* 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
(Adds details on payment for creditors)
By Shadia Nasralla
LONDON, Oct 6 (Reuters) - Premier Oil and private
equity-backed Chrysaor will merge in a reverse takeover which
will see Premier's creditors paid $1.23 billion in cash and its
shareholders taking an expected 5.45% of the combined group, the
firms said on Tuesday.
The deal will fold one of the world's oldest independent
producers into a private equity-backed group that will be the
British North Sea's largest oil and gas producer. The sector is
facing falls in both demand and market appetite for oil stocks.
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 deal still needs
approval by regulators and Premier's creditors and shareholders.
The combined group, which will have a new name, will be run
by current Harbour Chief Executive Linda Cook, while Chrysaor
CEO Phil Kirk will be president and chief of its European
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 had a
market capitalisation of $182 million before the announcement.
"The (Premier) 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 own
shares in the new group.
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, unlike other private
equity-backed producers in the basin, had not yet paid out its
owners any "meaningful" amount, the plan was to start paying
dividends with the merged group.
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.
Premier also brings a 25% stake in Mexico's Zama shallow
water offshore project, as well as production in east Asia.
It will withdraw from a planned purchase of some BP fields,
Premier CEO Tony Durrant, who will not have a role in the
combined business, 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.
(Additional reporting by Yadarisa Shabong in Bengaluru; Editing
by Krishna Chandra Eluri and Jan Harvey)