Premier Oil today struck a deal with the North Sea’s biggest operator to merge in a deal that will see shareholders in the group massively diluted but will fix the company’s vast debt problem.
The struggling oil explorer is to be bought for nearly $3 billion by privately owned Chrysaor in a move that will see a woman take over as chief executive of a major stock market quoted energy group for the first time.
Linda Cook is chief executive of Chrysaor’s owner, the US private equity backed business, Harbour. The former Shell executive will move to London to head up the group.
The deal will see Chrysaor reverse into Premier and combine the two companies’ operations.
It will effectively pay out Premier’s $2.7 billion debt holders and creates a London-based business producing 250,000 barrels of oil a day.
While the deal is complex, it is thought effectively to value Premier’s equity at about $280 million against $180 million before the deal was announced.
Creditors, who have long been trying to find a way to get back the money they lent the struggling Premier, will get a cash payment of $1.23 billion plus shares in the combined business.
Premier share and bondholders will end up owning up to 23% of the combined group, making it a reverse takeover of the listed company. Premier shareholders will end up with 5.45% of the enlarged business.
Premier fought a long running battle with one of its bondholders, the Hong Kong hedge fund ARCM, for much of last year. ARCM, along with six others holding 45% of the company’s debt, have agreed to today’s deal already.
A further 50 or so banks and funds holding the remainder of the debt are still to approve it.
Chrysaor has about 200,000 barrels a day coming out of the North Sea at the moment and will add in Premier's smaller production plus its overseas reserves.
Tony Durrant, Premier chief executive, told the Standard: "This is a sensible industrial and financial fit that takes away the risk of being a small company. Our shareholders have lots to look forward to: Chrysaor has lots of current production and we have future resources including internationally. This is a much better vehicle for our shareholders to invest in."