Page 6 - EurOil Week 41

EurOil COMMENTARY EurOil

Chrysaor snaps up fellow

UK player Premier Oil

The tie-up will create the largest independent oil and gas producer in the UK North Sea

UK CHRYSAOR Holdings struck a deal to acquire
Premier Oil earlier this month in a reverse takeo-
WHAT: ver that will establish the largest independent oil
Chrysaor has agreed to and gas producer in the UK North Sea.
buy Premier Oil, creating The takeover brings the journey of one of the
a company with 250,000 oldest listed independent oil producers to an
boepd of output. end. Premier started trading in 1934, originally
as the Caribbean Oil Company, with the aim of
WHY: exploring for oil and gas in Trinidad and Tobago.
Premier has been Premier has been struggling for years under
struggling under a debt a mountain of debt, though, and has found it
mountain for years. difficult to achieve growth. The sudden oil price
Chrysoar is continuing its crash earlier this year, which came just after Pre-
expansion drive. mier made an ill-fated bid to acquire a group of
North Sea assets from BP, ultimately sealed its
WHAT NEXT: fate.
The combined company This marks Chrysaor’s third major acquisi-
will need to arrest decline tion since its founding in 2007. Backed by pri- Premier said the deal marked a “new and
at mature assets, but may vate equity group EIG Global Energy Partners, exciting chapter” in its history.
look to acquire early- the company acquired $3bn of North Sea assets “There is significant industrial, commercial
stage exploration projects from Royal Dutch Shell in 2017, followed by a and financial logic to creating an independent oil
as well. similarly-sized acquisition of ConocoPhillips’ and gas company of this size with a leading posi-
operations in the region two years later. tion in the UK North Sea,” Premier CEO Tony
Chrysaor was one of a number of firms sup- Durrant said. “The transaction will also provide
ported with private money that expanded in the the combined group with a solid foundation
North Sea in the years after the 2014 oil price from which to pursue a fully funded interna-
crash, buying assets that were no longer wanted tional growth strategy.”
by the majors. Others included Siccar Point The newly formed company will boast more
Energy, Neptune Energy and Wintershall Dea. than 250,000 barrels of oil equivalent per day
By taking over Premier, Chrysaor will gain (boepd) in production, of which just over half
greenfield projects such as the North Sea’s Tol- is gas. Some 90% of production comes from the
mount gas field, due on stream in the second North Sea, while 70% of it is at operated assets,
quarter of 2021, as well as access to new inter- giving the company greater control over cash
national areas. Beyond the North Sea, Premier allocation and development plans. It will have
also operates in Indonesia, Vietnam and off the around 717mn barrels of oil equivalent (boe) in
Falkland Islands. proven and probable reserves as of the end of last
While officially a merger, Premier’s share- year.
holders will only get 5.45% of the newly com- A key challenge for the new company will be
bined company, while its creditors will get 10.6%, arresting decline at mature assets. But it may also
along with $1.2bn in cash. EIG’s Harbour Energy decide to invest more in early-stage exploration
unit and Chrysaor’s other shareholders will own assets.
the rest. Harbour will in turn pay off Premier’s Combined, Premier and Chrysaor gener-
$2.7bn of gross debt and other liabilities. The ated $1.76bn in revenues and $1.27bn of pre-tax
deal was part-financed by a $1.5bn reserves- earnings, with operating costs of $10.5 per boe.
based loan. Premier’s talks on acquiring BP’s Andrew
The board of directors of the new company Area and Shearwater assets have been sus-
will all come from Harbour. pended for the time being, although Chrysaor
Premier and Chrysaor will need to get both may resume them at a later point. Premier man-
creditor and shareholder approvals to finalise the aged to renegotiate the deal in June, lowering
tie-up. Premier’s board has unanimously recom- the initial purchase price by around two thirds
mended the transaction as being in shareholders’ to $210mn. But it was reported to be seeking a
best interests. second price cut in late September. ™

P6 www. NEWSBASE .com Week 41 15•October•2020