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Chrysaor gets listing with Premier deal

The private equity-backed producer accesses London market without having to attempt an IPO

Chrysaor, the North Sea producer backed by the Harbour Energy subsidiary of private equity (PE) firm EIG, will combine with debt-laden Premier Oil in a reverse takeover that retains the latter’s stock market listing to create the largest independent in the London market.

The deal will leave Harbour with a 39pc stake in the combined business but with the opportunity to monetise its investment without the need for an IPO or trade sale.

Premier had been seeking to refinance its $2.7bn debt and raise funds for an acquisition of BP’s stakes in the Andrew and Shearwater fields. That transaction is now off, while Chrysaor will pay off £1.23bn of debt and repay $400mn in Letters of Credit (LCs). It will also offer shares in the new firm, representing a 10.6pc stake, to Premier’s creditors.

250,000bl/d+ oe – Combined Chrysaor-Premier production

The combined Chrysaor-Premier would boast production amounting to 250,000bl/d+ oe as of the end of June and 2P reserves of 717mn bl oe as of the end of last year. Revenue would come to $1.76bn and Ebitdax to $1.27bn across the first half of this year. Operating costs across the two portfolios were £10.50/bl oe over the same period.

Combined net debt, excluding LCs, will be c.$3.2bn on completion of the deal, which is anticipated in the first quarter of next year. But this represent a leverage ratio—debt as a proportion of Ebitdax—of just 1.3 compared with Premier’s existing 2.7, and will be “significant lower cost”, according to the firms. The larger production base will also accelerate the use of Premier’s c.$4.1bn of UK tax losses.

Exit option

Linda Cook, the ex-Shell executive who is CEO of Harbour and will take the same role at the new entity, is non-committal on whether the listing is a significant driver of the deal, saying that she “can see the advantages and disadvantages of both” publicly traded and private firms.

“The funds that we have raised are not quite your typical PE, they might almost be termed permanent capital,” she continues. “We do not have in Harbour the same type of ticking clock in terms of liquidity and returning cash to investors that a lot of PE funds might.

“We have the option to be more patient in terms of providing an exit for our investors, one option of which would have been [an IPO].”

But one option for a patient exit is clearly a gradual sell-down of Harbour’s shares when market conditions are favourable. And the opening of such an avenue is a “key driver” in the logic of the deal, according to an analyst that covers Premier Oil.

“The funds that we have raised are not quite your typical PE, they might almost be termed permanent capital” Cook, Harbour

“The IPO market and trying to get a valuation for a ‘proper’ company like Chrysaor or [fellow PE-backed producer] Neptune is stuck and will be unavailable for some time to come,” he says. “These firms would be relying on the size of investors who simply cannot invest in E&P.”

Chrysaor also gets a significant advantage from being the first mover into a market that both has a saturation point for listed E&P firms of material size and has limited targets for others that might want to explore the reverse takeover option. The one obvious listed vehicle to play the Premier role in any similar deal is Anglo-Irish independent Tullow. Its debt position is more daunting than Premier’s, complicating any transaction, but it “could be the best possible Tullow outcome”, says the analyst.

Management reshuffle

Cook’s arrival as CEO, with current Chrysaor chief Phil Kirk moving to president and CEO Europe, has also attracted attention. One possible explanation is Harbour’s enthusiasm for Premier’s portfolio outside the North Sea, in Southeast Asia and Latin America, where Chrysaor had previously been solely focused on the UK and Norway.

Premier’s non-North Sea assets are “one of the attractions for us”, confirms Cook. And that includes “lik[ing]” a stake in the Zama discovery in Mexico which Premier had previously had up for sale, suggesting it will now be retained. With Kirk running Europe, “this might not be the last deal we will see to bolster the international portfolio” under Cook, the analyst suggests.

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