• Natural Gas News

    Chrysaor Snaps up Premier in All-Share Deal (Update 2)


The transaction will create the biggest UK independent but leaves Premier shareholders with barely 5% of the new entity.

by: William Powell

Posted in:

Natural Gas & LNG News, Europe, Top Stories, Europe, Premium, Corporate, Mergers & Acquisitions, Exploration & Production, News By Country, United Kingdom

Chrysaor Snaps up Premier in All-Share Deal (Update 2)

(Adds comments from Oil & Gas UK at end)

Harbour's UK operating company Chrysaor is to swallow UK explorer Premier in a reverse takeover that will settle Premier's $2.7bn of debt and other liabilities on completion, they said October 6. Premier, which had been struggling with debt and the purchase of BP's North Sea assets – talks on that matter have been suspended now – said it would  recommend shareholders accept the terms, saying the deal marked "a new and exciting chapter in Premier's history."

The deal will create the largest independent oil and gas company listed on the London Stock Exchange, able to compete with Norwegian peers such as BP Aker and Lundin, with combined production of over 250,000 barrels of oil equivalent (boe)/day (as at 30 June 2020). Most of those are operated, giving more control over cash allocation.

It still needs regulatory and creditors' approvals. So far 43% of the necessary 77% of the votes are in, from a small group of creditors who had to be informed of the deal earlier. The remaining votes are expected in the next two to three weeks, with the process of seeking approval more widely starting today. Premier CEO Tony Durrant, who said he was confident of reaching that target, told a webinar there was a lot to be done over the coming months: as a private company it does not have all the paperwork needed for a prospectus, including a competent person's report. 

Harbour CEO Linda Cook mentioned the Mexican Zama field and southeast Asia as attractive projects in Premier's portfolio, but not the Falklands, owing to the present market conditions. In the UK, she said there were a lot of opportunities aaround the UK-Norway median line; the J-Block area; west of Shetland; and the Britannia area.

The production split is roughly half and half oil and gas, although Chrysaor said it did not mind in which direction it expanded – organic versus inorganic growth, oil versus gas output – as long as the growth had value. 

Premier's shareholders are expected to own up to 5.45% of the combined group, creditors 10.6% while Chrysaor's largest shareholder, Harbour, is expected to own up to 39.021% of the combined group. Other Chrysaor shareholders will have about 45%.

Premier's creditors will receive a cash payment of $1.232bn and its cross-currency hedge counterparties holding $400mn in letters of credit will be refinanced; existing creditors will also receive shares in the combined group.

Cook will be CEO of the combined group and Chrysaor CEO Phil Kirk will be its president and also CEO Europe; the two other non-executive directors will also be appointed by Harbour.

The companies had combined 2020 H1 revenue of $1.76bn and pre-tax earnings of $1.27bn. Their operating costs are $10.5/boe and they claim sector leading strategies to reduce the carbon footprint of their operations. The reserves based loan that financed the deal is believed to be the first linked to "environment, social and governance" objectives with an incentive for carbon footprint reduction, Chrysaor said. 

The new business, the two companies said in a stock-exchange statement, will have a "stable platform for future growth and the ability to fund and realise value from its development portfolio and international exploration projects." The combined group will have net debt excluding letters of credit of about $3.2bn on completion but there will be cost and tax synergies, accelerating the use of Premier's $4.1bn of UK tax losses and "unlocking significant value for shareholders."

Upstream group Oil & gas UK welcomed the deal as good news for hydrocarbon production. CEO Deirdre Michie said: “Chrysaor and Premier Oil are great stewards, contributors and champions of this industry so this investment is encouraging news for the UK Continental Shelf. With companies increasingly looking to see how they can work together to meet as much of our oil and gas demand from domestic resources instead of imports, this merger will help to stimulate further activity for our hard-pressed supply chain and contribute to an inclusive transition towards a low carbon economy.”