The 27-year-old, who collected his maiden European Tour title in Qatar earlier this year, carded five birdies and just one dropped shot to close on five under par, while Mickelson bogeyed two of the last three holes to finish four behind the popular Englishman.
Pepperell said he had some wine with his coach but not an excessively late night.
That lead would be overtaken by countryman Justin Rose and then by the eventual victor, Italy's Francesco Molinari, but Pepperell still vaulted 30 spots up the leader board and finished tied for sixth.More news: Multiple people shot outside restaurant in Toronto
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Pepperell was playing with Phil Mickelson and he admitted that playing with the five-time major victor gave him "something to go out there with". "I won't lie. I had too much to drink last night", he said. I was so frustrated yesterday that today. He shot a four-under 67 (his best showing of the four-day tournament) and charged up the leaderboard to put himself in the running on the final day. Whether I shot 69 or 73 today, it wouldn't have been heartbreaking. "So you know", he added, "It's a amusing game".
On his birdie putt at the last: "Desperately trying to hole it but desperately thinking, well, I could easily wipe this three foot past, and the last thing I want to do is leave myself a three-footer at Carnoustie in front of 10,000 people". "Sometimes I'd have a few drinks", he added.
'But I did wake up in the middle of the night not feeling too good. "I didn't play one last week, and I didn't play one this week". Actually, what he did, I think I defended him on Twitter. "I didn't really have that much to drink, just I'm a lightweight, yeah", he said. It renewed the love of the Open for me'. I mean, I've done it all different types of ways in my career, and the next day it's been anything and everything.