Premier Oil Merges With Chrysaor Holdings

The British oil and gas exploration company Premier Oil, which has four interests in Mexico, has joined the Chrysaor Holdings ranks in a reverse takeover after struggling with debt for several years.

The company, founded in 1934, was considered one of the oldest independent E&P companies, devoted entirely to the upstream sector. The merger with Chrysaor Holdings will “create the largest independent oil and gas company listed on the London Stock Exchange,” said Premier Oil’s announcement, adding that the company would have a combined production of over 250Mboe/d and 2P reserves of 717MMboe as of Dec. 31, 2019.

Premier Oil has four participating interests in Mexico and presence in Indonesia, Vietnam, Brazil and Alaska, US. With the merger, the UK company will become the North Sea’s major producer. In Mexico, Premier Oil participates as a non-operating partner in Block 7, the location of the world famous Zama discovery, as well as Block 30. Both are shallow-water blocks in the Sureste Basin, located off the coast of Tabasco. It also has two 100 percent operated blocks, 11 and 13, won in Round 3.1, in the northern offshore Burgos Basin region. Premier Oil says that on both blocks it will be targeting exploration points from the Pliocene to Miocene in age and that 3D reprocessing would be completed this year.

In the merger agreement, Chrysaor is set to own a minimum of 77 percent of the combined group, while Premier shareholders will be left with less than 6 percent.

At the beginning of the week Premier had a gross debt of US$2.7 billion. It had struggled under debt for a while but the COVID-19 crisis worsened conditions for the struggling company and pushed it into a corner from which escape seemed unlikely. According to the Financial Times, Harbour Energy, a private-equity backed group, is behind the aggressive takeover strategy that Chrysaor has taken in the North Sea in recent years, which included “the bulk of Shell and ConocoPhillips’ UK assets."

The pandemic has brought about large shifts in the industry and caused M&A activity to rise as companies saw the opportunity to swallow their struggling competitors. Among recent activity was Chevron’s US$13 billion acquisition of Noble Energy in July.

Other post-COVID-19 moves have seen oil majors diversify further into renewable energies, as backers demand environmentally-friendly action in the new market environment, and majors including BP and Shell have made multi-billion write downs.

However, oil and gas is still needed to supply global energy demands, as Harbour Energy CEO Linda Cook told the FT following the Premier Oil acquisition. “We are not embarrassed to be an oil and gas company. The world still needs oil and gas, so there is an opening now for a large-scale independent oil and gas company,” she said.