Premier Oil is to be sold to Chrysaor in a reverse takeover which would solve the independent UK upstream company’s existing $2.7bn debt.
The new company would have a combined production of over 250 kboepd (30 June 2020), combined 2020 H1 revenue of $1.76bn and H1 EBITDAX of $1.27bn, and operating costs of $10.5/boe in H1 2020.
Premier will receive a cash payment of $1.23bn for its creditors and the company’s approximately $400m letters of credit will be refinanced. The company said that its approximately $2.7bn total gross debt and certain hedging liabilities would be repaid and cancelled on completion.
Premier added the deal would unite “two complementary businesses to create the largest London-listed independent oil and gas company by production and reserves” with a strong balance sheet and “significant international growth opportunities.”
“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 chief executive Tony Durrant.
“The transaction will also provide the combined group with a solid foundation from which to pursue a fully funded international growth strategy.”
Premier was founded in 1934 as the Caribbean Oil Company and its current interests lie in the North Sea, Indonesia, Vietnam, Falkland Islands, Alaska and Brazil. In July 2017, the company said it had discovered potentially more than one billion barrels of oil off the coast of Mexico.
Today’s announcement of the proposed merger results from an agreement between Premier and US private equity firm Harbour which owns Chrysaor.
The company’s stakeholders are expected to own up to 23% of the combined group, with Harbour and other Chrysaor shareholders owning at least 77%.
Premier added that its shareholders are expected to own up to 5.45% of the combined group, and Chrysaor’s largest shareholder, Harbour, is expected to own up to 39.02%.
The chief executive of new company will be current Harbour CEO, Linda Cook, and the board of directors will comprise 11 directors including six independent non-executive directors and three executive directors including current Chrysaor CEO, Phil Kirk. Mr Kirk will be president of the combined group and CEO Europe; the two other non-executive directors will be appointed by Harbour.
The deal is subject to regulatory approvals and approval by Premier’s shareholders and the existing creditors.
Premier added the new company would reduce the carbon footprint of operations with significant scale and diversification through the combination of material operated and non-operated cash generative production hubs in the UK North Sea.
The new business would also have a stable platform for future growth and the ability to fund its development portfolio and international exploration projects.