* 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 details on banks involved and future ownership, updates
graphics)
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 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 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 in the group.
Premier Oil shares were up about 7% by 1053 GMT at 16.22
pence, but are still down 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 oil 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 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. Overall, Premier stakeholders will own
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, 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 and Shell.
Premier also brings to the table 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'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 and 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)
BP (BP.)