Drilling Update - Varadero oil discovery

PREMIER OIL plc

("Premier" or "the Company")

Drilling Update - Varadero oil discovery

4 January 2011

Premier is pleased to announce that the Varadero (28/9-02) exploration well, located in the UK Central North Sea, has successfully encountered excellent quality oil bearing sandstones.

The well was drilled to a total depth of 5205 feet (ft) Measured Depth (MD).

Initial analysis indicates 84ft of net hydrocarbon pay in the main Tay sandstones over a gross interval of over 185ft, in line with pre-drill predictions. A further 22ft of pay also exists in thinner sands above the two main Tay sands. Two cores were taken in the main Tay sand bodies and confirmed oil bearing sand. Well logs indicate an average porosity of approximately 33 per cent for the Tay reservoirs. The API of the oil is 27 degrees as measured at 4235ft and is of similar quality to that established at the nearby Catcher discoveries.

The well is being plugged and abandoned before the Galaxy II drilling rig is moved 4 kilometres to the south-west to drill the multi-target Burgman prospect.

Premier has 35% equity in the 28/9 licence.

Simon Lockett, Chief Executive Officer, commented:

"We are delighted with the results of the Varadero well. In combination with the Catcher discoveries made in 2010, Varadero demonstrates the significant resource potential on Block 28/9."

Enquiries

Premier Oil plc 020 7730 1111

Simon Lockett

Tony Durrant

Pelham Bell Pottinger PR

Mark Antelme 020 7861 3232  

Henry Lerwill