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Premier Oil to be transformed in private-equity backed Chrysaor merger

A new 250,000 barrel per day producer will be created and billions of dollars of debt will be repaid, though existing Premier shareholders will retain only 5.45% of the new group.

Premier Oil PLC - Premier Oil to be transformed in private-equity backed Chrysoar merger
Premier Oil's Solan platform in UK North Sea

Premier Oil PLC (LON:PMO) is to be overhauled significantly through a merger with private equity-backed North Sea peer Chrysaor.

It will be London’s largest independent oil and gas company by production and reserves.

Premier’s current board intends to unanimously and unconditionally recommend the transaction to shareholders.

Existing shareholders will retain around 5.45% of the new company, which will have production of 250,000 barrels of oil equivalent per day (Premier’s assets currently yield’s around 65-70,000 boepd).

The new company is expected to generate over US$3bn of annual revenue and, significantly, Premier Oil’s debts will be refinanced alongside the reverse takeover transaction.

Some US$2.7bn of Premier’s gross debt and hedging liabilities will be repaid upon completion, a US$1.23bn cash payment will be made to Premier’s financial creditors, and, US$400mln in letters of credit will be refinanced.

The deal comes with substantial tax synergies, with the combined group set to have a bank of US$4.1bn worth of tax losses to utilise going forward.

Harbour Energy, an offshoot of US private equity group EIG Global, will hold around 38% of the company and Harbour’s chief executive Linda Cook will lead the group as Premier’s new chief executive.

Premier is expected to be in a position to offer a “meaningful dividend” for shareholders over time, the company said.

Tony Durrant, Premier Oil’s chief executive, commented: "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.

“The transaction will also provide the combined group with a solid foundation from which to pursue a fully-funded international growth strategy."

Chrysaor chief Phil Kirk, meanwhile, added: "Through this deal we will become the UK's largest London-listed independent E&P, by all key metrics.  With our combined organisation and operatorship of a large part of our now international portfolio, we will have the ability to deliver value safely, and play our part in the energy transition."

Linda Cook, Harbour chief executive and proposed Premier CEO, said: "This transaction is the next step in Harbour's aspiration to develop a new independent E&P company with global relevance.”

“It significantly advances our leading position in the North Sea, where we will continue to re-invest, and expands our geographic footprint to Asia and Latin America. 

“We are excited by the Premier assets in these regions and view them as the foundations upon which to build material portfolios and further diversify the company."

Harbour invested around US$1bn into Chrysaor back in 2017 to acquire 90% of the privately-owned North Sea oil business.

In August, Premier Oil launched a US$2.9bn refinancing plan and proposed a US$530mln equity raise.

On September 15, the company acknowledged speculation it had entered talks with Chrysaor and told investors it was exploring alternative options and transactions that would provide better outcomes for shareholders.

Quick facts: Premier Oil PLC

Price: 28.51 GBX

Market: LSE
Market Cap: £263.87 m

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