Premier Oil and Chrysaor to Merge in Reverse Takeover Deal
Chrysaor Holdings Ltd. has agreed to merge with Premier Oil Plc in a reverse takeover transaction that will result in the creation of the largest independent oil & gas company listed on the London Stock Exchange (LSE).
Chrysaor is backed by Harbour Energy Ltd., a permanent capital energy investment company managed by EIG Global Energy Partners. The company currently operates 14 fields in the UK across several hub facilities including Armada, Everest, Lomond, Greater Britannia, J-Area and the East Irish Sea. The company also holds a portfolio of exploration licenses in Norway.
Premier is engaged in operations both in the UK North Sea as well as internationally, in Indonesia, Vietnam, Falkland Islands, Brazil, Mauritania, Mexico and the United States.
Under the terms of the agreement, Chrysaor’s shareholders will hold 77% of the new company. Premier’s creditors will own approximately 18% and will receive GBP 950 million in cash, while its shareholders will own just 5.5% in the combined group.
The merged company will have total net production of more than 250,000 barrels of oil equivalent per day (boe/d) as of June 30th, 2020, and combined Proven + Probable (2P) reserves of 717 million barrels of oil equivalent (MMboe) as at December 31st, 2019. The company’s management will be led by Linda Z. Cook (currently CEO of Harbour) who will serve as CEO of the combined group, and Phil Kirk (currently CEO of Chrysaor) who will be President of the combined group and CEO Europe.
Mounting debt and falling oil prices had put pressure on Premier and its management over the past several years. Earlier this year, the company had engaged in a bitter public feud with Hong Kong-based hedge fund Asia Research & Capital Management Ltd. (ARCM), which had taken a significant short position in its shares at the time and opposed its planned acquisition of several North Sea assets from BP Plc.
ARCM subsequently dropped its planned appeal against a court ruling in favour of the BP deal and instead took a long equity position in the company to help it raise additional cash to fund the acquisition. Premier will no longer be proceeding with a previously proposed refinancing of up to GBP 410 million or the acquisition of assets from BP.
Upon completion of the deal with Chrysaor, Premier’s debts of approximately GBP 2 billion will be repaid and cancelled. The transaction offers significant tax savings to the combined entity, as Premier’s UK tax losses of approximately US$4.1 billion can be used to offset future earnings at an accelerated rate.
“There is significant industrial, commercial and financial logic to creating an independent oil and gas company of this size with a leading position in the UK North Sea,” said Tony Durrant, Premier’s CEO.
“The transaction will also provide the combined group with a solid foundation from which to pursue a fully-funded international growth strategy,” he added.
RBC Capital Markets is acting as the financial adviser to Premier, while Barclays and BMO Capital Markets are advising Chrysaor.
The completion of the transaction is subject to regulatory approvals as well as the approval of shareholders and creditors.