benefit obligation 319 314
service cost excluding employee contributions 02 03
interest cost 17 17
benefits paid 10 12
actuarial gains 21 05
currency translation effects 80 02
closing defined benefit obligation 227 319 86
notes to the parent company financial statements continued 
for the year ended 31 december 2008
premier oil plc 2008 annual report and financial statements
9 pension liability continued
changes in the fair value of scheme assets are as follows
at 31 at 31
december december
2008 2007
 million  million
opening fair value of scheme assets 293 280
expected return 19 17
investment losses 51 04
employer contributions 30 08
benefits paid 10 12
currency translation effects 74 04
closing fair value of scheme assets 207 293
major categories of scheme assets as a percentage of total scheme assets are as follows
at 31 at 31
december december
2008 2007
equities 32 43
bonds 39 38
cash 29 19
principal actuarial assumptions at the balance sheet date
at 31 december 2008 at 31 december 2007
discount rate 60 pa 59 pa
expected return on scheme assets 58 pa 67 pa
salary growth 50 pa 54 pa
price inflation 30 pa 34 pa
pension increases 30 pa 34 pa
mortality pcxa00 with ‘long cohort’ pxa92 by year of birth
projection min 1 with ‘medium cohort’
improvements projections
sensitivity to changes in assumptions
changes to the assumed discount rate would have a significant effect on the value placed on the defined benefit obligations
as at 31 december 2008 a one percentage point change in this assumption would have had the following effects on the closing
defined benefit obligation
discount rate
60 pa discount rate discount rate
as used for report 50 pa 70 pa
 million  million  million
defined benefit obligation 227 274 192
5 year historic record
2008 2007 2006 2005 2004
 million  million  million  million  million
defined benefit obligation 227 319 314 281 251
fair value of scheme assets 207 293 280 211 189
deficit in the scheme 20 26 34 70 62
experience adjustments on scheme liabilities –– 06 01 07
experience adjustments on scheme assets 51 04 02 16 02 87
premier oil plc 2008 annual report and financial statements
financial statements
9 pension liability continued
unfunded pensions
in addition the company is paying an unfunded pension to a former director of the company in regard to which annual increases
and a reversionary spouse’s pension apply on the same basis as to pensions paid under the scheme
on the same actuarial basis as used to assess the scheme’s pension costs the present value as at 31 december 2008 of the
future payments projected to be made in respect of unfunded pensions is us08 million 2007 us11 million a total gain
of us03 million 2007 loss of us01 million was recognised directly in equity during the year
10 capital commitments and guarantees
at 31 december 2008 the company had commitments for performance guarantees totalling usnil 2007 us46 million us01
million as retainer fees for its alliance partners 2007 us01 million and customs guarantees of us03 million 2007 us04 million
the company together with certain subsidiary undertakings has jointly guaranteed the group’s borrowing facilities of
us275 million and £53 million maturing on 31 july 2010
11 share capital
2008 2007
 million  million
balance at 1 january 735 733
shares issued 01 02
balance at 31 december 736 735
2008 2008 2007 2007
50p shares £ 50p shares £
ordinary shares
authorised 315224564 157612282 311904002 155952001
calledup issued and fully paid 82170460 41085230 82104049 41052025
2008 2008 2007 2007
175p shares £ 175p shares £
nonvoting convertible shares
authorised –– 9487317 1660280
calledup issued and fully paid ––– –
at the agm of the company held on 6 june 2008 the company’s authorised share capital was increased by £0525 by the
creation of three nonvoting convertible shares of 175 pence each following the increase in share capital the 9487320
authorised but unissued nonvoting convertible shares of 175 pence each were consolidated and redesignated as 3320562
ordinary shares of 50 pence each in the capital of the company carrying the rights and being subject to the restrictions set
out in the articles of association of the company
sharebased payments
shares issued relate to the company’s share option plans there has been no new issue of shares in relation to the asset and
equity plan
share option plans
the company has share option schemes under which options to subscribe for the company’s shares have been granted to
certain executives and employees options granted are normally exercisable not less than three years after their grant and will
lapse on their tenth anniversary options cannot be exercised until predetermined performance conditions have been achieved
under the savings related share option scheme eligible employees with six months or more continuous service can join the
scheme employees can save to a maximum of £250 per month through payroll deductions for a period of three or five years
after which time they can acquire shares at up to a 20 per cent discount
under the share incentive plan employees are invited to make contributions to buy partnership shares if an employee agrees
to buy partnership shares the company currently matches the number of partnership shares bought with an award of shares
matching shares on a oneforone basis 88
notes to the parent company financial statements continued 
for the year ended 31 december 2008
premier oil plc 2008 annual report and financial statements
11 share capital continued
2008 2007
weighted weighted
average average
options exercise price options exercise price
outstanding at the beginning of the year 418392 £385 566161 £331
granted during the year 18292 £1084 24497 £996
lapsed during the year 105202 £584 5689 £536
exercised during the year 141760 £215 166577 £288
outstanding at the end of the year 189722 £469 418392 £385
exercisable at the end of the year 111750 £220 214660 £167
 there were 66411 ordinary shares issued under the group’s share option schemes during the year 2007 166577 the remaining 75349 ordinary shares
were issued from the premier oil plc employee benefit trust 2007 nil
the weighted average share price at the date of exercise for share options exercised during the year was £215 the options
outstanding at 31 december 2008 had a weighted average exercise price of £469 and a weighted average remaining
contractual life of 26 years
the fair value of the options granted during the year was determined using the blackscholes valuation model and is not material
the company recognised a cost of us201 million and us78 million related to equitysettled sharebased payment
transactions in 2008 and 2007 respectively
asset and equity plan
the asset and equity plan is designed to reward employees for improvement in the asset value of the business and the market
value of the company over a threeyear period and is operated by reference to two bonus pools – an equity bonus pool and an
asset bonus pool the asset bonus pool is created by reference to the increase in the net asset value per share of the company
over a threeyear period and the equity bonus pool is created by reference to the increase in the equity market value per share
of the company over a threeyear period
full details about this plan have been provided in the remuneration report
the company uses a monte carlo simulation model to calculate the value of the equity bonus pool of the plan
the main assumptions used for the calculations are as follows
volatility 290 to 315
risk free rate of interest 41 to 49
historic market value growth factor 990 to 1090
for the asset bonus pool a discounted cash flow model based on the average oil price over the period is used to calculate the
final value of the pool and to estimate the value of future asset bonus pools
for the year ended 31 december 2008 the total cost recognised by the company for sharebased payments is us128 million 2007
us104 million with a cumulative liability on the balance sheet of us95 million 2007 us123 million a credit of us201 million has
been recorded in equity 2007 us78 million for all equitysettled payments for the company and its subsidiaries like other elements of
remuneration this charge is processed through the timewriting system which allocates cost based on time spent by individuals to various
entities within the premier oil group part of this cost is therefore capitalised as directly attributable to capital projects and part is charged
to the profit and loss account as exploration expense operating costs prelicence exploration costs or general and administration costs
ordinary shares
the rights and restrictions attached to the ordinary shares are as follows
dividend rights
the rights of the holders of ordinary shares shall rank pari passu in all respects with each other in relation to dividends
winding up or reduction of capital
on a return of capital on a winding up or otherwise other than on conversion redemption or purchase of shares the rights of
the holders of ordinary shares to participate in the distribution of the assets of the company available for distribution shall rank
pari passu in all respects with each other
voting rights
the holders of ordinary shares shall be entitled to receive notice of attend vote and speak at any general meeting of the company 89
premier oil plc 2008 annual report and financial statements
financial statements
12 share capital and reserves
share capital
share premium profit and redemption equity
capital account loss account reserve reserve total
 million  million  million  million  million  million
balance at 1 january 2007 733 86 98 17 – 738
issue of ordinary shares 02 08 ––– 10
profit for the year –– 742 –– 742
provision for sharebased payments –– 78 –– 78
pension costs – actuarial gains –– 01 –– 01
equity component of convertible bonds issued ––– – 518 518
balance at 31 december 2007 735 94 723 17 518 2087
issue of ordinary shares 01 03 ––– 04
purchase of shares for esop trust –– 179 –– 179
purchase of own shares –– 472 –– 472
profit for the year –– 870 –– 870
provision for sharebased payments –– 201 –– 201
pension costs – actuarial lossesgains –– 21 –– 21
balance at 31 december 2008 736 97 1122 17 518 2490
in june 2007 premier oil finance jersey ltd a 100 per cent subsidiary of the company issued convertible bonds at par value of
us250 million these bonds are convertible into ordinary shares of the company at any time from 6 august 2007 until six days
before their maturity date of 27 june 2014 at the initial conversion price of £1582 per share there are 8003434 ordinary shares
of the company underlying the bonds if the bonds have not been previously purchased and cancelled or converted they will be
redeemed at par value on 27 june 2014 interest of 2875 per cent per annum will be paid semiannually in arrears up to that date
13 reconciliation of movements in shareholders’ funds
2008 2007
 million  million
opening shareholders’ funds 2087 738
issue of ordinary shares 04 10
purchase of shares for esop trust 179 –
purchase of own shares 472 –
profit for the year 870 742
provision for sharebased payments 201 78
pension costs – actuarial lossesgains 21 01
equity component of convertible bonds issued – 518
net addition to shareholders’ funds 403 1349
closing shareholders’ funds 2490 2087
14 own shares
treasury esop
shares trust total
 million  million  million
at 1 january 2007 – 85 85
release of shares for longterm incentive plan – 49 49
at 31 december 2007 – 36 36
release of shares for longterm incentive plan – 50 50
acquired in the period 472 179 651
disposed of on exercise of options – 01 01
at 31 december 2008 472 164 636
the own shares reserve represents the cost of shares in premier oil plc purchased in the market
the treasury shares are held by the company the number of ordinary shares held by the company at 31 december 2008 was
2798186 2007 nil on 23 march 2009 the 2798186 treasury shares were cancelled by the company 90
notes to the parent company financial statements continued 
for the year ended 31 december 2008
premier oil plc 2008 annual report and financial statements
14 own shares continued
the esop trust shares are held by the premier oil plc employee benefit trust to satisfy options under the group’s share option
schemes the number of ordinary shares held by the premier oil plc employee benefit trust at 31 december 2008 was 863339
2007 205152
15 financial instruments
hedging instruments
oil production
a production from 2009 to 2012 is now 60 per cent hedged for the years 2009 and 2012 production is now hedged with an
average floor of us393bbl and a cap of us1000bbl
b at the end of 2007 an offtake agreement was agreed in which the parameters of the above hedges were embedded this
agreement is for four and a half years effective from 1 july 2008 and replaces the financiallysettled hedges for that period
c a further option agreement which has the effect of closing out the floor and cap in the original financiallysettled hedges
previously in place
d the value at 31 december 2008 of the option agreement totalling us336 million 2007 us379 million represents
deferred income which will be amortised over the life of the offtake agreement
the company entered into an intragroup hedging arrangement with premier oil holdings ltd under which a proportion of the
overall benefit and obligation of these hedging arrangements were transferred to the company as a hedge against a proportion
of its future oil production these instruments are accounted for as hedges
the fair value of the above oil hedges is a liability of us23 million which is recognised in the balance sheet in other creditors
while the above hedges were assumed to be effective all the movements considered nonintrinsic in the fair values have been
recognised in the profit and loss account
the fair value of the above hedges has been determined from the bank counterparties with whom the hedges have been
concluded
financial assets and liabilities
the carrying value of the company’s financial assets and liabilities approximates their fair value
16 subsequent events
acquisition
the group has reached a conditional agreement on 25 march 2009 with oilexco incorporated oilexco north sea ltd onsl
and its administrators to acquire either
i onsl’s entire issued share capital or
ii the principal operating assets of onsl and oilexco north sea exploration ltd for a maximum consideration of
approximately us505 million
the group proposes to fund the acquisition and associated costs by way of
• a 4 for 9 rights issue of new ordinary shares at a price of 485 pence per share to raise gross proceeds of approximately
£171 million
• new credit facilities comprising a us175 million 18month acquisition bridge facility a us225 million threeyear revolving
credit facility and us63 million and £60 million threeyear letter of credit facilities and
• the group’s existing cash resources
onsl is an oil and gas exploration and production company active in the uk with its producing properties located in the uk
central north sea onsl is a whollyowned subsidiary of oilexco inc and began operating in the north sea in 2003 onsl was
placed into administration by its lending banks on 7 january 2009 since that date onsl’s administrators ernst  young have
continued to operate the business which has continued to generate positive current cash flow from ongoing operations onsl’s
total production in the year ended 31 december 2008 was approximately 15500 boepd as at 31 december 2008 onsl had
total 2p reserves and contingent resources of approximately 60 mmboe of which 40 mmboe were bookable as 2p reserves by
the group
treasury shares
on 23 march 2009 the company cancelled the 2798186 treasury shares that it had acquired in 2008 91
premier oil plc 2008 annual report and financial statements
additional information
five year summary 
financials 2008 2007 2006 2005 2004
accounting basis ifrs ifrs ifrs ifrs ifrs
sales revenues  million 6552 5782 4022 3594 2518
profit before tax  million 2776 1470 1566 1246 535
net profit for the year after tax  million 983 390 676 386 221
cash flow from operating activities  million 3523 2695 2448 1212 1096
shareholders’ funds  million 5989 5529 4491 3761 3541
net cashdebt including joint ventures  million 1173 790 409 262 196
per share statistics
revenue per share centsshare 8049 7051 4917 4378 3045
earnings per share – basic centsshare 1208 476 826 470 268
earnings per share – diluted centsshare 1196 469 817 466 261
cash flow from operating activities per share centsshare 4328 3287 2993 1476 1325
reserves per share – yearend boeshare 279 258 186 199 213
issued ordinary shares – average million 814 820 818 821 827
operations
production working interest basis kboepd 365 358 330 333 347
proved and probable reserves working interest basis mmboe 2275 2115 1521 1635 1768
employees – uk number 62 60 60 62 56
– overseas number 316 300 249 219 217
key indices
realised average oil price  per bbl 9450 7230 6490 4838 2992
average exchange rates £ 185 200 184 182 183
closing exchange rates £ 146 198 196 172 192
2004 numbers were originally reported under uk gaap but have been restated in accordance with international financial reporting
standards ifrss
certain operations presented as discontinuing in 2006 were represented as continuing operations in 2007 the numbers for 2006 and
2005 have been restated accordingly shareholder information 
analysis of shareholding as at 23 march 2009 being the latest practicable date prior to the date of this document
number of number of
size of shareholding holders  shares held 
1 – 5000 11855 95397 5832413 7348
5001 – 10000 171 1376 1230866 1551
10001 – 50000 201 1617 4547379 5729
50001 – 100000 81 0652 5961278 7511
100001 – 500000 86 0692 18464709 23263
500001 and over 33 0266 43335629 54598
total 12427 100000 79372274 100000
dealing information financial calendar
seaq short code – pmo announcements
interim – august 2009
preliminary – march 2010
92
premier oil plc 2008 annual report and financial statements 93
premier oil plc 2008 annual report and financial statements
additional information
oil and gas reserves 
at 31 december 2008
working interest basis
north sea middle eastpakistan asia west africa total
oil and oil and oil and oil and oil and oil ngls
ngls gas ngls gas ngls gas ngls gas ngls gas
4
and gas
mmbbls bcf mmbbls bcf mmbbls bcf mmbbls bcf mmbbls bcf mmboe
group proved plus
probable reserves
at 1 january 2008 228 22 15 352 105 624 33 – 381 998 2115
revisions
1
01 2 – 3 06 55 05 1 02 51 104
discoveries and extensions
2
–– 09 7––– – 09 7 20
others
3
–––– 143 14 –– 143 14 169
production 30 2 01 34 06 18 03 – 40 54 133
at 31 december 2008 199 18 23 322 248 675 25 1 495 1016 2275
total group developed and
undeveloped reserves
proved on production 126 12 10 185 23 165 05 – 164 362 800
proved approvedjustified
for development 10 – 05 1 136 318 04 – 155 319 719
probable on production 37 5 04 135 05 18 07 1 53 159 316
probable approvedjustified
for development 26 1 04 1 84 174 09 – 123 176 440
at 31 december 2008 199 18 23 322 248 675 25 1 495 1016 2275
notes
1 revisions include upgrades at natuna sea block a indonesia in response to good performance at anoa
2 includes al amir discovery egypt and additional reserves discovered at qadirpur and kadanwari pakistan
3 reserves include chim sáo development which was approved by the vietnamese authorities during 2008
4 proved plus probable gas reserves include 51 bcf fuel gas
premier oil plc categorises petroleum resources in accordance with the 2007 spewpcaapgspee petroleum resource
management system spe prms
proved and probable reserves are based on operator or thirdparty reports and are defined in accordance with the statement
of recommended practice sorp issued by the oil industry accounting committee oiac dated july 2001
the group provides for amortisation of costs relating to evaluated properties based on direct interests on an entitlement basis which
incorporates the terms of the production sharing contracts in indonesia vietnam mauritania and egypt on an entitlement basis
reserves increased by 101 mmboe giving total entitlement reserves of 1978 mmboe as at 31 december 2008 2007 1877 mmboe
this was calculated in 2008 using an oil price assumption of us600bbl 2007 us600bbl worldwide licence interests 
as at 25 march 2009
licence block operator equity  field
congo marine ix marine ix premier 3150
egypt nw gemsa vegas oil  gas 1000
nw gemsa vegas oil  gas 1000 al amir se
indonesia buton japex 3000
kakap star energy 1875 kakap
natuna sea block a premier 2867 anoa
north sumatra block a medco 4167
tuna premier 6500
mauritania psc a deep water 3 and shallow petronas 462
water blocks 4  5
psc b block 4  5 petronas 923
psc b chinguetti petronas 812 chinguetti
norway pl359 161 part 164 lundin 3000
pl364 252 253 255 256 det norske 5000 frøy
pl374s 342 345 bg 1500
pl378 3512 3610 wintershall 4000
pl406 1712 1810 1811 83  91 premier 4000
pl407 178 9 11 12  187 10 bg 2000
pl417 313 321 3610 wintershall 4000
pl418 358 nexen 1500
pl496 77 710 premier 7000
pakistan production leases bolan mgcl 375 zarghun south
dadu bhp 937 zamzama
kirthar eni 600 badhra
kirthar eni 600 bhit
qadirpur ogdcl 475 qadirpur
tajjal eni 1579 kadanwari
philippines ragay gulf sc43 sc43 pearl energy 2100
united kingdom p218 1521a nexen 4583 scott
†
p218 1521a nexen 375 telford
††
p257 1425a talisman 152
p288 3121a 3126a 3126f hess 1500 angus fife flora
3126g 3127a
p354 222a premier 3000 nonchestnut field area
p534 986a 987a bp 1250 wytch farm offshore
†††
p748 292c cnr 4000 kyle
p758 3126c hess 3500
p802 391a hess 1500 fife
p802 392a hess 3500 fergus
p1022 9811 bp 1238
pl089 l9710 bp 1250 wytch farmwareham
†††
p1181 2322b paleocene premier 2500
p1181 2322b subpaleocene premier 2500
p1466 1524c 1525f premier 2500
vietnam offshore 12w premier 3750
0703 premier 4500
10410905 premier 5000
†
unitised share of 2183 per cent
††
unitised share of 082 per cent
†††
unitised share of 1238 per cent
 assignment of 2000 per cent to spring energy norway as is shortly to complete
94
premier oil plc 2008 annual report and financial statements the papers in this report have been independently certified in accordance with the
fsc forest stewardship council all pulps are totally chlorine free tcf and elemental
chloride free ecf and the inks used are all vegetable oil based
this has been printed using an alcohol free process and the printing inks are made from
vegetable oil and are nonhazardous from renewable sources over 90 of solvents and
developers are recycled for further use and recycling initiatives are in place for all other waste
associated with this production the printers are fsc and iso 14001 certified with strict
procedures in place to safeguard the environment through all their processes and are working
on initiatives to reduce their carbon footprint
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annual report and financial statements
year to 31 december 2008
premier oil plc 2008 annual report and financial statements


Summary:
 04
premier oil plc 2008 annual report and financial statements
chief executive’s review 
premier’ s record profits for 2008 reflect strong production
and high oil and gas prices despite volatile markets the
group is extremely well placed to fund the forthcoming
capital expenditures and deliver mediumterm growth
production and reserves
significant progress has been achieved during 2008 in all our major development projects
project approvals at partner and government levels have been secured together with
negotiation of gas and transportation agreements and key supplier contracts this activity
has positioned the group for success in the completion of our three projects in indonesia and
vietnam these together with an ongoing programme of infill drilling and debottlenecking
on our existing production portfolio are expected to increase premier’s production beyond
its stated target of 50000 boepd
average production for the full year 2008 was 36500 boepd 2007 35750 boepd in line
with previous guidance in the uk production performance from the scott field was
affected by maintenance work in the fourth quarter but the wytch farm and kyle fields
performed strongly in addition both pakistani and indonesian fields saw strong demand
from gas customers coupled with good production performance
working interest entitlement
production boepd 2008 2007 2008 2007
asia 11700 12000 7100 7900
middle eastpakistan 14550 12700 14550 12700
north sea 9300 9850 9300 9850
west africa 950 1200 800 1000
total 36500 35750 31750 31450
as at 31 december 2008 proven and probable reserves on a working interest basis based
on premier and operator estimates were 228 mmboe 2007 212 mmboe
proven and 2p reserves
probable reserves and 2c contingent
mmboe resources mmboe
start of 2008 212 369
production 13 13
net additions and revisions 29 26
end of 2008 228 382
simon lockett
chief executive
proven and
probable reserves
0
100
50
150
200
250
2006 2007 2008
mmboe 05
premier oil plc 2008 annual report and financial statements
“as at 31 december 2008 proven and probable
reserves on a working interest basis based on
premier and operator estimates were 228 mmboe
2007 212 mmboe”
at yearend reserves comprised 22 per cent liquids and 78 per cent gas the equivalent volume on
an entitlement basis amounted to 198 mmboe 2007 188 mmboe based on a price assumption of
us60bbl brent 2007 us60bbl brent
booked reserve additions and revisions include the vietnamese chim sáo field where all joint
venture and government approvals were achieved in late 2008 and construction work on the first
wellhead platform has commenced this has resulted in the booking of reserves for this asset for
the first time this year in addition there has been an increase in the indonesian natuna sea block
a reserves resulting from a comprehensive subsurface reevaluation of the strong and consistent
production performance from the anoa field other reserve additions include an increase to our
pakistan portfolio in response to integrated reservoir studies conducted during the year
contingent resources at yearend remained steady at 154 mmboe 2007 157 mmboe the
successful commercialisation of the chim sáo field being offset mainly by improved definition of
undeveloped assets in indonesia
exploration and appraisal
premier participated in 14 exploration and appraisal wells in 2008 of which seven were successful
successes included appraising the reserves base in the chim sáo discovery vietnam appraising
the gas volumes in the banda field mauritania stepout drilling adding reserves to the kadanwari
field pakistan and making a new oil discovery at al amir se egypt we acquired over 4250km of
new 2d seismic and 600km² of 3d to advance our exploration interpretations in preparation for
20092010 drilling we have also acquired new licences in vietnam and norway
our exploration cash spend on drilling and seismic activities in 2008 totalled us905 million on a
pretax basis 2007 us1047 million estimated posttax expenditure was us639 million
in vietnam our chim sáo north appraisal well 12wcs2x in the block 12w production sharing
contract psc confirmed the northern extension of the chim sáo field allowing development
sanction to proceed further south in the block we drilled two exploration wells and an exploration
sidetrack the chim ung well and the chim công well were both oil discoveries confirming the
southward extension of the exploration play but are currently considered subcommercial in
premier’s adjacent operated block the block 0703 psc a 1525km 2d survey has been acquired
and a rig contracted for 2009 drilling
premier also had an active year in indonesia acquiring 2d seismic in the tuna and buton pscs
2400km and 300km respectively and reprocessing data in our north sumatra block a acreage
these data are being interpreted and work is progressing towards drilling in all licences
in pakistan we started testing in the successful qadirpur deep1 well flowing 45 million standard
cubic feet per day mmscfd of high quality gas from hitherto undrilled reservoir zones below the
qadirpur field production from this zone is expected onstream during 2009 in the kadanwari
licence the k17 well made a discovery in a fault block to the south west of the main field the well
is being placed on production at an expected rate of up to 25 mmscfd
a new discovery al amir se in the nw gemsa licence in egypt tested over 3000 barrels of oil per
day bopd from kareem sandstones and an appraisal well drilled at yearend tested 5785 bopd
both wells were completed and production has already commenced
premier farmed out part of its licence equity for a full carry of our drilling costs on a high risk
prospect in our uk north sea 2322b block the well was dry but fulfilled the licence’s exploration
commitment this allows us to retain the block and evaluate the possibility that the moth condensate
discovery made in 2008 in the adjacent 2321 block extends into our licence we have been
granted the contiguous licence block 77 across the border in norway
performance 06
premier oil plc 2008 annual report and financial statements
chief executive’s review continued 
looking ahead to 2009 the exploration focus in south east asia is in vietnam where we
plan to drill in block 0703 commencing in the second quarter if that programme is
successful it will highgrade a large number of followon prospects on this block and on
adjacent acreage held by premier in the indonesian adjacent tuna block we are working up
interpretations of the newly acquired 2d ready for drilling in late 2009 or 2010 we are also
planning to drill a deep lama sandstone reservoir target beneath the anoa field in the
natuna sea block a psc this follows encouragement from our 2007 pancing discovery in
this poorlyexplored reservoir in the adjacent kakap block in pakistan following the success
of the qadirpur deep well we are drilling similar deep reservoirs below the badhra field with
the bado jabal well this has the potential for several trillion cubic feet tcf of gas we are
also drilling another new fault block in the kadanwari licence where we have drilled similar
opportunities that were successful in the recent past
a potentially highimpact well is being drilled in west africa where we have farmed out equity
in the congo marine block ix permit and are spudding a well on the large frida prospect in
mid2009 in norway the delayed appraisal well on the bream oil discovery is on course to
be drilled in the third quarter of 2009 the grosbeak north prospect is also scheduled to be
drilled in the second quarter we have farmed out equity in this licence pl378 to reduce
financial exposure but retain a 20 per cent equity interest later in the year the greater
luno well will target a possible extension of lundin’s luno field into our block
asia
indonesia
during 2008 premier’s operated natuna sea block a gas sales amounted to 142 billion
british thermal units per day bbtud gross whilst the nonoperated kakap field contributed
a further 60 bbtud gross liquids production from anoa averaged 2212 bopd gross and
from kakap 6000 bopd gross overall net production from indonesia amounted to 11700
boepd 2007 12000 boepd
following the signing of three gas sales agreements gsas with sembcorp gas pte ltd
sembgas in singapore and pt perusahaan listrik negara pln and pt universal batam
energy ube in batam indonesia in april the gas transportation and associated
agreements required to enable delivery of gas to sembgas were executed in october 2008
negotiation of the associated transportation agreements for batam sales are ongoing and
are expected to be signed in the second half of 2009 the government of indonesia has
approved the plan of development for three fields gajah baru naga and iguana long
lead item orders for steel compressors turbines and other critical equipment were placed
at the yearend a second tender for the engineering procurement and construction
contract was completed on 16 march 2009 it resulted in gross cost savings of
approximately us100 million with reductions in expected drilling costs total capex for the
whole project is now forecast at around us920 million gross maximum routine gas sales
will be in the order of 140 mmscfd and recoverable reserves from the three fields are
expected to exceed 500 bcf first gas is now expected before october 2011 and is still in
advance of the contractual obligation under the gsa with sembgas
on north sumatra block a commercialisation of the alur siwah alur rambong and julu
rayeu fields continued with signature in april 2008 of a second gsa with pln the state
electricity company for the longterm supply of 15 bbtud of gas the psc terms for
extension are being amended in line with the new standard psc for indonesia and are
awaiting government approval to compensate for changes in psc terms an amendment to
the first gsa with pt pupuk iskandar muda pim has been signed the resulting increased
gas sales price will have a floor of us650 per million british thermal units mmbtu
indonesia
philippines
vietnam
india 07
premier oil plc 2008 annual report and financial statements
approval for the plan of development for the gas fields was received in january and front end
engineering design feed commenced in july and is currently nearing completion early gas from
alur rambong is targeted for 2010 whilst first gas from the main development of alur siwah is
expected in 2011 a heads of agreement was signed with exxonmobil in november for use of
their facilities for transportation and a fully termed agreement is expected to be finalised in the first
half of 2009 drilling is expected to begin on alur rambong by early 2010
work on the reactivation of the tualang and lee tabue oil fields started in late 2008 and is
continuing up to six wells may be worked over and tested and subsurface studies have indicated
that there is potential to restart production from fields previously abandoned in 2001 plans for a
larger scale reactivation will be based on the results of this initial programme
exploration activities during 2009 will focus on the drilling of the anoa deep well expected in the
third quarter and maturing of other licences for further exploration in 2010
on the buton block a 2d seismic programme began in early 2008 and processing is nearing
completion during 2009 the operator will finalise studies to determine a location to be drilled in 2010
on the tuna block the acquisition of 2400km of 2d seismic was completed in october
interpretation focused on maturing and high grading the current prospect inventory in parallel with
the work programme in premier’s vietnam block 0703 immediately to the north it is now
anticipated that two wells on the tuna block will be drilled in early 2010
in partnership with the government authority migas premier has been awarded joint study
participation for three blocks in north sumatra east asahan east kalimantan east benjkanai and
offshore nw java north merak studies include reprocessing of seismic data and acquisition of
gravity data
vietnam
following the interpretation of the 2007 3d data over block 12w premier drilled a successful
appraisal well in the chim sáo field in 2008 which tested two zones at a combined rate of 4330
bopd plus 35 mmscfd all joint venture and government approvals for the project were achieved in
late 2008 as a result of the changing cost environment the development plan is being reengineered
to a single platform development with resultant cost reductions construction work on the wellhead
platform has commenced in vietnam discussions are ongoing with potential providers of a floating
production storage and offtake vessel fpso for leasing to the field owners and final execution
of both the fpso lease agreement and the epci contract await conclusion of this process
during 2008 premier drilled three further exploration prospects in block 12w the chim ung1
well intersected 15 metres of net oil pay in a good quality reservoir a sidetrack was drilled into
the adjacent chim boi fault block which did not encounter hydrocarbons the chim công1 well
tested oil at subcommercial rates with seven metres of net oil pay premier continues to evaluate
these well results ahead of the expiry of the psc exploration period late in 2009
premier became operator of block 0703 in late 2007 and in 2008 we acquired a 2d seismic
programme to define the location of two exploration wells the first of which is planned for may
2009 the second well will follow at yearend the exact schedule is dependent on the duration of
intervening wells drilled by the rigshare consortium which premier is leading in february 2008
premier was awarded block 10410905 and has since begun geological studies and geophysical
reprocessing of seismic data to better understand the exploration potential of this acreage
offshore northern vietnam
performance 08
premier oil plc 2008 annual report and financial statements
chief executive’s review continued 
philippines
the monte cristo1 exploration well on the sc43 licence proved to be dry and the well was
plugged and abandoned premier’s costs for the well were carried under a farmout
agreement premier and its partners are currently carrying out exploration activities over a
prospective trend in the panaon limestone formation found with new seismic data obtained
in early 2008
india
premier is maintaining a limited presence in india pending resolution of the signature of the
ratna licence with the government of india
middle eastpakistan
pakistan
production net to premier in 2008 was 14550 boepd an increase of about 15 per cent as
compared to the 12700 boepd in 2007 surpassing previous records this additional
volume was due to increased gas demand which was primarily met through additional
supplies from the zamzama and bhitbadhra gas fields
the qadirpur field produced an average of 4060 boepd from premier’s working interest of
475 per cent 2007 3980 boepd the qadirpur plant capacity enhancement project was
completed in 2008 with first gas achieved by the end of january 2009 a gsa was signed
with sui northern gas pipelines ltd for the supply of 75 mmscfd permeate gas equivalent
to 40 mmscfd processed gas with first gas expected in 2010 six new production wells were
drilled and tiedin to optimise increased processed gas sales the qadirpur deep1 well
was tested flowing 45 mmscfd of high quality gas from hitherto undrilled reservoir zones
below the qadirpur field production from this zone is expected onstream during 2009
the kadanwari field produced an average of 1225 boepd in 2008 2007 1260 boepd from
premier’s 1579 per cent working interest despite natural production decline field production
was maintained at 2007 levels largely due to tiein of the new k18 well a new production
well k17 was drilled and tiedin to the gas plant ahead of schedule on 30 december 2008
to maintain and increase the production levels of the field k14st is currently being drilled
with further wells planned in 2009
the zamzama field produced an average of 6075 boepd in 2008 2007 4620 boepd from
premier’s 9375 per cent working interest the zamzama phase2 development project was
commissioned in 2008 for production of high calorific value hcv gas this resulted in a
production increase in 2008 of 32 per cent over 2007 levels
bhitbadhra production was 3190 boepd in 2008 2007 2840 boepd from premier’s 6 per
cent working interest an increase of 12 per cent over last year the increase was due to the
completion of the phase 2 development which enhanced plant capacity from 270 mmscfd
to 320 mmscfd facilitating first gas from the badhra field and accelerated production from
the bhit field
in zarghun south feed is currently in progress and first gas is expected in 2010 premier’s
costs pertaining to its 375 per cent interest in zarghun south are substantially carried by
the operator
egypt
pakistan 09
premier oil plc 2008 annual report and financial statements
egypt
the al amir se1 well drilled in october 2008 encountered oil in the kareem formation opening
up a new play in the area the well tested over 3000 bopd and 425 mmscfd of associated gas
an appraisal well was then drilled on the discovery at yearend encountering two kareem sandstones
with 42ft of net pay this second well tested 5785 bopd of 42° api with 78 mmscfd of gas from
one of the two 20ft zones – the second zone will be perforated at a later date
in addition the 2005 al amir discovery was reevaluated and the original al amir1 well was reentered
and sidetracked in december in order to reappraise the well as a potential producer the sidetrack
confirmed the lateral extension of the original reservoir and also encountered deeper pay the upper
zone was tested with a sustained rate of 416 bopd of 16° api the lower pay will be tested at a
future date
development plans to bring the al amir and al amir se wells into early production were submitted
to egyptian general petroleum corporation egpc and production on al amir se commenced in
february 2009 flow rates had risen to over 3000 bopd gross by early march the oil is being
produced from the discovery well al amir se1x and the first appraisal well al amir se2x a 7km
pipeline has been laid between these two wells and the gazwarina facilities to which the oil is
being transported the al amir1 well is intended to be brought onto production shortly
abu dhabi
the joint venture continues to pursue the acquisition of upstream oil and gas assets across the middle
east and north africa with a particular focus on future projects in abu dhabi and iraq an office has
opened in abu dhabi and is staffed by a small team of secondees from premier and emirates
international investment company llc eiic
north sea
uk and norway
production in the uk amounted to 9300 boepd 2007 9850 boepd representing 25 per cent of
the group total 28 per cent in 2007 operational difficulties on the scott field particularly in the
fourth quarter were offset by successful programmes of infill drilling on other fields
the wytch farm oil field contributed 2965 boepd production net to premier similar to 2007 a strong
underlying production performance was maintained by a proactive wellwork campaign and minimal
production interruptions at the start of the year the m20 injection well was brought on line and
together with other water handling improvements has helped to restore reservoir pressure the
b41 rig was then mobilised to furzey island to drill the k08 and l13 infill wells and three workovers
a subsequent a12 sidetrack well has exceeded expectations and will be brought on line shortly
the wareham field is also back in production and the infield pipeline replacement project has been
completed with testing and commissioning completed in early 2009
production from the scott and telford fields was lower than expected at 3525 boepd net 2007
3700 boepd work on facility projects designed to improve reliability and extend facility life was
ongoing during the second half of the year two power generator units have now been upgraded
modifications to the sage export pipeline to import gas have been rescheduled to 2009 in october
2008 a three to four well infill drilling programme commenced
net production from kyle was 2500 boepd an increase on 2007 as a consequence of improved
operational performance and a full year under gas lift production performance during the second
half of 2008 was more reliable due to facility modifications to the banff fpso compressor system
during september work continues to optimise the operation of the three producing wells
norway
united kingdom
performance 10
premier oil plc 2008 annual report and financial statements
chief executive’s review continued 
the fife area where the planned suspension of production occurred on 2 may accounted
for the remainder of uk net production subsea facilities were made safe and the fpso unit
departed the field in september removal of remaining risers is scheduled for 2009 after
which the field will be suspended pending redevelopment or future abandonment
discussions have been held with a number of parties interested in participating in further
appraisal and redevelopment of the fields
on the frøy field in norway pl364 a plan of development was submitted to the authorities
in september recent events in the banking markets however have impacted the planned
contractor financing of the jackup production unit and development planning is now
progressing for first oil in 2013 the pl364 licence owners have agreed to use the delay to
implement cost reduction measures and to investigate opportunities for third party tieins
in addition to existing discoveries in the area surrounding frøy several new wells in the area
are planned by operators during 2009 having satisfied the initial licence work commitment
the frøy field partners have been granted a 10year licence extension by the authorities
exploration activities in the north sea focused on remaining potential in the uk portfolio
and moving towards drilling up the norwegian acreage
on block 2322b in the uk the sparrow well was farmed out to oilexco and bg the well
was drilled in march to a depth of 10598ft 50ft into the ekofisk formation fulfilling licence
commitments good reservoir sands were penetrated but unfortunately these were water
wet the well was drilled at zero cost to premier
subsequently oilexco and bg announced the discovery of oil in the deeper moth prospect
on the adjacent block 2321 this discovery has encouraging implications for the block 2322b
licence and the deeper jurassic prospectivity bg has farmin rights to the deeper prospect
on block 2322b under which premier would receive a partial carry whilst reducing equity
premier was awarded the operatorship of block 77 on the norwegian side of the median
line in the apa 2008 licence round this block adjoins the 2322b licence and provides
premier with complete coverage of the jurassic prospectivity identified adjacent to the
moth discovery
in norway on pl407 failure by the operator to obtain approval to bring the contracted rig
into norwegian waters has resulted in the bream appraisal well slipping to the third quarter
of 2009 this well will now be drilled with an alternative rig a 12month extension to the
licence deadline has been granted by the norwegian ministry of petroleum and energy
on the premieroperated licence pl406 the 3d seismic acquisition was completed as
planned in april processing of the new data commenced and initial fast track volumes were
received ahead of schedule site surveys and leg cores for the well are planned for the
second and third quarters of 2009 respectively a rig has been contracted to drill the
gardrofa prospect expected to spud in the third quarter of 2010
the recent jordbaer discovery has significantly enhanced the potential of our adjacent
licence pl374s and the decision has been taken to enter the drilling phase of this licence
with an expected well in 2010 in the pl359 licence immediately south of the 2007 luno
discovery a well is planned for the fourth quarter of 2009
the pl378 licence has been successfully farmed down with premier retaining an equity
position of 20 per cent in the licence the carried well is planned on the grosbeak north
prospect and will spud in the second quarter of 2009
premier has exited the pl419 licence disposing of its 25 per cent interest to nexen
the operator 11
premier oil plc 2008 annual report and financial statements
west africa
mauritania
in mauritania chinguetti production averaged 11700 bopd 950 bopd net to premier in 2008
the chinguetti phase 2b development programme comprising three workovers and two new
production wells was completed in the fourth quarter of 2008 increasing gross production from
10000 bopd to 17100 bopd by yearend production performance will be carefully monitored
during 2009 the operator continues to review and assess remaining potential within the field for
a future drilling campaign
evaluation of opportunities and development options on psc a and psc b are progressing in 2008
the joint venture drilled the bandanw well and sidetrack and the banda east well with the objective
of defining the banda gas and oil resources and commercial viability both wells were suspended as
potential future producers the operator continues working on the field development plan with
target completion by mid2009 for an investment decision
the operator is reevaluating the tiof field and proposing to reprocess the seismic data to assist in
better defining the subsurface and progressing this discovery to a development decision
the joint venture partnerships are currently in discussions with the mauritanian government to
extend the existing pscs
congo
in congo a farmout of 27 per cent of our equity was completed providing significant funding for a
possible twowell programme on the marine ix licence following the farmdown premier retains a
315 per cent equity and anticipates spudding the first of the albian raft prospects frida in july
2009 the transocean aleutian key semisubmersible rig has been contracted to drill the frida well
and preparations for the drilling operation are well advanced with the environmental impact study
completed and long lead items acquired further progress has also been made in the evaluation of
our deep water exploration block focusing on the tertiary channel sands that have proven
productive in the adjacent blocks
the frida prospect is a large untested albian raft with multiple stacked reservoir seal pairs and
potential reserves of 170 mmboe
sadr
the company’s exploration rights in the saharawi arab democratic republic sadr remain under
force majeure awaiting resolution of sovereignty under a united nations mandated process
mauritania
sadr
congo
performance