Stock of the week: Premier Oil gets discovered

It's been all about oil this past week. The price of the black stuff rose 10% in a matter of days and Shell's $47 billion offer for BG marks the biggest industry takeover in years. Predictably, oil companies dominate the list of top share price performers and the FTSE 350 Oil & Gas index is up an impressive 6%. Unfortunately, we can only pick one company and this week Premier Oil just shades it.

The North Sea and Falkland Islands operator is up 18% in the past five days, from 133p to 157p currently, a five-week high. Momentum began to build at the end of last week when Premier announced that the Zebedee well had discovered 81 feet of net oil-bearing reservoir and 55 feet of net gas-bearing reservoir.

"We now look forward to the results of the upcoming Isobel Deep well, potentially the highest impact well in this campaign," says exploration director Andrew Lodge. The results of this well in the southern part of the North Falkland Basin are expected in late April.

The price of Brent crude is up from less than $54 a barrel the Thursday before the Easter holiday to a high of $59.25 less than a week later.

Deutsche Bank is certainly excited about prospects.

"The well is testing the southern extent of the basin and success could establish a second, discreet hub, potentially equivalent in size to Sea Lion to the north," writes the DB oil team, which has a 230p target price on Premier. "In a farm-down scenario, we believe the prospect of multiple development projects would enhance the overall appeal of the basin, support individual project economics and provide optionality in any disposal discussions.

"Using Premier estimates, the Isobel well is targeting c. 55mmboe of resource with the potential to de-risk 243mmboe across the Elaine/Isobel fan complex. Isobel represents 2p/9p (risked/unrisked) of our ~325p risked NAV [net asset value]."

Of course, Shell's bid for BG has reignited speculation that the oil industry is about to witness the most significant round of consolidation since the late 1990s. Premier has already fended off one takeover approach - from Ophir Energy, which has just bought Salamander Energy, this time last year - and would clearly make an attractive target.