Premier Oil to focus on repaying debt as production rises

* Premier (BSE: 500540.BO - news) has a $2.7 billion debt pile

* Priority to get balance sheet in shape - CEO

* Focus on Mexico discovery at year end (Recasts, updates throughout)

By Ron Bousso

LONDON, Jan 11 (Reuters) - Premier Oil (LSE: PMO.L - news) will keep spending tight and focus on paying down debt in 2018 even as higher oil prices and a 10 percent increase in output help it shake off a three-year downturn, the chief executive said on Thursday.

A recovery in oil prices to just below $70 a barrel will allow Premier to reduce a $2.7 billion debt pile, which is more than four times the company's current market value, CEO Tony Durrant told Reuters.

Revenue is expected to climb with the higher oil prices and production, which is expected to rise to 85,000 barrels of oil equivalent per day (boe/d) from about 75,000 boe/d in 2017.

The output gain is mainly due to the Catcher field, which started last December and is set to ramp up to 60,000 boe/d in the first half of the year.

"The priority for the company is to get the balance sheet back in shape," Durrant said.

"The last oil price downturn was pretty deep and a pretty painful period for all of us. So we will be quite cautious about ramping up and getting our cheque books out again, it is still too fresh in our minds."

Premier shares were flat at 0943 GMT, similar to the broader energy index but are up nearly 30 percent since the start of the year, reflecting growing confidence in the sector.

Capital (Other OTC: CGHC - news) spending is expected to rise slightly this year to $300 million from $280 million last year, when Premier slashed its budget three times in the face of ballooning debt.

But the firm will not be at a complete standstill. The exploration and production company plans to begin appraisal work towards the end of the year on its Zama discovery offshore Mexico, one of the world's most closely watched basins. First (Shanghai: 603806.SS - news) oil is planned for 2022-23, according to Premier.

Premier is also developing the Natuna Sea Block A gas field in Indonesia which is expected to begin production in 2019. It is also preparing for the development of the Tolmount gas field in the southern North Sea.

"Catcher field ramp-up is ahead of expectations. Reaching its plateau target during 1H18 appears well on track and this news more than compensates for lower deleverage during 2017 than expected," Jefferies analyst Mark Wilson said in a note.

(Reporting by Ron Bousso; Editing by Jason Neely and Edmund Blair)