premier oil plc    2011 annual report and financial statements
annual report and financial statements
year to 31 december 2011
wwwpremieroilcom
premier oil plc
23 lower belgrave street
london sw1w 0nr
telephone 00 44 020 7730 1111
facsimile 00 44 020 7730 4696 heading
section 1 directors’ report performance
01 introduction
02 financial highlights
03 operational highlights
04 where we operate
05 how we operate
06 chairman’s statement
08 chief executive’s review
20 operations review
27 exploration review
31 financial review
36 key performance indicators
38 social performance review
section 2 directors’ report governance
44 board of directors
46 corporate governance report
52 audit and risk committee report
55 company risk factors
58 nomination committee report
59 report of the directors
62 remuneration report
83 statement of directors’ responsibilities
84 accounting policies
section 3 financial statements
90 independent auditor’s report – group
91 consolidated income statement
92 consolidated statement of comprehensive income
93 consolidated balance sheet
94 consolidated statement of changes in equity
95 consolidated cash flow statement
96 notes to the consolidated financial statements
122 independent auditor’s report – company
123 company financial statements
section 4 additional information
134 five year summary
135 shareholder information
136 oil and gas reserves
137 worldwide licence interests
140 glossary
141 contacts
premier is a leading ftse 250 independent
exploration and production company 
with oil and gas interests in the north sea
south east asia and in the middle east
africa and pakistan regions
our strategy is to add significant value for shareholders through
exploration and appraisal success astute commercial deals and optimal
asset management a growth business with
worldclass capability 
sound financial discipline
and focus on creating
shareholder value…
premier today is in the strongest position in its history…
exploration
development
production…  premier oil plc 2011 annual report and financial statements   01
introduction
five reviews     which are testament to our desire to excel
and to add value to whatever we undertake
 1  chim sáo  p 10  11
an organic growth asset
first oil from chim sáo discovered by premier in 2006 achieved in
october 2011
 2  gajah baru  p 12  13
meeting increasing singapore demand
first gas achieved in october 2011 with deliverability exceeding
expectations
 3  catcher  p 14  15
one of the largest north sea discoveries in
recent years
increased stake and assumed operatorship in this important project in
early 2012 progressing to first oil in 2015
 4  wytch farm  p 16  17
increased stake in one of our longterm assets
initiated an active drilling programme to increase deliverability
 5  commitment and responsibility
p 18  19
we support social investment that contributes
to sustainable development
we are committed to applying the highest ethical standards
directors’ report performance 02   premier oil plc 2011 annual report and financial statements
financial highlights
financial
 record profit after tax of us1712 million 2010 us1298 million
 operating cash flow of us4859 million 2010 us4360 million an increase
of 114 per cent
 yearend net debt of us7440 million 2010 us4057 million giving rise to
gearing of 30 per cent 2010 26 per cent proforma the completed encore
transaction 36 per cent at yearend
 cash and undrawn bank facilities including letters of credit of us1116 million
at yearend 2010 us1202 million increased to approximately us1400 million
following successful bank and bond market transactions in early 2012
total sales reached a new record level
of us8268 million and profit after tax
is a record us1712 million
0
20
10
30
40
50
kboepd
404
428
07 08 09 10 11
production
20072011
reserves and resources
20072011
operating cash flow
20072011
profit after tax
20072011
0
300
200
400
500
600
100
mmboe
07 08 09 10 11
527
488
proven and probable reserves
contingent resources
0
300
200
400
500
600
100
07 08 09 10 11
 million
4859
436
0
100
60
120
160
180
80
140
20
40
07 08 09 10 11
 million
1712
1298 premier oil plc 2011 annual report and financial statements   03
operational highlights
operational
 2011 exit rate of 60 kboepd achieved in line with guidance average
production for the year was 404 kboepd 2010 428 kboepd
 successful completion of operated chim sáo and gajah baru fields in the
fourth quarter of 2011 with deliverability ahead of expectations
 encore acquisition and assumption of catcher operatorship achieved
january 2012 solan project receives internal sanction march 2012
 12 out of 21 exploration and appraisal wells drilled in 2011 were successful
with notable discoveries at burgman in the uk and at cá rˆ o

ng 
–
do

and chim
sáo north west in vietnam
 proforma proven and probable reserves increased to 296 mmboe 2010 261
mmboe a reserve replacement ratio of 333 per cent reserves and resources
increased to 527 mmboe 2010 488 mmboe
outlook
 production guidance of 6065 kboepd average and 75 kboepd by yearend is
unchanged and dependent on first oilgas timing from the huntington and
rochelle projects
 final development sanction for several projects notably solan expected
shortly on target to reach group’s goal of 100 kboepd in the mediumterm
from existing fully funded projects
 up to 20 well exploration programme planned for 2012 targeting 200 mmboe
of unrisked potential encouraging start with successes in indonesia and
pakistan
 accelerated build up of prospect inventory for future drilling with new
licences acquired in the uk norway and kenya in 2011 and an active new
venture programme going forward
successful completion of two operated
development projects – commercialising
over 100 million barrels of oil and gas
investing us16 billion gross was a
worldclass achievement 04   premier oil plc 2011 annual report and financial statements
where we operate
focus on three core areas
norway
pakistan
vietnam
indonesia
north sea
south east asia
norway
active exploration
indonesia
gajah baru onstream in 2011
vietnam
chim sáo first oil in 2011
2012 yearend
production target
of 75000 boepd
 each business unit has production development and exploration
operations in total we manage a growing reserve and resource
base of 527 mmboe
middle east africa
and pakistan
pakistan
infield development successes
egypt
kenya
sadr
mauritania
united
kingdom
uk
building development
capability premier oil plc 2011 annual report and financial statements   05
how we operate
south east asia
 chim sáo and gajah baru
development projects
delivered safely and on
budget
 accelerating development
of pelikan and naga
projects
 exploration success at
anoa deep and appraisal
at cá rˆ o ng – do

strategy
we seek to develop the full
potential of our operated position
in the natuna sea and nam con
son basin bringing relationships
knowledge and technical skills to
bear and developing new
business opportunities in related
technical or geographical areas
outlook
 dua development sanction
and appraisal at north west
chim sáo – first half 2012
 active exploration
programme in indonesia
 growing presence in the
region through new
venture activity
strategy
we seek to maximise the value
of our pakistan producing gas
fields we continue to build our
exploration portfolio elsewhere
in the region using our technical
understanding of rift valleys and
frontal foldbelts
outlook
 focus on acquisition
opportunities
 continue the infield
development programme
 three well pilot project
planned to evaluate tight
gas potential at kadanwari
strategy
we seek to maximise output from
our current production base and
commercialise undeveloped
discoveries already held in the
portfolio we will build on our
existing position in the north sea
through an active exploration
programme in norway and the uk
outlook
 huntington and rochelle
expected onstream in 2012
 solan and catcher projects
sanction during 2012
 busy exploration
programme under way
upcoming carnaby
coaster luno and
lacewing wells
middle east
africa and
pakistan
 enhanced value of pakistan
assets through ongoing
field development and
compression upgrade
 exploration success at
kadanwari
 entered kenya with signing
of two pscs
north sea
 exploration success at
burgman catcher area
 completed five acquisitions
adding 60 million barrels at
a cost of around us8bbl
 assumed operatorship
of the catcher and solan
development projects
utilising our strong development and
project management skills in…
south east asia  middle east africa and pakistan  north sea 06   premier oil plc 2011 annual report and financial statements
chairman’s statement
the world around us
many western economies are in recession and the stability of the
eurozone in particular is under threat as a result 2011 was a year of
depressed financial markets and challenging access to capital
politically dramatic changes are taking place notably in north africa
the magnitude of these changes in difficult economic circumstances
presents significant challenges against this background the energy
sector continues to prosper with strength in commodity prices driven by
asian growth and resilient demand elsewhere finding and extracting
large hydrocarbon accumulations particularly oil in mature areas is by
definition becoming more challenging however with technological
change and through accessing unconventional resources exemplified
by the shale revolution in north america the industry is continuing to
respond to consistently strong demand for energy on a global basis
premier’s performance
premier’s achievements in 2011 demonstrate that there is a role for
companies of our size the successful completion of our two operated
development projects in asia – commercialising over 100 million barrels
of oil and gas investing some us16 billion on behalf of ourselves and
our partners and employing at peak over 3500 staff and contractors –
was a worldclass achievement we will look to maintain and build on
those skills within premier as we move forward with new operated
development projects
the new projects in asia contributed to meeting successfully our 2011
yearend production target of 60 thousand barrels of oil equivalent 
per day kboepd average production for 2011 was 404 kboepd 2010
428 kboepd in common with many other operators in the north sea
this was adversely affected by unplanned downtime in a number of our
uk north sea fields in the early part of the year i am pleased to report
that uk production recovered well in the second half of the year
continuing into the early months of 2012 it remains a top priority for our
operations team in aberdeen not just to maintain production levels but
to ensure the integrity of our production infrastructure as many fields in
the north sea move towards the end of their natural life
alongside proven operating and development skills it has never been
more important to maintain the balance sheet strength and liquidity to
finance such projects our strong financial position enabled us to deliver
on five acquisitions during the year adding some 60 million barrels of
reserves and resources and building on our existing presence particularly
in the north sea our financial performance continues to improve and
the outlook for strong growth in cash flows is robust even at much
lower oil prices than today we continue to have good access to capital
from both the bank and bond markets to fund future growth
a letter from mike welton
delivering our vision… premier oil plc 2011 annual report and financial statements   07
in exploration we are consistently adding reserves and resources on an
annual basis at an average aftertax cost of around us5 per barrel bbl
we are more than replacing our production in the natuna sea in south
east asia and in the central north sea in the uk we have leading
positions which given our data and knowledge bases we believe will
translate into further successes we are constantly reviewing new licence
opportunities in existing areas and in analogous geological plays in new
countries these will be the source of future growth and potential
upside for our investors
governance and the board
as the group expands the need for good corporate governance
processes and keen attention to risk management becomes ever more
critical consistent with external recommendations the board and its
committees pay close attention not just to the future strategy of the
company but also to board composition and the risk identification and
mitigation process as well as performance and remuneration policies
i am grateful for the excellent advice and support received from my
fellow directors during the year on all these matters
as in previous years particular attention at board level has been given
to health safety and environmental management the company’s
management systems have been successfully recertified to ohsas
18001 and iso 14001 standards and key performance indicators for
recordable injury frequency and high potential incidents were improved
against the prior year nevertheless we are constantly reminded of the
need for strong processes continuous vigilance and determination to
learn lessons for the future
shareholder returns
premier’s share price dropped by 26 per cent during 2011 in a poor year
for all equity markets following completion of the encore acquisition in
january 2012 we have seen a significant recovery over the three year
period to 31 december 2011 the shares have seen a growth of 80 per
cent significantly outperforming the ftse all share oil and gas
producers index
this outperformance is due to the hard work and skills of our employees
partners and suppliers i would like to pay tribute to all of them as we
look forward together to continued growth and success
mike welton
chairman
this outperformance
is due to the hard
work and skills of our
employees partners
and suppliers
i would like to pay tribute to all
of them as we look forward
together to continued growth
and success”
“ 08   premier oil plc 2011 annual report and financial statements
chief executive’s review
q  what is premier’s business model and growth strategy
a  premier seeks to offer both our investors and our
employees above average growth opportunities within business
units that are themselves good quality businesses this will be
reflected in a rising production profile from our operations and
development activities we will continue to set ourselves targets –
75000 boepd by the end of 2012 and 100000 boepd in the
mediumterm – which are challenging but achievable we expect
to source further growth from a combination of acquisitions and
organic exploration success we expect to play a growing role in
the places in which we choose to do business which in itself will
generate a stream of future opportunities over time we have
greatly widened our access to different sources of capital so that
our financial strength has become a real asset to the business
q  what were the highlights of 2011
a  in 2011 premier continued to grow through acquisition
development and our own exploration activities we have taken our
skills as a development operator in south east asia proved them on
new projects and are building up a comparable skill set in the north
sea our exploration programme is focused on areas where we have
a spread of acreage and a deep understanding of the geology we
are better placed than ever to achieve material resource additions
from our planned programmes
key milestones in achieving our growth in 2011 came from our
project teams in indonesia and vietnam who achieved excellent
results in bringing two major operated projects onstream on a
timely basis and in line with original cost projections this was a big
step forward for our asian business less visibly but just as valuable
for the future i believe we have made great strides in a number of
other areas our geologists and geophysicists enhanced their
understanding of the petroleum systems in both the natuna sea
and the uk central north sea adjacent to existing premier
discoveries and this will be reflected in the drilling programmes
established for 2012 and beyond our commercial teams in london
and aberdeen have made great progress on the shape structure
and schedules for new projects especially in the north sea our
operations staff have worked tirelessly to ensure that asset integrity
safety and the environment are at the top of our priority list all such
efforts are critical to the overall success of the company
an interview with simon lockett
simon lockett answers questions posed about premier oil
its performance during 2011 and the strategy for future success
continued growth… premier oil plc 2011 annual report and financial statements   09
q  how and where will you expand geographically
a  the group is well established in the north sea and in south east asia we expect that the majority
of our resources both personnel and financial will continue to be directed at these core businesses we
have the ambition over time to develop a third geographic area of expertise though only when the right
opportunities emerge and when the skills we already have in subsurface and engineering can be successfully
applied leading the way are our new venture teams who are already taking us into new geographies albeit
in ways which seek to address the challenges of new country entry in 2011 for example we obtained two
new exploration licences in offshore kenya and significantly expanded our acreage portfolio in the norwegian
sector of the north sea other geographies are under review for 2012
q  in 2011 you made a number of acquisitions are you looking for future acquisitions
a  we continually look at potential acquisitions as a way of building up our knowledge of assets in
our core areas though we are in the fortunate position that our internal growth profile is already strong
completed acquisition transactions have typically happened in times of market dislocation which creates
new opportunities in 2009 at a low point in the oil price cycle we completed major acquisitions in the uk
and in vietnam in 2011 the commodity markets held up well but the capital markets especially for smaller
companies were weak and development finance scarce our recent five completed acquisitions all in the
north sea reflected for the most part this opportunity and we are pleased to have added around 60 million
barrels of oil equivalent mmboe of reserves and resources to the portfolio at a cost of less than us8bbl
we expect 2012 to be another active year in the acquisition markets as the challenging conditions
especially in the bank sector seem destined to continue
q  what are the biggest challenges facing premier going forward
a  we operate in a highly competitive world where both good quality human and natural resources
are scarce we have been successful in retaining our people and in building up teams to execute new projects
our headcount has doubled from 300 to over 600 in the last four years our sharebased incentive package
offers good upside to employees if the company performs well but also ties in our employees for up to six years
before this upside is realised in my experience people enjoy the challenges offered by a growth programme
on the asset side continuing access to good quality acreage is critical to the longterm growth of the
company we constantly review new opportunities around the world which come to us via licensing rounds
knowledge of our partners’ and competitors’ strategies and through strong government relationships in the
areas in which we operate
q  can premier continue to build on its successes in the future
a  i believe that our combination of technical skills and financial strength positions us well for the
future our operations in the natuna sea and in the uk central north sea are very well established and
continue to offer opportunities for further growth we can see a path to production of 100000 barrels of oil
equivalent per day boepd from existing projects in the mediumterm our portfolio is already positioned
for success beyond that with ongoing developments and an active exploration programme 10   premier oil plc 2011 annual report and financial statements
q  can premier continue to build
on its successes
a  our portfolio is already positioned
for growth beyond 2015 1
review focus
chim sáo
an organic growth asset
location  vietnam
premier brought chim sáo onstream safely and on budget
in october 2011 the field which is the first oil field in the
nam con son basin to be delivered is performing ahead of
expectations with additional upside opportunities
profile     premier discovered the chim sáo oil field in november 2006 the subsequent
drilling programme prompted premier to proceed rapidly to development final approval for
which was achieved in november 2008 rising steel prices caused premier to opt for a single
central platform with long reach drilling this resulted in a gross cost saving of us112 million
against alternative development concepts the platform jacket and topsides were installed
during 2010 and the conversion of the fpso was completed in june 2011 the field was brought
onstream in october 2011 only six years after the initial discovery and gas exports commenced
in december 2011 deliverability of chim sáo is ahead of expectations and its cargoes are being
sold at a premium to average dated brent to date 12 wells nine producers and three water
injectors have been drilled and total drilling cost is expected to come in below budget
outlook  
• additional upside remains and reserves increasing
– optimise development of chim sáo
– better reservoir qualities than prognosed
– successful appraisal of the oligocene cau at deeper levels
• chim sáo north west
– additional gross resource estimate 1320 million barrels with further potential upside to
be appraised
– chim sáo north west to be tied in to existing facilities
• tie in of the nearby dua field to the chim sáo facilities by 2014 phil maclaurin
country manager
the successful and safe
delivery of chim sáo
demonstrates our ability
to operate to the highest
standards throughout the
cycle we now look to
recreate this achievement
with dua a tieback to
chim sáo which achieved
project sanction in
december 2011 we will
also appraise the new
accumulation at chim
sáo north west as a near
field tieback opportunity
in 2012”
“  12   premier oil plc 2011 annual report and financial statements
q  what is the key factor in your success
a  we have been successful in retaining
our talent pool and building our
capabilities to execute new projects 2
review focus
gajah baru
meeting increasing singapore demand
location  indonesia
first gas production from gajah baru was achieved within
budget in october 2011 volumes from the field continue to
increase with current production rates averaging 6090 bbtud
this marks the second phase of gas into singapore from the
premieroperated natuna sea block a
profile    premier discovered and successfully appraised the gajah baru gas field in 2000 and
2004 respectively in 2008 we negotiated three further gsas enabling gajah baru gas to be
sold into the singaporean and indonesian domestic markets the development plan was
approved in 2008 and a second tender for the epci contract was completed in march 2009
gross cost saving of us100 million 2011 saw the cpp connected to the whp on schedule and
on budget and the gas export equipment tied into the wnts pipeline the five development
well programme was completed in february 2011 and provided in excess of 200 bbtud of gas
deliverability gas exports from gajah baru commenced in october 2011 volumes continue to
ramp up towards 90 bbtud on completion of a gas swap an additional 40 bbtud will be
delivered from gajah baru at indonesian domestic prices
outlook  
• next phase of development projects being worked on
– anoa phase 4 sanctioned and epci contract awarded
– project sanction for pelikan and naga expected imminently
• returned to exploration on block
– anoa deep which spudded in february 2012 was successful testing gas with a flow rate
of 17 mmscfd 
– biawak besar is currently drilling with results expected in april 2012
• total sales capacity from block a will increase to 400 bbtud over time  roberto lorato
president premier indonesia
gajah baru has the plant
capacity to produce in
excess of 200 bbtud
significantly more than
contracted quantities
this along with our
pipeline of future projects
on natuna sea block a
will put us in a strong
position to benefit from
rising demand from
singapore and indonesia”
“  14   premier oil plc 2011 annual report and financial statements
q  will you expand geographically
a  only when the right opportunities
emerge 3
review focus
catcher
one of the largest north sea discoveries in recent years
location  north sea
premier has increased its stake in the important catcher
project to 50 per cent and has taken over operatorship 
development studies are well advanced and a decision on the
conceptual design is expected during the first half of 2012
profile    premier acquired an interest in the catcher area as a result of its 2009 oilexco
acquisition the catcher discovery in 2010 pointed to the presence of much lighter oil than
anticipated and proved that hydrocarbons could migrate to the outer margins of the central
north sea follow up wells 2892 3 and 4 were drilled between january 2011 and march 2011
discovering the varadero and burgman fields and appraising catcher north the six penetrations
drilled to date have estimated discovered reserves in the order of 80 million barrels in october
2011 premier made a recommended acquisition of encore for cash with a share alternative the
acquisition completed in january 2012 with shareholders representing 935 per cent of encore
shares electing to take premier shares operatorship of catcher was transferred to premier and
premier’s working interest increased from 35 per cent to 50 per cent
outlook  
• formal concept selection which is expected in the first half of 2012 will be followed by further
engineering studies on the chosen concept ahead of development approval by yearend
• additional upside remains on the block with further exploration planned
– carnaby will be drilled in april 2012 with results expected in may 2012
– the coaster prospect on the adjoining block to catcher
– additional prospects on the catcher block include bonneville cougar rapide and rocket
• premier plans to pursue the knowledge it has acquired from its activities in the catcher area
to other margin plays in the uk central north sea neil hawkings
operations director
we have made
significant progress
on the engineering
and screening studies
and concept selection
is expected imminently
as operator we are
now in a much stronger
position to advance
the development of
the catcher area’s
discovered resources”
“  16   premier oil plc 2011 annual report and financial statements
4
review
q  are you looking for further acquisitions
a  we are always looking at opportunities
which have the potential to add
shareholder value focus
wytch farm
increased stake in one of our longterm assets
location  uk
in december 2011 premier acquired an additional 177 per cent
stake in the producing wytch farm field and its undeveloped
beacon satellite the transaction has added approximately
2500 boepd net production with reserves upside in both wytch
farm and beacon
profile    in 1984 premier purchased a 1238 per cent interest in the onshore oilfield at wytch
farm in dorset this acquisition had a significant impact on premier’s reserve base and cash flow
in december 2011 premier completed its acquisition of an additional 177 per cent interest in
the wytch farm and beacon fields taking its interest in these assets to 301 per cent perenco
also acquired operatorship of wytch farm in december 2011 drilling activity was suspended
by the previous operator bp in 2009 but has recently restarted under perenco’s operatorship
premier believes that sufficient reservesadding opportunities exist to sustain an active rig
programme to 2017 and beyond drilling activity will target infill locations in the producing areas
as well as undeveloped satellite accumulations
outlook  
• acquisition adds approximately 12 mmboe of net reserves and 2500 boepd of net
production in 2012
• active drilling programme
– infill drilling in producing reservoirs to accelerate production and optimise recovery
– bringing into production of satellite discoveries onshore
– development planning for the significant beacon satellite field offshore
• longterm production and reserves upside through optimised waterflood management in
producing fields nigel wilson
north sea regional manager
we are pleased to have
increased our equity
stake in one of our
quality core producing
assets to over 30 per
cent we look forward
to an active drilling
programme and to
working with perenco
to deliver maximum
value from wytch farm”
“  18   premier oil plc 2011 annual report and financial statements
5
review
q  what does corporate social responsibility mean
to premier
a  it is about doing the right thing as well as managing
risk and protecting our reputation it’s about investing
in the community and people it is our policy to support social investment that contributes
to the sustainable development goals of the communities
and countries where we operate this means working in partnership with
professional social development organisations government agencies and local ngos to ensure
our investment addresses relevant and material issues in a rigorous manner with positive impacts
on society our investment is increasingly focused on the development of local capacity and
educational initiatives that deliver social and economic returns for both local communities and
host governments we also contribute to local infrastructures and disaster relief initiatives
recent examples include
• indonesia premier has now built a total of six kindergartens that enrol around 400 children in
six remote villages in the anambas regency premier has also developed several infrastructure
projects at the request of the anambas local government including construction of public
health centres libraries and school classrooms two of the multifunctional buildings we
supported in 2010 were completed and handed over to local government in 2011
• uk in 2011 premier partnered with the cyrenians a charity providing a range of services for
homeless people to refurbish its training suite and kitchen facilities in aberdeen the centre
is used for residential courses to help reintegrate homeless individuals into society the
centre offers computer training and access for those looking to develop their resumes use
email facilities and apply for jobs
• vietnam our community investment programme continues to be guided by the national
socioeconomic plan with goals and programmes related to economic growth poverty
reduction job creation education and vocational skills development in 2011 for the
second year in a row premier oil vietnam received the saigon times top 40s award for
environmental excellence and csr programmes we also formalised our commitment to
provide adolescents with enhanced vocationalemployment opportunities by researching
and publishing a directory of vocational training institutions in ho chi minh city that offer
free or subsidised training and guidance on career choices to disadvantaged young people
premier oil vietnam has a longterm partnership with friends for street children ffsc in
ho chi minh city in 2011 in celebration of first oil from the chim sáo field we announced
our intention to fund the ffsc binh tho development centre for the life of the chim sáo
field the centre provides education vocational training and healthcare to 145 disadvantaged
children from poor families and focuses mainly on equipping younger children to integrate
into junior public high schools ffsc also supports older children to find meaningful and
respectful employment in roles such as accounting photography sales and skilled factory
and office work paul dennis
hse and security manager
it is our policy to support
social investment that
contributes to the
sustainable development
goals of the communities
and countries where we
operate”
“  20   premier oil plc 2011 annual report and financial statements
operations review
production development and reserves
average working interest production for the fullyear was 404 kboepd
2010 428 kboepd our north sea business faced challenging
conditions due to extended unplanned downtime on key producing
assets at the balmoral scott and wytch farm fields however the year
end target of 60 kboepd was achieved following the return to full
production at the uk fields and the startup of new asian projects
during the fourth quarter production in other areas remained steady
with strong gas demand and good production performance in both
pakistan and our existing fields in indonesia
working interest entitlement
production boepd 2011 2010 2011 2010
indonesia and vietnam 14350 11650 11700 7300
uk 10300 15500 10300 15500
pakistan 15100 14900 15100 14900
mauritania 650 700 550 600
total 40400 42750 37650 38300
major milestones were achieved on our operated development
projects the chim sáo development in vietnam was completed and
first oil production was achieved safely and on budget through the
lewek emas floating production storage and offtake vessel fpso
with reservoir and well performance exceeding expectations in
indonesia the gajah baru development was completed with successful
installation of a new central processing platform on schedule and
budget the gas export equipment was tied into the existing subsea
west natuna transportation system pipeline to deliver gas to
singapore on the same block the anoa phase 4 project to upgrade
compression facilities and increase production capacity has been
sanctioned the project will be completed in 2013 accessing a further
200 billion cubic feet bcf of reserves for export
development activities continued on the huntington field in the uk with
the completion of phase 1 of the subsea installation and drilling of one
injection and three production wells the upgrade of the voyageur
fpso is now being progressed and the operator is expecting first oil in
the fourth quarter of 2012 the east and west rochelle subsea fields in
the uk north sea were unitised premier equity 15 per cent in order to
facilitate a fast track development programme via the scott platform
host production facility the field achieved final project sanction with the
department of energy and climate change decc approving the field
development plan in the second half of 2011 subsea facilities fabrication
and offshore construction on the host scott platform is progressing to
schedule with first gas and condensate anticipated in the fourth quarter
of 2012
by neil hawkings operations director premier oil plc 2011 annual report and financial statements   21
as at 31 december 2011 proven and probable 2p reserves on a working interest basis
were 284 mmboe 2010 261 mmboe on a proforma basis the encore acquisition
completed in early january 2012 increased reserves to 296 mmboe giving a reserve
replacement ratio of 333 per cent
proven and 2p reserves and
probable 2p 2c contingent
reserves resources
mmboe mmboe
start of 2011 261 488
production 15 15
net additions and revisions 38 40
end of 2011 284 513
encore acquisition 12 14
proforma total 296 527
 the encore acquisition completed in january 2012 reserve additions exclude encore’s interest in the cladhan field
which was sold in march 2012
upon completion of the encore acquisition the percentage of liquids in total reserves
increased from 35 per cent at the end of 2010 to 51 per cent the equivalent volume of 2p
reserves on an entitlement basis amounted to 2638 mmboe 2010 2220 mmboe based on
a price assumption equal to the dated brent forward curve in 2012 and 2013 and us75bbl
in ‘real’ terms thereafter 2010 fixed price of us75bbl
booked reserve additions were mainly due to the acquisition of encore additional 15 per
cent equity in catcher area progress with the solan field and the additional equity acquired
in wytch farm other reserves additions included exploration successes at burgman in the
uk and at kadanwari in pakistan proforma contingent resources at yearend were increased
to 231 mmboe 2010 227 mmboe
asia
premier successfully completed the chim sáo and gajah baru projects achieving first oil
and gas in the fourth quarter driving the company’s yearend production runrate to
60 kboepd in indonesia we continue to develop our gas positions and are accelerating
development of the pelikan and naga projects set to achieve sanction in the first half of
2012 in vietnam significant progress has been achieved in plans to develop the dua field
which is also expected to be sanctioned in the first half of 2012 22   premier oil plc 2011 annual report and financial statements
operations review continued
indonesia
during 2011 the premieroperated natuna sea block a sold an overall gross average of
161 billion british thermal units per day bbtud 2010 160 bbtud including rates in excess
of 200 bbtud as gajah baru came onstream the anoa facility delivered 5 per cent over its
contractual market share at nearly 42 per cent the nonoperated kakap field contributed a
further 42 bbtud gross 2010 54 bbtud gross liquids production from the block a anoa
field increased by over a third to an average 2400 barrels of oil per day bopd 2010 1758
bopd with a further 3400 bopd 2010 2993 bopd from kakap overall net production from
indonesia amounted to 11450 boepd 2010 11650 boepd
the gajah baru development involved the successful installation in 2011 of a new central
processing platform connected to a new wellhead platform on schedule and budget the
gas export equipment was tied into the existing subsea west natuna transportation system
pipeline to deliver additional gas to singapore during the year five development wells were
successfully completed providing in excess of 200 bbtud of gas deliverability from this new
facility
volumes from the gajah baru field are being supplied in accordance with the second gas
sales agreement gsa2 good progress has also been made on a swap agreement gsa5
under which additional volumes of gajah baru gas supplied to singapore will be swapped
with existing supplies from sumatra to singapore these sumatra volumes will be redirected
to the indonesian domestic gas market the relevant agreements are expected to be
completed shortly and physical supplies of up to 40 bbtud gross should commence in the
second quarter of this year gsa5 will replace gas previously contracted to be supplied to
batam island indonesia under gsa3 and gsa4 until at least december 2013 when gsa3
and gsa4 contracts are expected to commence
on the anoa field workovers were performed on the a7 and a11 wells these workovers
added a further 30 million standard cubic feet per day mmscfd of gas deliverability a new
oil well a22 was successfully completed which added around 1500 bopd of incremental oil
production a threewell drilling campaign on the anoa field’s west lobe platform has
progressed well and included the discovery of new reserves in the deeper lama reservoir
below anoa
in order to upgrade the compression facilities and to increase production capacity on the
producing anoa field a major ‘brownfield’ development project has been sanctioned
extending the assumed field plateau and developing some 200 bcf of gross field reserves
this project known as anoa phase 4 will be completed in 2013
elsewhere on the block tendering commenced for the engineering procurement
construction and installation epci contract for two wellhead platforms and connecting
pipelines for the development of the pelikan and naga fields final project sanction and
contract award is expected in mid2012 to provide future supply to existing singapore and
indonesia sales contracts
on the nonoperated block a in aceh a fully termed production sharing contract psc
extending the licence term for 20 years became effective from 1 september 2011 work
continued on the gas development project in support of two firm gsas however the epci
contract for the facilities will be retendered and first gas is now scheduled for 2015 premier oil plc 2011 annual report and financial statements   23
vietnam
first oil production from the chim sáo oil field was achieved safely and on budget in october
followed by the commencement of gas export in early december by yearend close to
2 million barrels had already been produced from six production wells a further three
production wells will be available to come onstream in early 2012 when the four well water
injection system will also commence further valuable opportunities have been identified in
the chim sáo area a well deepened into the oligocene directly beneath the main field
proved an estimated 17 metres of net hydrocarbonbearing pay and an additional well to be
drilled in early 2012 will accelerate production from a shallow reservoir which has larger
reserves than initially evaluated
the csn2p well a development production well for the chim sáo project intersected the
shallow part of a previously undrilled fault terrace to the north west of the chim sáo field
the well encountered a 20 metre oil column in an independent closure within good quality
upper dua sandstones the plan is to further appraise this new accumulation in 2012 as a
nearfield tieback opportunity
in december the government of vietnam approved the outline development plan for the
dua field and orders were placed for the equipment required to develop dua as a tieback
to chim sáo we are targeting full production from dua in early 2014
north sea
our north sea business unit continued to grow with the acquisition of encore oil plc
which held an additional 15 per cent in the catcher area and the purchase of an additional
177 per cent equity in wytch farm the development portfolio has moved forward
significantly with the huntington field targeting first oil and the rochelle area achieving
project sanction for first gas during 2012 significant concept engineering work was
completed on newly acquired projects with the solan project achieving premier board
sanction in march 2012
production performance in the first half of 2011 was hampered by downtime on key
producing assets these maintenance issues have been resolved and premier is now seeing
a stronger production performance from existing fields in 2012 24   premier oil plc 2011 annual report and financial statements
operations review continued
uk
2011 production net to premier was 10300 boepd 2010 15500 boepd production was
negatively affected by extended unplanned downtime on key producing assets the balmoral
area fields were shutin in the first quarter due to topside integrity issues and in midyear due
to a subsea leak the nonoperated wytch farm field was shutin during january due to a
flow line leak which occurred late in 2010 giving rise to a full pipeline integrity study production
from the nonoperated scott field was restricted in the first quarter due to a fracture in the
gas export line which required restricted production from high gasoil ratio wells to comply
with the gas flare consent production from the balmoral area improved in the second half of
2011 as the immediate issues that affected our production performance in the first half of the
year were resolved the december 2011 bblock production rate was significantly better at
around 7500 boepd net to premier compared to the 2011 fullyear average of 3750 boepd
the nonoperated kyle field contributed strong production until gale force winds in
december damaged the mooring system of the host banff fpso production facility forcing
it 270 metres off location and causing damage to the banff field subsea risers umbilicals and
possibly the fpso turret the damage is currently being assessed by the operator of banff
but it is likely that the kyle field will be shutin until mid2013 premier is currently processing
insurance claims under its business interruption and property damage policies 
several significant acquisitions were negotiated in 2011 the most significant of which being
the purchase of encore oil plc which included 15 per cent equity and operatorship of the
catcher area premier now owns 50 per cent of the catcher area and is therefore in a strong
position to progress the development of the area’s discovered resources towards first oil in
2015 development studies are well under way and a decision on the conceptual design is
targeted for the first half of 2012 in addition to catcher premier acquired additional licences
via the encore acquisition including the cladhan discovery and the coaster prospect premier
agreed to sell its newly acquired 166 per cent equity interest in cladhan for us54 million
and farm down 50 per cent of the acquired 100 per cent equity in the coaster prospect on a
promoted basis the sale of cladhan was completed in march 2012
acquisition of an additional 177 per cent equity in the wytch farm producing asset was
completed in late december at a final cost of us90 million increasing premier’s equity to
301 per cent of remaining reserves and adding approximately 2500 boepd of net production
in 2012
a new predevelopment asset was acquired by the purchase of a 60 per cent equity in the
solan field p164 block 20526a which is located west of shetland premier was appointed
as development operator in january 2012 the upfront acquisition cost was us10 million
with premier providing a carry and financing package to the prior owner during the
development phase the solan project received internal premier approval in march 2012 and
is expected to receive decc development sanction approvals shortly the field is expected
to produce around 42 million barrels following first oil in 2014 with capital expenditure of
around us850 million
premier also exercised an option to become the operator of the fyne field with a 399 per
cent equity stake in return for providing a carry through ongoing exploration and appraisal
work the results of the nearby erne discovery well drilled in the fourth quarter of 2011 and
the east fyne appraisal well completed in 2012 are currently being evaluated by the joint
venture partners however at this stage potential developments in the greater fyne area do
not meet the company’s economic thresholds
significant progress was achieved on other development assets the phase 1 subsea
installation for the huntington field has been successfully completed and one injection and
three production wells have been drilled with production rates testing at over 10000 bopd
per well earlier schedule slippage on the voyageur fpso was addressed by a change in
ownership of the vessel the fpso upgrade is now progressing in norway and the operator
is expecting first oil during the fourth quarter premier oil plc 2011 annual report and financial statements   25
the east and west rochelle subsea fields were unitised premier equity 15 per cent to
facilitate the fast track rochelle development programme via the scott platform host
production facility a processing tariff was agreed with the scott owners and initial rochelle
modifications were made to the scott topside facility during the year the development
programme has made good progress towards first gas from rochelle in november 2012
the subsea fabrication work is on schedule and drilling rigs have been contracted to drill the
rochelle development wells this summer
the caledonia field redevelopment project close to the balmoral area made progress
during 2011 and is now part of a project to bring fuel gas to balmoral project sanction is
expected later in 2012 for first oil and gas in 2014
norway
progress has been made on the bream development during 2011 after engineering
evaluation of a number of different alternatives the selected development concept is an
fpso and subsea wells with artificial lift a specific fpso has been identified and front end
engineering studies are being conducted for both this vessel and the associated subsea
systems and wells a project sanction decision will be taken after the engineering studies and
fpso contract negotiations are completed in the second quarter of 2012 a licence extension
until february 2013 has been granted the first oil date for the field would be late 2015
the frøy project made a technical concept selection in the first quarter of 2011 however the
operator decided not to continue the project in its current form for strategic reasons further
work has been completed during the year on a potential area development which would take
resources from a number of fields within a 1020km distance to a central processing hub
middle east africa and pakistan
natural decline in gas production in pakistan was more than offset by ongoing infield
development exploration successes and compression upgrades oil production in mauritania
also remained stable while the focus has been on enhancing the value of our pakistan
producing assets we continue to build our exploration portfolio elsewhere in the region 26   premier oil plc 2011 annual report and financial statements
pakistan
average net to premier production in pakistan during 2011 was 15100 boepd marginally
higher than in 2010 14900 boepd
net to premier the qadirpur field averaged 3750 boepd 2010 3550 boepd the increased
production was the result of the wellhead compression project coming onstream at the end
of 2010 work is in progress for the installation of two front end compressors by september
2012 in order to maintain production levels the development extended reach wells erw
qp42 and qp43 have been successfully drilled completed and tied in to production during
2011 while drilling of qp44 also erw is in progress two centrifugal compressors for the
compression and recycling of permeate gas a side stream were commissioned in july and
october 2011 this has minimised the flaring of permeate gas and resulted in a corresponding
increase of sales gas 2530 mmscfd gross
average production net to premier from the kadanwari field was 2050 boepd 2010 
1750 boepd and included increased contributions from successful exploration and
development wells 
the zamzama field averaged 5800 boepd net to premier 2010 6050 boepd the decrease
in production was primarily due to natural decline front end compression was commissioned
in july subsurface studies were conducted during the year following which two infill wells
zam8 and zam9 are now planned to be drilled in the second half of 2012 while an
additional infill well zam10 is under consideration for drilling in the first quarter of 2013
the bhitbadhra fields produced 3500 boepd net to premier 2010 3550 boepd the slight
decrease in production was because the field’s annual maintenance programme originally
scheduled to be carried out in the second half of 2010 was deferred to april 2011 the bhit
13 development well was successfully drilled and completed in the second half of 2011 and
was tied in to facilities in january 2012 the installation and commissioning of a wellhead
compressor at the badhra gas field was successfully completed at the end of 2011
mauritania
in mauritania 2011 working interest production from the chinguetti field averaged 650 bopd
2010 700 bopd with the decline rate continuing to be lower than expected
negotiations between the government and the joint venture partners have been completed
for extensions to psc a and psc b their respective exploration areas have been merged
into a new psc c10 in which premier holds a 623 per cent working interest the
undeveloped discoveries banda tiof and tevet in psc a and psc b will continue to be
held by joint venture partners for up to 18 months while development studies are
undertaken potential gas sales arrangements for banda are currently under discussion
operations review continued premier oil plc 2011 annual report and financial statements   27
exploration review
the nearterm goal for exploration within premier is to add 200 mmboe
of net 2p reserves by 2015 this is being achieved by focusing on
geographies and geological themes in which premier has demonstrable
knowledge skills and expertise namely in rift basins of south east asia
the north sea and africa together with frontal fold belt provinces as
exemplified by our asset base in pakistan since the goal was set in 2009
70 mmboe of reserves and resources have been added which with
further evaluation and appraisal could rise to over 100 mmboe the
programme is therefore on track to meet its target
in 2011 premier participated in 21 exploration and appraisal wells of
which 12 were successful an overall success rate of 57 per cent the
most notable successes were in the uk central north sea and the nam
con son basin in vietnam in vietnam the 2009 cá rˆ o ng – do

discovery
in block 0703 was successfully appraised with oil gas and condensate
being encountered the gas and condensate was found in a deeper
reservoir sequence than the oil and this opens up a new play fairway
within premier’s acreage in the nam con son basin in the uk central
north sea the discovery at burgman continued the successful
exploration drilling on the catcher licence uk block 289
premier also explores for nearfield resources capable of being tied
back to its existing infrastructure in pakistan three nearfield
exploration wells encountered gas in untested fault block compartments
within the kadanwari field area and in vietnam oil was discovered in a
previously untested trap immediately north west of the chim sáo field
on block 12w
premier continues to apply the most advanced seismic interpretation
techniques in maturing its lead and prospect inventory to drillable status
and in 2011 acquired new 3d seismic data in the catcher licence and
surrounding acreage on nonoperated acreage a new 3d survey was
acquired in norway in the blåbaer licence and 2d and 3d seismic data
was acquired in kenya
2011 was a significant year for new acreage capture with a total of 25
licences being secured by yearend amounting to a net acreage gain of
3885km
2
 a total of 12 licences were acquired in the uk central north
sea and two in ireland in the celtic sea via the encore acquisition in
addition four new blocks were offered for award through encore as
part of the deferred 26th round awards in early january 2012 – three of
these are in the central north sea and one is in the solent
in norway premier acquired two new blocks in february 2011 as a result
of the 2010 apa awards in the latter half of 2011 three licences in the
norwegian portion of the central north sea were acquired from nexen
for a cost of us55 million early in 2012 premier was also awarded
equity in four new licences via the 2011 apa licence round three
licences in the north sea and one offshore midnorway all acreage
awards in norway were acquired on a drill or drop option basis and the
target is to deliver prospects from this new portfolio for drilling in the
20132014 time frame
by andrew lodge exploration director 28   premier oil plc 2011 annual report and financial statements
exploration review continued
in mauritania the exploration psc extension was signed and ratified in 2011 resulting in a
new psc the new psc in which premier holds a 623 per cent equity interest has a gross
area of 10725km
2
 the plan is to drill the first of two exploration wells on this new psc in the
latter half of 2012
additional acreage was secured in east africa via premier’s entry into two new pscs offshore
kenya offshore east africa was an industry focus in 2011 with the discovery of significant
resources offshore mozambique and tanzania premier’s acreage offers the potential to
extend these successful plays northwards into offshore kenya
premier plans to drill between 15 and 20 exploration and appraisal wells in 2012 including a
further exploration well on the uk catcher block and two wells coaster and spaniards on
acreage acquired through the encore acquisition in norway the luno ii well is planned for
the fourth quarter and in asia the appraisal of the north west chim sáo discovery will take
place as well as four exploration wells in indonesia 
asia
indonesia
on the premieroperated tuna psc exploration wells gajah laut utara and belut laut were
drilled to test the miocene and oligocene potential of two prospects on the block gajah
laut utara spudded in may 2011 and was followed by belut laut which spudded in july both
wells encountered good oil and gas shows in the oligocene section proving the existence
of a working petroleum system in both of these previously undrilled subbasins postwell
studies will continue into 2012 with further drilling in the nam con son basin planned after
integration of the 2011 results
on natuna sea block a a blockwide prospect inventory review was carried out to
characterise the remaining exploration potential on the block two exploration wells anoa
deep wl5x and biawak besar were scheduled for drilling in early 2012 in february 2012
it was announced that the anoa deep well had successfully encountered some 300 feet of
fractured lama formation sandstone which tested gas at a rate of 17 mmscfd from a 112
feet interval
in north sumatra preparations are at an advanced stage for the drilling of the matang1
exploration well during 2012 on block a aceh
planning and preparation has continued on the nonoperated buton block for the drilling of
the benteng1 exploration well which is now scheduled to drill in the first half of 2012
vietnam
following the exploration discovery at cá rˆ o ng – do

crd in block 0703 premier drilled and
tested the crd2x appraisal well into the oligocene sands that had not been tested by the
discovery well drill stem tests of the hydrocarbon bearing sands in the oligocene section
flowed gas and condensate at potentially commercial rates and the well was then side
tracked to provide further data on the distribution of hydrocarbons in the miocene sands
evaluation of the crd discovery and the surrounding exploration acreage continued
throughout the year
the high risk qua mit vang well drilled in block 10410905 was plugged and abandoned
after flowing gas with 99 per cent carbon dioxide from fractured basement rock with well
costs substantially carried via a farminee
in block 12w two development wells drilled into a fault terrace to the north west of the chim
sáo field proved the presence of oil in this previously undrilled area encountering columns of
15 and 89 metres of oil bearing sands within good quality upper dua sandstones a dedicated
appraisal well will be drilled into this discovery in 2012 premier oil plc 2011 annual report and financial statements   29
north sea
uk
premier continued its success in the catcher area licence p1430 block 289 with discoveries
at burgman and catcher north in 2011 both of which will contribute to a catcher area
development plan the joint venture also acquired 455km
2
3d seismic data across block 289
and 190km
2
3d data on the surrounding open acreage
premier became operator of central fyne in may 2011 with a 399 per cent equity interest by
exercising a farmin option to drill the east fyne well in licence p077 block 2128a premier
also agreed to participate in the erne exploration well in nearby licence p1875 block 2129d
the erne well was drilled in december and was suspended as a potential tieback to any
future developments in the greater fyne area subsequent to yearend the east fyne
appraisal well was also drilled despite encountering oil and gasbearing sands the well was
plugged and abandoned the results of the wells are currently being incorporated into the
plans for the greater fyne area by the partnership group
the bluebell prospect on p1466 block 1524c was farmed down from a premier 100 per
cent equity position to a farminee who funded 6767 per cent of the well cost in return for a
40 per cent interest post yearend it was announced that the palaeocene target
encountered excellent sand quality but was water wet
norway
during the year two wells were drilled on the pl378 licence which contains the 2009
grosbeak discovery the first well an exploration well on the gnatcatcher prospect was dry
the second well an appraisal on the grosbeak discovery delivered mixed results the
primary bore was on prognosis and confirmed the oil water contact seen in the discovery
well the subsequent sidetrack came in deep with the target sands penetrated below the
contact the partnership is now focusing on commercialising grosbeak together with other
discoveries in the nearby area
premier drilled an operated exploration well on the southern segment of the gardrofa
prospect in licence pl406 in the third quarter of 2011 the well was plugged and abandoned
as a dry hole
premier made good progress in building its portfolio in 2011 with significant new acreage
awards and acquisitions premier was awarded two licences early in the year from the 2010
apa licence round one operated in the central north sea pl567 on which the work
programme comprises seismic reprocessing and the second pl378b as protection acreage
to the pl378 grosbeak licence further additions were captured in the third quarter when a
transaction to acquire three operated exploration blocks in the north sea was agreed with
nexen two of these blocks pl539 and pl566s are close to pl567
an application was submitted for four blocks in the 2011 apa licence round and in january
2012 the ministry notified that this had been successful with four new licences being offered
for award three of these licences are in the central north sea and one is in midnorway 30   premier oil plc 2011 annual report and financial statements
middle east africa and pakistan
pakistan
three exploration wells k25 dira k27 and k28 were drilled in 2011 in the kadanwari
lease the kadanwari k25 dira well tested 4 mmscfd but due to tight reservoir conditions
the decision on whether to tiein this well for production is still pending however both k27
and k28 exploration wells tested at high flow rates up to 50 mmscfd in k27 and
approximately 30 mmscfd in k28 the k27 well was tied in to the system in early march
2012 and is expected to add around 8 bcf of reserves net to premier the k28 well together
with the k30 well which was successfully drilled in early 2012 will be tied in by midyear
2012 to produce at maximum available plant capacity
egypt
the award of the south darag block in the gulf of suez is awaiting formal government
ratification having been delayed by the egyptian parliamentary election process
premier farmed into the nonoperated north red sea block 1 in december 2010 taking a
20 per cent interest the nrs2 cherry exploration well was drilled to a target depth of
5200 metres the well encountered hydrocarbon shows whilst drilling but failed to intersect
reservoir quality sandstones geological studies are continuing to assess further prospectivity
on the block
kenya
in may 2011 premier made an entry into kenya with the signing of two pscs for offshore
exploration blocks l10a and l10b a 3d seismic data acquisition programme was completed
ahead of schedule at yearend and a 2d programme was completed on 15 january 2012
processing and interpretation will take place in 2012 with exploration drilling provisionally
scheduled for 2013
sadr
premier’s exploration rights in the daora haouza mahbes and mijek blocks in the saharawi
arab democratic republic sadr remain under force majeure while awaiting resolution of
sovereignty under a united nations mandated process premier extended its acreage
position in the sadr by gaining the laguara block as part of the encore acquisition
exploration review continued premier oil plc 2011 annual report and financial statements   31
financial review
economic and business background
oil prices further strengthened during 2011 due to supply concerns and
the volatile political situation in the middle east brent crude prices
averaged us1113bbl for the year against us795bbl in 2010
premier’s portfolio of crudes sells at an average of us15bbl premium
to brent given the timing of our crude oil liftings average actual
realisations prehedge for the year were us1119bbl 2010
us797bbl after taking into account the effect of longterm hedging
contracts the average oil price realised for 2011 was us896bbl 2010
us783bbl
in indonesia 2011 has seen continuing good production performance
from natuna sea block a coupled with strong demand for gas from
singapore under the first gas sales agreement gsa1 out of a total
singapore demand of 364 bbtud 2010 355 bbtud gross sales from the
anoa field for the year averaged 152 bbtud a share of approximately
42 per cent of deliveries against a contractual share of 369 per cent
in october gas production commenced from the gajah baru field
under the second gas sales agreement gsa2 volumes at gajah baru
are continuing to increase with current production rates of around
6090 bbtud gross 
in vietnam first oil from the chim sáo field was achieved in october
2011 with gas exports commencing in december reservoir and well
performance has exceeded expectations though some topside and
marine system facility issues remain to be resolved excellent pricing
has been achieved for oil cargoes sold in 2011 averaging in excess
of us550bbl over brent prices
in the uk production from the balmoral area improved in the second
half of 2011 as the immediate issues that affected our production
performance in the first half of the year were resolved a good
production result was achieved from the scott area and kyle fields
in pakistan natural gas is a critical component of the country’s energy
needs meeting around 47 per cent of total energy requirements total
domestic gas production has remained at around 4 bcf per day with
demand continuing to grow at around 10 per cent per annum due to
population growth and usage of natural gas as vehicle fuel this has
created an increased shortfall of gas resulting in supply shortages in the
country with significant gas reserves remaining we are well placed to
maintain or increase production through front end compression projects
and new development drilling 
income statement
production in 2011 on a working interest basis averaged 404 kboepd
2010 428 kboepd on an entitlement basis which under the terms
of our pscs allows for additional government take at higher oil prices
production was 377 kboepd 2010 383 kboepd working interest gas
production averaged 153 mmscfd 2010 156 mmscfd during the year
or approximately 65 per cent of total production average gas prices
for the group were us851 per thousand standard cubic feet mscf
by tony durrant finance director 32   premier oil plc 2011 annual report and financial statements
2010 us626mscf gas prices in singapore which are linked to high sulphur fuel oil
hsfo pricing in turn closely linked to crude oil pricing averaged us195mscf 2010
us139mscf for the year average gas prices for pakistan were us38mscf 2010
us35mscf
total sales revenue from all operations reached a new record level of us8268 million
2010 us7636 million driven by higher commodity prices cost of sales was lower by
us1156 million at us4149 million 2010 us5305 million mainly reflecting a us259 million
impairment reversal against a us653 million charge in 2010 due principally to the sustained
high oil price environment which necessitated an increase in the base price assumption
used for the valuation of future cash flows unit operating costs were us159 per barrel of oil
equivalent boe 2010 us139boe reflecting higher unit costs in the uk as production
levels declined and the inclusion of vietnam operating costs in the last quarter
underlying unit amortisation excluding impairment rose to us138boe 2010 us126boe
largely as a result of the addition of chim sáo field production in vietnam
exploration expense and prelicence exploration costs amounted to us1875 million 2010
us682 million and us230 million 2010 us189 million respectively this includes the
writeoff of the following exploration wells gardrofa and gnatcatcher in norway cherry in
egypt qua mit vang in vietnam and gajah laut utara and belut laut in indonesia the
decision was also taken to writeoff us317 million of costs in relation to the fyne area since
at this stage potential developments in the greater fyne area do not meet the company’s
project development metrics
net administrative costs were us258 million 2010 us183 million with the increase
mainly due to transaction costs incurred to acquire encore oil plc
operating profits were us1756 million 2010 us1277 million finance costs and other
charges net of interest revenue and other gains were us681 million 2010 us655 million
reflecting lower levels of interest income and increased gross debt levels offset by higher
capitalisation of borrowing costs for our development projects in asia and the uk the
charge arising due to the unwinding of the discounted decommissioning provision increased
to us283 million 2010 us162 million reflecting increased provisions and a higher
discount rate
pretax profits of us1415 million 2010 us1008 million also reflect a positive adjustment
of us340 million in respect of the group’ s commodity hedge portfolio 2010 us386 million
this was driven by the unwinding of prior year provisions in respect of our oil and gas hedges
the current tax charge for 2011 is us773 million an effective tax rate of 44 per cent of
operating profits additionally us721 million has been provided for potential additional tax
charges in indonesia and pakistan over fiscal disputes relating to prior years these disputes
are subject to clarification between the host governments and the oil and gas industry these
charges are offset by a deferred tax credit of us1770 million resulting in a net tax credit of
us297 million 2010 us290 million the deferred tax credit arises mainly in the uk and
includes the impact of a 12 per cent increase in supplementary corporation tax for the
industry and the availability of ring fence expenditure supplement rfes allowances in
addition a deferred tax asset of us870 million was recognised this relates to us1400 million
of previously unbooked uk corporation tax allowances which following the group’ s acquisition
of additional fields in the uk are now expected to be fully utilised at yearend the group
had an estimated us136 billion of carried forward uk corporation tax allowances which will
be utilised against uk ring fence profits over time
profit after tax is a record us1712 million 2010 us1298 million resulting in basic earnings
per share of 366 cents 2010 restated 280 cents
financial review continued premier oil plc 2011 annual report and financial statements   33
cash flow
cash flow from operating activities was us4859 million 2010 us4360 million after
accounting for tax payments of us440 million 2010 us679 million
capital expenditure in 2011 totalled us6605 million 2010 us5141 million
capital expenditure  million 2011 2010
fieldsdevelopment projects 4281 3471
exploration and evaluation 2282 1647
other 42 23
total 6605 5141
the principal fields and development projects were chim sáo gajah baru huntington and
rochelle together with drilling and compression projects in pakistan
exploration and evaluation spend includes costs relating to the solan fyne and nexen
norway assets which were categorised as predevelopment assets at the time of acquisition
acquisitions
in december premier completed the acquisition of an additional 17715 per cent interest
in wytch farm for an adjusted consideration of us899 million taking its total interest to
301 per cent
the acquisition of encore oil plc was approved by its shareholders in december and
subsequently sanctioned by the court in january 2012 shareholders representing 935 per cent
of encore’s shares elected to take new premier shares which began trading in january 2012
total consideration of us4076 million was therefore satisfied by the issuance of 609 million
new premier shares and the payment of £141 million us216 million in cash as a result of
the acquisition premier has increased its stake in the catcher project from 35 per cent to 50
per cent and has assumed operatorship this acquisition will be accounted for in the group’s
2012 financial statements
balance sheet position
net debt at 31 december 2011 amounted to us7440 million 2010 us4057 million with
cash resources of us3091 million 2010 us2997 million
net debt  million 2011 2010
cash and cash equivalents 3091 2997
convertible bonds 2282 2204
other debt 8249 4850
total net debt 7440 4057
 convertible bonds have a nominal value of us2500 million an equity conversion price of £339 and a final maturity
date of 27 june 2014 other debt includes €750 million of longterm senior notes which are valued at yearend
us1296€ spot rate however these will be redeemed at us1423€ due to a cross currency swap arrangement
in june 2011 the company issued seven and 10 year senior notes of us2440 million and
€750 million in the private placement market total debt facilities therefore increased to
us21849 million 2010 us15720 million as at yearend drawn borrowings were
us10531 million and issued letters of credit were us3247 million undrawn facilities were
therefore us8071 million which together with cash in hand provided available cash
funding and letter of credit capacity of us11162 million
subsequent to yearend additional bank facilities of us3500 million were negotiated and
a second issue of senior notes was completed this second issue with maturities of seven
10 and 12 years amounted to us2020 million and €250 million a us1750 million term loan
has been repaid during march 2012 leaving cash and undrawn facilities of approximately
us14 billion
40
kboepd
production
231
mmboe
resources
296
mmboe
reserves
171
million
profit
after tax
us 34   premier oil plc 2011 annual report and financial statements
financial review continued
financial risk management
commodity prices
the board’s commodity pricing and hedging policy continues to be to lock in oil and gas
price floors for a proportion of expected future production at a level which ensures that
investment programmes for sanctioned projects are adequately funded floors are
purchased for cash or via collars funded by selling caps at a ceiling price this policy has
provided sensible downside protection for the company over the period since 2008 and
going forward into 2012 during which time over us1 billion will have been invested in new
development projects the requirement for future hedging for 2013 and beyond will be
considered as new projects are sanctioned taking into account expected future operating
cash flows of the group and the size of the relevant investment programme
at yearend a total of 18 million barrels of dated brent oil were hedged via collars for the
period to end 2012 with an average floor price of us400bbl and an average cap of
us1000bbl in addition 21 million barrels of dated brent oil were hedged through forward
sales for 2012 at an average price of us1053bbl this volume represents approximately
32 per cent of the group’s expected liquids working interest production over the period
162000 metric tonnes mt of hsfo which drives our gas contract pricing in singapore was
subject to collars covering the period to mid2013 with a cap of us5000mt equivalent to
around us850bbl an additional 132000 mt have been sold under monthly forward sales
contracts for 2012 at an average price of us6220mt these two hedges cover approximately
28 per cent of our expected indonesian gas working interest production for 2012
during 2011 embedded oil price collars for 32 million barrels and fuel oil collars for 120000
mt expired at a cost of us1191 million 2010 us81 million including forward sales cost
which has been offset against sales revenue
oil hedge collars are incorporated within the pricing terms of physical offtake agreements
avoiding the requirement to revalue them a credit of us280 million 2010 us182 million
arises in respect of past mark to market provisions for oil hedges which have now expired
gas price hedging is still required to be marked to market as the hedges are held by
counterparties independent of physical product sales a credit of us60 million 2010
us204 million arises in respect of such mark to market movements resulting in a total
credit to the income statement of us340 million in respect of commodity contracts 2010
us386 million
foreign exchange
premier’s functional and reporting currency is us dollars exchange rate exposures relate
only to local currency receipts and expenditures within individual business units local
currency needs are acquired on a shortterm basis during the year the group recorded a
loss of us04 million on such shortterm hedging 2010 us04 million in 2011 the group
also issued €750 million longterm senior loan notes which have been hedged under a cross
currency swap in us dollars at a fixed rate of us1423€
486
million
operating
cash flow
us premier oil plc 2011 annual report and financial statements   35
interest rates
although the group’s borrowing facilities are defined in floating rate terms substantially all
current drawings have effectively been converted to fixed interest rates using the interest
rate swap markets on average therefore the cost of drawn bank funds for the year was 
52 per cent mark to market movements on these interest rate swaps amounted to 
us64 million 2010 us121 million which was charged to other comprehensive income
cash balances are invested in shortterm bank deposits and aaa rated liquidity funds
subject to board approved limits and with a view to spreading counterparty risks
insurance
the group undertakes a significant insurance programme to reduce the potential impact of
the physical risks associated with its exploration development and production activities in
addition business interruption cover is purchased for a proportion of the cash flow from
producing fields for a maximum period of 18 months due to exceptionally bad weather in
december the banff fpso – which handles kyle production – lost its anchors and the risers
were damaged severely as a result the banff fpso has been removed from its location
while repairs are assessed it is currently unlikely that production from the kyle field will
recommence in 2012 and a claim for business interruption insurance is being processed
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 and gas prices and other negative
economic scenarios in order to manage the risk of funds shortfalls or covenant breaches and
to ensure the group’s ability to continue as a going concern
despite economic volatility the directors consider that the expected operating cash flows
of the group and the headroom provided by the available borrowing facilities give them
confidence that the group has adequate resources to continue as a going concern as a
result they continue to adopt the going concern basis in preparing the 2011 annual report
and financial statements
661
million
capital
investment
us
1 1
billion
cash and
undrawn
facilities
us 36   premier oil plc 2011 annual report and financial statements
key performance indicators
premier measures its performance in line with strategic objectives of continuous growth and
creating significant value for shareholders key performance indicators kpis are the primary
measures used to track progress against set targets in the areas of safe responsible and
sustainable operations growth through exploration development production and acquisitions
and maintaining financial strength there are a series of detailed kpis around all of these areas
which link to senior management’s remuneration
operating safely responsibly and sustainably
premier is committed to operating responsibly in every part of the business success in these
areas inherently protects our assets our revenue streams and our reputation
health and safety performance is measured using total recordable injury frequency trif
per million manhours and near miss high potential incidents hipos safety performance
data includes both premier employees and contractors
trif performance whilst improved on 2010 was short of the 20 target premier is working
to improve performance by reinforcing procedures and standards and through continued
training and ongoing communication premier’s trif target for 2012 remains at less than
20 injuries per million manhours
as part of its safety performance management process premier tracks hipos which include
any event that might lead to significant injury environmental damage property damage or
security breaches premier ensures that key lessons are learned and disseminated for all
hipos and companywide safety alerts are issued citing key causes and preventative actions
required in 2011 there was a continued improvement in performance with six hipos a
frequency rate of 083 per million manhours and below the 20 target the target for 2012 is
a hipo frequency of below 20 per million manhours
building the strong production base
part of premier’s strategy is to build on the existing production base in order to sustain and
continue to deliver growth this is measured using daily average production and the number
of development projects being brought through to sanction
while average production was slightly lower in 2011 due to reported maintenance activity the
successful delivery of chim sáo and gajah baru increased the yearend runrate to 60 kboepd
premier is targeting a 2012 yearend exit rate of 75 kboepd and 100 kboepd in the mediumterm
premier’s production goal is underpinned by the pipeline of development projects being
progressed across the portfolio and the ability to commercialise these projects is key to the
company’s success
0
2
3
4
1
07 08 09 10 11
236
284
actual
total recordable injury frequency trif
per million manhours
0
4
6
2
07 08 09 10 11
083
159
actual
high potential incident hipo frequency
per million manhours premier oil plc 2011 annual report and financial statements   37
0
20
10
30
40
50
kboepd
404
428
07 08 09 10 11
working interest
production
delivering growth
premier looks to create future growth through exploration in
focused geologies and valueled acquisitions in core areas
progress towards this growth ambition is measured by reserves
replacement risked prospective resource added and finding costs
premier also undertakes acquisitions to access additional
resources the company delivered on five acquisitions in 2011
which were encore oil plc increased equity in wytch farm
nexen norway’s exploration acreage and equities in the solan
and fyne predevelopment assets
proforma reserves and resources increased to 527 mmboe giving
the company a reserve replacement ratio of 333 per cent
demonstrating premier’s ability to replace production and
deliver future growth
premier added reserves and resources through exploration at an
average cost of around us50bbl and through acquisitions at
an average cost of us80bbl
0
300
200
400
500
600
100
mmboe
07 08 09 10 11
527
488
proven and probable reserves
contingent resources
reserves and resources
maintaining financial strength
one of premier’s strategic objectives is to maintain financial
strength in order to invest in the future of the business and deliver
significant returns to shareholders 2011 was another strong year
with record profit after tax of us1712 million an increase of
32 per cent and operating cash flow of us4859 million an
increase of 11 per cent
premier’ s portfolio of crudes was sold at an average of us15bbl
premium to brent and realised oil prices prehedge were 40 per
cent higher in 2011 realised average gas prices a significant
portion of which tracks oil price movement were 36 per cent
higher in 2011
operating costs increased in 2011 to us159boe reflecting
higher unit costs in the uk as production levels declined and the
inclusion of vietnam operating costs in the last quarter
rising cash flows along with successful bank and bond market
transactions provide premier with the funding required for
future growth ability to add new capital and sufficient covenant
headroom are measured to ensure the company has the funds
to meet forecast cash requirements and maintain liquidity
throughout the cycle
0
6
5
7
8
10
9
4
2
1
3
mscf
851
626
07 08 09 10 11
realised gas price
0
60
40
80
100
140
120
bbl
20
1119
797
07 08 09 10 11
realised oil price
0
12
10
14
16
18
4
2
6
8
boe
159
139
07 08 09 10 11
operating costs
0
300
200
400
500
600
100
 million
4859
4360
07 08 09 10 11
cash flow from
operating activities 38   premier oil plc 2011 annual report and financial statements
social performance review
premier is committed to applying the high ethical standards necessary to maintain our
reputation as a worldclass operator in oil and gas our reputation for doing the right thing
enables us to access new licences enter new countries build lasting relationships with local
communities and ultimately secure the licence to operate we have policies and procedures
in place to ensure that our investment and operational decisions take appropriate account of
the impacts that might arise from our activities
premier carries out independent audits of its policies to ensure compliance with the
requirements of the following bodies the global reporting initiative the international
petroleum industry environmental conservation association ipieca oil and gas industry
guidance on voluntary sustainability reporting 2010 the carbon disclosure project
ftse4good and the united nations global compact of which premier is a signatory
our last report identified areas for improvement relating to the continued improvement of our
social investment programmes implementation of an employee engagement survey and the
rollout of our code of conduct training it also highlighted the need for additional process
safety procedures and disclosures as well as more structured reporting on greenhouse gas
emissions steps were taken in 2011 to address each of these areas and to further strengthen
our underlying management systems in line with emerging global standards disclosure of our
performance in this area and for all of the commitments made in 2011 is presented in our
social performance report 2011
we report below on how we have evolved applied and delivered on our stated policies in 2011
and we explain any areas where we have not complied
further details on our policies and procedures are available on our website wwwpremieroilcom
social responsibility
social responsibility is primarily about how we engage assess and manage our community
and societal issues and risks our corporate social responsibility and human rights policies
are applicable to all premieroperated entities and may be adapted to address local
priorities our code of conduct and employment policy are managed through the legal and
human resources functions respectively all policies are compliant with relevant legislation
and take due account of appropriate initiatives and standards industry guidance and
relevant best practice
corporate social responsibility policy
we recognise that we have responsibilities to a diverse group of stakeholders including
shareholders customers employees business partners local communities and society at
large including special interest groups that represent public interest concerns our investment
decisions take account of economic environmental and social impacts and their management
in all its operations premier will always comply with local laws and regulatory requirements as
a minimum and make representations to the relevant authorities if we believe that policies
and practices of host governments undermine our policies we complete environmental and
social impact assessments prior to undertaking any new investment and evaluate these
impacts regularly to ensure that they are responsibly managed on an ongoing basis we
expect our contractors suppliers joint venture and alliance partners to respect our policies
their concurrence with the principles upheld by our policies is an important factor in our
decision to form or remain in a relationship with them
it is our policy to support social investment that contributes to the sustainable development
goals of the communities and countries where we operate this means working in
partnership with professional social development organisations government agencies and
local nongovernmental organisations to ensure our investment addresses relevant and
material issues in a rigorous manner with positive impacts on society
there were no reported noncompliances with this policy in the review period premier oil plc 2011 annual report and financial statements   39
human rights policy
our human rights policy is based on the fundamental rights pronounced in the universal
declaration of human rights and is guided by those rights enshrined in the core labour
conventions of the international labour organisation these rights are to be protected and
promoted throughout premier’s business operations and in our relations with both business
and local community partners the scope of our policy includes the rights of our employees
– and their health and safety as well as their security arrangements and working conditions –
and the development rights of our external stakeholders in particular local communities
where appropriate we will also use our legitimate influence to promote the protection of
human rights outside of our areas of operation
there were no reported violations of this policy in the review period
employment policy and social justice in the work place
premier is committed to the principle of equal opportunity in employment and to the
establishment of a fair and nondiscriminatory work environment when recruiting developing
and dealing with employees and service providers people will be treated fairly equally and
without prejudice our equal employment opportunities policy applies to all permanent
contractual and temporary staff as well as all job applicants
equal employment opportunity means having a commitment to equality of opportunity in all
employment practices policies and procedures no employee or potential employee is
treated less favourably due to their race creed colour nationality ethnic origin age religion
or belief gender sexual orientation marital status gender reassignment status or disability
any employee who has a concern regarding the application of this policy is able to make use
of the company’s grievance policy
all employees must
• cooperate with any measures introduced to ensure equal opportunity
• report any suspected discriminatory acts or practices
• not induce or attempt to induce others to practice unlawful discrimination
• not victimise anyone as a result of them having reported or provided evidence of
discrimination
• not harass abuse or intimidate others on account of their race creed colour etc and
• not canvass job applicants in an attempt to discourage them from applying or taking up
a post
where there has been a clear breach of the equal employment opportunities policy
disciplinary procedures will follow serious offences will be dealt with as gross misconduct
there were no reported violations of our employment policy in 2011 there were also no
reported incidents of discrimination or formal grievance procedures reported in 2011
our global code of conduct
integrity honesty and fairness are fundamental to the way we conduct our business we are
committed to transparency in all our dealings as part of this commitment we will not
engage in any activities that undermine the legitimate business environment including
bribery or corruption in any form 40   premier oil plc 2011 annual report and financial statements
social performance review continued
premier has developed and implemented a global code of conduct the new code of
conduct is informed by and compliant with the bribery act 2010 and its evolving guidance
in the united kingdom it applies to all employees at every level in the business and all those
associated with premier all of whom are required to behave ethically and with personal
integrity this includes adhering to laws in the countries where we operate performing our
duties in accordance with the code of conduct and disclosing all potential and actual
conflicts between personal interests and those of premier
the code of conduct covers the following key issue areas
• antibribery 
• gifts and hospitality
• charitable and political donations
• intermediaries and
• facilitation payments
premier prohibits bribery and corruption in any form by all employees and by those working
for andor connected with the business this includes facilitation payments premier avoids
accepting hospitality or gifts that might place it under an obligation all business transactions
must be properly recorded and accounted for we expect the same ethical standards to be
applied in all our business relationships in all areas of operation and we promote our code
of conduct and associated antibribery policy with all our business associates employees
are expected to report bribery or attempted bribery to their line managers even if only
suspected or attempted
premier encourages employees contractors and agency workers to voice their concerns to
line managers if they feel the company or anyone working on behalf of the company has not
acted in accordance with our code of conduct and associated policies premier provides a
confidential third party reporting hotline for employees that feel unable to raise concerns in
the normal way this hotline is available 24 hours a day seven days a week no reports were
made through this service in 2011 or at any point over the last three years 
no incidents of corruption or noncompliance with these policies were identified in 2011
health safety and environment policy
premier is committed to operating responsibly and will never knowingly compromise our
health safety or environmental standards to meet our operational objectives 
our goals are to ensure the safety of everyone involved with our operations and to protect
the environment
to achieve this we will
• encourage open and honest communication 
• seek ways to continually improve our performance 
• assess and manage risks
• provide appropriate resources 
• maintain clean safe and healthy workplaces
• investigate and learn from any incidents
• plan and prepare for potential emergencies
• maintain highquality documented systems and processes
• seek external certification of key management systems and
• meet or surpass statutory requirements
in 2011 premier implemented and communicated a set of golden rules on health and
safety the golden rules reinforce our existing health safety and environment hse policy
procedures and standards and have been established to help prevent the most common
causes of serious incidents in our industry every employee is accountable and has a shared
personal responsibility for hse employees are also expected to ‘stop the job’ if they see or
believe something is unsafe or can be better controlled premier oil plc 2011 annual report and financial statements   41
occupational health and safety performance
in 2011 we worked 72 million manhours 2010 88 million manhours this represents an
182 per cent decrease on the previous year mainly due to the completion of construction at
our gajah baru and chim sáo facilities in indonesia and vietnam respectively most of these
manhours 59 million vs 77 million in 2010 were worked by contractors on our operations
there was however a significant increase in development drilling in 2011 we drilled more
than 20 wells making it our busiest year ever
key safety parameters and indicators 2011 2010 2009 2008 2007
fatalities 1 1– – 1
lost time injuries lti 8 52 12
restricted workday cases rwdc 3 9– – 4
ltirwdc frequency 167 170 055 040 186
t otal recordable injury frequency trif 236 284 110 080 340
high potential incident hipo frequency 083 159 210 200 550
 per million manhours worked
note all safety statistics include both premier employees and contractors
total recordable injuries
our overall trif performance improved significantly from 284 in 2010 to 236 in 2011 but
did not meet our 20 target trif performance at our drilling operations was exceptional at
000 excellent in construction at 180 but poor in our production operations at 610 the
overall higher than anticipated trif score was attributed to mostly minor accidents including
slips falls and finger injuries in our production operations many of these occurred at our
balmoral operation in the north sea with a frequency of 942 where performance is subject
to new sitespecific safety initiatives facilities in asia performed much better with a trif
score of 148 the continued rollout of our golden rules programme that reenforces
personal responsibility and the ability to stop the job if employees feel unsafe or that work
can be better controlled is anticipated to help reduce similar future incidents
this last year also saw one very unfortunate and unrelated diving fatality at balmoral in the
north sea at the date of signing this report the incident was still under investigation by
premierdiving contractor the police and the health and safety executive
premier has been certified to ohsas 18001 and iso 14001 since 2004 for global drilling and
since 2006 for our indonesian production operations in 2011 we completed a number of
ohsas 18001 and iso 14001 surveillance audits on our production and drilling operations
drilling anoa and balmoral production retained their certifications our new production
operations in vietnam chim sáo and indonesia gajah baru are working towards ohsas
18001 and iso 14001 certification gajah baru has now completed its stage one audit and is
on track to achieve certification in 2012
process safety performance
process safety focuses on the design and engineering of facilities to prevent fires explosions
or accidental chemical releases as well as maintenance and operation this includes the
prevention detection control and mitigation of hydrocarbon and other leaks oil spills
equipment malfunction overpressures overtemperatures corrosion metal fatigue and
similar conditions managing these risks requires a robust planning process effective safety
cases and the ongoing monitoring and management of asset integrity
premier has integrated process safety protocols into the project safety reviews psrs of all its
projects these reviews provide assurance that material hse issues have been identified and
are being effectively managed throughout the project lifecycle a typical project lifecycle will
require six strategic reviews as a project moves from concept to construction and then to
operation these psrs align closely with our project approval gates at which time strategic
decisions are made to either progress a project further towards the operations stage or to
delay or divest in 2011 we implemented a structured psr procedure to ensure consistent
and clear application of these gates at all operations 42   premier oil plc 2011 annual report and financial statements
social performance review continued
safety cases are in place at all of our operated installations this safety case regime is aligned
with the regulated standards in the united kingdom we believe this represents best
practice and are committed to implementing such cases at all of our operated production
facilities worldwide even when not required by the local regulatory regime safety cases are
developed during the project and become more detailed as a project nears the operation
stage safety cases must be in place before production commences premier is also
developing an asset integrity and maintenance management process based on the asset
integrity toolkit standard produced by oil  gas uk the process will apply to all of our
installations and is intended to ensure the requirements set out in our performance standard
for safety critical elements are met and maintained
high potential incidents
this last year saw a significant reduction in hipos per million manhours from 159 in 2010 to
083 in 2011 this was largely due to exceptional performance at our drilling and construction
operations with annual frequencies of 000 and 036 respectively our production operations
achieved an annual frequency of 244 t ogether this overall reduction in frequency allowed
the achievement of our 20 target our hipo frequency target for 2012 is also 20
loss of primary containment
during 2011 there were no reported loss of primary containment lopc events of ‘greater
consequence’ as defined in ipieca 2011 such incidents are characterised as unintended
process safety events with severe consequences these can include multiple fatalities
widespread environmental impact andor significant property damage there was one tier 1
event and 35 lopc events of ‘lesser consequence’ reported 2010 18 events this includes
a single crude oil spill in the pump room classified as tier 1 15 gas leaks or contained spills
that did not reach the environment 2010 five gas leaks and 20 minor spills 2010 13 minor
spills outlined below and in our social performance review 2011
environmental performance
environmental assessment management and reporting forms a major part of premier’s hse
risk management process we conduct baseline surveys and environmental and social
impact assessments for each new operated activity this involves an assessment of the
physical socioeconomic and biological environments including biodiversity we measure
and review each impact in turn and gauge both its significance and how it can be reduced to
as low as reasonably practicable alarp by adopting best available techniques in line with
our internal environmental alarp process potential actions to improve environmental
performance are screened based on cost duration and impact to determine which are
feasible for implementation we periodically review these environmental impacts and actions
for our existing facilities to ensure we comply with our policy of continuous improvement
environmental indicators and targets
we report our environmental performance in line with the ipieca oil and gas industry
guidance on voluntary sustainability reporting 2010 we then benchmark our performance
by contributing our data to an industry database compiled and published by the
international association of oil and gas producers as an oil company with production
facilities in the north sea we also comply with the european union emissions trading
scheme and submit an annual externally verified report on our emissions profile to the
department of energy and climate change we also participate in the carbon disclosure
project where we achieved a carbon disclosure score of 66 in 2011 2010 74
key environmental parameters and indicators 2011 2010 2009 2008 2007
greenhouse gases
tonnes per thousand tonnes of production 305 185 171 167 171
oil spills tonnes 27 13 15 – 137
oil in produced water parts per million 14 11 19 23 20
energy use gigajoules per tonne of production 26 21 17 20 18 premier oil plc 2011 annual report and financial statements   43
climate change and greenhouse gas emissions
greenhouse gas emissions associated with hydrocarbon combustion at our operated assets
amounted to 615000 tonnes in 2011 2010 350000 tonnes this increase in absolute
emissions from 2010 was largely due to a significant increase in development drilling activity
and associated diesel consumption as well as the startup of our gajah baru and chim sáo
operations in asia a number of technical challenges at chim sáo during an extended
commissioning required us to implement a longer period of gas flaring that was beyond our
initial expectations 
our operated emissions intensity also increased from 185 tonnes per thousand tonnes of
production to 305 tonnes per thousand tonnes of production in 2011 this is mainly due to
the above additional development drilling activity as well as a series of unexpected events
the latter included flaring at chim sáo due to prolonged commissioning issues as well as
three months of no production at our balmoral facility in the north sea when excluding this
development work and unexpected events our underlying steadystate emissions intensity
figure is 163 tonnes per thousand tonnes of production
we calculate our greenhouse gas co
2
equivalent emissions both for operated assets and
on an equity basis for production across our global portfolio greenhouse gas emissions
from flaring and fuel gas combustion associated with our full equity portfolio amounted to
172 tonnes per thousand tonnes of production 2010 155 tonnes per thousand tonnes of
production
spills and discharges
the total volume of produced water discharged from our operations in 2011 amounted to
2055878 tonnes 2010 2922707 tonnes this decrease was largely due to the shutdown of
our north sea operations for three months of the calendar year the average oil in produced
water increased slightly from 11 ppmwt in 2010 to 14 ppmwt in 2011 this increase in the oil
concentration of produced water was mainly due to a slight increase at balmoral that
averaged 14 ppmwt 2010 104 ppmwt the average concentration of oil in produced water
discharged by our anoa facility reduced significantly to 13 ppmwt 2010 177 ppmwt
in 2011 there were 20 spills to the environment 2010 13 spills 16 of these were hydrocarbon
spills 2010 seven spills four of these hydrocarbon spills were greater than one barrel with
the remainder being minor in nature the largest of these was 54 barrels the total volume
amounted to 27 tonnes 2010 13 tonnes about 90 per cent 24 tonnes of this total was
associated with the 13 spills at our production operations and 03 tonnes with the three
hydrocarbon spills at our drilling activities we maintain oil spill contingency plans for each
of our operations and have ongoing contracts with oil spill response specialists to provide
support in the unlikely event of a major incident four other chemical spills occurred at our
production operations in 2011 2010 six chemical spills totalling 13 tonnes 2010 69 tonnes 44   premier oil plc 2011 annual report and financial statements
board of directors
robin allan joe darby tony durrant neil hawkings
jane hinkley david lindsell simon lockett andrew lodge
professor david roberts michel romieu mike welton premier oil plc 2011 annual report and financial statements   45
robin allan 52 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 mr allan returned to asia in 2009 as director – asia and manages the asian
portfolio from the singapore office
joe darby 63 joined premier’s board as a nonexecutive director in september 2007 mr darby has over 40 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 is
a nonexecutive director of alkane energy plc and has held nonexecutive roles at nordaq energy plc british nuclear
fuels plc mowlem plc and centurion energy inc he was chairman of mowlem plc 20052006 and faroe petroleum plc
20032007 mr darby is premier’ s senior independent nonexecutive director and is a member of premier’ s audit and risk
remuneration and nomination committees
tony durrant 53 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 joined the premier board in july 2005 as finance director
neil hawkings 50 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
jane hinkley 61 joined premier’s board in september 2010 as a nonexecutive director ms hinkley is a qualified
chartered accountant with executive experience primarily in international shipping she has held managing directorships
at navion shipping as and gotaaslarsen shipping corporation she has been an independent director on the board
of teekay gp llc an international provider of marine transportation services for lng lpg and crude oil since 2005 and
also previously held the position of nonexecutive director of revus energy asa a norwegian exploration and production
company ms hinkley is the chairman of premier’ s remuneration committee and a member of the nomination committee
david lindsell 64 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 is deputy chairman of
the financial reporting review panel mr lindsell is the chairman of premier’s audit and risk committee and a member
of the remuneration and nomination committees
simon lockett 47 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
andrew lodge 55 has been exploration director of premier since april 2009 prior to joining premier mr lodge was
vice president – exploration at hess where he was responsible for europe north africa asia and australia for nine years
previously he was vice president – exploration asset manager and group exploration advisor for bhp petroleum based
in london and australia prior to joining bhp petroleum he worked for bp as a geophysicist mr lodge is a nonexecutive
director of egdon resources plc
professor david roberts 68 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 medserv 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 72 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 and nomination committees
mike welton 65 joined premier’ s board in june 2009 as a nonexecutive director and became chairman in october 2009
mr welton is a director of morrison utility services and high speed two the governmentowned llc set up to examine
high speed rail connections between london and the west midlands he sits on the advisory board of montrose
associates mr welton was previously chairman of southern water services ltd 20082012 hanson plc 20052007 the
turkishbritish business council and the uk government’s railway sector advisory group he was also chief executive
of balfour beatty plc 19992004 mr welton is the chairman of premier’s nomination committee
directors’ report governance 46   premier oil plc 2011 annual report and financial statements
corporate governance report
the company is required to make certain statements relating to the way it is governed as laid down in the uk corporate
governance code the code this report describes the manner in which the company has applied the main principles of
governance set out in section 1 of the code and complied with the detailed code provisions it is the board’s view that the
company has fully complied with the code throughout 2011 except where reported below while the board supports the value
of the code it does not believe that good governance can be defined merely in terms of compliance with a set of rules
the board is committed to high standards of governance at the board and aims to create a culture which demands the same
commitment and performance in all our business activities this is enshrined in our code of conduct which was updated and
rolled out to our employees in 2011
the board
the role of the board
one major purpose of the board is to ensure that the company’s strategic objectives are properly pursued and that 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 is responsible for overall group strategy acquisition and divestment policy approval of major capital expenditures
the overall group debt and equity structure and consideration of significant financing matters the board has continued to focus
its efforts in 2011 on strategic issues which will create shareholder value monitoring performance against agreed objectives and
planning future business opportunities
board composition
the board of directors comprises the chairman chief executive four other executive directors and five independent non
executive directors biographical details of each including membership of board committees are set out in the board of
directors section of the annual report and financial statements details of the executive directors’ service contracts and the
nonexecutive directors’ letters of appointment are laid out in the remuneration report
chairman and chief executive
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 is effected through meetings as well as contact with other
board members shareholders joint venture partners and host governments the chief executive’ s role is the operational
management of the business developing strategy in consultation with the board and then implementing such strategy
nonexecutive directors
the nonexecutive directors bring independent judgement to bear on issues of strategy and resources including key appointments
and standards of conduct the nonexecutive directors have a particular responsibility to challenge independently and
constructively the performance of the executive management and to monitor the performance of the management team in the
delivery of the agreed objectives and targets in meeting this responsibility the chairman and the nonexecutive directors meet
periodically without the executive directors present and the nonexecutive directors meet once a year without the chairman
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 considers each of the nonexecutive directors to be independent in
character and judgement
nonexecutive directors are appointed for a specified time of three years subject to annual reelection and to companies act
provisions relating to the removal of a director the terms and conditions of their appointment are made available for inspection
letters of appointment do not specifically set out expected time commitment as this may vary considerably however all non
executive directors undertake that they will have sufficient time to meet what is expected of them and any significant commitments
are disclosed to the board prior to appointment changes to such commitments are disclosed to the board on an ongoing basis
board composition
executive 
directors
nonexecutive 
directors
cut
cto
nex
cto
board composition
exec
dire
non
dire
45 55
length of tenure
0  3 years
4  6 years
7  10 years
3 ye
6 ye
0 y
length of tenure
0  3 ye
4  6 
7  10 y
27
18
55
board experience
oil  gas  
energy
finance
other industry
 g
rgy
anc
er 
board experience
oil  
ene
fina
oth
18
27
55 premier oil plc 2011 annual report and financial statements   47
the board continued
senior independent director
mr joe darby is the company’s senior independent nonexecutive director he is available to shareholders who have concerns
that cannot be resolved through discussion with the chairman or chief executive
appointments and development
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 to this end the
nomination committee reviews the structure size and composition of the board and makes recommendations to the board with
regard to any adjustments that are deemed necessary in selecting new directors the nomination committee prepares a
description of the role and capabilities required for a particular appointment
how the board operates
the board meets at least eight times each year and in addition a regular update conference call takes place in the months when
no formal meeting is scheduled the agenda for each board meeting is set by the chairman in consultation with the chief
executive and the company secretary board members receive a monthly report of the company’s activities which incorporates
an update on progress against objectives and the management of business risks
the board has a formal schedule of matters reserved for the board a copy of which can be found on the company’ s website
wwwpremieroilcom the schedule is reviewed by the board regularly key matters reserved are the consideration and approval of
corporate strategy • overall direction and strategy of the business
• new country andor business entry
• acquisition or disposal of interests
finance • group debt and equity structure
• budget
expenditure • major capital expenditure and budgets
• development plans and projects
• major acquisition
risk management • recognising highimpact business risks and risk mitigating strategies
• internal control systems in respect of finance operations and health safety environment and
security hses
corporate governance • the group’s corporate governance and compliance arrangements
succession planning • appointment and removal of directors and officers of the board
and appointments
• appointment and removal of external auditors brokers and advisers to the company
delegated authorities
board committees
the board has established audit and risk remuneration and nomination committees each committee has formal terms of
reference approved by the board which 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 48   premier oil plc 2011 annual report and financial statements
corporate governance report continued
delegated authorities continued
the number of meetings of the board and its committees during 2011 and individual attendance by directors is shown below
audit 
board and risk remuneration nomination
number of meetings 946
1
2
attendance
r a allan 99 –––
j darby 89 44 56 22
a r c durrant 99 –––
n hawkings 99 –––
i j hinkley 89 – 66 22
d c lindsell 99 44 56 22
s c lockett 99 –– 22
a g lodge 99 –––
j r w orange
2
33 22 44 11
professor d g roberts 99 – 56 22
m romieu 99 44 – 22
m w welton 99 –– 22
notes
1 
there were five scheduled meetings of the remuneration committee during the year the remaining meeting only attended by ms i j hinkley and
mr j r w orange was called to approve the detail of arrangements approved in principle by a prior scheduled meeting of the remuneration committee
2
mr j r w orange resigned from the board and the audit and risk nomination and remuneration committees on 20 may 2011
executive committee and management structure
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 executive committee is made up of each of the executive directors and the company
secretary each executive director has been given responsibility for specific aspects of the group’s affairs the executive
committee is chaired by the chief executive and normally meets weekly
the responsibilities of the executive committee include the development of group strategy for approval by the board portfolio
management and the delivery of performance against the targets set by the board at its meetings it reviews health safety
environmental and security performance and operational business performance reports
three regional business units – north sea asia and middle east africa and pakistan – manage the geographical spread of
business in the group each business unit is headed by a regional business unit manager who delivers against specific strategies
and performance targets set by the executive committee
delegation of authority
responsibility levels are communicated throughout the group as part of corporate accounting and through an authorisation
manual which sets out inter alia delegated authority levels segregation of duties and other control procedures
board performance evaluation
the board believes that there is benefit in the periodic involvement of an independent external facilitator in the annual board
evaluation process as this brings independent perspective to the process it is the board’s current practice to engage such an
external facilitator every two years during 2010 the board worked with an external facilitator to conduct the annual evaluation
review
during 2011 the board and committee evaluations were facilitated by the chairman the evaluation comprised a written
questionnaire and a series of onetoone interviews by the chairman with all directors the questionnaire and interviews covered
a number of key areas including strategy succession planning board size and composition the roles and responsibilities of the
board and its committees risk management and the relationship between the board and management the results of the
reviews were considered by the chairman and the committee chairmen and were then discussed with the relevant committees
and collectively by the board as a whole
the performance of individual nonexecutive directors was evaluated by the chairman with input from the committee chairmen
and the other directors the performance of the chief executive and other executive directors was evaluated by the chairman
and nonexecutive directors
no major issues arose from the evaluation process and the directors have concluded that the board and its committees operate
effectively recommendations were made to further enhance the performance and effectiveness of the board and a process of
continuous improvement is now being led by the chairman premier oil plc 2011 annual report and financial statements   49
induction information and support
new directors receive a full induction to the company this consists of information covering the operations of the board as well
as meetings with the board chief executive and other executive directors all nonexecutives have direct contact with the
company’s senior management between board meetings and also visit the company’s operations in order to familiarise
themselves with its activities and to meet and engage with staff shareholders are given the opportunity to meet with new
directors upon request or at the next annual general meeting agm following their appointment the company has directors’
and officers’ liability insurance in place and details of the policy are given to new directors on appointment formal procedures
are in place to enable individual board members to take independent advice where appropriate
conflicts of interest
a director has a duty to avoid a situation in which he or she has or can have a direct or indirect interest that conflicts or possibly
may conflict with the interests of the company formal procedures are in place to ensure the board’s powers of authorisation of
conflicts or potential conflicts of interest of directors are operated effectively the board determined that during 2011 these
procedures were enforced and adhered to appropriately
risk management and internal controls
the corporate governance process in premier is designed to determine the nature and level of risk that the company is willing to
take in pursuit of its strategy and that any risks taken are soundly managed and that the system of internal controls is effective
any system of internal control can provide only reasonable and not absolute assurance that material financial irregularities will
be detected or that the risk of failure to achieve business objectives is eliminated
business management system
internal controls within premier are governed by the business management system bms this system is composed of the
policies standards procedures processes and guidelines for every function required to carry out premier’s business including
risk hses corporate social responsibility operations exploration business development finance and other business support
services corporate group functional management systems are complemented by local management systems within the
business units which are designed to supplement corporate policies standards procedures processes and guidelines with those
specifically required in order to operate and manage the business under local conditions and in compliance with local laws and
regulations
the bms is designed to manage rather than eliminate the risk of failure to meet our business objectives the effectiveness of the
bms is a function of both the adequacy of the system and compliance with the system premier’s audit and review programme
includes specific scope to review adequacy of and compliance by component business unit and functional management systems
at appropriate regular intervals
the annual cycle of monitoring in premier culminates in the completion of declarations by business unit and functional
management confirming compliance with the group’s bms as well as identifying enhancements as part of a continuous process
for improvement of the effectiveness of management systems
risk management
premier believes that risk management is just part of good management which leads to quality decision making and
achievement of targets for growth of the business the risk management process is central to premier’s bms
since the appointment of a group audit and risk manager in 2010 premier’s risk management system has been further
developed in accordance with the risk management principles and guidelines of iso 31000 risk management – principles and
guidelines the processes developed by the company cover all key elements of iso 31000
strategy
architecture
risk protocols
continuous 
improvement
cycle
core process 50   premier oil plc 2011 annual report and financial statements
corporate governance report continued
risk management and internal controls continued
in early 2012 det norske veritas dnv carried out an assessment of the extent to which premier’s risk management system is
aligned with iso 31000 and found that premier had a well structured system of risk management that was strongly aligned
the core process for risk management lies at the heart of the system framework
this core process is used to manage the spectrum of risks which premier face from strategic geopolitical and other external risks
to operational financial and organisational risk
the context for risk management is established by development and communication of strategy growth targets team
performance deliverables and key performance indicators kpis
a systematic process for identification and assessment of risk is undertaken across the company business units and functions
regular workshops are undertaken with input from independent consultants with specialist knowledge and from dialogue with
our partners to assist with risk identification and assessment and risks are reviewed on a regular basis to ensure that new risks or
exposures as a result of changes in the business or the business environment are captured
a standard matrix of impact versus likelihood is used to assess risks at all levels in the organisation appropriate consideration is
given to risk dependency and amalgamation of similar specific risks across the organisation risks are categorised according to a
scale of major medium minor and escalated to the appropriate level
risk treatment includes risk acceptance or tolerance and active risk reduction measures risk appetite objectives are defined
and action plans are implemented particular attention is given to safety and environmental factors to ensure that residual risks
are at a level that is as low as reasonably practicable
the status of risks and progress with risk treatment plans are monitored continuously and reviewed periodically via performance
reviews workshops audits and risk assessments
the architecture of the organisation provides the framework for defining the accountability and responsibility for risk
identification and management and links the board and audit and risk committee to the executive committee and functional
and business unit management structure and enables risks to be escalated and managed at the appropriate level the group
audit and risk manager is responsible for the risk management system and the overall running of the process
the risk protocols are the policy procedures and processes documented as part of the risk management system and key tools
used in the process the corporate risk register is the primary tool for risk management in premier the register is a webbased
tool which is updated at regular intervals the register facilitates recording of functional and business unit risks together with
their assessment definition of existing and new treatment plans for control and mitigation and assignment of responsibility at
the appropriate level in the organisation
a cycle of continuous improvement to the risk management system within the organisation is adopted and regularly reviewed
with both the executive committee via regional and functional performance reviews and the audit and risk committee
as already noted premier’s risk management process has been developed significantly over the past two years in accordance
with the risk management principles and guidelines of iso 31000 initiatives are in hand to further embed risk management in
the group’s culture and business processes
establish
context
monitor and
review
risk
assessment
risk
treatment premier oil plc 2011 annual report and financial statements   51
risk management and internal controls continued
audit and review
the effective operation of internal control procedures is reviewed by planned audits an annual programme of audit and review
is agreed between functional and business unit management and approved by the audit and risk committee the programme
adopts a risk based focus and includes audit of management system effectiveness and control as well as targeting key
operational financial and organisational delivery milestones
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 premier is embedding effective risk management into its operations significant
findings from each review are presented to the audit and risk committee a rolling threeyear plan to cover all operations is
in place
in addition where we are the operator audits of joint venture operations are carried out by our joint venture partners where one
of our partners is the operator we participate in audits of these joint venture partners
the business management system risk management processes and programme of audits and reviews provide the board with
reasonable assurance that appropriate controls are in place to provide effective management of business risks and to safeguard
the group’s assets from inappropriate use or from loss and fraud
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 the halfyearly report trading updates and interim management statements all
of which are available to shareholders there is regular dialogue with institutional investors through meetings presentations and
conferences general presentations to analysts and investors for the fullyear and halfyearly results which are broadcast live via
the company’s website as well as other ad hoc investor events 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 these
discussions the company’s website wwwpremieroilcom also provides detailed information on the group’s activities
in accordance with current regulations the company uses its website as its default method of publication for statutory
documents to reduce printing costs and help benefit the environment all shareholders are offered the choice of receiving
shareholder documentation including the annual report electronically or in paper format as well as the choice of submitting
proxy votes either electronically or by post all new shareholders receive hard copies of statutory documents until they elect or
are deemed to have elected otherwise
the company promotes the use of online shareholder services at wwwpremieroilsharescom on this website shareholders are
able to access their shareholding and to update their address or submit queries on their account directly to the company’s
registrars shareholders also have the ability to vote online prior to the 2012 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 receive an email notifying them when the company has
added a statutory document to its website 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 guidelines on its website advising shareholders of how to deal with potential share scams where
shareholders may have received unsolicited phone calls offering to buy premier shares at a higher price than their market value
or concerning alternative investment matters where callers may have stated they work for a subsidiary of or on behalf of the
company the company does not retain the services of any such business for these purposes and shareholders are advised to be
extremely wary of any unsolicited advice or offers
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
21 march 2012 the committee is comprised solely of nonexecutive directors its members are david
lindsell chairman joe darby and michel romieu john orange retired from the board
in may 2011 and was a member of the committee until his retirement
the board has determined that david lindsell a chartered accountant with expertise in
accounting and auditing has recent and relevant financial experience as required by the
uk corporate governance code the code
all members of the committee are deemed to be independent and the committee has
concluded that its membership meets the requirements of the code
the meetings of the committee are normally attended by the finance director the
group financial controller the group audit and risk manager and representatives of the
external auditors stephen huddle the company secretary acts as secretary to the
committee other executive directors or senior managers are required to attend when
significant risk management or control issues relating to their area of responsibility are
considered by the committee
role of the committee
committee’s main responsibilities 
• 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 including the results of
management system reviews
• overseeing the company’s relationship with its external auditor including making recommendations as to the appointment or
reappointment of the external auditor reviewing the terms of their engagement monitoring their independence and developing
and implementing policy governing any engagement of the external auditor to supply nonaudit services
• reviewing the effectiveness of the company’s code of conduct with particular reference to systems and controls for the
prevention of bribery and the prevention and detection of fraud and receiving reports on any noncompliance
the committee is required to report its findings to the board identifying any matters on which it considers that action or
improvement is needed and make recommendations on the steps to be taken
the committee may engage the services of external advisers as it deems necessary in the furtherance of its duties at the
company’s expense no external advisers materially assisted the committee during the year the committee’s terms of
reference which can be found on the company’s website wwwpremieroilcom include all matters indicated by the disclosure
and transparency rule 71 and the code
meetings
the committee is required to meet at least three times per year and has an agenda linked to events in the company’s financial
calendar
activities during the year
the committee met four times in 2011 and has met twice in 2012 to date
its january and march 2011 meetings focused primarily on the status of the 2010 risk management and internal control reviews
the 2011 plan for such reviews and the 2010 fullyear results and annual report and financial statements together with the
committee’s annual assessment of the effectiveness of internal controls at its july meeting the committee considered the
results of the group internal control reviews carried out in the first half of the year together with accounting and reporting issues
relating to the halfyear results and in august it reviewed the halfyear results in january 2012 it considered accounting and
reporting issues relating to the fullyear results reviewed the status of the 2011 risk management and internal control reviews
focusing on the significant findings and actions and reviewed and approved the 2012 audit plan for such reviews in march it
reviewed the 2011 fullyear results the annual report and financial statements and its annual assessment of the effectiveness
of internal controls to enable the board to make its statement on internal control in the corporate governance report
52   premier oil plc 2011 annual report and financial statements
audit and risk committee report
david lindsell
chairman of the audit and risk committee premier oil plc 2011 annual report and financial statements   53
activities during the year continued
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 in this regard following the creation of the role of group audit and risk manager in 2010 the risk
management process has been further developed in accordance with the principles and guidelines on risk management set
out in iso 31000 the risk management process was reviewed during the year by det norske veritas with satisfactory overall
results and some suggestions for improvements which are in hand
• the risk register is the principal record of information about identified risks and the controls in place to mitigate them at both
business unit and corporate function level the further development of the risk register in 2010 and 2011 has enabled the
programme of financial and operating controls reviews to be prioritised based on the areas of greater risk as reflected in the
risk register the committee reviewed the process for maintaining and updating the risk register approved the programme
of financial and operating controls reviews for the year and reviewed the findings from the reviews together with progress in
implementing any required improvements
– in reviewing the findings from financial and operating reviews during 2011 the committee noted that the company
continued to use both premier staff with the necessary expertise and thirdparty specialists to carry out the programme of
reviews and that in addition the company obtains independent confirmation of the effectiveness of internal controls from
a variety of external sources including joint venture and governmental financial and operational audits for example in
relation to the effectiveness of internal financial control the vietnam business became a producing operation in 2011 and
was therefore an area of focus with deloitte’s london audit team visiting vietnam to oversee the extended external audit
scope there and petrovietnam carrying out reviews of the company’s relevant systems and controls in addition external
assurance regarding a number of operational controls was received and these included independent certification of our
occupational health and safety management systems for our indonesia and north sea operations and our global drilling
function and an independently inspected uk well examination scheme
• the committee reviewed the 2011 halfyear and fullyear financial results announcements and draft 2011 annual report and
financial statements with the finance director and group financial controller and considered the findings from the external
auditor’s review of the interim results and their audit of the 2011 financial statements the committee considered in particular
the significant assumptions estimates and forecasts used in measuring items in the financial statements including future oil
and gas price assumptions estimates of oil and gas reserves and decommissioning cost estimates together with the financial
statement items directly or indirectly affected by them such as the recoverability of development and production and
exploration and evaluation assets amortisation and depreciation charges and the recognition of deferred tax assets arising
from tax losses the committee noted that no significant deficiencies in the financial reporting system were identified by the
external auditor in the course of the audit
• the fee proposals for the external audit and halfyearly review were considered and agreed and the committee reviewed the
scope and fees for nonaudit assignments awarded to the external auditor to satisfy itself that the assignments concerned did
not give rise to threats to the auditor’s independence and objectivity
• 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 financial reporting council guidance on
audit committees recommendations to streamline attendance at committee meetings and thus improve its effectiveness
were adopted during the year and
• the committee met once in the absence of management with the external auditor in march and no matters of significance
were drawn to the committee’s attention at this meeting
internal audit
it has been the company’s policy for several years to carry out a programme of financial and operating controls reviews using
both internal and external resources however as there was no dedicated internal audit or risk management function the
committee has in previous years reviewed the need for such a function and concluded that in view of the scope and scale of the
controls review activity and the extent of the independent confirmation obtained through this activity regarding the effectiveness
of the company’s system of internal control there was no need for a dedicated internal audit resource
the growth in the size and complexity of the company in recent years has led to a reconsideration and in 2010 it was decided to
create the role of group audit and risk manager and to appoint a senior manager to fill that role as a result of this and related
developments such as the prioritisation of financial and operating controls reviews based on the risk register the committee
believes that the company now has a function that is substantially equivalent to internal audit and that is expected to become
fully equivalent as the function develops further 54   premier oil plc 2011 annual report and financial statements
audit and risk committee report continued
external auditor
deloitte llp deloitte was initially appointed external auditor of the company in 2004
the committee regularly reviews the issue of the independence of the external auditor this review considers the overall
relationship between the auditor and the company based on feedback from the company’s finance team and from the auditor
and the nature and extent of nonaudit services provided by the auditor and takes account of the safeguards established by the
auditor against loss of audit independence including rotation of the audit partner and other key members of the audit team
the committee believes that in certain limited circumstances nonaudit work may be carried out by the external auditor the
allocation of nonaudit work is considered by reference to the company’s policy on the provision of nonaudit services by the
auditor this policy is aimed at ensuring continued independence the use of the external auditor for services relating to accounting
systems or financial statements is not permitted nor are various other services that could give rise to conflicts of interest or other
threats to the auditor’s objectivity that cannot be reduced to an acceptable level by applying safeguards the committee
believes that there is nonaudit work such as certain assurance and advisory services that may be best performed by the audit
team as a result of their unique knowledge of the company any material nonaudit work of this nature requires approval by the
committee the policy and overall fees paid to our auditor are also reviewed on an annual basis by the committee
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 auditors to confirm that in
providing nonaudit services they comply with the ethical standards for auditors issued by the uk auditing practices board this
confirmation was received for 2011
in accordance with the ethical standards for auditors the audit engagement partner rotates at least every five years the current
audit engagement partner is matthew donaldson who has been in the role since 2009
the committee reviews the expertise performance and effectiveness of the auditor on the basis of the reviews carried out the
committee recommended to the board that it should propose the reappointment of deloitte as the external auditor of the
company
by order of the board
d c lindsell
chairman of the audit and risk committee
21 march 2012 premier oil plc 2011 annual report and financial statements   55
company risk factors
premier’s business may be impacted by various risks leading to failure to achieve strategic targets for growth loss of financial
standing cash flow and earnings and reputation not all of these risks are wholly within the company’s control and the company
may be affected by risks which are not yet manifest or reasonably foreseeable
effective risk management is critical to achieving our strategic objectives and protecting our assets personnel and reputation
and therefore premier has a comprehensive approach to risk management as set out in more detail in the corporate
governance report
a critical part of the risk management process is to assess the impact and likelihood of risks occurring so that appropriate
mitigation plans can be developed and implemented risk severity matrices are developed across premier’s business to facilitate
assessment of risk the specific risks identified by departments project teams corporate functions and business units are
consolidated and amalgamated to provide an oversight of key risk factors at each level from operations through business unit
management to executive committee and board level
for all the known risks facing the business premier attempts to minimise the likelihood and mitigate the impact according to
the nature of the risk premier may elect to tolerate risk treat risk with controls and mitigating actions transfer risk to third parties
or terminate risk by ceasing particular activities or operations premier has a zero tolerance to financial fraud or ethics non
compliance and ensures that hses risks are managed to levels that are as low as reasonably practicable whilst managing
exploration and development risks on a portfolio basis
the key risk factors identified from this approach are represented in the matrix below and the accompanying table summarises
their potential impacts and our approach to managing them the assessment of the impact and likelihood takes into account the
risk mitigation measures currently applied
likelihood
rare low medium high
not significant
low
medium
high
extreme
impact
organisation
 capability exploration
commodity 
price volatility
production and 
development delivery
political and fiscal
joint venture 
partner alignment
financial discipline
 and governance
hses 56   premier oil plc 2011 annual report and financial statements
company risk factors continued
key risk factor risk detail how is it managed
health safety
environment and
security hses
major process safety incident or operational
accident natural disasters pandemics
social unrest civil war
consequences may include accidents
resulting in loss of life injury andor
significant pollution of the local
environment destruction of facilities and
disruption to business activities 
comprehensive hses and operations
management systems including emergency
response and oil spill response capability and
asset integrity
active security monitoring and management and
regular testing of business continuity plans
learning from company and thirdparty incidents
production and
development delivery
uncertain geology and reservoir
performance leading to lower production
and reserves recovery availability of
services including fpsos and rigs
availability of technology and engineering
capacity availability of skilled resources
maintaining project schedules and costs as
well as fiscal regulatory political and other
conditions leading to operational problems
and production loss or development delay
consequences may include lower
production andor recovery of reserves
production delays cost overruns andor
failure to fulfil contractual commitments 
geoscience and reservoir engineering
management systems including rigorous
production forecasting and independent reserves
auditing processes
operations development and project execution
management systems and cost controls together
with capable project teams
longterm development planning to ensure
timely access to fpsos rigs and other essential
services 
exploration success
and reserves addition
failure to identify and capture acreage and
resource opportunities to provide a
portfolio of drillable exploration prospects
and sufficient development projects to
achieve reserves addition targets
consequences may be that specific
exploration programmes may fail to add
reserves and hence value failure to
negotiate access rights or close transactions
could slow growth of reserves and
production and lead to loss of competitive
advantage
strong portfolio management and alignment with
strategic growth targets appropriate balance
between growth by exploration and acquisition
exploration management systems including
comprehensive peer review with focus on
geologies in core areas we know well and in
which we can build a competitive advantage
focused ma effort focusing on geographical
and technical areas aligned with our strategy
diligence in acquisition process and post
acquisition integration to ensure targeted returns
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
consequences may include forced
divestment of assets limits on production
or cost recovery 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 increase in regulatory
burden it is difficult to predict the timing or
severity of these occurrences or their
potential impact
premier’s portfolio includes operations in both
low and higher risk environments premier
actively monitors the local situation and has
business continuity plans in each area which can
be activated depending on predefined levels
of alert
premier strives to be a good corporate citizen
globally and fosters reputation by strong and
positive relationships with government and
communities where we do business premier
engages in respectful industrywide lobby and
sustainable csr programmes rigorous
adherence to premier’s business ethics policy and
code of conduct
continuous monitoring of the external
environment for emerging risks to the business premier oil plc 2011 annual report and financial statements   57
key risk factor risk detail how is it managed
commodity price
volatility
oil and gas prices are affected by global
supply and demand and price can be subject
to significant fluctuations factors that
influence these include operational issues
natural disasters weather political instability
or conflicts and economic conditions or
actions by major oilexporting countries
price fluctuations can affect our business
assumptions and can effect investment
decisions and financial capability 
oil and gas hedging programmes to underpin
our financial strength and capacity to fund our
future developments and operations
premier investment guidelines ensure that our
development programmes are robust to
downside sensitivity price scenarios
organisational
capability
risk that the capability of the organisation is
not adequate to deliver plans for growth
the capability of the organisation is a
function of both the strength of its human
resources and its business management
systems inadequate systems or lack of
compliance may lead to loss of value and
failure to achieve growth targets loss of
personnel to competitors or inability to
attract and retain quality human resources
could affect our operational performance
and delivery of growth strategy
premier has created a competitive remuneration
and retention package including bonus and long
term incentive plans to incentivise loyalty and
good performance from the existing highly
skilled workforce
premier is continuing to strengthen its
organisational capability to achieve strategic
objectives this includes resource planning
competency development training and
development programmes succession planning
including leadership development
continuous strengthening of business
management systems and controls as appropriate
to the size and market position of the company
joint venture partner
alignment
global operations in the oil and gas
industry are conducted in a joint venture
environment there is a risk that joint
venture partners are not aligned in their
objectives and drivers and this may lead to
inefficiencies andor delays many of our
major projects are operated by our joint
venture partners and our ability to influence
our partners is sometimes limited due to
our small shares in such ventures
continuous and regular engagement with
partners in joint ventures in both operated and
nonoperated projects premier takes strategic
acquisition opportunities where appropriate to
gain a greater degree of influence and control
financial discipline
and governance
risk that sufficient funds are not available to
finance the business risk of financial fraud
strong financial discipline and balance sheet
premier has an established financial management
system 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 premier
maintains access to capital markets through the
cycle the management system includes policies
and a delegation of authority manual to
reasonably protect against risk of financial fraud
in the group
an insurance programme is put in place 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 with minimum a credit
rating banks aaa managed liquidity funds and
a1p1 commercial paper subject to board
approved limits 58   premier oil plc 2011 annual report and financial statements
nomination committee report
the nomination committee presents its report in relation to the financial year ended
31 december 2011
composition and role of the nomination committee
the nomination committee meets as and when required and comprises mike welton
chairman joe darby jane hinkley david lindsell simon lockett michel romieu and
professor david roberts the board considers the membership of the nomination
committee to be in compliance with the uk corporate governance code
the committee met twice in 2011 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 committee includes
• reviewing the structure size and composition of the board and making 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
• reviewing the development and leadership potential of senior executives below board level and ensuring that appropriate
succession plans are in place for both board and senior positions
during 2011 the main focus of the committee has been on management succession and development the objectives of this
process are to
• ensure that the succession pipeline for senior executive and business critical roles in the organisation is adequate
• ensure the succession is managed smoothly and effectively
• ensure that talented individuals can maximise their potential
• identify potential successors and manage succession activity
• provide a structured approach to developing and preparing possible successors
• identify ‘at risk’ posts and
• support the delivery of our diversity agenda
the meeting in may focused on the senior leadership roles and the meeting in december reported on the work that had been
done to look at the whole population of middlemanagement positions in the group
the committee discussed the results of the succession work carried out and noted that senior and middlemanagement
throughout the organisation is now being encouraged to discuss the issue of succession and individual managers now have
performance targets which include a requirement to develop their successors
the focus of the committee in this area will now be on ensuring that the group is introducing appropriate training and
development for the next generation of senior management
by order of the board
m w welton
chairman
21 march 2012
mike welton
chairman premier oil plc 2011 annual report and financial statements   59
report of the directors
the directors present their annual report on the affairs of the group together with the audited group financial statements for the
year ended 31 december 2011 the corporate governance report forms part of this report
results and dividends
the group’s net profit for the year amounted to us1712 million 2010 profit of us1298 million a dividend is not proposed
2010 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 note 10 in the notes to the consolidated financial
statements
business review
the company is required by the companies act 2006 to set out in this report a fair review of the business of the group during the
financial year ended 31 december 2011 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
• operations review
• exploration review
• financial review
• key performance indicators
• environmental employee social and community matters within the social performance review
• company risk factors
the chairman’s statement chief executive’s review operations review exploration review and the financial review also
include details of expected future developments in the business of the group
annual general meeting agm
the company’s 10th agm will be held on friday 18 may 2012 at 1100am the notice of the agm together with details of all
resolutions which will be placed before the meeting accompanies this report
directors
the directors who served throughout the year except as noted were as follows
• mr mike welton chairman
3
• mr robin allan
• mr joe darby senior independent nonexecutive director
4 5 6
• mr tony durrant
• mr neil hawkings
• ms jane hinkley
1 6
• mr david lindsell
2 4 6
• mr simon lockett chief executive
6
• mr andrew lodge
• mr john orange resigned 20 may 2011
• professor david roberts
4 6
• mr michel romieu
5 6
notes
1
chairman of the remuneration committee
2
chairman of the audit and risk committee
3
chairman of the nomination committee
4
member of the remuneration committee
5
member of the audit and risk committee
6
member of the nomination committee
biographical details of all directors can be found in the board of directors section on page 45 60   premier oil plc 2011 annual report and financial statements
report of the directors continued
directors’ election
in accordance with best practice for ftse 350 companies as published in the financial reporting council’s uk corporate
governance code the code all directors will stand for annual reelection by shareholders
with regard to the appointment and replacement of directors the company is governed by its articles of association the code
the companies act 2006 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 the
company’s articles of association may only be amended by special resolution at a general meeting of the shareholders
directors’ interests
the directors who held office at 31 december 2011 had the following interests in the ordinary shares of the company
at at at
1 january 31 december 21 march 
name 2011 2011 2012
r a allan
1
427416 185310 375621
j darby
2
23108 23108 23108
a r c durrant
1
384368 631185 816888
n hawkings
1 3
122676 340485 524303
i j hinkley
2
– 4000 4000
d c lindsell
2
17332 17332 17332
s c lockett
1
748440 937573 1195058
a g lodge
1
55316 139078 213130
professor d g roberts
2
–––
m romieu
2
–––
m w welton
2
7320 22531 22531
notes
1
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
2
the beneficial interests of the nonexecutive directors comprise personal shareholdings
3
this includes ordinary shares held by mr n hawkings’ wife 59964 ordinary shares held as at 1 january 2011 138416 ordinary shares held as at
31 december 2011 and 138416 ordinary shares held as at 21 march 2012
 shareholdings noted in the above table have been adjusted to reflect the 41 share split in may 2011
directors’ interests in share options deferred bonus shares deferred and matching share awards under the asset and equity
plan performance share awards under the long term incentive plan and 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 of 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
share capital
details of the issued share capital together with details of the movements in the company’s issued share capital during the year
are shown in note 19 of the notes to the consolidated financial statements the company has one class of ordinary share which
carries no right to fixed income each share carries the right to one vote at general meetings of the company
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 details of employee
share schemes are set out in note 19 the voting rights in relation to the shares held within the employee benefit trust are
exercisable by the trustees details of the number of shares held by the employee benefit trust are set out in the remuneration
report no person has any special rights of control over the company’s share capital and all issued shares are fullypaid premier oil plc 2011 annual report and financial statements   61
substantial shareholders
at 21 march 2012 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
blackrock inc

11224700 9790 indirect
axa sa  group companies 40173814 8580 indirect
schroders plc 27072247 5118 indirect
aviva plc

3859897 4870 direct
ameriprise financial inc 24666346 4663 indirect
legal  general group plc 18861914 3560 direct
bear stearns international trading ltd

2552847 3109 direct
notes
1
where the nature of the holding is both direct and indirect the larger holding has been quoted
 where notifications were made prior to the 41 share split in may 2011 numbers have not been adjusted
supplier 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 the group’s normal payment terms are four weeks
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
subsequent events
post balance sheet events are disclosed in note 25 of the notes to the consolidated financial statements
charitable and political donations
during the year the group made charitable contributions amounting to us302221 2010 us708614 no political
contributions were made during the year 2010 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 employee 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
auditor
each of the persons who is a director at the date of approval of this annual report and financial statements confirms that
• so far as the director is aware there is no relevant audit information of which the company’s auditor is 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 auditor is aware of that information
this confirmation is given and should be interpreted in accordance with the provisions of s418 of the companies act 2006
a resolution to reappoint deloitte llp as auditor will be put to shareholders at the forthcoming agm
by order of the board
s c huddle
company secretary
21 march 2012 62   premier oil plc 2011 annual report and financial statements
remuneration report
dear fellow shareholder
on behalf of the board i am pleased to present the 2011 directors’ remuneration report
for which we are seeking approval from shareholders at our annual general meeting
2011 has been a strong year for premier as detailed in the reports of mike welton and
simon lockett the results are a consequence of high calibre executive leadership and
the commitment of our employees despite an economic environment that continues to
provide many challenges
john orange the former chairman of the committee stepped down during the year
following his retirement from the board and i would like to extend my thanks to him for his
considerable contribution to the committee the committee currently comprises joe darby
david lindsell professor david roberts and me whilst the background of our committee
members is varied all have many years of board experience and many also have strong
knowledge of the oil and gas sector none of the members of the committee currently hold
a position as an executive director
following my appointment as chairman of the committee in may 2011 i took the opportunity to meet with our largest shareholders
in december to understand their views in relation to our current remuneration framework particularly in light of the fact that the
shareholder vote at the last agm was lower than we had hoped for most of the shareholders that we spoke to welcomed our
meeting to help build their trust in the governance of pay at premier and we certainly found it useful to understand the reasons for
any concerns more fully in particular many shareholders appreciated increased clarity in relation to the annual bonus determination
and in respect of the long term incentive plan ltip the criteria used for assessing the underlying company performance that
the committee must be satisfied are fairly reflected in the outcome of the ltip before awards are paid out under the scheme
we have addressed some of these concerns in this report and we are currently undertaking a complete review of our remuneration
framework which will continue into 2012 to ensure it remains effective and appropriate the committee’s key challenge in
relation to future policy is to balance the incentivisation of the management team to create further shareholder value against the
need to ensure that this does not put at risk the value created to date and the overall stability and sustainability of the business
the remuneration committee at premier continues to strive to ensure that our remuneration policy serves shareholder interests
and closely reflects the group’s business strategy whilst also being mindful of the external focus on executive remuneration
while our principal role is to recommend to the board the framework and policy for the remuneration of the company’ s chairman
and the executive directors the committee is sensitive to the levels of the remuneration packages of all our employees across the
group we have a diverse workforce operating in six countries so our employee remuneration packages must meet local needs
while respecting our culture and values and reflecting our overall remuneration philosophy premier thus operates a similar
philosophy to pay throughout the organisation and all employees will receive awards under the same schemes as those used to
make awards to executive directors this ensures alignment throughout the organisation and a focus on common business goals
reward in the oil and gas sector remains intensely competitive and our pay must reflect the increase in the size and complexity
of our business particularly in light of recent acquisitions such as the successful purchase of encore oil plc our remuneration
policy is designed to provide remuneration packages that will retain and motivate our high performing team and attract new
talent as required the committee’s expectation is that the greater part of executive directors’ remuneration will be variable
given the longterm nature of our business executive director remuneration packages are weighted towards longterm
incentives with time horizons of three to six years and which pay out only if share price performance is strong and the
committee is satisfied with the company’s underlying performance
the committee ensures alignment between senior management and shareholders by encouraging share ownership through formal
shareholding guidelines the committee believes that the focus on longterm incentives longterm performance measures such as
tsr and executive share ownership reinforces effective risk management encourages focus on shareholder returns thus aligning
executive interests with the interests of longterm shareholders this approach is underlined by the requirement that all members
of the senior management team are required to defer half of their ltip awards into a matching scheme for a further three years
2011 marks the end of the first full cycle of the ltip approved by shareholders at the agm in 2009 £100 invested in premier at
the start of 2009 was worth £181 by the end of 2011 compared with only £135 if invested in the ftse all share oil  gas
producers index over the same period in addition the company’s performance has been in the top quarter of its comparator
group in this period premier’s 22 per cent annualised return since 2009 includes the performance for 2011 where the company’s
market value fell by 25 per cent against a background of economic uncertainty all premier’s employees led by the executive
directors contributed to this longterm performance and will receive share awards under the ltip scheme as is detailed later in
the report the committee considered other factors in assessing whether the underlying performance of the company was
reflective of these achievements and concluded that it was
the following sections explain our remuneration policy for executive directors and senior management and sets out individual
payments made to executive directors in relation to the year under review as well as the reasons for this committee’s decisions
yours sincerely
jane hinkley
chairman of the remuneration committee
21 march 2012
jane hinkley
chairman of the remuneration committee premier oil plc 2011 annual report and financial statements   63
compliance
this report has been prepared in accordance with schedule 8 of the companies act 2006 and the large and mediumsized
companies and groups accounts and reports regulations 2008 the company complied with the provisions of the uk
corporate governance code the code regarding best practice on the design of performancerelated remuneration the report
has been divided into separate sections for unaudited and audited information part a of the report is not subject to audit part b
contains information which has been audited
in line with the association of british insurers’ guidelines on responsible investment disclosure the committee ensures that the
company’s remuneration policy will not raise environmental operational social or governance risks by inadvertently motivating
irresponsible behaviour eg one of the important factors in determining annual bonus performance is the achievement of
specific hses targets
remuneration committee
the former committee chairman mr j r w orange stepped down from the committee during the year and ms i j hinkley was
appointed committee chairman from may 2011 the committee currently comprises four nonexecutive directors and met five
times during the year the members of the committee and their attendance are summarised below
member throughout number of
committee member 2011 meetings attended
mr j r w orange chair to 19 may 2011 to 20 may 2011 4
ms i j hinkley chair from 19 may 2011 3 6
mr j darby 3 5
mr d c lindsell 3 5
professor d g roberts 3 5
note
there were five scheduled meetings of the remuneration committee during the year the remaining meeting only attended by mr j r w orange and
ms i j hinkley was called to approve the details of arrangements approved in principle by a prior scheduled meeting of the remuneration committee
the board considers that the membership of the committee is compliant with the code recommendations stephen huddle
general counsel and company secretary acts as secretary to the committee and lee johnson group hr manager attends all
committee meetings no director of the company is involved in determining his own remuneration the determination of the
remuneration of the nonexecutive directors is a matter reserved for the board excluding the nonexecutive directors
the committee acts within its agreed written terms of reference which are published on the company’s website
wwwpremieroilcom
committee’s main responsibilities
• considering and determining the remuneration policy for executive directors and senior management
• considering and determining the total compensation package of each executive director within this agreed policy
• considering and advising on the general principles under which remuneration is applied to employees
• considering the design of and determining targets for the annual bonus plan for senior management
• determining the quantum and performance conditions for the longterm incentive awards
• determining the policy for pension arrangements service agreements and termination payments to executive directors and
senior management
• determining the chairman’s fee
kepler associates was appointed by the committee in september 2011 as its independent adviser kepler associates does not
provide any other services to the company during the year the committee also took advice from hewitt new bridge street who
were the independent advisers to the committee until september 2011 and capita hartshead in relation to pension policy 64   premier oil plc 2011 annual report and financial statements
remuneration report continued
part a the information in this section of the report is not audited
remuneration policy
executive directors are eligible to receive base salary annual bonus benefits awards under the company’s longterm incentive
schemes in which all employees participate and pension provision the package is structured such that the greater part of total
remuneration is delivered through performancerelated incentives and in particular longterm sharebased incentives these
incentive schemes are designed to align the interests of senior management with those of shareholders and establish a clear link
between pay and performance the key elements of the remuneration packages for executive directors are set out below
summary of executive director remuneration policy and structure
component objectives details
salary • support recruitment and retention • adjustments are effective 1 january
• aim to position around the median of the relevant
market
pension and benefits • provide competitive benefit and • executive directors receive a final salary pension or 
pension provision equivalent contributions
• other benefits include medical cover and life
assurance
annual bonus • reinforces the delivery of key • opportunity of up to 100 per cent of salary for 
shortterm financial and executive directors
operational objectives • based on kpi scorecard and committee discretion
deferred bonus • extends the time horizon of the bonus • any annual bonus earned in excess of 50 per cent of
salary is paid in shares and deferred for three years
long term incentive plan • reinforces the delivery of absolute • three ltip elements equity pool allocation
and relative returns to shareholders performance shares and matching awards
• provides alignment with shareholders • vesting is based on i the change in equity value
per share ii premier’s tsr performance relative
to oil and gas sector peers and iii the committee’s
assessment of underlying performance
• performance is measured over a total of up to six years
share ownership guidelines • provides alignment with shareholders • executive directors are required to acquire a
shareholding worth at least 100 per cent of base salary
200 per cent for the ceo through the retention of
deferred bonus and ltip shares
the company’s remuneration policy for executive directors is to provide remuneration packages which reward employees fairly
and responsibly for their contributions and which deliver superior remuneration for superior performance remuneration
packages are intended to be 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
in respect of comparable positions in similar companies and also pay and conditions throughout the remainder of the group
remuneration for senior management is significantly geared towards performanceoriented pay for example at ‘median’
performance see chart for assumptions approximately 61 per cent of the ceo’s remuneration package is delivered through
variable components rising to approximately 93 per cent at ‘stretch’ performance
proportion of ceo pay package value delivered through each pay component
0 25 50 75 100
variable components
stretch
performance
median
performance
proportion of overall package
variable components
salary
benefits
cash bonus
longterm incentives
‘median’ performance assumes bonus payout of 60 per cent
of salary ltip performance shares vesting at 25 per cent
625 per cent ltip matching award equity pool based on
1 per cent of the change in market value and share price
appreciation of 10 per cent per annum compound
‘stretch’ performance assumes all bonus equity pool
performance share and matching awards vest in full with
share price growth of 20 per cent per annum compound
the value of all longterm incentives is their net present value premier oil plc 2011 annual report and financial statements   65
base salary
base salaries are reviewed annually from 1 january whilst aiming to position base salaries around the median of comparable
companies the committee also considers whether the overall remuneration package including incentives is competitive for
positions in similar companies within the oil and gas industry as well as other broadly similar sized companies across other
industries taking into account performance
whilst the committee does not slavishly follow the market midpoint for salaries it does review market data as a point of
reference and it has been aware for several years that base salaries for both the ceo and for other executive directors are well
below industry average levels for comparable roles between 13 per cent and 24 per cent partly because of the company’s
policy to focus remuneration towards longterm incentives and partly because of the company’s recent rapid growth
hence last year the committee chairman wrote to shareholders detailing the salary increases for 2011 which went some of the
way towards correcting this positioning having taken into account salary increases both in the external market and within the
group as well as the performance of the executive team at premier the committee has decided to increase executive director
salaries by approximately 6 per cent from january 2012 in making this decision the committee was particularly mindful of the
climate and pressures surrounding executive remuneration but was keen to ensure that the salaries we offer do not put us at a
greater competitive disadvantage in the future the salary increases for 2012 which are in line with those made to our uk
employees will continue to bring salaries towards market median but despite this executive director salaries remain below this
target when compared to both companies in the same sector and companies of a similar size across all sectors the committee
will continue to review salaries annually to ensure they remain appropriate particularly given the current highly competitive talent
market in this sector and the fact that it is critical to our future success that we retain our key talent
the salaries of the executive directors are as follows
salary from salary from 
1 january 2011 1 january 2012 percentage increase
director position £ £ 
s c lockett chief executive 500000 530000 60
r a allan director – asia 310000 330000 65
a r c durrant finance director 340000 360000 59
n hawkings operations director 310000 330000 65
a g lodge exploration director 310000 330000 65
the company’s policy for all other employees is to target salaries at the upper quartile of comparable positions within the
industry the committee believes that this positioning is appropriate given the competitive market that exists within the industry
in which premier operates
annual bonus scheme
executive directors are eligible to participate in nonpensionable discretionary bonus arrangements subject to the achievement
of challenging corporate oneyear targets and committee discretion relating to overall company performance the achievement
of these targets and overall company performance is carefully assessed each year by the committee bonuses for executive
directors are subject to a maximum of 100 per cent of base salary no major revisions to the annual bonus plan structure are
proposed for 2012
the committee sets targets on the basis of a balanced scorecard comprising kpis and other corporate objectives the main
elements of the scorecard for 2012 are hses production and development exploration and exploration new ventures finance
and business development
payout is determined with reference to the balanced scorecard subject to the committee’s discretion based on a broader
assessment of overall company performance in assessing 2011 performance the committee has reviewed performance in
multiple aspects of the five categories below against specific targets targets were set at the beginning of 2011 and designed to
be stretching but achievable we do not disclose the exact targets themselves for reasons of commercial sensitivity however
performance in relation to threshold base and stretch levels is detailed below 66   premier oil plc 2011 annual report and financial statements
remuneration report continued
determination of 2011 annual bonus outcome
performance achievement
between between at or 
below threshold base above
performance category threshold and base and stretch stretch
hses • total recordable injury frequency 3
• high potential incidents 3
production and • meet december 2011 runrate 3
development • average working interest production 3
• deliver products on time and on budget 3
exploration and • reserve replacement 3
exploration • deliver the risked resource target 3
new ventures • make a material exploration success and deliver
new ventures to replenish the portfolio of reserves
as measured by resource additions 3
finance and • net operating cash flow 3
business • profitloss after tax 3
development • peak net debt gearing 3
• acquire new assets and improve the quality
of premier’s core business while maintaining a healthy
balance sheet as measured by value creation of
any acquisition 3
organisation • gross ga costs before ltip and bonus 3
• continue to develop premier’s people and
the processsystem within which they work 3
in addition to the achievement of specific targets the committee considered the wider overall company performance and
awarded annual bonuses of 55 per cent of salary to the executive directors awards are therefore as follows
2011 annual bonus outcome by executive director
executive director cash £ deferred shares £ total £
s c lockett 250000 25000 275000
r a allan 155000 15500 170500
a r c durrant 170000 17000 187000
n hawkings 155000 15500 170500
a g lodge 155000 15500 170500
significant bonuses are subject to partial deferral in shares the committee’s policy for executive directors and other senior
management is that any annual bonus earned above 50 per cent of salary is deferred in shares for three years deferred bonus
shares remain subject to a ‘bad leaver’ provision such that shares would lapse in the event that an executive director was to leave
to join a competitor annual bonus awards are subject to a clawback provision in the event of a material misstatement of the
company’s financial results gross misconduct or error in the calculation of performance conditions premier oil plc 2011 annual report and financial statements   67
long term incentive plan ltip
executive directors are eligible to participate in the ltip  the company’s primary longterm incentive plan in which all employees
are eligible to participate thereby encouraging throughout the company a focus on longerterm performance and alignment
with shareholders the executive directors are also eligible to participate in a share incentive plan and a save as you earn scheme
the ltip  approved by shareholders at the 2009 agm is structured to reinforce the delivery of strong share price growth and
relative stock market outperformance over the longterm under this sharebased plan performance is assessed over a
minimum of three years and over six years once the matching scheme is included vesting is based on a combination of the
absolute change in the company’s equity value per share and the company’s relative total shareholder return tsr  share price
plus dividends performance against peers and only starts for performance above median the committee considers that these
two criteria are an appropriate performance measure for the ltip because the first captures the absolute return delivered to
shareholders and the second measures performance on a relative basis thereby negating the impact of shortterm volatility such
as oil price movements
to optimise the link between reward and performance the plan has certain safeguards ltip awards vest only if the committee is
satisfied that the recorded tsr is reflective of the underlying performance of the company the amount that participants may
receive is subject to a cap at the discretion of the committee and ltip awards are subject to clawback in the event of a material
misstatement of the company’s financial results gross misconduct or error in the calculation of the performance conditions in
assessing the underlying performance of the company the committee takes into account amongst other factors the company’s
• return on invested capital
• reserve replacement
• cash flow
• earnings per share growth and
• health and safety record
awards under the ltip comprise three elements equity pool awards and performance share awards that each vest after a three
year performance period and matching awards that vest after a further threeyear performance period
• equity pool awards vest after three years and are based on a share of a pool which is subject to annualised growth in the
company’s equity value per share – 50 per cent of the vested award is deferred for a further three years
• performance share awards vest after three years based on the company’s tsr relative to a comparator group of international
oil and gas companies – 50 per cent of the vested award is deferred for a further three years and
• deferred equity pool awards and performance share awards are eligible for a matching award of up to 25x the number of
shares deferred vesting after a further three years based on the company’s tsr relative to a comparator group of international
oil and gas companies
the illustration below helps to explain the operation of a single cycle under the ltip
each component is described in more detail below no revisions are planned to the ltip structure in 2012 we will undertake a review
of our longterm incentives in 2012 to ensure they remain appropriate any changes will relate to awards made in 2013 onwards
1 equity pool
2 performance shares
year 1 year 2 year 3 year 4 year 5 year 6
premier’s performance based on
growth in the company’s equity
value per share
premier’s tsr performance compared
to other oil and gas companies
50 initial shares vest
3 share matching scheme
half of initial shares released to participant
reinvest half and receive up to
25 additional shares per deferred 
share after three years based on 
comparative tsr
initial
award
granted
initial shares 
calculated based 
on performance
matching shares
calculated based 
on performance 68   premier oil plc 2011 annual report and financial statements
remuneration report continued
long term incentive plan ltip continued
equity pool awards
at the start of each threeyear performance period executive directors are allocated an entitlement to an equity pool in 2011 the
chief executive was granted an entitlement to 6 per cent of the ltip equity pool with other executive directors each granted an
entitlement to 425 per cent the value of the entitlement is then calculated at the end of the performance period based on the
final value of the ltip equity pool and is delivered in shares 50 per cent of the shares are released at the end of the performance
period with the balance deferred for a further three years and eligible for a match under the ltip matching award for
participants below senior management the deferral period is restricted to six months unless the employee elects to extend the
deferral period to three years in return for a grant of an ltip matching award
the value of the ltip equity pool is based on the growth in the company’s equity value per share over the performance period
if the company’s compound annualised growth is equal to 10 per cent per annum 1 per cent of the growth will be credited to
the ltip equity pool for growth of 20 per cent per annum or more 25 per cent of the gain will be credited all employees are
eligible to participate in the ltip equity pool as of 31 december 2011 only 48 per cent of the 2011 ltip equity pool had
been allocated
equity pool funding schedule
at the end of the performance period the committee has the discretion to scale back the size of the ltip equity pool if it is not
satisfied that the growth in equity value per share is reflective of underlying financial and operational performance furthermore
an individual’s entitlement is capped at 100 per cent of salary subject to the committee’s discretion to exceed the cap
potentially up to the full value warranted by the formulaic funding schedule provided the committee is satisfied that there has
been a longterm underlying improvement in the performance of the company taking into account the five criteria detailed on
page 67 in particular the committee may
• increase the cap to 200 per cent of salary for growth in equity value per share of up to 15 per cent per annum if the formulaic
allocation warrants payment above the 100 per cent salary cap and
• for growth in equity value per share of more than 15 per cent per annum permit the full value of the individual entitlement
ie as if no cap applied if the formulaic allocation warrants payment
performance share award
each year executive directors are granted conditional awards of ltip performance shares of up to 125 per cent of salary 150 per
cent for the ceo awards vest subject to the company’s threeyear tsr performance relative to a comparator group of oil and
gas companies no awards vest if the company’s tsr is below median 25 per cent vest at median and full vesting is at upper
quartile the oil sector comparators have been selected on the basis of their similarity to premier with regard to several factors
including business mix and geographic location at the end of the performance period the committee has the discretion to
scale back the vesting of ltip performance shares if it is not satisfied that the company’s tsr performance is reflective of
underlying financial and operational performance taking into account the five criteria detailed on page 67
00
20
25
10
15
05
10 pa 20 pa
funding rate  of growth
growth in equity value per share premier oil plc 2011 annual report and financial statements   69
long term incentive plan ltip continued
performance share award vesting schedule
50 per cent of the vested shares are released at the end of the performance period with the balance deferred for a further three
years and eligible for a match under the ltip matching award for participants below senior management the deferral period is
restricted to six months unless the employee elects to extend the deferral period to three years in return for a grant of an ltip
matching award
tsr comparator group constituents by performance share award cycle
company 2009 2010 2011 company 2009 2010 2011
afren 333 medco energi international 333
awe 333 melrose resources 333
beach energy 333 nexen 333
cairn energy 333 niko resources 333
cairn india 333 noble energy 333
calvalley petroleum – 33 norwegian energy co 333
carrizo oil  gas 333 oil search 333
dana gas 333 pa resources 333
det norske oljeselskap 333 roc oil 333
dno international 333 salamander energy 333
endeavour international 333 santos 333
maurel et prom 333 serica energy 333
hardy oil  gas 333 soco international 333
heritage oil – 33 talisman energy 333
jkx oil  gas 333 tullow oil 333
lundin petroleum 333 vaalco energy 333
0
75
100
25
50
median upper 
quartile
percentage of shares which vest
tsr rank 70   premier oil plc 2011 annual report and financial statements
remuneration report continued
long term incentive plan ltip continued
matching award
for executive directors and senior management 50 per cent of the shares vesting from the ltip equity pool award and ltip
performance share award are subject to compulsory deferral over three years and are eligible for a potential match of up to
251 dependent on the tsr performance of the company against the same comparator group used for coterminous ltip
performance share awards however full vesting will occur only if the company’s tsr is at or above the upper decile with 25 per
cent vesting 06251 at median
ltip matching award vesting schedule
remuneration in 2011
the table below summarises the component parts of the remuneration package in 2011 including bonuses earned for
performance in 2011 and longterm incentive awards
remuneration
element details s c lockett r a allan
1
a r c durrant n hawkings a g lodge
base salary £500000 £310000 £340000 £310000 £310000
annual • maximum opportunity 100 100 100 100 100
bonus • actual paid for 2011
2
55 55 55 55 55
 of salary
ltip awards • percentage of equity pool awards 600 425 425 425 425
granted in vesting subject to change in market
2011 capitalisation
performance
• performance share award vesting
period 1
subject to threeyear relative tsr
january 2011
– percentage of salary 150 125 125 125 125
31 december
– number of shares 174337 90074 98791 90074 90074
2013
• matching award opportunity vesting
subject to threeyear relative tsr
up to 25 x 50 of actual vested awards from
2008 asset and equity plan
– number of shares 265860 183350 195570 183350 116290
pension • company pension contribution £142000 £101900 £117700 £75300 £96900
benefits • including medical insurance car £22400 £300200 £31900 £21300 £24100
allowance and subsidised gym
membership
notes
1
mr r a allan receives additional benefits relating to his expatriate position in singapore full details of such benefits are disclosed in the directors’
emoluments table on page 73
2
executive directors received a total annual bonus award for the year ended 31 december 2011 of 55 per cent of salary 50 per cent of salary paid as cash
with the remaining 5 per cent awarded in deferred shares
0
200
250
100
150
50
median upper 
decile
match
tsr rank premier oil plc 2011 annual report and financial statements   71
remuneration in 2011 continued
the 2011 executive director remuneration package comprises several elements some of which are paid during the year salary
and benefits some of which are earned for the year but paid in the next year annual bonus some of which are granted during
the year but not released until three years later ltip performance shares ltip equity pool awards and ltip matching shares and
some of which are earned for the year but will not benefit the director until retirement pension whilst there is no perfect
approach to summarising the value of such a multifaceted pay package the summary above is considered by the committee to
be the simplest and most consistent approach for assessing the value of the premier package
shareholding guidelines
formal shareholding guidelines exist which encourage the executive directors and other members of the executive committee to
retain no less than 50 per cent of the net value of shares vesting under the company’ s deferred bonus and longterm incentive
arrangements until such time as they have achieved a holding worth 100 per cent of salary 200 per cent for the ceo as the graph
below shows all the executive directors hold shares with a value substantially higher than these threshold shareholding requirements
shareholdings at 31 december 2011 against share ownership guidelines
note
includes value of deferred awards under the annual bonus and asset and equity plan where performance conditions have been achieved and such awards
are subject to a holding period the value of shareholdings is based on the closing price of a premier share on 31 december 2011 £363
tsr performance
the chart below compares the value of £100 invested in premier shares including reinvested dividends on 31 december 2006
compared to the equivalent investment in the ftse all share oil  gas producers index over the last five financial years the
ftse all share oil  gas producers index has been chosen as it comprises companies who are exposed to broadly similar risks
and opportunities as premier
fiveyear tsr performance
this graph looks at the value by 31 december 2011 of £100 invested in premier oil plc five years earlier on 31 december 2006 compared with £100 invested
in the ftse all share oil  gas producers index share price growth plus dividends reinvested on exdiv date
0
s c lockett
r a allan
a r c durrant
n hawkings
a g lodge
919
200
929
100
547
100
270
100
477
100
shareholding guideline
actual holding as  of base salary at 31 december 2011
500
400
600
700
800
300
100
200
900
1000
0
100
200
150
50
31 dec 06
31 dec 07
31 dec 08
31 dec 09
31 dec 10
31 dec 11
£143
£145
ftse all share oil  gas producers index
premier 72   premier oil plc 2011 annual report and financial statements
remuneration report continued
sourcing of shares and dilution limits
awards under all the company’s share schemes may be met using a combination of market purchases financed by the company
through the premier oil plc employee benefit trust and newlyissued shares the company complies with the association of
british insurers’ recommended guidelines on shareholder dilution through employee share schemes awards under the group’s
discretionary schemes which may be satisfied by new issue shares must not exceed 5 per cent of the company’s issued share
capital in any rolling 10year period and the total of all awards satisfied via new issue shares under all plans must not exceed
10 per cent of the company’s issued share capital in any rolling 10year period
as of 31 december 2011 1973998 shares were held by the employee benefit trust 2010 6887880
1
 and the commitments to
issue new shares are summarised below
dilution percentage
number of shares issued or committed to be issued over 10 years 2011 limit used 
new issue shares under aep  ltip and esos within 5 per cent limit 11740108 23402991 5016
as above plus saye within 10 per cent limit 12537856 46805982 2679
1
share numbers have been adjusted to reflect the 41 share split which took place in may 2011
executive directors’ contracts of service
details of the service contracts of the executive directors of the company are as follows
unexpired term potential
director contract date notice period of contract termination payment
s c lockett 091203 12 months rolling contract 12 months’ salary and benefits
r a allan 091203 12 months rolling contract 12 months’ salary and benefits
a r c durrant 010705 12 months rolling contract 12 months’ salary and benefits
n hawkings 230306 12 months rolling contract 12 months’ salary and benefits
a g lodge 200409 12 months rolling contract 12 months’ salary and benefits
the service contract of each executive director may be terminated on 12 months’ notice in writing by either party in accordance
with current market practice in such an event the compensation commitments in respect of their contracts could amount to one
year’s remuneration based on base salary and benefits in kind and pension rights during the notice period in line with normal
market practice an individual may receive an annual bonus for the proportion of a financial year worked before cessation of
employment but there will be no right to any bonus for any period of notice not worked there are provisions for termination
with less than 12 months’ notice 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
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
external appointments
executive directors are entitled to accept nonexecutive appointments outside the company providing that the board’s approval
is sought as a result of the acquisition of encore oil plc the company has a 30 per cent interest in egdon resources plc egdon
and is entitled to board representation mr lodge was appointed to the board of egdon as a nonexecutive director on 9 march
2012 and will be donating all fees retained to charity
nonexecutive directors
nonexecutive directors have letters of appointment which are all effective for a period of three years subject to annual
reappointment by the members in general meeting all of which have a notice period of three months
date of 
director appointment letter notice period unexpired term
m w welton 230909 3 months 6 months
professor d g roberts 230909 3 months 6 months
j darby 010910 3 months 17 months
i j hinkley 010910 3 months 17 months
d c lindsell 170111 3 months 21 months
m romieu 170111 3 months 21 months premier oil plc 2011 annual report and financial statements   73
nonexecutive directors continued
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 fees for nonexecutives are reviewed at least every two years having regard to
the size of the company and the time commitments of the nonexecutives fees paid to nonexecutive directors for the year
under review were as follows
other nonexecutive directors
senior 
committee independent 
chairman basic fee chairmanship director
2011 £160000 £50000 £10000 £10000
part b the information in this section of the report has been audited
directors’ emoluments
total emoluments paid to directors executive and nonexecutive for the year ended 31 december 2011 was £3838900 2010
£2951300
the remuneration paid to the executive directors during the year under review is summarised in the table below
total total pension shares total
cash pension emolu emolu contribu vested and remuner
salary benefits bonus benefits other ments ments tions realisable ation
2011 2011 2011
‡
2011
©
2011 2011 2010 2011
©
2011 2011
†
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
s c lockett
1
chief executive 5000 224 2500 1036 – 8760 5831 384 32409 41553
r a allan
2
3054 267 1550 474 2735 8080 6562 545 19996 28621
a r c durrant
3
3400 319 1700 1177 – 6596 4980 – 20242 26838
n hawkings
4
3061 213 1550 583 – 5407 3946 170 18639 24216
a g lodge
5
2798 241 1550 362 – 4951 4381 607 5223 10781
total 17313 1264 8850 3632 2735 33794 25700 1706 96509 132009
notes
 the main benefits provided are medical insurance car allowance life assurance health insurance and a subsidised gym membership
‡ executive directors received a total annual bonus award for the year ended 31 december 2011 of 55 per cent of salary 50 per cent of salary paid as cash
as disclosed in the table above with the remaining 5 per cent awarded in deferred shares details of the deferred bonus shares awarded are given on
page 66 of this report
©
pension benefits include nonbonusable salary supplements and target funding payments which are paid direct to the executive pension contributions
are paid into a pension scheme and therefore are excluded from the emoluments section of the table above full details of pension arrangements for
each director are given on pages 74 to 75 of this report
 shares vested and realisable is the sum of the value of various share awards as at the date of vesting in relation to the deferred annual bonus aep and
matching shares based on performance periods stretching back as far as 2006 in some cases
† total remuneration receivable is the sum of the salary annual bonus cashbased benefits and shares vested which became realisable in the year at the
share price on the date of vesting of the award
1
mr s c lockett was paid a nonbonusable salary supplement of £59700 and a target funding payment of £43900 as part of his pension arrangements
2
mr r a allan sacrificed £4650 of his salary into his pension scheme he was paid a nonbonusable salary supplement of £7900 and a target funding
payment of £39500 as part of his pension arrangements mr allan received £196000 of expatriate benefits during the year and was also paid a non
pensionable and nonbonusable overseas premium of £77500 relating to his position in singapore the company deducts a hypothetical tax equivalent
to uk tax rates on mr allan’s salary annual bonus and longterm incentive payments this is offset against local singapore tax due as the maximum tax
rate in singapore is lower than in the uk the difference is retained by the company
3
mr a r c durrant was paid a nonbonusable salary supplement of £59900 and a target funding payment of £57800 as part of his pension arrangements
4
mr n hawkings sacrificed £3875 of his salary into his pension scheme he also received a nonbonusable salary supplement of £40900 and a target
funding payment of £17400 as part of his pension arrangements
5
mr a g lodge sacrificed £30247 of his salary into his pension scheme he also received a target funding payment of £36200 as part of his pension
arrangements 74   premier oil plc 2011 annual report and financial statements
remuneration report continued
directors’ emoluments continued
remuneration paid to the nonexecutive directors during the year under review is summarised in the table below
total emoluments
2011 2010
£’000 £’000
m w welton chairman 1600 1500
j darby 561 400
i j hinkley 561 133
d c lindsell 600 480
j r w orange
1
273 500
professor d g roberts 500 400
m romieu 500 400
total 4595 3813
notes
1
mr j r w orange’s total remuneration in 2011 is calculated to 20 may 2011 being the date of his resignation from the board
pension schemes
the company operates a group personal pension plan in the uk together with a funded registered defined benefit pension
scheme the premier oil plc retirement and death benefits plan the scheme which was closed to new members in 1997 the
scheme provides a pension on broadly a fiftieths accrual basis of up to twothirds 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 operated its own cap on pensionable earnings since april 2006 when the external cap was removed in the
scheme the cap is determined at 1 january each year and for the year to 31 december 2011 this was set at £123600 and will
increase to £129600 for the year to 31 december 2012
the company has agreed to provide messrs s c lockett r a allan a r c durrant n hawkings and a g lodge 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 cap the value of this target pension provision is made available at each director’s
option in the form of an enhanced level of pension contributions andor a nonpensionable salary supplement regular reviews
are carried out to assess the extent to which the payments already made to each director are projected to be sufficient to
provide the accrued component of their target pension where such reviews indicate a shortfall the company provides an
additional nonpensionable target funding payment
in respect of 2011 mr a r c durrant elected to receive a salary supplement mr a g lodge elected to receive pension
contributions whilst messrs s c lockett r a allan and n hawkings elected for a combination of the two
messrs r a allan n hawkings and a g lodge are members of the company’s group personal pension plan whilst mr s c lockett
is a member of the scheme and also has a personal pension policy premier oil plc 2011 annual report and financial statements   75
pension schemes continued
the payments by the company in respect of pension benefits are summarised below
target
salary pension funding
supplements contributions payments total
£’000 £’000 £’000 £’000
s c lockett
1
597 384 439 1420
r a allan 79 545 395 1019
a r c durrant 599 – 578 1177
n hawkings 409 170 174 753
a g lodge – 607 362 969
note
1
the company’s pension contribution for mr s c lockett comprises a payment of £7497 made to his personal pension policy and £30900 made to the
scheme in respect of his membership thereof
the accrued pension entitlements of the directors who were members or deemed members of the scheme during 2011 are 
as follows
b d e g
a transfer value c transfer value increase from f 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 
2011 2011 2010 2010 during 2011 benefit inflation 
£’000 pa £’000 £’000 pa £’000 £’000 £’000 £’000
s c lockett 924 13429 781 10411 2731 1442 119
r a allan 458 8025 389 6262 1590 826 57
a r c durrant 402 7317 322 5347 1779 1083 70
n hawkings 329 5508 256 3935 1400 915 65
a g lodge 148 2929 90 1624 1132 915 55
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 values under b d and f have been calculated in line with the occupational pension schemes transfer values amendment regulations
2008 si 20081050
– the increases under e are principally due to the additional pension accrued over the year
– the amounts under f 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
– 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 2011 pension paid during 2010
£ £
j a heath 35354 33606 76   premier oil plc 2011 annual report and financial statements
remuneration report continued
annual bonus scheme
details of shares held in trust in respect of the deferred element of previous annual bonus awards for directors are as follows
number of 
number shares made market number 
of shares subject to price of of shares
held at award event and shares on held at 31 
date of 1 january during number of date of december earliest 
grant 2011
1
2011 shares award 2011 vesting date
s c lockett 110108 26656

– 26656
a
32925p – 110111
220109 42312

–– 18538p 42312 220112
070110 34764

–– 31375p 34764 070113
250311 – 26256 – 49975p 26256 250314
103732 26256 26656 103332
r a allan 110108 19172

– 19172
a
32925p – 110111
220109 30528

–– 18538p 30528 220112
070110 23972

– – 31375p 23972 070113
250311 – 18108 – 49975p 18108 250314
73672 18108 19172 72608
a r c durrant 110108 19240

– 19240
a
32925p – 110111
220109 31064

–– 18538p 31064 220112
070110 25572

–– 31375p 25572 070113
250311 – 19312 – 49975p 19312 250314
75876 19312 19240 75948
n hawkings 110108 29476 – 29476
a
32925p – 110111
220109 47204 –– 18538p 47204 220112
070110 40636 –– 31375p 40636 070113
250311 – 18108 – 49975p 18108 250314
117316 18108 29476 105948
a g lodge 070110 15408

–– 31375p 15408 070113
250311 – 18108 – 49975p 18108 250314
15408 18108 – 33516
notes
 on 29 march 2010 these awards were changed from conditional awards of shares to restricted shares some of the shares were sold to pay income tax
and national insurance contributions payable by messrs s c lockett a r c durrant and a g lodge upon the accelerated vesting of the awards but the
amounts received from the sale remain subject to clawback in the event of the participant leaving premier other than as a ‘good leaver’ in the case of
mr r a allan who as an expatriate is not subject to uk tax a percentage of the shares were withheld equal to the percentage tax rate that would have
applied had he been subject to uk income tax these shares reverted to the employee benefit trust and the company will pay any overseas duties
payable by mr allan as a result of the vesting of his shares but the amount paid remains subject to clawback if mr allan leaves premier other than as a
‘good leaver’ the remaining shares are held in a nominee account within the employee benefit trust until the end of the original deferral period and are
forfeitable if the director leaves other than as a ‘good leaver’
1
the number of deferred bonus shares have been adjusted to reflect the 41 share split which took place in may 2011 the adjusted numbers are quoted in
the table above
a
shares released net on 13 january 2011 the midmarket closing price on 13 january 2011 was 500p
annual bonuses for the year ended 31 december 2011 were awarded on 19 january 2012 details of the bonuses awarded to
executive directors are given on page 66 premier oil plc 2011 annual report and financial statements   77
details of outstanding ltip awards
ltip equity pool awards
as at 31 december 2011 three equity pools were outstanding as follows
aggregate equity pool
participation points
starting market  of
capitalisation equity pool
cycle performance period £ million allocated unallocated allocated
2009 010609 – 311211 871 99043 5210 95
2010 010110 – 311212 1342 105868 30460 78
2011 010111 – 311213 2101 715009 78499 48
as at 31 december 2011 the executive directors have the following allocations under the outstanding equity pools
2009 2010 2011
 of  of  of
director points equity pool points equity pool points equity pool
s c lockett 5250 504 6820 500 9000 600
r a allan 4200 403 5450 400 6375 425
a r c durrant 4200 403 5450 400 6375 425
n hawkings 4200 403 5450 400 6375 425
a g lodge 4200 403 5450 400 6375 425
the first ltip equity pool cycle the 2009 cycle completed its performance period on 31 december 2011 as stated within
the rules of the ltip  the base valuation for the 2009 cycle was averaged over the eightmonth period from 1 october 2008 to
31 may 2009 with adjustment for the rights issue in may 2009 the terminal valuation was averaged over the threemonth period
from 1 october 2011 to 31 december 2011 over the performance period the company’ s market value increased from £871 million
to £1703 million equivalent to growth of 296 per cent per annum generating an aggregate ltip equity pool valued at
£208 million the committee considered the longterm underlying improvement in the performance of the company and were
satisfied that the ltip performance was reflective of the performance of the company for the same period as a result the equity
pool vested in january 2012 and £208 million will be distributed between all ltip participants with 50 per cent released in
shares and 50 per cent in deferred shares
ltip performance share awards
as at 31 december 2011 three performance share award cycles were outstanding as follows
total performance
cycle performance period share awards granted
2009 010609 – 311211 5001852
2010 010110 – 311212 5583740
2011 010111 – 311213 2490635
13076227 78   premier oil plc 2011 annual report and financial statements
remuneration report continued
details of outstanding ltip awards continued
in each of 2009 2010 and 2011 the executive directors were granted ltip performance share awards over shares with a value of
150 per cent of salary for the ceo and 125 per cent of salary for the other executive directors as at 31 december 2011 the
executive directors have the following allocations under the outstanding performance share awards
market
awards awards price of
held at held at 31 shares on earliest 
date of 1 january december date of performance vesting 
grant 2011 granted lapsed vested 2011 award period date
s c lockett 280809 204864 –– – 204864 31850p 010609 – 311211 010112
1
270510 231792 –– – 231792 28150p 010110 – 311212 010113
280611 – 174337 –– 174337 42860p 010111 – 311213 010114
436656 174337 –– 610993
r a allan 280809 117736 –– – 117736 31850p 010609 – 311211 010112
1
270510 133212 –– – 133212 28150p 010110 – 311212 010113
280611 – 90074 –– 90074 42860p 010111 – 311213 010114
250948 90074 –– 341022
a r c durrant 280809 125588 –– – 125588 31850p 010609 – 311211 010112
1
270510 142092 –– – 142092 28150p 010110 – 311212 010113
280611 – 98791 –– 98791 42860p 010111 – 311213 010114
267680 98791 –– 366471
n hawkings 280809 117736 –– – 117736 31850p 010609 – 311211 010112
1
270510 133212 –– – 133212 28150p 010110 – 311212 010113
280611 – 90074 –– 90074 42860p 010111 – 311213 010114
250948 90074 –– 341022
a g lodge 280809 107924 –– – 107924 31850p 010609 – 311211 010112
1
270510 133212 –– – 133212 28150p 010110 – 311212 010113
280611 – 90074 –– 90074 42860p 010111 – 311213 010114
241136 90074 –– 331210
notes
 the number of performance share awards has been adjusted to reflect the 41 share split which took place in may 2011 the adjusted numbers are
quoted in the table above
1
shares vested on 19 january 2012 the midmarket closing price on the date of vesting was 4254p
the first ltip performance share award cycle the 2009 cycle completed its performance period on 31 december 2011 over the
period the company’s tsr relative to its peers was in the upper quartile having taken into consideration the underlying financial
and operational performance of the company including the company’s return on invested capital reserve replacement cash
flow earnings per share growth and health and safety record the committee was satisfied that the results warranted a vesting of
100 per cent of the performance share awards 50 per cent of the vested shares were released in january 2012 with the
remaining 50 per cent deferred premier oil plc 2011 annual report and financial statements   79
outstanding awards under previous longterm incentive arrangements
asset and equity plan aep
the aep preceded the ltip as the company’s main longterm incentive and expired in 2009 the aep has two elements the
asset pool and the equity pool the value of the asset pool is based on the increase in the net asset value per share of the
company over a threeyear period and the value of the equity pool is based on the increase in equity value per share of the
company over a threeyear period in both cases no pool is created for growth in asset value or share price of less than 10 per
cent per annum at growth of 10 per cent per annum the pools are funded by 1 per cent of the growth the funding of the pools
is capped at 25 per cent of the growth at growth of 20 per cent per annum the funding rate of the pools increases on a straight
line 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
the pools are allocated to eligible employees based on their pro rata entitlement 50 per cent of vested aep awards are
released in shares at the end of the performance period the remaining 50 per cent is deferred in shares over three years and are
eligible for a matching award which vests subject to the company’s threeyear tsr relative to a comparator group of oil and gas
companies ie on the same basis as ltip matching awards
the last aep award the 2008 cycle covered the threeyear performance period 1 january 2008 to 31 december 2010 50 per
cent of the vested 2008 aep awards were released in shares during 2011 and 50 per cent were deferred matching awards were
granted during the year equal to 25x the deferred awards the details of the awards to the executive directors are as follows
shares deferred matching awards
released shares granted during
director 2011
1
 awarded
1
 the year
2
s c lockett 106344 106344 265860
r a allan 73340 73340 183350
a r c durrant 78228 78228 195570
n hawkings 73340 73340 183350
a g lodge 46516 46516 116290
notes
1
the midmarket closing price was 49975p on the day the aep award vested 25 march 2011 this number has been adjusted to reflect the 41 share split
in may 2011
2
the matching awards granted during the year relate to the deferred shares and are the maximum award possible under the matching award scheme
subject to performance criteria the midmarket closing price was 4286p on the date of grant of matching awards 28 june 2011
 the number of deferred shares awarded was adjusted to reflect the 41 share split which took place in may 2011 the adjusted numbers are quoted in
the table above
at 31 december 2011 the executive directors held several outstanding awards of deferred shares and matching awards
granted under the asset and equity plan as set out below
number of 
shares number of
made matching market
awards subject to awards awards price of
held at award granted event and held at 31 shares on earliest 
date of type of 1 january during during number december date of performance vesting 
grant award 2011
1
2011
2
2011
3
of shares 2011 award period date
s c lockett 110108 deferred 97364

–– 97364
a
– 32925p – 010111
share
130308 matching 412560 –– 412560
b
– 33575p 010108 – 010111
award 311210
200409 deferred 48976

–– – 48976
4
30700p – 010112
share
290509 matching 207528 –– – 207528
5
28400p 010109 – 010112
award 311211
260310 deferred 85528

–– – 85528 30275p – 010113
share
170610 matching 362428 –– – 362428 30350p 010110 – 010113
award 311212
250311 deferred – 106344 –– 106344 49975p – 010114
share
280611 matching –– 265860 – 265860 42860p 010111 – 010114
award 311213
1214384 106344 265860 509924 1076664 80   premier oil plc 2011 annual report and financial statements
remuneration report continued
outstanding awards under previous longterm incentive arrangements continued
number of 
shares number of
made matching market
awards subject to awards awards price of
held at award granted event and held at 31 shares on earliest 
date of type of 1 january during during number december date of performance vesting 
grant award 2011
1
2011
2
2011
3
of shares 2011 award period date
r a allan 110108 deferred 58100

–– 58100
a
– 32925p – 010111
share
130308 matching 246192 –– 246192
b
– 33575p 010108 – 010111
award 311210
200409 deferred 35544

–– – 35544
4
30700p – 010112
share
290509 matching 150624 –– – 150624
5
28400p 010109 – 010112
award 311211
260310 deferred 56128

–– – 56128 30275p – 010113
share
170610 matching 237840 –– – 237840 30350p 010110 – 010113
award 311212
250311 deferred – 73340 –– 73340 49975p – 010114
share
280611 matching –– 183350 – 183350 42860p 010111 – 010114
award 311213
784428 73340 183350 304292 736826
a r c durrant 110108 deferred 58100

–– 58100
a
– 32925p – 010111
share
130308 matching 246192 –– 246192
b
– 33575p 010108 – 010111
award 311210
200409 deferred 35544

–– – 35544
4
30700p – 010112
share
290509 matching 150624 –– – 150624
5
28400p 010109 – 010112
award 311211
260310 deferred 56128

–– – 56128 30275p – 010113
share
170610 matching 237840 –– – 237840 30350p 010110 – 010113
award 311212
250311 deferred – 78228 –– 78228 49975p – 010114
share
280611 matching –– 195570 – 195570 42860p 010111 – 010114
award 311213
784428 78228 195570 304292 753934
n hawkings 110108 deferred 51004

–– 51004
a
– 32925p – 010111
share
130308 matching 216132 –– 216132
b
– 33575p 010108 – 010111
award 311210
200409 deferred 35544

–– – 35544
4
30700p – 010112
share
290509 matching 150624 –– – 150624
5
28400p 010109 – 010112
award 311211
260310 deferred 56128

–– – 56128 30275p – 010113
share
170610 matching 237840 –– – 237840 30350p 010110 – 010113
award 311212
250311 deferred – 73340 –– 73340 49975p – 010114
share
280611 matching –– 183350 – 183350 42860p 010111 – 010114
award 311213
747272 73340 183350 267136 736826 premier oil plc 2011 annual report and financial statements   81
outstanding awards under previous longterm incentive arrangements continued
number of 
shares number of
made matching market
awards subject to awards awards price of
held at award granted event and held at 31 shares on earliest 
date of type of 1 january during during number december date of performance vesting 
grant award 2011
1
2011
2
2011
3
of shares 2011 award period date
a g lodge 260310 deferred 12480

–– – 12480 30275p – 010113
share
170610 matching 52888 –– – 52888 30350p 010110 – 010113
award 311212
250311 deferred – 46516 –– 46516 49975p – 010114
share
280611 matching –– 116290 – 116290 42860p 010111 – 010114
award 311213
65368 46516 116290 – 228174
notes
 on 29 march 2010 these awards were changed from conditional awards of shares to restricted shares some of the shares were sold to pay income tax
and national insurance contributions payable by messrs s c lockett a r c durrant n hawkings and a g lodge upon the accelerated vesting of the
awards but the amounts received from the sale remain subject to clawback in the event of the participant leaving premier other than as a ‘good leaver’
in the case of mr r a allan who as an expatriate is not subject to uk tax a percentage of the shares were withheld equal to the percentage tax rate that
would have applied had he been subject to uk income tax these shares reverted to the trust and the company will pay any overseas duties payable by
mr allan as a result of the vesting of his shares but the amount paid remains subject to clawback if mr allan leaves premier other than as a ‘good leaver’
the remaining shares are held in a nominee account within the employee benefit trust until the end of the original deferral period and are forfeitable if
the director leaves other than as a ‘good leaver’
a
shares released net from the employee benefit trust on 13 january 2011
b
awards vested 13 january 2011 the midmarket closing price on the date of vesting was 500p
1
the number of deferred shares and matching award shares awarded under the asset and equity plan were adjusted to reflect the 41 share split which
took place in may 2011 the adjusted numbers are quoted in the table above
2
there are no performance criteria for the deferred shares
3
matching awards granted are the maximum award possible under the matching award scheme subject to performance criteria based on tsr against a
comparator group of approximately 33 listed companies in the oil and gas sector full vesting requires upper decile performance
4
awards vested 19 january 2012 and were released net from the employee benefit trust
5
awards vested 19 january 2012 the midmarket closing price on the date of vesting was 4254p
conditional share awards
mr a g lodge was awarded a conditional share award equivalent in value to the shares he forfeited at his employer when he
left to join the company this award was considered essential to induce mr lodge to join the company vesting of the awards is
contingent on mr lodge remaining in employment at the vesting date but is not dependent on any further performancerelated
measures details of the conditional share award are set out below
market 
awards awards price of
held at event and held at 31 shares on earliest 
date of 1 january number december date of vesting 
director grant 2011
1 2
of shares 2011 award date
a g lodge 200409 60616 60616
a
– 29875p 200411
notes
a
shares released net from the employee benefit trust on 10 may 2011
1
the number of conditional share awards were adjusted to reflect the 41 share split which took place in may 2011 the adjusted numbers are quoted in
the table above
2
on 29 march 2010 these awards were changed from conditional awards of shares to restricted shares some of the shares were sold to pay income tax
and national insurance contributions payable by mr a g lodge upon the accelerated vesting of the awards but the amounts received from the sale
remained subject to clawback in the event of mr lodge leaving premier other than as a ‘good leaver’ the remaining shares were transferred to a
nominee account within the employee benefit trust until the end of the deferral period the midmarket closing price on 29 march 2010 was 3105p
this number has been adjusted to reflect the 41 share split in may 2011 82   premier oil plc 2011 annual report and financial statements
remuneration report continued
share option schemes
savings related share option scheme 2003
directors’ interests under this scheme are shown below
options options 
acquisition held at held at 
date of exercisable price per 1 january 31 december
grant dates share £
1
2011
1
granted exercised lapsed 2011
r a allan 030507 010612 – 203433 8048 ––– 8048
301112
a r c durrant 040506 010611 – 166668 9656 – 9656
2
––
301111
n hawkings 040506 010611 – 166668 9656 – 9656
3
––
301111
notes
1
the number of options and the option acquisition price have been adjusted to reflect the 41 share split which took place in may 2011 the adjusted
numbers are quoted in the table above
2
the midmarket closing price was 4651p on the day of exercise 16 june 2011
3
the midmarket closing price was 4030p on the day of exercise 20 july 2011
savings related share option scheme 2009
directors’ interests under this scheme are shown below
options options 
acquisition held at held at 
date of exercisable price per 1 january 31 december
grant dates share £
1
2011
1
granted exercised lapsed 2011
s c lockett 050510 010613 – 2605 3480 ––– 3480
301113
a g lodge 050510 010613 – 2605 3480 ––– 3480
301113
notes
1
the number of options and the option acquisition price has been adjusted to reflect the 41 share split which took place in may 2011 the adjusted
numbers are quoted in the table above
share incentive plan sip
shares held beneficially in this plan by the directors during the financial year were as follows
total total partnership 
partnership matching shares and matching
shares awarded in shares acquired
purchased in 2011 at prices shares between 
shares held 2011 at prices between 329p held on 1 january
on 1 january between 329p and 50825p 31 december and 21 march 
2011
1
and 50825p vesting in 2014 2011 2012
s c lockett 16308 353 353 17014 186
r a allan 16272 354 354 16980 186
a r c durrant 6120 353 353 6826 186
n hawkings 6120 353 353 6826 186
a g lodge 1488 354 354 2196 186
notes
1
the number of sip shares held has been adjusted to reflect the 41 share split which took place in may 2011 the adjusted numbers are quoted in the table above
share price movements during 2011
the midmarket closing price of the company’ s shares at 31 december 2011 was £363 31 december 2010 £4875 adjusted to reflect
the 41 share split in may 2011 the intraday trading price of the company’ s shares during 2011 was between £310 and £535
by order of the board
i j hinkley
chairman of the remuneration committee
21 march 2012 premier oil plc 2011 annual report and financial statements   83
statement of directors’ responsibilities
the directors are responsible for preparing the annual report and financial statements in accordance with applicable law and
regulations
company law requires the directors to prepare financial statements for each financial year under that law the directors are
required to prepare the group financial statements in accordance with international financial reporting standards ifrss as
adopted by the european union and article 4 of the ias regulation and 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 under company law the directors must not approve the accounts unless they are satisfied that
they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period
in preparing the parent company financial statements the directors are required to
• select suitable accounting policies and then apply them consistently
• make judgements and accounting estimates that are reasonable and prudent
• state whether applicable uk 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
in preparing the group financial statements international accounting standard 1 – ‘presentation of financial statements’
requires that directors
• properly select and apply accounting policies
• present information including accounting policies in a manner that provides relevant reliable comparable and
understandable information
• provide additional disclosures when compliance with the specific requirements in ifrss are insufficient to enable users to
understand the impact of particular transactions other events and conditions on the entity’s financial position and financial
performance and
• make an assessment of the company’s ability to continue as a going concern
the directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure
that the financial statements comply with the companies act 2006 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 wwwpremieroilcom legislation in the united kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions
responsibility statement
we confirm that to the best of our knowledge
• the financial statements prepared in accordance with the relevant financial reporting framework give a true and fair view of
the assets liabilities financial position and profit or loss of the company and the undertakings included in the consolidation
taken as a whole and
• the management report which is incorporated into the directors’ report includes a fair review of the development and
performance of the business and the position of the company and the undertakings included in the consolidation taken as a
whole together with a description of the principal risks and uncertainties that they face
by order of the board
s c lockett a r c durrant
chief executive finance director
21 march 2012 21 march 2012 84   premier oil plc 2011 annual report and financial statements
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 asia and middle east africa and pakistan
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
there are no new or amended standards or interpretations adopted with effect from 1 january 2011 that have a material impact
on the group’s annual results
at the date of authorisation of these financial statements the following standards and interpretations which have not been
applied in these financial statements were in issue but not yet effective and in some cases had not yet been adopted by the
european union
• ifrs 1 amended – ‘severe hyperinflation and removal of fixed dates for firsttime adopters’
• ifrs 7 amended – ‘disclosures – transfers of financial assets’
• ifrs 9 – ‘financial instruments’
• ifrs 10 – ‘consolidated financial statements’
• ifrs 11 – ‘joint arrangements’
• ifrs 12 – ‘disclosure of interests in other entities’
• ifrs 13 – ‘fair value measurement’
• ias 1 amended – ‘presentation of items of other comprehensive income’
• ias 12 amended – ‘deferred tax recovery of underlying assets’
• ias 19 revised – ‘employee benefits’
• ias 27 revised – ‘separate financial statements’
• ias 28 revised – ‘investments in associates and joint ventures’
• ifric 20 – ‘stripping costs in the production phase of a surface mine’
ifrs 9 – ‘financial instruments’ is effective for annual periods beginning on or after 1 january 2015 rather than 1 january 2013
as originally intended with transitional arrangements depending upon the date of initial application the group has not yet
decided the date of its initial application and has not yet completed its evaluation of the effect of adoption the new standard
has not yet been adopted by the european union
other than to expand certain disclosures within the financial statements the directors do not expect that the adoption of the other
standards and interpretations listed above will have a material impact on the financial statements of the group in future periods
basis of preparation
the financial statements have been prepared in accordance with international financial reporting standards ifrss as adopted
by 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 the going concern basis further information relating to the going concern
assumption is provided in the financial review
during the year management responsibility for the group’s activities in africa was transferred from the former north sea and
west africa business unit to the middle eastpakistan business unit the segmental information for the comparative year
contained within these financial statements has been represented to reflect this change
the principal 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 goodwillexcess of fair value over cost
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 premier oil plc 2011 annual report and financial statements   85
basis of consolidation continued
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
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 shares 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 group’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
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 86   premier oil plc 2011 annual report and financial statements
accounting policies continued
oil and gas assets continued
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 acquisition method when the assets acquired and
liabilities assumed constitute a business
transactions involving the purchase of an individual field interest or a group of field interests that do not constitute a
business are treated as asset purchases irrespective of whether the specific transactions involve 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
e decommissioning
provision for decommissioning is recognised in full when the related facilities are installed the amount recognised is the
present value of the estimated future expenditure a corresponding amount equivalent to the provision is also recognised as
part of the cost of the related oil and gas property 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 dealt with prospectively as an
adjustment to the provision and the oil and gas property the unwinding of the discount is included as a finance cost
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 premier oil plc 2011 annual report and financial statements   87
tax
the tax expensecredit represents the sum of the tax currently payablerecoverable and deferred tax movements during the year
the tax currently payable is based on taxable profit for the year taxable 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
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 goodwillexcess of fair value over cost 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 the group reassesses its
unrecognised deferred tax asset each year taking into account changes in oil and gas prices the group’s proven and probable
reserve profile and forecast capital and operating expenditures
deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted at the balance sheet date deferred tax is charged or credited in
the income statement except when it relates to items charged or credited in other comprehensive income in which case the
deferred tax is also dealt with in other comprehensive income
deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
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 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 nonmonetary assets held at historic cost are translated at the date of purchase and are not retranslated
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 comprehensive
income 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 88   premier oil plc 2011 annual report and financial statements
accounting policies continued
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
financial instruments
financial assets and financial liabilities are recognised in 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
borrowing costs
borrowing costs directly relating to the construction or production of a qualifying capital project under construction are
capitalised and added to the project cost during construction until such time as the assets are substantially ready for their
intended use ie when they are capable of commercial production where the funds used to finance a project form part of
general borrowings the amount capitalised is calculated using a weighted average of rates applicable to relevant general
borrowings of the group during the period all other borrowing costs are recognised in the income statement in the period in
which they are incurred
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 and 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 currently the group only has cash flow hedge
relationships
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 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
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 premier oil plc 2011 annual report and financial statements   89
derivative financial instruments continued
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
cash and cash equivalents
cash comprises cash in hand and shortterm deposits less overdrafts
cash equivalents comprise funds held in term deposit accounts with an original maturity not exceeding three months
sharebased payments
the group issues equitysettled 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 a monte carlo simulation the main assumptions are provided in note 19
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
• derivative financial instruments note 17
• tax and recognition of deferred tax assets note 18
• sharebased payments note 19 and
• pensions note 23 90   premier oil plc 2011 annual report and financial statements
independent auditor’s 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 2011 which comprise the
consolidated income statement the consolidated statement of comprehensive income the consolidated balance sheet the
consolidated statement of changes in equity the consolidated cash flow statement and the related notes 1 to 25 the
financial reporting framework that has been applied in their preparation is applicable law and international financial reporting
standards ifrss as adopted by the european union
this report is made solely to the company’s members as a body in accordance with chapter 3 of part 16 of the companies act
2006 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 auditor’s 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 auditor
as explained more fully in the directors’ responsibilities statement the directors are responsible for the preparation of the
group financial statements and for being satisfied that they give a true and fair view our responsibility is to audit and express an
opinion on the group financial statements in accordance with applicable law and international standards on auditing uk and
ireland those standards require us to comply with the auditing practices board’s ethical standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement whether caused by fraud or error this includes an
assessment of whether the accounting policies are appropriate to the group’s circumstances and have been consistently applied
and adequately disclosed the reasonableness of significant accounting estimates made by the directors and the overall
presentation of the financial statements in addition we read all the financial and nonfinancial information in the annual report
to identify material inconsistencies with the audited financial statements if we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report
opinion on financial statements
in our opinion the group financial statements
• give a true and fair view of the state of the group’s affairs as at 31 december 2011 and of its profit for the year then ended
• have been properly prepared in accordance with ifrss as adopted by the european union and
• have been prepared in accordance with the requirements of the companies act 2006 and article 4 of the ias regulation
opinion on other matter prescribed by the companies act 2006
in our opinion the information given in the directors’ report for the financial year for which the group financial statements are
prepared is consistent with the group financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you if in our opinion
• certain disclosures of directors’ remuneration specified by law are not made or
• we have not received all the information and explanations we require for our audit
under the listing rules we are required to review
• the directors’ statement contained within the directors’ report in relation to going concern and
• the part of the corporate governance report relating to the company’s compliance with the nine provisions of the uk
corporate governance code specified for our review and
• certain elements of the report to shareholders by the board on directors’ remuneration
other matter
we have reported separately on the parent company financial statements of premier oil plc for the year ended 31 december
2011 and on the information in the remuneration report that is described as having been audited
matthew donaldson fca senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london united kingdom
21 march 2012 premier oil plc 2011 annual report and financial statements   91
consolidated income statement
for the year ended 31 december 2011
2011 2010
note  million  million
sales revenues 1 8268 7636
cost of sales 2 4149 5305
exploration expense 8 1875 682
prelicence exploration costs 230 189
general and administration costs 258 183
operating profit 1756 1277
interest revenue finance and other gains 5 55 25
finance costs and other finance expenses 5 736 680
gain on derivative financial instruments 17 340 386
profit before tax 1415 1008
tax 6 297 290
profit after tax 1712 1298
earnings per share cents
basic 7 366 280
diluted 7 315 258
the results relate entirely to continuing operations
financial statements 92   premier oil plc 2011 annual report and financial statements
consolidated statement of comprehensive income
for the year ended 31 december 2011
2011 2010
note  million  million
profit for the year 1712 1298
cash flow hedges on commodity swaps


losses arising during the year 245 22
less reclassification adjustments for losses in the year 178 –
17 67 22
cash flow hedges on interest rate and foreign exchange swaps

17 65 121
exchange differences on translation of foreign operations 34 19
actuarial gains on longterm employee benefit plans 23 14 06
other comprehensive expense 152 156
total comprehensive income for the year 1560 1142
 no deferred tax asset has been recognised on the losses arising on cash flow hedges in either the current or preceding years as insufficient nonring
fence taxable profits are expected to arise in the future against which the deferred tax asset could reverse
all comprehensive income is attributable to the equity holders of the parent premier oil plc 2011 annual report and financial statements   93
consolidated balance sheet
as at 31 december 2011
2011 2010
note  million  million
noncurrent assets
intangible exploration and evaluation assets 8 3155 3108
property plant and equipment 9 22578 17328
deferred tax assets 18 5008 2853
30741 23289
current assets
inventories 277 186
trade and other receivables 11 3899 2455
tax recoverable 395 675
derivative financial instruments 17 491 657
cash and cash equivalents 12 3091 2997
8153 6970
total assets 38894 30259
current liabilities
trade and other payables 13 3812 3140
current tax payable 1465 564
shortterm borrowings 14 1837 –
provisions 16 351 237
derivative financial instruments 17 1548 1091
deferred revenue 17 84 –
9097 5032
net current liabilitiesassets 944 1938
noncurrent liabilities
convertible bonds 14 2265 2181
other longterm debt 14 6265 4664
deferred tax liabilities 18 2191 1837
longterm provisions 16 5654 4732
longterm employee benefit plan deficit 23 186 152
deferred revenue 17 – 359
16561 13925
total liabilities 25658 18957
net assets 13236 11302
equity and reserves
share capital 19 988 983
share premium account 2745 2548
retained earnings 9229 7387
other reserves 274 384
13236 11302
the financial statements were approved by the board of directors and authorised for issue on 21 march 2012
they were signed on its behalf by
s c lockett a r c durrant
chief executive finance director 94   premier oil plc 2011 annual report and financial statements
consolidated statement of changes in equity
for the year ended 31 december 2011
attributable to the equity holders of the parent
other reserves
share capital
share premium retained redemption translation equity
capital account earnings reserve reserves reserve total
note  million  million  million  million  million  million  million
at 1 january 2010 970 2237 6032 43 71 360 9713
issue of ordinary shares 13 311 321 –– – 03
net purchase of esop trust shares –– 83 –– – 83
provision for sharebased payments 19 –– 527 –– – 527
transfer between reserves

–– 71 –– 71 –
total comprehensive income –– 1161 – 19 – 1142
at 31 december 2010 983 2548 7387 43 52 289 11302
issue of ordinary shares 05 197 200 –– – 02
net sale of esop trust shares –– 26 –– – 26
provision for sharebased payments 19 – – 346 –– – 346
transfer between reserves

–– 76 –– 76 –
total comprehensive income –– 1594 – 34 – 1560
at 31 december 2011 988 2745 9229 43 18 213 13236
 the transfer between reserves relates to the noncash interest on the convertible bonds less the amortisation of the issue costs that were charged directly
against equity premier oil plc 2011 annual report and financial statements   95
consolidated cash flow statement
for the year ended 31 december 2011
2011 2010
note  million  million
net cash from operating activities 21 4859 4360
investing activities
capital expenditure 6605 5141
prelicence exploration costs 230 189
acquisition of oil and gas properties 899 74
proceeds from disposal of oil and gas properties – 204
recovery of cash previously held in a decommissioning trust – 692
net cash used in investing activities 7734 4508
financing activities
proceeds from issuance of ordinary shares 02 03
net salepurchase of esop trust shares 26 83
proceeds from drawdown of longterm bank loans 338 3100
proceeds from issuance of senior loan notes 3507 –
debt arrangement fees 25 179
repayment of longterm bank loans 351 1780
interest paid 546 409
net cash from financing activities 2951 652
currency translation differences relating to cash and cash equivalents 18 13
net increase in cash and cash equivalents 94 491
cash and cash equivalents at the beginning of the year 2997 2506
cash and cash equivalents at the end of the year 21 3091 2997 96   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements
for the year ended 31 december 2011
1 operating segments
the group’s operations are located and managed in three regional business units – north sea asia and middle east africa
and pakistan these geographical segments are the basis on which the group reports its segmental information
2011 2010
 million  million
revenue
north sea 2538 4254
asia 4214 1957
middle east africa and pakistan 1516 1425
total group sales revenue 8268 7636
interest and other finance revenue 20 25
total group revenue 8288 7661
group operating profitloss
north sea 479 174
asia 2011 1079
middle east africa and pakistan 625 690
unallocated

401 318
group operating profit 1756 1277
interest revenue finance and other gains 55 25
finance costs and other finance expenses 736 680
gain on derivative financial instruments 340 386
profit before tax 1415 1008
tax 297 290
profit after tax 1712 1298
balance sheet
segment assets
north sea 19451 13451
asia 14395 11421
middle east africa and pakistan 1466 1734
unallocated

3582 3653
total assets 38894 30259
liabilities
north sea 7755 5844
asia 4824 3555
middle east africa and pakistan 1089 1267
unallocated

11990 8291
total liabilities 25658 18957
other information
capital additions and acquisitions
north sea 5161 3521
asia 3399 3520
middle east africa and pakistan 416 550
total capital additions and acquisitions 8976 7591
depreciation depletion amortisation and impairment
north sea 933 2132
asia 706 312
middle east africa and pakistan 162 192
total depreciation depletion amortisation and impairment 1801 2636
 unallocated expenditure assets and liabilities include amounts of a corporate nature and not specifically attributable to a geographical segment
these items include corporate general and administration costs prelicence exploration costs cash and cash equivalents mark to market valuations
of commodity contracts and interest rate swaps convertible bonds and other shortterm and longterm debt
out of the total group worldwide sales revenues of us8268 million 2010 us7636 million revenues of us2538 million
2010 us4254 million arose from sales of oil and gas to customers located in the uk premier oil plc 2011 annual report and financial statements   97
1 operating segments continued
included in assets arising from the north sea segment are noncurrent assets excluding deferred tax assets of us11286
million 2010 us8176 million located in the uk
revenue from four customers 2010 four customers each exceeded 10 per cent of the group’s consolidated revenue
and amounted respectively to us1615 million and us1943 million arising from sales of crude oil 2010 us1341 million
and us2258 million and us2282 million and us897 million arising from sales of gas 2010 us1731 million and
us795 million
2 cost of sales
2011 2010
note  million  million
operating costs 2352 2171
stock overliftunderlift movement 228 356
royalties 224 142
amortisation and depreciation of property plant and equipment
oil and gas properties 9 2032 1960
other fixed assets 9 28 23
impairment reversalcharge on oil and gas properties 9 259 653
4149 5305
3 auditor’s remuneration
2011 2010
 million  million
audit fees
fees payable to the company’s auditor for the company’s annual report 07 05
audit of the company’s subsidiaries pursuant to legislation 01 01
08 06
nonaudit fees
other services pursuant to legislation – interim review 01 01
corporate finance services

07 –
tax services 02 05
information technology subscription fees for upstream data 01 01
other services – 02
11 09
 the 2011 corporate finance services fee represents the reporting accountants’ work performed in relation to the acquisition of the additional equity
interest in the wytch farm field and to the acquisition of encore oil plc
the audit and risk committee has a policy on the use of auditors in a nonaudit capacity which is aimed at ensuring their
continued independence the use of the external auditor for services relating to accounting systems or financial statements
is not permitted as are various other services that could give rise to conflicts of interest or other threats to the auditor’s
objectivity that cannot be reduced to an acceptable level by applying safeguards 98   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
4 staff costs
2011 2010
 million  million
staff costs including executive directors
wages and salaries 1443 1138
social security costs 123 96
pension costs
defined contribution 35 26
defined benefit 11 19
1612 1279
a portion of the group’s staff costs above are recharged to 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
2011 2010
average number of employees during the year
technical and operations 441 378
management and administration 197 183
638 561
 staff numbers include executive directors
5 interest revenue and finance costs
2011 2010
note  million  million
interest revenue finance and other gains
shortterm deposits 09 14
exchange differences and others 46 11
55 25
finance costs and other finance expenses
bank loans and overdrafts 380 350
payable in respect of convertible bonds 14 156 152
payable in respect of senior loan notes 109 –
unwinding of discount on decommissioning provision 16 283 162
longterm debt arrangement fees 64 156
exchange differences and others 07 29
gross finance costs and other finance expenses 999 849
finance costs capitalised during the year 9 263 169
736 680
the amount of finance costs capitalised was determined by applying the weighted average rate of finance costs applicable
to the borrowings of the group of 544 per cent 2010 634 per cent to the expenditures on the qualifying asset
during the year a credit of us35 million of currency exchange gains was made by the group to income 2010 charge of
us22 million of currency exchange losses this excluded exchange gains and losses arising on financial instruments
measured at fair value through profit or loss premier oil plc 2011 annual report and financial statements   99
6 tax
2011 2010
note  million  million
current tax
uk corporation tax on profits – –
uk petroleum revenue tax 172 259
overseas tax 601 569
adjustments in respect of prior years

700 214
total current tax 1473 614
deferred tax
uk corporation tax 2226 739
uk petroleum revenue tax 110 208
overseas tax 346 43
total deferred tax 18 1770 904
tax on profit on ordinary activities 297 290
 for 2011 the adjustments in respect of prior years consist principally of additional provisions in indonesia and pakistan for fiscal disputes
the tax credit for the year can be reconciled to the profit per the consolidated income statement as follows
2011 2010
 million  million
group profit on ordinary activities before tax 1415 1008
group profit on ordinary activities before tax at 326 weighted average rate 2010 479 461 483
tax effects of
incomeexpenses that are not taxabledeductible in determining taxable profit 229 25
tax and tax credits not related to profit before tax including uk petroleum revenue tax 425 49
unrecognised tax losses 318 86
utilisation and recognition of tax losses not previously recognised 964 674
adjustments in respect of prior years 700 259
effect of change in tax rates 616 –
tax credit for the year 297 290
effective tax rate for the year 210 288
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 yearonyear relates to the mix of profit and loss
in each jurisdiction the standard tax rate on uk ring fence profits is 62 per cent 2010 50 per cent 100   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
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
in may 2011 the company conducted a 41 share split in accordance with ias 33 – ‘earnings per share’ the comparatives
have been restated accordingly
basic and diluted earnings per share are calculated as follows
weighted average
profit after tax number of shares earnings per share
2010 2010
2011 2010 2011 restated 2011 restated
 million  million million million cents cents
basic 1712 1298 4674 4640 366 280
contingently issuable shares – – 758 396  
diluted 1712 1298 5432 5036 315 258
 the inclusion of the contingently issuable shares in the 2011 and 2010 calculations produces diluted earnings per share the contingently issuable
shares include any expected additional share issues due to future sharebased payments and for the acquisition of encore oil plc as detailed in
note 25 to the consolidated financial statements at 31 december 2011 37349360 2010 restated 37349360 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 2010 antidilutive if the contingently issuable shares for the
acquisition of encore oil plc were excluded diluted earnings per share would increase to 355 cents
8 intangible exploration and evaluation ee assets
oil and gas properties
middle east
africa and
north sea asia pakistan total
 million  million  million  million
cost
at 1 january 2010 1111 1077 128 2316
exchange movements 11 –– 11
additions during the year 1237 189 306 1732
transfer to property plant and equipment 209 28 10 247
exploration expense 506 09 167 682
at 31 december 2010 1622 1229 257 3108
exchange movements 03 –– 03
additions during the year 1759 716 255 2730
transfer to property plant and equipment 771 – 34 805
exploration expense 807 671 397 1875
at 31 december 2011 1800 1274 81 3155
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 2011 annual report and financial statements   101
9 property plant and equipment
oil and gas properties
middle east
africa and other
north sea asia pakistan fixed assets total
 million  million  million  million  million
cost
at 1 january 2010 10400 7294 3153 135 20982
exchange movements ––– 02 02
acquisitions 83 ––– 83
additions during the year

2178 3329 243 26 5776
disposals ––– 02 02
transfer from intangible ee assets 209 28 10 – 247
at 31 december 2010 12870 10651 3406 157 27084
exchange movements ––– 01 01
acquisitions

1240 ––– 1240
additions during the year

2094 2683 160 69 5006
disposals ––– 01 01
transfer from intangible ee assets 771 – 34 – 805
at 31 december 2011 16975 13334 3600 224 34133
amortisation and depreciation
at 1 january 2010 3086 1608 2349 79 7122
exchange movements ––– 01 01
charge for the year 1458 311 191 23 1983
impairment charge 653 ––– 653
disposals ––– 01 01
at 31 december 2010 5197 1919 2540 100 9756
exchange movements ––– 01 01
charge for the year 1101 705 226 28 2060
impairment reversalcharge 194 – 65 – 259
disposals ––– 01 01
at 31 december 2011 6104 2624 2701 126 11555
net book value
at 31 december 2010 7673 8732 866 57 17328
at 31 december 2011 10871 10710 899 98 22578
 finance costs that have been capitalised within oil and gas properties during the year total us263 million 2010 us169 million at a weighted
average interest rate of 544 per cent 2010 634 per cent
 acquisitions in the current year relate to the purchase of the additional equity interest in the wytch farm field the group has assessed this
transaction and concluded that it does not constitute a ‘business’ under ifrs 3 – ‘business combinations’
other fixed assets include items such as leasehold improvements motor vehicles and office equipment
amortisation and depreciation of 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 on an entitlement basis 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
during the year a net reversal of previous impairments of producing oil and gas properties was recognised the main
elements were credits of us335 million and us65 million for reversal of previously recorded impairments in respect of the
scott and chinguetti fields offset by impairment charges of us73 million and us68 million in respect of the balmoral
and brenda fields the reversals resulted from an increased estimate of the quantities of hydrocarbons recoverable from the
scott field coupled with a positive change in the estimates used to determine the assets’ recoverable amount since the
impairment losses were recognised most notably an increase in base price assumption for hydrocarbons due to the
sustained high oil price environment the impairment charges arose mainly as a result of reduced estimates of the quantities
of hydrocarbons recoverable from the balmoral and brenda fields 102   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
9 property plant and equipment continued
the impairment charges and reversals were calculated by comparing the future discounted cash flows expected to be
derived from production of commercial reserves the valueinuse against the carrying value of the asset the future cash
flows were estimated using an oil price assumption equal to the dated brent forward curve in 2012 and 2013 and us75bbl
in ‘real’ terms thereafter 2010 fixed price of us75bbl and were discounted using a discount rate of 10 per cent 2010
10 per cent assumptions involved in impairment measurement include estimates of commercial reserves and production
volumes future oil and gas prices and the level and timing of expenditures all of which are inherently uncertain
10 investments
principal subsidiary undertakings
at 31 december 2011 the company had 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 holdings ltd intermediate holding company uk england and wales
premier oil overseas bv intermediate holding company netherlands netherlands
premier oil uk ltd exploration production and development uk scotland
premier oil natuna sea bv exploration production and development indonesia netherlands
premier oil kakap bv exploration production and development indonesia netherlands
premier oil sumatra north bv exploration production and development indonesia netherlands
premier oil pakistan holdings bv intermediate holding company netherlands 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
premier oil vietnam offshore bv exploration production and development vietnam netherlands
premier oil vietnam ltd exploration production and development vietnam british virgin islands
premier oil norge as exploration production and development norway norway
 held directly by premier oil plc all other companies are held through subsidiary undertakings
subsequent to yearend the company completed the acquisition of encore oil plc further details are given in note 25 to
the consolidated financial statements
joint ventures
the group has a 49 per cent interest in premco energy projects company llc a company registered in the united arab
emirates and a 50 per cent interest in premco energy projects bv  a company registered in the netherlands the results of
these two jointly controlled entities which are indirectly held through subsidiary undertakings and which are involved in
business development opportunities across the middle east and north africa region are accounted for using proportionate
consolidation and were immaterial to the group in 2011 and 2010
11 trade and other receivables
2011 2010
 million  million
trade receivables 2052 1267
other receivables 1661 1012
prepayments 186 176
3899 2455
the carrying values of the trade and other receivables are equal to their fair value as at the balance sheet date premier oil plc 2011 annual report and financial statements   103
12 cash and cash equivalents
2011 2010
note  million  million
cash at bank and in hand 562 215
shortterm deposits 2529 2782
21 3091 2997
13 trade and other payables
2011 2010
 million  million
trade payables 589 435
accrued expenses 2531 2102
other payables 692 603
3812 3140
the carrying values of the trade and other payables are equal to their fair value as at the balance sheet date
14 borrowings
2011 2010
note  million  million
shortterm borrowings – bank loans 17 1837 –
convertible bonds

2282 2204
other longterm debt – bank loans

17 3000 4850
other longterm debt – senior loan notes

17 3412 –
total borrowings 10531 7054
 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 us17 million 2010 us23 million and debt arrangement fees of us147 million 2010 us186 million respectively
a maturity analysis showing the ageing profile of the total borrowings is shown in note 17
during the year the group undertook a private placement of senior loan notes of us2440 million and €750 million at the
yearend date the group’s principal credit facilities comprised a us1750 million term loan and a nok 1500 million
us251 million exploration financing facility both maturing in 2012 and a us3000 million term loan a us4568 million
revolving credit facility and a £3947 million us6118 million letter of credit facility all maturing in 2015
convertible bonds
in june 2007 the group issued bonds at a par value of us2500 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 were 8003434 ordinary shares of the company underlying the
bonds in april 2009 the conversion price was adjusted from £1582 per share to £1356 per share as a result of the
company’s four for nine rights issue of new ordinary shares at the adjusted conversion price of £1356 per share there were
9337340 ordinary shares of the company underlying the bonds in may 2011 the conversion price was adjusted from
£1356 per share as a result of the company’s 41 share split at the adjusted conversion price of £339 per share there are
37349360 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 104   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
14 borrowings continued
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
2011 2010
 million  million
liability component at 1 january 2181 2101
interest charged 156 152
interest paid 72 72
total liability component at 31 december 2265 2181
the total interest charged for the year has been calculated by applying an effective annual interest rate of 673 per cent
2010 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 us2500 million at maturity
there is no material difference between the carrying amount of the liability component of the convertible bonds and its fair
value this fair value is calculated by discounting the future cash flows at the market rate
capital management
the primary objective of the group’s capital management policy is to ensure that it maintains healthy capital ratios in order
to support its business and increase shareholder value the group manages its capital structure and makes adjustments to it
in light of changes in economic conditions no changes were made to the objectives policies or processes during the years
ended 31 december 2011 and 31 december 2010
the group monitors capital using a gearing ratio which is net debt divided by net assets plus net debt the group’s policy is
to keep the longterm gearing ratio below 50 per cent net debt comprises interestbearing bank loans senior loan notes
and convertible bonds less cash and shortterm deposits
note 2011 2010
net debt  million 21 7440 4057
net assets  million 13236 11302
net assets plus net debt  million 20676 15359
gearing ratio  360 264
15 obligations under leases
2011 2010
 million  million
minimum lease payments under operating leases recognised as an expense in the year 213 72
outstanding commitments for future minimum lease payments under
noncancellable operating leases which fall due as follows
within one year 832 239
in two to five years 2724 2985
over five years 2480 970
6036 4194
operating lease payments represent the group’s share of lease costs payable by the group for floating production storage
and offtake vessels and for rentals of certain of its office properties office equipment and motor vehicles premier oil plc 2011 annual report and financial statements   105
16 longterm provisions
2011 2010
note  million  million
decommissioning costs
total provisions at 1 january 4969 3034
acquisitions 260 09
revision arising from
new provisions and changes in estimates 522 1896
exchange differences 29 132
unwinding of discount on decommissioning provision 5 283 162
total provisions at 31 december 6005 4969
reclassification of shortterm provisions to current liabilities 351 237
longterm provisions at 31 december 5654 4732
the decommissioning provision represents the present value of decommissioning costs relating to oil and gas interests in
the uk indonesia vietnam pakistan and mauritania which are expected to be incurred up to 2038 these provisions have
been created based on the group’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
new provisions and changes in estimates result from an increase in decommissioning estimates for nonoperated fields in
the uk and further provisions for fields in development in the uk indonesia and vietnam offset by an increase in the
discount rate used to 520 per cent 2010 325 per cent the change in discount rate used in 2011 increased the unwinding
of discount charge by us106 million
17 financial instruments
financial risk management objectives and policies
the group’s principal financial liabilities other than derivative financial instruments derivatives comprise accounts payable
bank loans convertible bonds and senior loan notes the main purpose of these financial instruments is to manage short
term cash flow and to raise finance for the group’s capital expenditure programme the group has various financial assets
such as accounts receivable and cash and shortterm deposits which arise directly from its operations
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
the main risks that could adversely affect the group’s financial assets liabilities or future cash flows are commodity price risk
cash flow interest rate risk foreign currency exchange risk credit risk and liquidity risk 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
derivative financial instruments
the group uses derivatives to manage its exposure to oil and gas price fluctuations and to changes in interest rates and
foreign currency
oil and gas hedging is undertaken with collar options reverse collars swaps and hedges embedded in longterm crude
offtake agreements 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
the group’s exposure to interest rates is managed by maintaining an appropriate mix of both fixed and floating interest rate
borrowings within its debt portfolio however given the very low level of fixed interest rates available relative to historical
rates substantially all of the current drawings have been converted to fixed interest rates using the interest rate swap markets
as the group reports in us dollars since that is the currency in which the majority of the group’s transactions are
denominated significant exchange rate exposures currently relate only to certain local currency receipts and expenditures
within individual business units exchange rate exposures are managed within approved policy parameters utilising forward
foreign exchange contracts 106   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
17 financial instruments continued
fair value hierarchy
in line with ias 39 – ‘financial instruments recognition and measurement’ the group uses the following hierarchy for
determining the fair value of financial instruments by valuation technique
level 1 quoted unadjusted prices in active markets for identical assets or liabilities
level 2 other techniques for which all inputs which have a significant effect on the recorded fair value are observable either
directly or indirectly and
level 3 techniques which use inputs which have a significant effect on the recorded value that are not based on observable
market data
as at 31 december 2011 the group held the following financial instruments measured at fair value excluding any primary
financial instruments such as cash and bank loans
assets measured at fair value
financial assets at fair value through profit and loss
at
31 december level 1 level 2 level 3
 million  million  million  million
2011
oil reverse collars 488 – 488 –
gas forward sale contracts 03 – 03 –
total 491 – 491 –
2010
oil reverse collars 657 – 657 –
total 657 – 657 –
liabilities measured at fair value
financial liabilities at fair value through profit and loss
at
31 december level 1 level 2 level 3
 million  million  million  million
2011
oil collars 1008 – 1008 –
oil forward sale contracts 04 – 04 –
gas collars 237 – 237 –
interest rate swaps 193 – 193 –
forward foreign exchange contracts 10 – 10 –
cross currency swap 96 – 96 –
total 1548 – 1548 –
2010
oil collars 699 – 699 –
oil forward sale contracts 42 – 42 –
gas collars 215 – 215 –
interest rate swaps 129 – 129 –
forward foreign exchange contracts 06 – 06 –
total 1091 – 1091 –
all of the above fair values are based on level 2 techniques premier oil plc 2011 annual report and financial statements   107
17 financial instruments continued
commodity price risk
oil
at 31 december 2011 the group had 18 million barrels of dated brent oil hedged with collars at an average floor price of
us400bbl and an average cap of us1000bbl all of which are embedded through offtake agreements to the end of 2012
the group also has oil collars with banks which are marked to market through profit or loss additionally the group has
executed reverse collars with certain oil trading companies at strike prices identical to the bank collars similar to the bank
collars these reverse collars are derivatives that must be marked to market through profit or loss they effectively offset each
other resulting in no net impact on the income statement or balance sheet the hedges embedded in longterm crude
offtake agreements are not fair valued as they qualify for ‘ownuse’ exemption under ias 39
in addition 21 million barrels of dated brent oil were hedged through forward sales for 2012 at an average price of
us1053bbl
during the year embedded oil price collars for 324 million barrels matured generating a net cost of us1013 million
2010 us80 million this cost has been offset against sales revenues
indonesian gas
at the yearend date 162000 metric tonnes mt of singapore 180 hsfo which underlies the pricing mechanism for
indonesian gas sold into the singapore market was subject to collars covering the period to midyear 2013 with a floor of
us2500mt and a cap of us5000mt an additional 132000 mt have been sold under monthly forward sales contracts for
2012 at an average price of us6220mt
during the year singapore 180 hsfo contracts for 120000 mt matured generating a cash cost of us178 million 2010
us01 million which have been offset against sales revenues all of these contracts have been designated as cash flow
hedges and were assessed to be effective in the current year us60 million of the movement in the fair value of these
contracts was credited to the income statement 2010 credit of us204 million as this movement related to the timevalue
portion of hedges under ias 39 the remaining movement being a charge of us63 million 2010 charge of us120 million
related to the intrinsic value of such instruments and was recognised directly in retained earnings
movement in commodity collar and swap contracts
oil gas total
assetliability  million  million  million
at 1 january 2010 1073 298 1371
cash settlement for swaps 162 – 162
deduction against sales revenues 80 01 81
credit to income statement for the year 152 204 356
creditcharge to retained earnings for the year 98 120 22
at 31 december 2010 741 215 956
cash settlement for swaps and collars 572 163 735
deduction against sales revenues 1013 178 1191
credit to income statement for the year 174 60 234
charge to retained earnings for the year 04 63 67
at 31 december 2011 1012 233 1245
movement in commodity reverse collars
oil gas total
assetliability  million  million  million
at 1 january 2010 809 – 809
charge to income statement for the year 152 – 152
at 31 december 2010 657 – 657
charge to income statement for the year 169 – 169
at 31 december 2011 488 – 488
the fair values which have been determined from counterparties with whom the trades have been concluded have been
recognised in the balance sheet in current assets and current liabilities 108   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
17 financial instruments continued
commodity contract sensitivity analysis
the key variable which affects the fair value of the group’s hedging instruments is market expectations about future
commodity prices the following illustrates the sensitivity of net income and equity to a 10 per cent increase and a 10 per
cent decrease in this variable
oil gas total
increasedecrease in mark to market value  million  million  million
ten per cent increase 221 86 307
ten per cent decrease 187 80 267
deferred revenue related to oil reverse collars
deferred revenue has been created due to firstday gains arising from offtake agreements and related oil reverse collars this
deferred revenue is being released to the income statement over the life of each individual offtake agreement as shown below
oil gas total
assetliability  million  million  million
at 1 january 2010 541 – 541
credit to income statement for the year 182 – 182
at 31 december 2010 359 – 359
credit to income statement for the year 275 – 275
at 31 december 2011 84 – 84
interest rate risk
at 31 december 2011 us4500 million of the group’s longterm bank borrowings have been swapped from floating rate to
fixed rate under these interest rate swap contracts the group has agreed to exchange the difference between fixed and
floating interest amounts calculated on agreed notional principal amounts such contracts enable the group to mitigate the
risk of changing interest rates and the cash flow exposure on the issued variable rate debt held
these contracts have been designated as cash flow hedges and were assessed to be effective the fair value of interest rate
swaps at the reporting date is determined by discounting the future cash flows using the forward curves at this date the
movement in fair values is shown in the table below
total
assetliability  million
at 1 january 2010 08
cash settlement for swaps 70
charge to income statement for the year 70
charge to retained earnings for the year 121
at 31 december 2010 129
cash settlement for swaps 89
charge to income statement for the year 89
charge to retained earnings for the year 64
at 31 december 2011 193
interest rate swaps sensitivity analysis
the key variable which affects the fair value of the group’s hedging instruments is market expectations about future interest
rates the following illustrates the sensitivity of comprehensive income to an increase of 50 basis points in this variable
total
increasedecrease in mark to market value  million
increase of fifty basis points 44
a decrease of 50 basis points in this variable has not been considered appropriate due to the current very low level of
floating interest rates premier oil plc 2011 annual report and financial statements   109
17 financial instruments continued
foreign currency exchange risk
during the year the group issued €750 million longterm senior loan notes which have been hedged under a cross currency
swap in us dollars at a fixed rate of us1423€ the fair value of this cross currency swap at the reporting date is shown
below
total
assetliability  million
at 1 january 2011 –
charge to income statement for the year 95
charge to retained earnings for the year 01
at 31 december 2011 96
to cover sterling exposures an amount of £1820 million was purchased with forward contracts during the year 2010 £1980
million premier’s activities are largely conducted in us dollars the majority of borrowings at yearend were denominated in
us dollars to match the currency of the assets
the impact of variations in foreign exchange rates on the group’s results would be immaterial
other financial instruments
credit risk
the group’s credit risk is attributable to its trade receivables and its bank deposits the amount of receivables presented in
the balance sheet is net of allowances for doubtful receivables which were immaterial in 2011 and 2010 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
an indication of the concentration of credit risk is shown in note 1 whereby the revenue from four customers each
exceeded 10 per cent of the group’s consolidated revenue in 2011 and 2010
the ageing profile of the group’s trade and other receivables and trade and other payables as at 31 december including
the related undiscounted 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
2011
trade and other receivables 2990 181 542 –– 3713
trade and other payables 881 289 111 –– 1281
bank loans –– 2015 3362 – 5377
convertible bonds –– 72 2608 – 2680
senior loan notes –– 188 752 3982 4922
total 2109 108 1844 6722 3982 10547
2010
trade and other receivables 1826 178 275 –– 2279
trade and other payables 972 64 02 –– 1038
bank loans –– 233 5390 – 5623
convertible bonds –– 72 2680 – 2752
total 854 114 32 8070 – 7134
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 110   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
17 financial instruments continued
borrowing facilities
the group has committed borrowing facilities of us12981 million and letter of credit facilities of £4249 million
us6586 million in addition to the convertible bonds and senior loan notes the undrawn cash balance from the
committed borrowing facilities as at 31 december was
2011 2010
 million  million
expiring in more than one year but not more than two years 164 172
expiring in more than two years but not more than five years 4568 4468
the undrawn balance on the letter of credit facilities as at 31 december 2011 was £2154 million us3339 million 2010
£2809 million us4382 million
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 
2011
bank loans 4500 337 4837 5171
convertible bonds 2500 – 2500 2875
senior loan notes 3412 – 3412 5506
total 10412 337 10749 –
2010
bank loans 4500 350 4850 5171
convertible bonds 2500 – 2500 2875
total 7000 350 7350 –
 at 31 december 2011 us4500 million of the group’s longterm bank borrowings have been swapped from floating interest rate to fixed interest
rate and are therefore included as a fixed rate liability in the table above 2010 us4500 million
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
2011 2010
 million  million
bank loans 4708 4664
senior loan notes 3394 –
convertible bonds
liability component 2265 2181
equity component 213 289
the floating rate financial liabilities at 31 december 2011 comprised bank borrowings bearing interest at rates set by
reference to nibor and us libor exposing the group to a cash flow interest rate risk premier oil plc 2011 annual report and financial statements   111
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
2011
cash and shortterm deposits
sterling 54 06 60
us dollar 2666 167 2833
other 84 114 198
total 2804 287 3091
2010
cash and shortterm deposits
sterling 111 – 111
us dollar 2601 57 2658
other 53 175 228
total 2765 232 2997
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
fair value of financial assets and financial liabilities
the fair values of the financial assets and financial liabilities excluding current assets current liabilities and derivative
financial instruments are
2011 2011 2010 2010
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 3091 3091 2997 2997
bank loans 4837 4837 4850 4850
senior loan notes 3412 3412 ––
liability component of convertible bonds 2282 2282 2204 2204
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 112   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
18 deferred tax
2011 2010
 million  million
deferred tax assets 5008 2853
deferred tax liabilities 2191 1837
2817 1016
charged
at 1 credited to at 31
january exchange income december
2010 movements statement 2010
 million  million  million  million
uk deferred corporation tax
fixed assets and allowances 1869 – 1721 148
decommissioning 1163 – 723 1886
deferred petroleum revenue tax 69 – 105 36
tax losses and allowances 177 – 1210 1387
unrecognised tax losses and allowances 1376 – 674 702
deferred revenue 141 – 42 99
total uk deferred corporation tax 2043 – 739 2782
uk deferred petroleum revenue tax
1
137 – 208 71
overseas deferred tax
2
1798 04 43 1837
total 108 04 904 1016
charged
at 1 credited to at 31
january exchange income december
2011 movements statement 2011
 million  million  million  million
uk deferred corporation tax
fixed assets and allowances 148 – 2360 2212
decommissioning 1886 – 797 2683
deferred petroleum revenue tax 36 – 60 24
tax losses and allowances 1387 – 3054 4441
unrecognised tax losses and allowances 702 – 702 –
deferred revenue 99 – 27 72
total uk deferred corporation tax 2782 – 2226 5008
uk deferred petroleum revenue tax
1
71 – 110 39
overseas deferred tax
2
1837 31 346 2152
total 1016 31 1770 2817
1
the uk deferred petroleum revenue tax relates mainly to temporary differences associated with decommissioning provisions
2
the overseas deferred tax relates mainly to temporary differences associated with fixed asset balances
the group’s unutilised tax losses and allowances at 31 december 2011 are recognised to the extent that taxable profits are
expected to arise in the future against which the tax losses and allowances can be utilised in accordance with paragraph 37
of ias 12 – ‘income taxes’ the group reassessed its unrecognised deferred tax assets at 31 december 2011 with respect to
ring fence tax losses and allowances the corporate model used to assess whether additional deferred tax assets should be
recognised was rerun taking into account additional equity acquired in the wytch farm and catcher areas and the
inclusion of other additional uk fields using an oil price assumption equal to the dated brent forward curve in 2012 and
2013 and us75bbl in ‘real’ terms thereafter as a result the remaining unrecognised deferred tax assets of us702 million
have been recognised in 2011 at 31 december 2011 the group uk ring fence deferred tax assets in respect of tax losses
and allowances have been recognised in full premier oil plc 2011 annual report and financial statements   113
18 deferred tax continued
in addition to the above there are nonring fence uk tax losses of approximately us1812 million 2010 us1713 million
and current year nonuk tax losses of approximately us694 million for which a deferred tax asset has not been recognised
none of the uk tax losses ring fence and nonring fence have a fixed expiry date for tax purposes
no deferred tax has been provided on unremitted earnings of overseas subsidiaries following a change in uk tax legislation
in 2009 which exempted foreign dividends from the scope of uk corporation tax where certain conditions are satisfied
19 share capital
2011 2011 2010 2010
125p shares £ 50p shares £
ordinary shares
calledup issued and fullypaid 468059828 58507479 116395912 58197956
2011 2010
 million  million
at 1 january 983 970
shares issued to the premier oil plc employee benefit trust nominal value 05 13
at 31 december 988 983
ordinary shares
at the annual general meeting on 20 may 2011 shareholders authorised the company to subdivide each of the company’s
ordinary shares of 50 pence each into four ordinary shares of 125 pence each such shares having the rights and being
subject to the restrictions set out in the articles of association of the company the subdivision took effect at 0800am on
23 may 2011
in april 2011 prior to the 41 share split the company issued 600000 ordinary shares of 50 pence each with a nominal value of
£300000 us484770 to the premier oil plc employee benefit trust to be used to satisfy future awards under the company’ s
share incentive plans 2010 1700000 ordinary shares of 50 pence each with a nominal value of £850000 us1327955
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
sharebased payments and share incentive plans
the group currently operates a long term incentive plan ltip for all employees and a share incentive plan and a save as
you earn scheme for ukbased and expatriate employees only
for the year ended 31 december 2011 the total cost recognised by the group for equitysettled sharebased payment
transactions was us346 million a credit of us346 million has been recorded in retained earnings 2010 us527 million
for all equitysettled payments of 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 plc
group part of this cost is therefore capitalised as directly attributable to capital projects and part is charged to the income
statement as operating costs prelicence exploration costs or general and administration costs 114   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
19 share capital continued
details of the different share incentive plans currently in operation are set out below
i long term incentive plan
the long term incentive plan ltip was introduced in 2009 to provide a longterm all employee scheme which motivates all
employees and provides a longerterm perspective to the total remuneration package awards under the ltip comprise
three elements equity pool awards and performance share awards that vest after the expiry of a threeyear performance
period and a potential matching award that vests at the expiry of a further threeyear performance period commencing at
the end of the threeyear performance period for equity pool and performance share awards
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 and of the
performance share awards the main assumptions used for the calculations are as follows
volatility 400 to 410
risk free rate of interest 29 to 37
correlation factor with comparator group 029 to 032
ii share incentive plan
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
iii savings related share option scheme
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
2011 2010
weighted weighted
average average
options exercise price options exercise price
outstanding at the beginning of the year

418684 £208 174473 £472
granted during the year 63936 £417 38906 £1042
lapsed during the year 14716 £275 2369 £849
exercised during the year

99504 £159 106339 £311
outstanding at the end of the year 368400 £255 104671 £833
exercisable at the end of the year –– 5831 £208
 the options outstanding at 1 january 2011 have been restated to reflect the 41 share split that occurred on 23 may 2011
 76180 ordinary shares with a nominal value of £9523 us15436 were issued under the group’s share option schemes during the year 2010
22846 ordinary shares with a nominal value of £11423 us16988 the remaining 23324 ordinary shares were issued from the premier oil plc
employee benefit trust 2010 83493
the weighted average share price at the date of exercise for share options exercised during the year was £446 the options
outstanding at 31 december 2011 had a weighted average exercise price of £255 and a weighted average remaining
contractual life of 236 years
the fair value of the options granted during the year was determined using the blackscholes valuation model and is not
material premier oil plc 2011 annual report and financial statements   115
20 own shares
total
note  million
at 1 january 2010 165
issuance of ordinary shares market value

19 321
net purchase of esop trust shares 83
release of shares for longterm incentive arrangements 252
at 31 december 2010 317
issuance of ordinary shares market value

19 200
net sale of esop trust shares 26
release of shares for longterm incentive arrangements 366
at 31 december 2011 125
 in april 2011 prior to the 41 share split the company issued 600000 ordinary shares of 50 pence each 2010 1700000 ordinary shares of 50 pence
each to the premier oil plc employee benefit trust
the own shares reserve represents the net cost of shares in premier oil plc purchased in the market or issued by the
company into the premier oil plc employee benefit trust this esop trust holds shares to satisfy awards under the group’s
share incentive plans at 31 december 2011 the number of ordinary shares of 125 pence each held by the trust was
1973998 2010 1721970 ordinary shares of 50 pence each
21 notes to the cash flow statement
2011 2010
 million  million
profit before tax for the year 1415 1008
adjustments for
depreciation depletion amortisation and impairment 1801 2636
exploration expense 1875 682
prelicence exploration costs 230 189
provision for sharebased payments 85 138
interest revenue and finance gains 55 25
finance costs and other finance expenses 736 680
gain on derivative financial instruments 340 386
operating cash flows before movements in working capital 5747 4922
increasedecrease in inventories 91 167
increasedecrease in receivables 1202 181
increasedecrease in payables 825 258
cash generated by operations 5279 5012
income taxes paid 440 679
interest income received 20 27
net cash from operating activities 4859 4360 116   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
21 notes to the cash flow statement continued
analysis of changes in net debt
2011 2010
note  million  million
a reconciliation of net cash flow to movement in net debt
movement in cash and cash equivalents 94 491
proceeds from drawdown of longterm bank loans 338 3100
proceeds from issuance of senior loan notes 3507 –
repayment of longterm bank loans 351 1780
noncash movements on debt and cash balances 17 72
increase in net debt in the year 3383 901
opening net debt 4057 3156
closing net debt 7440 4057
b analysis of net debt
cash and cash equivalents 12 3091 2997
borrowings

14 10531 7054
total net debt 7440 4057
 borrowings consist of the shortterm borrowings the convertible bonds and the other longterm debt 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 us17 million 2010 us23 million
and debt arrangement fees of us147 million 2010 us186 million respectively
22 capital commitments and guarantees
at 31 december 2011 the group had capital commitments on exploration and development licences totalling us1645 million
2010 us2096 million and performance guarantees of us41 million 2010 us20 million in addition the group had
issued letters of credit for future decommissioning liabilities totalling £2095 million us3247 million 2010 £1173 million
us1830 million
23 group pension schemes
balance sheet
2011 2010
 million  million
uk funded pension scheme 29 41
uk unfunded pension scheme 09 09
indonesia unfunded termination benefit scheme 148 102
total liability in balance sheet 186 152
other comprehensive income
at 31 at 31
december december
2011 2010
 million  million
actuarial gains 14 06
cumulative amount of actuarial gainslosses recognised in other comprehensive income 120 134 premier oil plc 2011 annual report and financial statements   117
23 group pension schemes continued
funded pensions
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
the disclosures set out below are based on calculations carried out as at 31 december 2011 by a qualified independent
actuary the figures have been prepared in compliance with ias 19 – ‘employee benefits’
the scheme’s assets are held in a separate trusteeadministered fund to meet longterm pension liabilities to past and
present employees the trustee of the scheme is required to act in the best interest of the scheme’s beneficiaries the
appointment of members of the trustee board is determined by the trust documentation
the liabilities of the defined benefit scheme are measured by discounting the best estimate of future cash flows to be paid
out of the scheme using the projected unit credit method this amount is reflected in the deficit in the balance sheet the
projected unit credit method is an accrued benefits valuation method in which the scheme liabilities make allowance for the
projected earnings
the liabilities set out in this note have been calculated using membership data current as at 31 december 2011 the results
of the calculations and the assumptions adopted are shown below
as at 31 december 2011 contributions are payable to the scheme by the group at the rates set out in the schedule of
contributions dated 26 september 2008 under this schedule the company contributes on a monthly basis at the rate of
25 per cent of the aggregate of members’ pensionable salaries
principal assumptions
the principal actuarial assumptions at the balance sheet date were
at 31 at 31
december december
2011 2010
discount rate 46 pa 54 pa
expected return on scheme assets 50 pa 57 pa
rpi inflation 30 pa 37 pa
cpi inflation 23 pa 32 pa
rate of increase in salaries 50 pa 57 pa
rate of increase in pensions in payment lpi max 50 30 pa 37 pa
pre and postretirement mortality pca00 yob mc pca00 yob lc
minimum 10 improvements
withdrawals no allowance no allowance
cash commutation 20 x precommutation 10 x precommutation
pension pension
life expectancy of male aged 65 now 218 238
life expectancy of male aged 65 in 20 years 229 259
life expectancy of female aged 65 now 241 263
life expectancy of female aged 65 in 20 years 250 282
asset breakdown
the major categories of scheme assets as a percentage of total scheme assets are
at 31 at 31
december december
2011 2010
equities 438 497
gilts 300 248
corporate bonds 262 236
cash – 19
total 1000 1000 118   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
23 group pension schemes continued
reconciliation of funded status and amount recognised in balance sheet
at 31 at 31
december december
2011 2010
 million  million
fair value of scheme assets 284 282
present value of defined benefit obligation 313 323
deficit 29 41
components of pension expense for year
2011 2010
 million  million
current service cost 02 02
interest cost 18 17
expected return on scheme assets 16 12
net actuarial gain recognised 13 03
total 09 04
changes in the present value of the defined benefit obligation
2011 2010
 million  million
present value of defined benefit obligation at 1 january 323 312
service cost 02 02
interest cost 18 17
actuarial gainslosses 20 12
benefits paid 08 08
currency translation effects 02 12
present value of defined benefit obligation at 31 december 313 323
changes in the fair value of scheme assets
2011 2010
 million  million
fair value of scheme assets at 1 january 282 256
expected return 16 12
actuarial lossesgains 07 15
contributions by employer 02 16
benefits paid 08 08
currency translation effects 01 09
fair value of scheme assets at 31 december 284 282
actual return on scheme assets 09 27
reconciliation of balance sheet liability
2011 2010
 million  million
at 1 january 41 56
pension expense for year 09 04
total contributions paid 02 16
currency translation effects 01 03
at 31 december 29 41 premier oil plc 2011 annual report and financial statements   119
23 group pension schemes continued
history of experience adjustments
2011 2010 2009 2008 2007
 million  million  million  million  million
defined benefit obligation 313 323 312 227 319
scheme assets 284 282 256 207 293
deficit 29 41 56 20 26
experience adjustments on scheme liabilities
amount of gainloss 09 06 06 01 –
percentage of scheme liabilities 3 2 2 ––
changes in the assumptions for value of scheme liabilities
amount of gainloss 29 06 55 22 06
percentage of scheme liabilities 9 2 18 10 2
experience adjustments on scheme assets
amount of gainloss 07 15 19 51 04
percentage of scheme assets 2 5 7 25 1
net actuarial gainloss recognised 13 03 30 30 02
projected components of pension expense for year to 31 december 2012
the significant volatility in investment markets means that it is difficult to project forward the ias 19 figures for the next year
with confidence the following projections should therefore be treated with caution assumptions implicit in the following
projections are
• the return on assets from 31 december 2011 is 50 per cent per annum
• contributions to the scheme will continue throughout 2012 in accordance with the current schedule of contributions in
place at the date of signing this report and
• there will be no changes to the terms of the scheme
the amounts recognised in the components of pension expense are
2012
 million
current service cost 02
interest cost 14
expected return on scheme assets 14
total 02
unfunded pensions
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 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 2011 of the future payments projected
to be made in respect of uk unfunded pensions is us09 million 2010 us09 million
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 us35 million 2010 us26 million represents contributions
payable to these schemes by the group at rates specified in the rules of the scheme 120   premier oil plc 2011 annual report and financial statements
notes to the consolidated financial statements continued
for the year ended 31 december 2011
24 related party transactions
transactions between the company and its subsidiaries 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
2011 2010
 million  million
shortterm employee benefits 61 52
postemployment benefits 06 04
other longterm benefits sharebased payments 170 84
237 140
25 events after the balance sheet date
acquisition
subsequent to yearend the company completed the acquisition of the entire issued share capital of encore oil plc encore
encore was an aim listed oil and gas exploration and production company focused on the offshore uk continental shelf
where its portfolio of assets included interests in the catcher and cladhan discoveries exploration acreage and a 30 per
cent holding in egdon resources plc an aim listed exploration and production company focused on onshore assets with
interests in the uk and europe
under the terms of the agreement announced on 5 october 2011 shareholders in encore were offered a consideration of
70 pence in cash for each encore share held alternatively encore shareholders could elect to receive 02067 new shares in
the company for each encore share held instead of part or all of the cash consideration
on completion shareholders representing 935 per cent of encore’s shares elected to take new premier shares resulting in
the company paying a total of £141 million us216 million in cash to encore shareholders and issuing 60931514 new
ordinary shares to those who chose the share alternative the new shares began trading on 17 january 2012
as a result of the acquisition the group increased its stake in the catcher project from 35 to 50 per cent and became
operator of the development
prior to completion of the encore transaction the company reached an agreement with taqa bratani ltd taqa to onsell
the 166 per cent interest in the cladhan area which it indirectly acquired from the encore acquisition for a consideration of
us540 million taqa also agreed to farm in to a 50 per cent interest in encore’s whollyowned block 2810a on a
promoted basis whereby it will pay 80 per cent of certain well costs and 50 per cent of back costs on the coaster prospect
planned to be drilled as part of the company’s 2012 drilling programme the onsale of these assets was completed in
march 2012
the transaction will be accounted for by the purchase method of accounting with an effective date of 16 january 2012
being the date on which the group gained control of encore information in respect of assets acquired is still being
assessed and the fair value allocation to the encore assets is provisional in nature and will be reviewed in accordance with
the provisions of ifrs 3 – ‘business combinations’ premier oil plc 2011 annual report and financial statements   121
25 events after the balance sheet date continued
provisional
fair value
 million
net assets acquired
intangible exploration and evaluation assets 08
property plant and equipment 3481
investments 75
trade and other receivables 34
restricted cash 72
cash and cash equivalents 190
assets held for sale 540
trade and other payables 304
deferred tax liabilities 1893
longterm provisions 05
total identifiable assets 2198
goodwill 1878
total consideration 4076
 million
satisfied by
cash 216
equity instruments 60931514 ordinary shares 3860
total consideration transferred 4076
 million
net cash inflow arising on acquisition
cash consideration 216
less cash and restricted cash balances acquired 262
net cash inflow 46
goodwill arises principally due to the requirement to recognise deferred uk corporation tax assets and liabilities for the
difference between the assigned fair values and the tax bases of assets acquired and liabilities assumed in a business
combination none of the goodwill recognised is expected to be deductible for tax purposes
by the yearend date acquisitionrelated expenses of us42 million had been incurred by the group and were included
within general and administration costs
refinancing
the company together with certain subsidiary undertakings jointly guarantees the group’s borrowing facilities
subsequent to yearend the group successfully negotiated a new us3500 million revolving credit facility to replace the
us1750 million term loan this new facility matures in 2017 in addition the group completed a private placement of
senior notes of us2020 million and €250 million with maturities between 2019 and 2024 122   premier oil plc 2011 annual report and financial statements
independent auditor’s 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 2011 which
comprise the company balance sheet the company statement of total recognised gains and losses and the related notes 1
to12 the financial reporting framework that has been applied in their preparation is applicable law and united kingdom
accounting standards united kingdom generally accepted accounting practice
this report is made solely to the company’s members as a body in accordance with chapter 3 of part 16 of the companies act
2006 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 auditor’s 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 auditor
as explained more fully in the directors’ responsibilities statement the directors are responsible for the preparation of the parent
company financial statements and for being satisfied that they give a true and fair view our responsibility is to audit and express
an opinion on the parent company financial statements in accordance with applicable law and international standards on auditing
uk and ireland those standards require us to comply with the auditing practices board’ s ethical standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement whether caused by fraud or error this includes an
assessment of whether the accounting policies are appropriate to the parent company’s circumstances and have been
consistently applied and adequately disclosed the reasonableness of significant accounting estimates made by the directors
and the overall presentation of the financial statements in addition we read all the financial and nonfinancial information in the
annual report to identify material inconsistencies with the audited financial statements if we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report
opinion on financial statements
in our opinion the parent company financial statements
• give a true and fair view of the state of the company’s affairs as at 31 december 2011
• have been properly prepared in accordance with united kingdom generally accepted accounting practice and
• have been prepared in accordance with the requirements of the companies act 2006
opinion on other matters prescribed by the companies act 2006
in our opinion
• the part of the remuneration report to be audited has been properly prepared in accordance with the companies act 2006 and
• the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent
with the parent company financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters where the companies act 2006 requires us to report to you if in
our opinion
• adequate accounting records have not been kept by the parent company or returns adequate for our audit have not been
received from branches not visited by us or
• the parent company financial statements and the part of the remuneration report to be audited are not in agreement with the
accounting records and returns or
• certain disclosures of directors’ remuneration specified by law are not made or
• we have not received all the information and explanations we require for our audit
other matter
we have reported separately on the group financial statements of premier oil plc for the year ended 31 december 2011
matthew donaldson fca senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london united kingdom
21 march 2012 premier oil plc 2011 annual report and financial statements   123
company financial statements balance sheet
as at 31 december 2011
2011 2010
note  million  million
fixed assets
investments in subsidiaries 3 5532 5532
total fixed assets 5532 5532
current assets
debtors
amounts falling due within one year 4 43 01
amounts falling due after more than one year 4 812 388
total current assets 855 389
creditors amounts falling due within one year 5 20 10
net current assets 835 379
total assets less current liabilities 6367 5911
pension liability 6 38 50
net assets including pension liability 6329 5861
capital and reserves
calledup share capital 8 988 983
share premium account 9 2745 2548
profit and loss account 9 2035 1769
capital redemption reserve 9 43 43
equity reserve 9 518 518
total equity shareholders’ funds 10 6329 5861
the financial statements of premier oil plc registered number sc234781 were approved by the board of directors and
authorised for issue on 21 march 2012
they were signed on its behalf by
s c lockett a r c durrant
chief executive finance director
statement of total recognised gains and losses
for the year ended 31 december 2011
2011 2010
note  million  million
profit for the financial year 2 80 74
pension costs – actuarial gains 6 14 06
total recognised gains and losses relating to the year 94 80 1 significant accounting policies
basis of accounting
the separate financial statements of the company are presented as required by the companies act 2006 they have been
prepared under the historical cost convention and in accordance with applicable united kingdom accounting standards
and law the results relate entirely to continuing operations
the financial statements have been prepared on the going concern basis further information relating to the going concern
assumption is provided in the financial review
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 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 value 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 highquality 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
the local currency of the company is us dollars all transactions denominated in foreign currencies being currencies other
than the local 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 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
nondisclosure of transactions between group companies
sharebased payments
the company issues equitysettled 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 sharebased
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 a monte carlo simulation the main assumptions are provided in note 8
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
notes to the company financial statements
for the year ended 31 december 2011
124   premier oil plc 2011 annual report and financial statements 1 significant accounting policies continued
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 the exception to this is that 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
2 profit for the year
as permitted by section 408 of the companies act 2006 the company has elected not to present its own profit and loss
account for the year the company reported a profit for the financial year ended 31 december 2011 of us80 million 2010
profit of us74 million
the auditor’s remuneration for audit and other services is disclosed in note 3 to the consolidated financial statements
3 fixed asset investments
2011 2010
 million  million
cost and net book value
subsidiary undertakings 5532 5532
a list of the significant investments in subsidiaries held at 31 december 2011 including the name and type of business the
country of operation and the country of incorporation or registration is given in note 10 to the consolidated financial
statements
subsequent to yearend the company completed the acquisition of encore oil plc further details are given in note 12
4 debtors
2011 2010
 million  million
other debtors 42 –
prepayments and accrued income 01 01
total debtors due within one year 43 01
amounts owed by subsidiary undertakings due after more than one year 812 388
total debtors 855 389
the amounts owed by subsidiary undertakings comprise a loan which bears interest based on libor and which is not
secured this loan is denominated in us dollars and falls due for repayment in 2020
the carrying values of the company’s debtors approximate their fair value
5 creditors amounts falling due within one year
2011 2010
 million  million
accruals and deferred income 20 10
the carrying values of the company’s creditors approximate their fair value
premier oil plc 2011 annual report and financial statements   125 126   premier oil plc 2011 annual report and financial statements
notes to the company financial statements continued
for the year ended 31 december 2011
6 pension liability
balance sheet
2011 2010
 million  million
uk funded pension scheme 29 41
uk unfunded pension scheme 09 09
total liability in balance sheet 38 50
statement of total recognised gains and losses strgl
at 31 at 31
december december
2011 2010
 million  million
actuarial gains including currency translation effects 14 06
cumulative amount of actuarial gainslosses
recognised in the strgl including currency translation effects 120 134
funded pensions
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
the disclosures set out below are based on calculations carried out as at 31 december 2011 by a qualified independent
actuary the figures have been prepared in compliance with frs 17 – ‘retirement benefits’ incorporating the amendment
announced in december 2006
the scheme’s assets are held in a separate trusteeadministered fund to meet longterm pension liabilities to past and
present employees the trustee of the scheme is required to act in the best interest of the scheme’s beneficiaries the
appointment of members of the trustee board is determined by the trust documentation
the liabilities of the defined benefit scheme are measured by discounting the best estimate of future cash flows to be paid
out of the scheme using the projected unit credit method this amount is reflected in the deficit in the balance sheet the
projected unit credit method is an accrued benefits valuation method in which the scheme liabilities make allowance for the
projected earnings
the liabilities set out in this note have been calculated using membership data current as at 31 december 2011 the results
of the calculations and the assumptions adopted are shown below
as at 31 december 2011 contributions are payable to the scheme by the company at the rates set out in the schedule of
contributions dated 26 september 2008 under this schedule the company contributes on a monthly basis at the rate of
25 per cent of the aggregate of the members’ pensionable salaries premier oil plc 2011 annual report and financial statements   127
6 pension liability continued
principal assumptions
the principal actuarial assumptions at the balance sheet date were
at 31 at 31
december december
2011 2010
discount rate 46 pa 54 pa
expected return on scheme assets 50 pa 57 pa
rpi inflation 30 pa 37 pa
cpi inflation 23 pa 32 pa
rate of increase in salaries 50 pa 57 pa
rate of increase in pensions in payment lpi max 50 30 pa 37 pa
pre and postretirement mortality pca00 yob mc pca00 yob lc
minimum 10 improvements
withdrawals no allowance no allowance
cash commutation 20 x precommutation pension 10 x precommutation pension
life expectancy of male aged 65 now 218 238
life expectancy of male aged 65 in 20 years 229 259
life expectancy of female aged 65 now 241 263
life expectancy of female aged 65 in 20 years 250 282
asset breakdown
the major categories of scheme assets as a percentage of total scheme assets are
at 31 at 31
december december
2011 2010
equities 438 497
gilts 300 248
corporate bonds 262 236
cash – 19
total 1000 1000
employee benefit obligations
the amounts recognised in the balance sheet are as follows
at 31 at 31
december december
2011 2010
 million  million
fair value of scheme assets 284 282
present value of funded obligations 313 323
deficit 29 41
total expense recognised in profit or loss
2011 2010
 million  million
current service cost 02 02
interest on obligation 18 17
expected return on scheme assets 16 12
total 04 07 128   premier oil plc 2011 annual report and financial statements
notes to the company financial statements continued
for the year ended 31 december 2011
6 pension liability continued
changes in the present value of the defined benefit obligation
2011 2010
 million  million
present value of defined benefit obligation at 1 january 323 312
service cost 02 02
interest cost 18 17
actuarial gainslosses 20 12
benefits paid 08 08
currency translation effects 02 12
present value of defined benefit obligation at 31 december 313 323
changes in the fair value of scheme assets
2011 2010
 million  million
fair value of scheme assets at 1 january 282 256
expected return 16 12
actuarial lossesgains 07 15
contributions by employer 02 16
benefits paid 08 08
currency translation effects 01 09
fair value of scheme assets at 31 december 284 282
actual return on scheme assets 09 27
movements over previous five year period
2011 2010 2009 2008 2007
 million  million  million  million  million
defined benefit obligation 313 323 312 227 319
scheme assets 284 282 256 207 293
deficit 29 41 56 20 26
experience gainloss on scheme liabilities 09 06 06 01 –
gainloss from changes in the assumptions
for value of scheme liabilities 29 06 55 22 06
experience gainloss on scheme assets 07 15 19 51 04
projected profitloss recognition to 31 december 2012
the significant volatility in investment markets means that it is difficult to project forward the frs 17 figures for the next year
with confidence the following projections should therefore be treated with caution assumptions implicit in the following
projections are
• the return on assets from 31 december 2011 is 50 per cent per annum
• contributions to the scheme will continue throughout 2012 in accordance with the current schedule of contributions in
place at the date of signing this report and
• there will be no changes to the terms of the scheme
the amounts recognised in the profit and loss account are
2012
 million
current service cost 02
interest on obligation 14
expected return on scheme assets 14
total 02 premier oil plc 2011 annual report and financial statements   129
6 pension liability continued
sensitivity and risk
the results of the calculations are sensitive to the assumptions used the balance sheet position revealed by frs 17
calculations must be expected to be volatile principally because the market value of assets with a significant exposure to
equities is being compared with a liability assessment derived from corporate bond yields
at 31 december 2011 a one percentage point change in this assumption would have had the following effects on the
closing defined benefit obligation
discount rate 
46 pa discount rate discount rate
as used for report 36 pa 56 pa
 million  million  million
defined benefit obligation 313 376 261
the key risks which could significantly impact the balance sheet and to a lesser extent the profit and loss account are as follows
• falls in asset values which are not offset by a rise in the discount rate used to value liabilities
• a reduction in the discount rate which will increase the value placed on the scheme’s liabilities
• an increase in price inflation andor salary inflation and
• improving life expectancy lower mortality rates resulting in benefits being paid for longer
unfunded pensions
the company is paying an unfunded pension to a former director 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 2011 of the future payments projected to be made
in respect of uk unfunded pensions is us09 million 2010 us09 million
7 commitments and guarantees
at the yearend date the company together with certain subsidiary undertakings had jointly guaranteed the group’s
borrowing facilities which consist of a us1750 million term loan and a nok 1500 million us251 million exploration
financing facility both maturing in 2012 a us3000 million term loan a us4568 million revolving credit facility and a
£3947 million us6118 million letter of credit facility all maturing in 2015 and the private placement of senior notes of
us2440 million and €750 million which mature between 2018 and 2021
8 share capital
2011 2011 2010 2010
125p shares £ 50p shares £
ordinary shares
calledup issued and fullypaid 468059828 58507479 116395912 58197956
2011 2010
 million  million
at 1 january 983 970
shares issued to the premier oil plc employee benefit trust nominal value 05 13
at 31 december 988 983
ordinary shares
at the annual general meeting on 20 may 2011 shareholders authorised the company to subdivide each of the company’ s
ordinary shares of 50 pence each into four ordinary shares of 125 pence each such shares having the rights and being subject
to the restrictions set out in the articles of association of the company the subdivision took effect at 0800am on 23 may 2011
in april 2011 prior to the 41 share split the company issued 600000 ordinary shares of 50 pence each with a nominal value of
£300000 us484770 to the premier oil plc employee benefit trust to be used to satisfy future awards under the company’ s
share incentive plans 2010 1700000 ordinary shares of 50 pence each with a nominal value of £850000 us1327955 notes to the parent company financial statements continued
for the year ended 31 december 2010
130   premier oil plc 2011 annual report and financial statements
notes to the company financial statements continued
for the year ended 31 december 2011
8 share capital continued
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
sharebased payments and share incentive plans
the group currently operates a long term incentive plan ltip for all employees and a share incentive plan and a save as
you earn scheme for ukbased and expatriate employees only
for the year ended 31 december 2011 the total cost recognised by the company for equitysettled sharebased payment
transactions was us155 million 2010 us180 million a credit of us346 million has been recorded in the profit and loss
reserve 2010 us527 million for all equitysettled payments of 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 plc 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 operating costs prelicence exploration costs or general and administration costs
details of the different share incentive plans currently in operation are set out below
i long term incentive plan
the long term incentive plan ltip was introduced in 2009 to provide a longterm all employee scheme which motivates all
employees and provides a longerterm perspective to the total remuneration package awards under the ltip comprise
three elements equity pool awards and performance share awards that vest after the expiry of a threeyear performance
period and a potential matching award that vests at the expiry of a further threeyear performance period commencing at
the end of the threeyear performance period for equity pool and performance share awards
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 and of the
performance share awards the main assumptions used for the calculations are as follows
volatility 400 to 410
risk free rate of interest 29 to 37
correlation factor with comparator group 029 to 032
ii share incentive plan
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 premier oil plc 2011 annual report and financial statements   131
8 share capital continued
iii savings related share option scheme
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
2011 2010
weighted weighted
average average
options exercise price options exercise price
outstanding at the beginning of the year

418684 £208 174473 £472
granted during the year 63936 £417 38906 £1042
lapsed during the year 14716 £275 2369 £849
exercised during the year

99504 £159 106339 £311
outstanding at the end of the year 368400 £255 104671 £833
exercisable at the end of the year –– 5831 £208
 the options outstanding at 1 january 2011 have been restated to reflect the 41 share split that occurred on 23 may 2011
 76180 ordinary shares with a nominal value of £9523 us15436 were issued under the group’s share option schemes during the year 2010
22846 ordinary shares with a nominal value of £11423 us16988 the remaining 23324 ordinary shares were issued from the premier oil plc
employee benefit trust 2010 83493
the weighted average share price at the date of exercise for share options exercised during the year was £446 the options
outstanding at 31 december 2011 had a weighted average exercise price of £255 and a weighted average remaining
contractual life of 236 years
the fair value of the options granted during the year was determined using the blackscholes valuation model and is not
material
9 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
at 1 january 2010 970 2237 1566 43 518 5334
issue of ordinary shares 13 311 321 –– 03
net purchase of esop trust shares –– 83 –– 83
profit for the year –– 74 –– 74
provision for sharebased payments –– 527 –– 527
pension costs – actuarial gains –– 06 –– 06
at 31 december 2010 983 2548 1769 43 518 5861
issue of ordinary shares 05 197 200 –– 02
net sale of esop trust shares –– 26 –– 26
profit for the year –– 80 –– 80
provision for sharebased payments –– 346 –– 346
pension costs – actuarial gains –– 14 –– 14
at 31 december 2011 988 2745 2035 43 518 6329 132   premier oil plc 2011 annual report and financial statements
notes to the company financial statements continued
for the year ended 31 december 2011
9 share capital and reserves continued
in june 2007 premier oil finance jersey ltd a 100 per cent subsidiary of the company issued convertible bonds at a par
value of us2500 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 were 8003434 ordinary shares of the company underlying the
bonds in april 2009 the conversion price was adjusted from £1582 per share to £1356 per share as a result of the
company’s four for nine rights issue of new ordinary shares at the adjusted conversion price of £1356 per share there were
9337340 ordinary shares of the company underlying the bonds in may 2011 the conversion price was adjusted from
£1356 per share as a result of the company’s 41 share split at the adjusted conversion price of £339 per share there are
37349360 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
10 reconciliation of movements in shareholders’ funds
2011 2010
 million  million
opening shareholders’ funds 5861 5334
issue of ordinary shares 02 03
net salepurchase of esop trust shares 26 83
profit for the year 80 74
provision for sharebased payments 346 527
pension costs – actuarial gains 14 06
net addition to shareholders’ funds 468 527
closing shareholders’ funds 6329 5861
11 own shares
total
note  million
at 1 january 2010 165
issuance of ordinary shares market value

8 321
net purchase of esop trust shares 83
release of shares for longterm incentive arrangements 252
at 31 december 2010 317
issuance of ordinary shares market value

8 200
net sale of esop trust shares 26
release of shares for longterm incentive arrangements 366
at 31 december 2011 125
 in april 2011 prior to the 41 share split the company issued 600000 ordinary shares of 50 pence each 2010 1700000 ordinary shares of 50 pence
each to the premier oil plc employee benefit trust
the own shares reserve represents the net cost of shares in premier oil plc purchased in the market or issued by the
company into the premier oil plc employee benefit trust this esop trust holds shares to satisfy awards under the group’s
share incentive plans at 31 december 2011 the number of ordinary shares of 125 pence each held by the trust was
1973998 2010 1721970 ordinary shares of 50 pence each premier oil plc 2011 annual report and financial statements   133
12 subsequent events
acquisition
subsequent to yearend the company completed the acquisition of the entire issued share capital of encore oil plc encore
encore was an aim listed oil and gas exploration and production company focused on the offshore uk continental shelf
where its portfolio of assets included interests in the catcher and cladhan discoveries exploration acreage and a 30 per
cent holding in egdon resources plc an aim listed exploration and production company focused on onshore assets with
interests in the uk and europe
under the terms of the agreement announced on 5 october 2011 shareholders in encore were offered a consideration of
70 pence in cash for each encore share held alternatively encore shareholders could elect to receive 02067 new shares in
the company for each encore share held instead of part or all of the cash consideration
on completion shareholders representing 935 per cent of encore’s shares elected to take new premier shares resulting in
the company paying a total of £141 million us216 million in cash to encore shareholders and issuing 60931514 new
ordinary shares to those who chose the share alternative the new shares began trading on 17 january 2012
as a result of the acquisition the group increased its stake in the catcher project from 35 to 50 per cent and became
operator of the development
prior to completion of the encore transaction the company reached an agreement with taqa bratani ltd taqa to onsell
the 166 per cent interest in the cladhan area which it indirectly acquired from the encore acquisition for a consideration of
us540 million taqa also agreed to farm in to a 50 per cent interest in encore’s whollyowned block 2810a on a
promoted basis whereby it will pay 80 per cent of certain well costs and 50 per cent of back costs on the coaster prospect
planned to be drilled as part of the company’s 2012 drilling programme the onsale of these assets was completed in
march 2012
further details are provided in note 25 to the consolidated financial statements
refinancing
the company together with certain subsidiary undertakings jointly guarantees the group’s borrowing facilities
subsequent to yearend the group successfully negotiated a new us3500 million revolving credit facility to replace the
us1750 million term loan this new facility matures in 2017 in addition the group completed a private placement of
senior notes of us2020 million and €250 million with maturities between 2019 and 2024 134   premier oil plc 2011 annual report and financial statements
five year summary
financials 2011 2010 2009 2008 2007
sales revenues  million 8268 7636 6211 6552 5782 
profit before tax  million 1415 1008 799 2776 1470 
net profit for the year after tax  million 1712 1298 1130 983 390 
cash flow from operating activities  million 4859 4360 3477 3523 2695 
shareholders’ funds  million 13236 11302 9713 5989 5529 
net debtcash  million 7440 4057 3156 1173 790 
per share statistics
revenue per share centsshare 1769 1646
2
5719 6598
3
7051 
earnings per share – basic centsshare 366 280
2
1041 990
3
476 
earnings per share – diluted centsshare 315 258
2
1039 982
3
469 
cash flow from operating activities per share centsshare 1040 940
2
3202 3548
3
3287 
reserves per share – yearend boeshare 063
1
056
2
235 229
3
258 
issued ordinary shares – average million 4674
1
4640
2
1086 993
3
820 
operations
production working interest basis kboepd 404 428 442 365 358 
proved and probable reserves working interest basis mmboe 2963 2608 2552 2275 2115 
employees – uk number 136 119 110 62 60 
– overseas number 502 442 398 406
4
300 
key indices
realised average oil price bbl 11190 7970 6630 9450 7230 
average exchange rates £ 160 155 157 185 200 
closing exchange rates £ 155 156 162 146 198 
notes
1
the working interest reserves for 2011 are proforma reserves which include the reserves acquired from the acquisition of encore oil plc excluding
cladhan this acquisition was completed in january 2012
2
the average issued ordinary shares for 2010 have been adjusted to reflect the 41 share split that occurred in may 2011 the 2010 ‘per share statistics’
have been restated accordingly the ‘per share statistics’ for 2009 2008 and 2007 have not been adjusted for the 41 share split
3
the average issued ordinary shares for 2008 have been adjusted to reflect the bonus element related to the rights issue in 2009 the 2008 ‘per share
statistics’ have been restated accordingly the ‘per share statistics’ for 2007 are as reported
4
the 2008 overseas employee numbers have been restated to reflect a reclassification of employee categories during 2009 and the inclusion of offshore
staff the numbers for 2007 are as reported premier oil plc 2011 annual report and financial statements   135
shareholder information
analysis of shareholding as at 21 march 2012
size of shareholding number of holders  number of shares 
1 – 5000 10567 8349 12726894 241
5001 – 10000 885 699 6170660 117
10001 – 50000 705 557 14577860 275
50001 – 100000 134 106 9352289 177
100001 – 500000 217 172 53701318 1015
500001 and over 148 117 432462321 8175
total 12656 10000 528991342 10000
additional information 136   premier oil plc 2011 annual report and financial statements
oil and gas reserves
proforma working interest reserves at 31 december 2011
1
working interest basis
middle east
north sea africa and pakistan asia total
oil oil oil oil oil
and and and and ngls
ngls gas ngls gas ngls gas ngls gas
4
and gas
mmbbls bcf mmbbls bcf mmbbls bcf mmbbls bcf mmboe
group proved plus probable reserves
at 1 january 2011 571 31 13 269 336 660 920 960 2608
revisions 226 3 05 8 13 110 244 115 56
discoveries and extensions
2
82 20 – 10 –– 82 30 134
acquisitions and divestments
3
303 5––– – 303 5 312
production 33 2 03 35 15 19 51 56 147
at 31 december 2011 1149 57 15 236 334 531 1498 824 2963
total group developed and undeveloped reserves
proved on production 218 10 07 142 213 190 438 342 1036
proved approvedjustified for development 501 24 – 17 19 203 520 244 965
probable on production 120 7 07 57 91 46 218 110 405
probable approvedjustified for development 310 16 01 20 11 92 322 128 557
at 31 december 2011 1149 57 15 236 334 531 1498 824 2963
notes
1
the working interest reserves for 2011 are proforma reserves which include the reserves acquired from the acquisition of encore oil plc excluding cladhan
this acquisition was completed in january 2012
2
includes reserves discovered at burgman uk and kadanwari pakistan and unitisation at rochelle uk
3
acquisitions include increased working interests in wytch farm the catcher area and solan
4
proved plus probable gas reserves include 97 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 thirdparty reports and internal estimates 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 pscs in indonesia vietnam and mauritania on an entitlement basis reserves were 2638 mmboe
as at 31 december 2011 2010 2220 mmboe this was calculated in 2011 using an oil price assumption equal to the dated brent
forward curve in 2012 and 2013 and us75bbl in ‘real’ terms thereafter 2010 fixed price of us75bbl premier oil plc 2011 annual report and financial statements   137
worldwide licence interests
as at 21 march 2012
licence block operator po equity  fielddiscovery
congo marine ix
1
marine ix ophir 3150
egypt north red sea block 1 hess 2000
south darag
2
premier 10000
ireland pel 405
3
4917 part 4922 part  san leon 1500 old head of kinsale
4923 part
pel 505
3
4826 part 4827 part san leon 1250 schull
571 part  572
indonesia buton japex 3000
kakap star energy pt 1875 kakap
natuna sea block a premier 2867 anoa
block a aceh pt medco ep malaka 4167 alur siwah
tuna premier 6500
kenya l10a bg 2000
l10b bg 2500
mauritania psc a block 3 4  5 shallow water tullow 4615
psc b block 4  5 deep water tullow 923
psc b chinguetti eea petronas 812 chinguetti
psc c10 tullow 623
norway pl359 161 part  164 part lundin 3000
pl364 252 part  255 part det norske 5000 frøy
pl374s 342 part  345 part bg 1500 blåbaer
pl378 3512 part  3610 part wintershall 2000 grosbeak
pl378b 3512 part wintershall 2000
pl406 83 part 91 part 1712 part premier 4000
1810 part  1811 part
pl407 178 part 179 part bg 2000 bream
1711 part 1712 part
187 part  1810 part
pl539 37 part premier 4000
pl565 19 part premier 6000
pl566s 28 part 29 part  211 part premier 5000
pl567 26 part premier 6000
pl617 29 part valiant 3500
pl622 1512 part 1610 part  premier 6000
1611 part
pl623 158 part 159 part talisman 2000
1511 part  1512 part
pl647 65074 part  65075 part maersk 3000
pakistan production leases bolan mari gas 375 zarghun south
dadu bhp 9375 zamzama
kirthar eni 600 badhra
kirthar eni 600 bhit
qadirpur ogdcl 475 qadirpur
tajjal eni 1579 kadanwari
sadr daora haouza mahbes mijek
4
ophir 5000
offshore laguera
4
premier 10000
notes
1
notice has been served to withdraw from this licence
2
this government concession has been signed and is awaiting ratification
3
a two year lease undertaking is being sought for this licence which expired in october 2011
4
these pscs were signed in 2006 and will be ratified by the sadr government once the sadr has been internationally recognised as an independent state licence block operator po equity  fielddiscovery
united kingdom p077 2128a premier 3990
p077 2212a shell 5000 nelson
1
p087 227f1 premier 4650 nelson
2
p101 2321 north  south moth – bg 5000
3
moth
below bottom chalk
p110 2214a noneverest deep bg 2724 mallory
p110 2214a noneverest shallow premier 2504 huntington east
p119 1529a area p premier 6000
4
ptarmigan
p164 20526a chrysaor
5
6000 solan
p185 1522 rest of block nexen 5000 blackhorse
nonpalaeocene formation
p201 1621a premier 8500 balmoral
6
 stirling
7
 glamis
p201 1621a brenda field area premier 10000 brenda
above 7500ft
p213 1626 area p premier 10000 caledonia
p218 1521a scott field nexen 4583 scott
8
p218 1521a telford field area nexen 729 telford
9
p218 1521a premier 2800
p233 1525a premier 7000 nicol
p257 1425a talisman 1518
p288
10
3121a 3126a 3126f 3126g hess 1500 angus fife flora
 3127a
p300 1426a oddjob area nexen 2500
p344 1621b northern area premier 5500
p344 1621b  1621c premier 4420 balmoral
6
 stirling
7
p354 222a nonchestnut field area premier 3000
p489 1523b nexen 5000 blackhorse
p534 986a  987a perenco 30385 wytch farm offshore
11
p640 1524b area b conocophillips 5000
p748 292c cnr 4000 kyle
p758
10
3126c hess 3500 fife
p1042 1525b premier 10000 brenda
p1114 2214b  2219b eon ruhrgas 4000 huntington
p1157 1525e premier 10000 brenda
p1181 2322b premier 5750
12
p1212 1513b nexen 5000
p1220 2123a sterling 6500 sheryl
p1243 481b  482c premier 2500 cobra
p1260 222b premier 10000 shelley
notes
1
unitised share of 131404 per cent
2
unitised share of 0348750 per cent
3
premier has entered into a farmout agreement with conocophillips subject to government and coventurer consents premier will transfer a 25 per cent
interest to conocophillips on completion of which premier’s interest will be 25 per cent
4
subject to government consents chevron will transfer their entire 28 per cent interest to premier on completion of which premier’ s interest will be 88 per cent
5
premier will become operator of this licence once formal notice has been received
6
unitised share of 78115421 per cent
7
unitised share of 6868 per cent
8
unitised share of 2183 per cent
9
unitised share of 158677 per cent
10
this licence will be relinquished once government approval has been given
11
unitised share of 3009625 per cent
12
premier has entered into a farmout agreement with conocophillips subject to government and coventurer consents premier will transfer a 373 per cent
interest to conocophillips on completion of which premier’s interest will be 202 per cent
worldwide licence interests continued
as at 21 march 2012
138   premier oil plc 2011 annual report and financial statements premier oil plc 2011 annual report and financial statements   139
licence block operator po equity  fielddiscovery
united kingdom p1298 1526b nexen 5000 kildarewest rochelle
1
continued p1335 4313a premier 10000 esmond
p1420 2213b premier 7273
p1430 289  2810c premier 5000 catchervaradero
p1463 1430a premier 4000 tudor rose
p1466 1524c  1525f premier 10000
2
p1475 11329c 11330 nautical 5000
p1559 1523e premier 10000
p1577 2015 20224 20225 20229 premier 10000
20230 20316 20321  20326
p1615 1526c endeavour 2500 west rochelle
3
p1620 2219c premier 5000
p1655 1521g premier 2800
p1769 1429e 204c part  premier 5000 hoylake
205f part
p1770 1430b nexen 5000
p1771 159 1510 1514  1515 nexen 5000
p1772 1523g premier 5000
p1784 217b premier 7000
p1804 2221c  2226d maersk 3000
p1812 285 2810a  291d premier 10000
4
p1866 1328b echo 5000
p1870 1521d echo 5000
p1875 2129d antrim 5000
p1876 225c echo 5000
p1886 1214 1219a split  1220a premier 5000
5
p1887 1216b  1217b first oil 2500
pl089 sy87b sy88b sy89b sy97b perenco 3038
5
wytch farm
sy98a sy99a sz7  sz8a onshore
6
26th round 2 9813 split  9814 part np solent 750
7
26th round 2 1230 echo 000
8
vietnam 12w premier 53125 chim sáo 
0703 premier 3000 cá rˆ o ng  dó
10410905
9
premier 5000
notes
1
unitised share of 9289175 per cent
2
premier has entered into an earnin agreement with canadian overseas petroleum uk ltd subject to completion of drilling and government consents
premier will transfer a 40 per cent interest to canadian overseas petroleum uk ltd on completion of which premier’s interest will be 60 per cent
3
unitised share of 5710825 per cent
4
premier has entered into a farmout agreement with taqa britani ltd subject to government consent premier will transfer a 50 per cent interest to
taqa britani ltd on completion of which premier’s interest will be 50 per cent
5
this licence was awarded in the uk 26
th
round 2
nd
tranche jointly with awe offshore uk ltd awe offshore uk ltd has withdrawn from the ukcs
subject to decc granting the licence premier will accept the licence as sole licensee
6
unitised share of 3009625 per cent
7
these blocks were awarded in the 26
th
round 2
nd
tranche subject to licence grant and the secretary’s consent to a further assignment which will be
sought after any such grant encore oil has agreed to assign its entire 75 per cent interest to egdon resources
8
this block was awarded in the 26
th
round 2
nd
tranche to echo petroleum subject to licence grant and government consent premier will exercise an
option to acquire a 50 per cent interest in this licence from echo once granted
9
notice has been served to withdraw from this licence 140   premier oil plc 2011 annual report and financial statements
glossary
aep asset and equity plan
bbl barrel
bbtud billion british thermal units per day
bcf billion cubic feet
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
bopd barrels of oil per day
cpp central processing platform
decc department of energy and climate change
epci engineering procurement construction and installation
erw extended reach well
fdp field development plan
feed front end engineering and design
fpso floating production storage and offtake vessel
fpv floating production vessel
gsa gas sales agreement
hipo high potential incident
hses health safety environment and security
hsfo high sulphur fuel oil
ias international accounting standard
ifrs international financial reporting standard
kboepd thousand barrels of oil equivalent per day
kpi key performance indicator
lopc loss of primary containment
lti lost time injury
ltip long term incentive plan
mmbbls million barrels
mmboe million barrels of oil equivalent
mmscfd million standard cubic feet per day
mscf thousand standard cubic feet
mt metric tonne
psc production sharing contract
rwdc restricted workday case
trif total recordable injury frequency
tsr total shareholder return
whp wellhead platform contacts
registered office
premier oil plc
4th floor
saltire court
20 castle terrace
edinburgh
eh1 2en
registered no 234781 scotland
head office
premier oil plc
23 lower belgrave street
london
sw1w 0nr
tel 00 44 020 7730 1111
fax 00 44 020 7730 4696
wwwpremieroilcom
auditor
deloitte llp
2 new street square
london
ec4a 3bz
solicitors
slaughter and may
one bunhill row
london
ec1y 8yy
stockbrokers
deutsche bank ag
winchester house
1 great winchester street
london
ec2n 2db
and
oriel securities ltd
150 cheapside
london
ec2v 6et 
registrars
capita registrars ltd
4th floor
erskine house 
6873 queen street 
edinburgh
eh2 4nr
shareholder enquiries
capita registrars
the registry
34 beckenham road
beckenham
kent
br3 4tu
tel 0871 664 0300

uk
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premier oil plc 2011 annual report and financial statements   141 premier oil plc    2011 annual report and financial statements
annual report and financial statements
year to 31 december 2011
wwwpremieroilcom
premier oil plc
23 lower belgrave street
london sw1w 0nr
telephone 00 44 020 7730 1111
facsimile 00 44 020 7730 4696


Summary:
 08   premier oil plc 2011 annual report and financial statements
chief executive’s review
q  what is premier’s business model and growth strategy
a  premier seeks to offer both our investors and our
employees above average growth opportunities within business
units that are themselves good quality businesses this will be
reflected in a rising production profile from our operations and
development activities we will continue to set ourselves targets –
75000 boepd by the end of 2012 and 100000 boepd in the
mediumterm – which are challenging but achievable we expect
to source further growth from a combination of acquisitions and
organic exploration success we expect to play a growing role in
the places in which we choose to do business which in itself will
generate a stream of future opportunities over time we have
greatly widened our access to different sources of capital so that
our financial strength has become a real asset to the business
q  what were the highlights of 2011
a  in 2011 premier continued to grow through acquisition
development and our own exploration activities we have taken our
skills as a development operator in south east asia proved them on
new projects and are building up a comparable skill set in the north
sea our exploration programme is focused on areas where we have
a spread of acreage and a deep understanding of the geology we
are better placed than ever to achieve material resource additions
from our planned programmes
key milestones in achieving our growth in 2011 came from our
project teams in indonesia and vietnam who achieved excellent
results in bringing two major operated projects onstream on a
timely basis and in line with original cost projections this was a big
step forward for our asian business less visibly but just as valuable
for the future i believe we have made great strides in a number of
other areas our geologists and geophysicists enhanced their
understanding of the petroleum systems in both the natuna sea
and the uk central north sea adjacent to existing premier
discoveries and this will be reflected in the drilling programmes
established for 2012 and beyond our commercial teams in london
and aberdeen have made great progress on the shape structure
and schedules for new projects especially in the north sea our
operations staff have worked tirelessly to ensure that asset integrity
safety and the environment are at the top of our priority list all such
efforts are critical to the overall success of the company
an interview with simon lockett
simon lockett answers questions posed about premier oil
its performance during 2011 and the strategy for future success
continued growth… premier oil plc 2011 annual report and financial statements   09
q  how and where will you expand geographically
a  the group is well established in the north sea and in south east asia we expect that the majority
of our resources both personnel and financial will continue to be directed at these core businesses we
have the ambition over time to develop a third geographic area of expertise though only when the right
opportunities emerge and when the skills we already have in subsurface and engineering can be successfully
applied leading the way are our new venture teams who are already taking us into new geographies albeit
in ways which seek to address the challenges of new country entry in 2011 for example we obtained two
new exploration licences in offshore kenya and significantly expanded our acreage portfolio in the norwegian
sector of the north sea other geographies are under review for 2012
q  in 2011 you made a number of acquisitions are you looking for future acquisitions
a  we continually look at potential acquisitions as a way of building up our knowledge of assets in
our core areas though we are in the fortunate position that our internal growth profile is already strong
completed acquisition transactions have typically happened in times of market dislocation which creates
new opportunities in 2009 at a low point in the oil price cycle we completed major acquisitions in the uk
and in vietnam in 2011 the commodity markets held up well but the capital markets especially for smaller
companies were weak and development finance scarce our recent five completed acquisitions all in the
north sea reflected for the most part this opportunity and we are pleased to have added around 60 million
barrels of oil equivalent mmboe of reserves and resources to the portfolio at a cost of less than us8bbl
we expect 2012 to be another active year in the acquisition markets as the challenging conditions
especially in the bank sector seem destined to continue
q  what are the biggest challenges facing premier going forward
a  we operate in a highly competitive world where both good quality human and natural resources
are scarce we have been successful in retaining our people and in building up teams to execute new projects
our headcount has doubled from 300 to over 600 in the last four years our sharebased incentive package
offers good upside to employees if the company performs well but also ties in our employees for up to six years
before this upside is realised in my experience people enjoy the challenges offered by a growth programme
on the asset side continuing access to good quality acreage is critical to the longterm growth of the
company we constantly review new opportunities around the world which come to us via licensing rounds
knowledge of our partners’ and competitors’ strategies and through strong government relationships in the
areas in which we operate
q  can premier continue to build on its successes in the future
a  i believe that our combination of technical skills and financial strength positions us well for the
future our operations in the natuna sea and in the uk central north sea are very well established and
continue to offer opportunities for further growth we can see a path to production of 100000 barrels of oil
equivalent per day boepd from existing projects in the mediumterm our portfolio is already positioned
for success beyond that with ongoing developments and an active exploration programme 10   premier oil plc 2011 annual report and financial statements
q  can premier continue to build
on its successes
a  our portfolio is already positioned
for growth beyond 2015 1
review focus
chim sáo
an organic growth asset
location  vietnam
premier brought chim sáo onstream safely and on budget
in october 2011 the field which is the first oil field in the
nam con son basin to be delivered is performing ahead of
expectations with additional upside opportunities
profile     premier discovered the chim sáo oil field in november 2006 the subsequent
drilling programme prompted premier to proceed rapidly to development final approval for
which was achieved in november 2008 rising steel prices caused premier to opt for a single
central platform with long reach drilling this resulted in a gross cost saving of us112 million
against alternative development concepts the platform jacket and topsides were installed
during 2010 and the conversion of the fpso was completed in june 2011 the field was brought
onstream in october 2011 only six years after the initial discovery and gas exports commenced
in december 2011 deliverability of chim sáo is ahead of expectations and its cargoes are being
sold at a premium to average dated brent to date 12 wells nine producers and three water
injectors have been drilled and total drilling cost is expected to come in below budget
outlook  
• additional upside remains and reserves increasing
– optimise development of chim sáo
– better reservoir qualities than prognosed
– successful appraisal of the oligocene cau at deeper levels
• chim sáo north west
– additional gross resource estimate 1320 million barrels with further potential upside to
be appraised
– chim sáo north west to be tied in to existing facilities
• tie in of the nearby dua field to the chim sáo facilities by 2014 phil maclaurin
country manager
the successful and safe
delivery of chim sáo
demonstrates our ability
to operate to the highest
standards throughout the
cycle we now look to
recreate this achievement
with dua a tieback to
chim sáo which achieved
project sanction in
december 2011 we will
also appraise the new
accumulation at chim
sáo north west as a near
field tieback opportunity
in 2012”
“  12   premier oil plc 2011 annual report and financial statements
q  what is the key factor in your success
a  we have been successful in retaining
our talent pool and building our
capabilities to execute new projects 2
review focus
gajah baru
meeting increasing singapore demand
location  indonesia
first gas production from gajah baru was achieved within
budget in october 2011 volumes from the field continue to
increase with current production rates averaging 6090 bbtud
this marks the second phase of gas into singapore from the
premieroperated natuna sea block a
profile    premier discovered and successfully appraised the gajah baru gas field in 2000 and
2004 respectively in 2008 we negotiated three further gsas enabling gajah baru gas to be
sold into the singaporean and indonesian domestic markets the development plan was
approved in 2008 and a second tender for the epci contract was completed in march 2009
gross cost saving of us100 million 2011 saw the cpp connected to the whp on schedule and
on budget and the gas export equipment tied into the wnts pipeline the five development
well programme was completed in february 2011 and provided in excess of 200 bbtud of gas
deliverability gas exports from gajah baru commenced in october 2011 volumes continue to
ramp up towards 90 bbtud on completion of a gas swap an additional 40 bbtud will be
delivered from gajah baru at indonesian domestic prices
outlook  
• next phase of development projects being worked on
– anoa phase 4 sanctioned and epci contract awarded
– project sanction for pelikan and naga expected imminently
• returned to exploration on block
– anoa deep which spudded in february 2012 was successful testing gas with a flow rate
of 17 mmscfd 
– biawak besar is currently drilling with results expected in april 2012
• total sales capacity from block a will increase to 400 bbtud over time  roberto lorato
president premier indonesia
gajah baru has the plant
capacity to produce in
excess of 200 bbtud
significantly more than
contracted quantities
this along with our
pipeline of future projects
on natuna sea block a
will put us in a strong
position to benefit from
rising demand from
singapore and indonesia”
“  14   premier oil plc 2011 annual report and financial statements
q  will you expand geographically
a  only when the right opportunities
emerge 3
review focus
catcher
one of the largest north sea discoveries in recent years
location  north sea
premier has increased its stake in the important catcher
project to 50 per cent and has taken over operatorship 
development studies are well advanced and a decision on the
conceptual design is expected during the first half of 2012
profile    premier acquired an interest in the catcher area as a result of its 2009 oilexco
acquisition the catcher discovery in 2010 pointed to the presence of much lighter oil than
anticipated and proved that hydrocarbons could migrate to the outer margins of the central
north sea follow up wells 2892 3 and 4 were drilled between january 2011 and march 2011
discovering the varadero and burgman fields and appraising catcher north the six penetrations
drilled to date have estimated discovered reserves in the order of 80 million barrels in october
2011 premier made a recommended acquisition of encore for cash with a share alternative the
acquisition completed in january 2012 with shareholders representing 935 per cent of encore
shares electing to take premier shares operatorship of catcher was transferred to premier and
premier’s working interest increased from 35 per cent to 50 per cent
outlook  
• formal concept selection which is expected in the first half of 2012 will be followed by further
engineering studies on the chosen concept ahead of development approval by yearend
• additional upside remains on the block with further exploration planned
– carnaby will be drilled in april 2012 with results expected in may 2012
– the coaster prospect on the adjoining block to catcher
– additional prospects on the catcher block include bonneville cougar rapide and rocket
• premier plans to pursue the knowledge it has acquired from its activities in the catcher area
to other margin plays in the uk central north sea