* Merger will create biggest UK N. Sea oil, gas producer
* Premier had $1.9 bln in net debt
* Reverse takeover would retain Premier's London listing
* Premier shareholders expected to own under 6% of new group
* FACTBOX on North Sea oil's changing ownership:
(Adds comment from Harbour CEO)
By Shadia Nasralla
LONDON, Oct 6 (Reuters) - Private equity-backed Chrysaor has
agreed a reverse takeover of Premier Oil, the firms said
on Tuesday, creating the British North Sea's largest oil and gas
producer at a time the sector is facing a sharp decline in
demand.
The deal, which will see Premier's creditors paid $1.23
billion in cash, will fold one of the world's oldest independent
producers into a private equity-backed group in which Premier
shareholders will receive an expected 5.45% stake.
Chrysaor's largest shareholder, Harbour Energy, is expected
to own just over 39% of the merged company, which will stay
listed on the London Stock Exchange.
The combined group, which will have a new name, will be run
by Harbour Chief Executive Linda Cook, while Chrysaor CEO Phil
Kirk will be head of its European business. Current Premier CEO
Tony Durrant will not have a role.
Premier Oil shares were up about 5% at 15.93 pence by 1405
GMT, but are still down more than 84% in the year to date.
Benchmark Brent crude oil prices have fallen as low as
$16 a barrel this year as the coronavirus sapped global demand.
Premier, which traces its history back to the 1930s,
underwent debt restructuring in 2017 after the last oil price
collapse. It currently has net debt of $1.9 billion, and before
the announcement had a market capitalisation of $182 million.
The deal still needs approval by regulators and Premier's
creditors and shareholders. "The Board intends to recommend
unanimously this transaction to shareholders," Premier chairman
Roy Franklin said.
Creditors, who the companies' spokesmen said will get
between 70 and 80 cents on each dollar owed, will also receive
shares in the new group, though overall, Premier stakeholders
will hold not more than 23%.
Chrysaor, backed by private equity firms Harbour and EIG,
has become a major North Sea producer by buying up British
fields from Royal Dutch Shell and ConocoPhillips
, spending about $5.7 billion since 2017.
Kirk said while the group had not yet paid out its owners
any "meaningful" amount, the plan was to start paying dividends
with the merged group.
"Our investors of course would be happy to have a dividend
some day," future CEO Cook told a conference call.
"But I think they're also more interested in making sure we
have a sustainable, vibrant portfolio with a lot of... growth so
that any dividend that we decide to pay in the future is going
to be sustainable."
Chrysaor produces just under 200,000 barrels of oil
equivalent per day (boe/d). Combined with Premier's output of
around 70,000 boe/d, it would become be the biggest oil and gas
producer in the British North Sea, topping BP and Shell.
Premier also brings to the table a 25% stake in Mexico's
Zama shallow water offshore project, plus production in east
Asia.
It will withdraw from a planned purchase of some BP fields,
Premier's Durrant said. The new firm will also be able to use
tax allowances from past losses Premier has accrued.
"We estimate (Premier) shareholders gain a low premium
merger with upside from materially reduced balance sheet risk
and tax synergies," Jefferies analysts said in a note.
A prospectus on the proposed reverse takeover is expected
towards the end of the year, Kirk and Durrant told Reuters.
Chrysaor has hired banks BMO, Barclays, Premier RBC and
Jefferies to work on the deal, while Premier's biggest creditor
ARCM has been working with Moelis, and other creditors with
Lazard.
(Additional reporting by Yadarisa Shabong in Bengaluru; Editing
by Krishna Chandra Eluri and Jan Harvey)
