Chrysaor and Premier Oil to Merge in Reverse Takeover

Chrysaor and Premier Oil have agreed to merge, creating the largest independent oil and gas company listed on the London Stock Exchange.

Both companies said the deal would create a business with a “stable platform for future growth”.  The enlarged group will have production of more than 250,000 barrels per day and reserves of 717 million barrels of oil equivalent.  It will also take advantage of “substantial cost and tax synergies”, accelerating the use of Premier’s £3.15bn of UK tax losses.

The firms said the proposed all-share merger represented a reverse takeover, with Premier expected to own up to 23% of the enlarged group and Chrysaor holding at least 77%.  Chrysaor’s biggest shareholder, Harbour Energy, an investment vehicle formed by EIG Global Energy Partners, would have up to 39.02%.  Premier creditors would have 18% and shareholders only around 5%. 

Chrysaor, founded in 2007, made a splash in the North Sea in 2017 with its acquisition of a package of assets from Shell for £2.3bn ($3bn).  It expanded further last year through the purchase of ConocoPhillips for £2bn ($2.67bn).  In 2019, Chrysaor notched up revenues of £1.8bn and pre-tax profits of £350m.  In the first half of 2020, it had revenues of £955m, but swung to losses of £180m, dented by an impairment of £240m.  First-half production averaged 187,000 barrels per day at Chrysaor, whose reserves totaled 542m barrels at the end of last year.  Chrysaor had 1,200 full-time staff members upon completion of its acquisition of ConocoPhillips’ UK North Sea business last year.  

Premier employs 800 people globally, including 250 in Aberdeen, while Premier has interests in the UK, Brazil, Indonesia, Vietnam, the Falkland Islands and Mexico.  It was founded in 1934 in Scotland to pursue oil and gas exploration and production activities in Trinidad and acquired its first interest in the North Sea in 1971.  Premier’s top performer is the Catcher area, which came on stream in the central North Sea in December 2017.

London-listed Premier’s £2 billion of total gross debt will be repaid on completion of the deal, subject to approval from regulators, shareholders and creditors.  A cash payment of £950 million will be made to financial creditors of Premier and its subsidiaries.

The agreement means Premier, whose shares rose 10.73% to 16.82p in early trading, will not proceed with the refinancing it proposed in August, which included an equity raise of up to £410 million.  Premier’s acquisition of BP’s interests in the Andrew area and Shearwater field, which was to be paid for using the proceeds of the refinancing, won’t go ahead either.

The merger is expected to be completed late Q1 or early Q2 next year.