Chrysaor has agreed a reverse takeover of premier oil in a deal to create the largest london-listed independent oil and gas group as the industry consolidates amid a steep downturn and an uncertain future.
Under the terms of the debt-for-equity agreement laid out on tuesday, chrysaor will own at least 77 per cent of the combined group, with creditors in struggling premier taking the second-largest share of the company. premier shareholders will own less than 6 per cent.
Premiers market capitalisation was $180m at the close of trading on monday, with gross debts of $2.7bn.
Harbour energy, the private equity-backed group led by former royal dutch shell executive linda cook, has already turned chrysaor into the largest oil and gas producer in the uk north sea following a string of multibillion-dollar acquisitions in recent years, including the bulk of shell and conocophillips uk assets.
Ms cook will lead the combined listed company, which will produce roughly 250,000 barrels of oil equivalent a day with reserves of 700m boed.
Chrysaor chief executive phil kirk, who has helped drive the companys expansion, will become president as it looks to use premiers assets in asia and latin america as a basis for further growth.
We are excited by thepremierassets in these regions, ms cook said, adding that the company wanted to eventually pay a meaningful dividend to investors. the sector is ripe for consolidation.
Premiers shares rose as much as 24 per cent on tuesday before easing to a gain of about 10 per cent, as analysts broadly praised the deal. the company is seeking to compare the combined group to rivals in norway like aker bp and lundin energy.
Premiers shareholders now have a stake in a company that is viable for the long-term, saidnathanpiper, head of oil and gas research at investec.
The uk has needed a sizeable [exploration and production company] for a long time that can invest across cycles and internationally. it is a much stronger entity.
The move comes as the oil industry tries to weather one of the most severe downturns in decades, after the pandemic slashed demand for fuel and knocked oil prices sharply lower.
Premier chief executive tony durrant, who had tried to fight off an initial approach in september, said there had always been a logic in putting the two companies together.
Premier had previously been looking to raise $530m in equity to pay down debt and buy some of bps north sea assets with the aim of boosting cash flow, but was hamstrung by opposition from its creditors. under the chrysaor deal the bp transaction had been terminated, harbour energy said.
Hong kong-based hedge fund asia research and capital management, premiers largest creditor as well as holding a sizeable short position in its shares, was involved in what mr durrant called three-way talks.
In the current macro environment, raising capital is difficult for an e&p, mr durrant said, adding that he planned to step down at the end of the year.
As well as a good combinedbusiness in the uk north sea, our asia platform and latin america platformallows them to grow in those regions. this is not classic slash and burn private equity, this is about investment.
The deal brings chrysaor a number of benefits, not least the ability to avoid an initial public offering at a time when oil and gas companies are out of favour with investors.
Two steep oil price slumps in five years has hammered an industry that is beset by concerns that demand could peak as electric vehicles gain traction but which argues that the world will be consuming oil for decades to come.
Premier also has $4.1bn of previous losses chrysaor will be able to use to offset its tax position in the north sea.
Mr durrant said there was no immediate plan for job cuts but conceded there may be some overlap in their aberdeen-based north sea operations.
Under the deal premiers creditors, which need to approve the transaction, will receive a cash payment of $1.23bn. the combined company will have group net debt of about $3.2bn.