Zama 1 is the first exploration well to be drilled on acreage awarded in Mexico's first international licencing round in 2015.
The Zama structure is estimated to have a P90-P10 gross unrisked resource range of 100-500 mmbbls.
The well is expected to take up to 90 days to drill both the Zama prospect and the secondary target, Zama Deep, at a total cost to Premier of US$16mln.
Premier has a 25% equity interest in Block 7, with the other partners being operator Talos Energy, with a 35% stake, and Sierra Oil and Gas, with a 40% holding.
In afternoon trading, Premier Oil shares were 2.25% higher at 63.14p.
In a note to clients repeating a ‘buy’ rating and 90p price target on Premier, analysts at Peel Hunt said: “If successful, Zama would represent a significant addition to Premier's resource base with attractive fiscal terms and follow-on potential in this established hydrocarbon basin.”
In an AGM statement last week, Premier’s chief executive Tony Durrant had said: “We look forward to the spudding of the Zama prospect in Mexico, a potentially transformational well for Premier.”
Durrant also said: “Our refinancing, shortly to be completed, incorporates a plan for net debt reduction and, over time, selective investment in new projects. We are ahead of plan."
-- Adds broker comment, updates share price --