Two UK-based offshore oil and gas companies Premier Oil and Chrysaor are set to merge in an all-stock transaction. Premier Oil also said that its proposed acquisition of BP's North Sea assets will not take place.
In a joint statement released Tuesday, Premier Oil and Harbour Energy, Chrysaor's largest shareholder, said the proposed merger would create the largest independent oil and gas company by production and reserves listed on the London Stock Exchange with combined production of over 250 kboepd as at 30 June 2020.
In addition, the companies said, the combined group will have a strong balance sheet and significant international growth opportunities.
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.
Upon completion of the transaction, the Existing Creditors will receive a cash payment of US$1.232 billion in satisfaction of part of the Premier Group’s existing debt and cross-currency swaps and Premier will issue new shares to the Existing Creditors to satisfy the balance of the Premier Group’s existing debt and cross-currency swaps.
The transaction is expected to result in Harbour and other Chrysaor shareholders owning at least 77 percent of the combined group. Premier's stakeholders will own 23 percent - Premier's shareholders will own 5 percent, and existing creditors 18 percent - of the combined group.
The merged company's board of directors will comprise 11 directors including six independent non-executive directors and three executive directors including Linda Z. Cook (currently CEO of Harbour) who will be CEO of the Combined Group and Phil Kirk (currently CEO of Chrysaor) who will be President of the combined group and CEO Europe; the two other non-executive directors will be appointed by Harbour.
Tony Durrant, currently CEO of Premier, will step down from the Premier Group at year-end.
The transaction is subject to regulatory approvals and approval by Premier's shareholders and the Existing Creditors.
Premier, which owns oil and gas assets in the UK, Indonesia, Vietnam, the Falkland Islands, and Mexico said its board would provide its unanimous and unconditional recommendation to Premier's shareholders to vote in favor of the merger with UK North Sea focused Chrysaor.
Tony Durrant, CEO of Premier, 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."
Linda Cook, CEO of Harbour, 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."
Phil Kirk, CEO of Chrysaor, commented: "Through this deal, we will become the UK's largest London-listed independent E&P, by all key metrics. With our combined organization 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."
BP deal off
To remind, Premier Oil in January reached a deal to acquire a package of BP's North Sea assets for $625 million. BP then in June agreed to a discount payment for the fields, only for Premier, according to Reuters, to seek another price cut in September.
In a statement on Tuesday, Premier reminded it had in August reached an agreement with a subset of the Existing Creditors a heads of terms for a long term refinancing of the Premier Group’s debt, which included an equity raise of up to US$530 million.
"The proposed refinancing remained subject to Existing Creditor and shareholder approval as well as to total take-up under the equity raise being not less than US$325 million," Premier Oil said.
Premier Oil then, as previously reported, on September 15, 2020, confirmed that, in parallel to seeking existing creditor consent for the proposed refinancing, it was in discussions with a number of third parties, including Chrysaor, regarding alternative long term refinancing solutions.
"Premier’s Board believes that the Transaction is of broadly comparable value to shareholders as compared to the proposed refinancing but, taking into account today’s challenging macroeconomic conditions, has greater execution certainty. As a result, Premier will not be proceeding with the proposed refinancing or the acquisitions of assets from BP previously announced which were to be financed from the proceeds of the proposed refinancing," Premier Oil said.