LONDON - British oil producer Premier Oil is to buy North Sea-focused Encore Oil for 221 million pounds ($340 million), continuing its strategy of expanding by incremental acquisitions rather than concentrating on high-risk, high-impact exploration.

While the headline price being paid represents a heady $20 per barrel for Encore's reserves, Chief Financial Officer Tony Durrant pointed out that the deal included tax losses and exploration potential.

Citigroup said the tax losses brought the purchase price down to $17/bbl, still at the upper end of recent transactions. The bank also noted that raising Premier's stake in the Catcher field to 50 percent could allow the company to accelerate development of the field, potentially raising earnings.

Premier said on Wednesday it was offering 70 pence per Encore Oil share, a 55 percent premium to Tuesday's close, and that Encore investors could take the bid in cash or Premier shares. Encore was advised on the deal by Rothschild.

London-based Premier also said it was on track to deliver on its stated strategy and to realize its medium-term target of pumping 100,000 barrels of oil equivalent per day.

Premier generally takes a more conservative approach to exploration than some rivals such as Tullow Oil and Heritage Oil , keeping its exploration budget at only one third of cashflow.

Nonetheless, it is present in some frontier areas including East Africa, which many oil executives believe has the potential to emerge as a major new oil and gas producing region.  

On Wednesday, Anadarko Petroleum and Cove Energy said a gas find they made in Mozambique was larger than earlier believed.  

($1 = 0.649 pound)