Premier Oil to buy E.ON's UK North Sea assets for $120 mln

* Deal will add 15,000 boepd to Premier Oil (LSE: PMO.L - news) 's production

* Deal will lower E.ON's net debt by around $620 million

* Premier Oil shares suspended in London (Updates throughout after deal confirmation)

By Karolin Schaps and Christoph Steitz

LONDON/FRANKFURT, Jan 13 (Reuters) - London-listed exploration and production firm Premier Oil has agreed to buy German utility E.ON's UK North Sea oil and gas assets for $120 million, the companies said on Wednesday.

Energy experts are predicting an increase in mergers in the oil and gas sector this year as companies with weakened balance sheets look to sell assets and stronger players hunt for bargains, with oil prices close to 12-year lows.

Premier Oil said the deal, which it will finance using existing cash, would add "significant" production and cashflow in 2016 and 2017, even at current oil and gas prices.

"This is a portfolio we have been watching for several years and we would have bought it anyway," Premier Oil Chief Executive Tony Durrant told Reuters.

The deal, flagged earlier by Reuters, will add around 15,000 barrels of oil equivalent per day (boepd) to Premier (NasdaqGS: PINC - news) 's production and give it access to a hedging position worth around $80 million.

Premier completed the sale of its Norwegian business for $120 million to Det norske oljeselskap (LSE: 0M5J.L - news) just three weeks ago.

For E.ON, the transaction marks the end of a sales process of its North Sea oil and gas business, which it put under review in late 2014.

The deal will lower E.ON's net debt by around $620 million mainly through the release of decommissioning obligations, the company said. It (Other OTC: ITGL - news) would keep $150 million in cash that the unit had on its balance sheet as of Jan. 1, 2015.

The deal, which is expected to close in the first half of 2016, comprises E.ON's equity interests in 40 licences in the UK North Sea, including a 5.2 percent stake in the Elgin-Franklin field and a 47 percent interest in the Babbage field.

In October E.ON sold the bulk of its North Sea oil and gas assets in Norway for $1.6 billion to Russian billionaire Mikhail Fridman. At the time, analysts expected E.ON's British oil and gas assets to fetch about 300-400 million euros ($326-434 million), but oil prices have fallen further since.

Ahead of the announcement, Premier Oil requested its shares be suspended as the acquisition could be classified as a reverse takeover, a stock exchange statement said, which typically means the target is larger in value than the bidder.

Premier Oil is valued at 97 million pounds ($139.9 million). ($1 = 0.9214 euros) ($1 = 0.6932 pounds) (Additional reporting by Freya Berry and Ron Bousso in London; Editing by David Clarke, Greg Mahlich)