As London-listed Premier Oil and UK North Sea focused Chrysaor announced their proposed all-stock merger this week, creating one of the largest UK North Sea oil and gas producers, Global Data analysts think the deal is a "win-win."
As reported Tuesday, Premier said it would merge with Chrysaor through a reverse takeover, with London listing retained. Premier Oil also announced the reorganization of its existing debt and cross-currency swaps.
Under the terms of the Transaction, Premier will acquire Chrysaor in return for the issuance of new Premier shares and Premier Group’s approximately US$2.7 billion of total gross debt and cross-currency swaps will be repaid and canceled.
Daniel Rogers, Oil and Gas Analyst at GlobalData said: "With Premier Oil carrying a US$2bn debt load, and private equity players unable to execute high-value exit strategies through IPOs or divestments under current market conditions, this deal makes a lot of sense for both parties. With the stock price down over 80% from the start of the year, Chrysaor will take advantage of the depressed market value as an expansion opportunity and to list the combined businesses on the London Stock Exchange.
"The two companies will create a dominant North Sea player with production of around 250,000 barrels of oil equivalent per day and growth opportunities such as the Tolmount gas development - which GlobalData expects to boost the combined production to almost 270,000 boed in 2021."
Rogers points out that the merger will allow Chrysaor to expand its significant North Sea footprint with low-cost assets but will also gain exposure to producing assets in Indonesia and high-value development projects in South America. The combined entity will have a strengthened financial backing that should allow Premier’s pre sanctioned growth developments to move forward."
In a separate statement, Deirdre Michie, chief executive of UK's oil and gas industry body OGUK said the deal was encouraging news for the UK offshore oil and gas industry.
She said: "Chrysaor and Premier Oil are great stewards, contributors, and champions of this industry so this investment is encouraging news for the UK Continental Shelf."
“With companies increasingly looking to see how they can work together to meet as much of our oil and gas demand from domestic resources instead of imports, this merger will help to stimulate further activity for our hard-pressed supply chain and contribute to an inclusive transition towards a low carbon economy.”