Premier Oil in early talks on deal with Chrysaor

By Laura Hurst, Dinesh Nair and Luca Casiraghi on 9/15/2020

(Bloomberg) --Premier Oil Plc and Chrysaor Holdings Ltd. have held preliminary talks about a potential deal that would bring together two of the largest UK oil and gas producers, according to people with knowledge of the matter.

The two companies have discussed a possible combination of part or all of their businesses, according to the people, who asked not to be identified because the information is private. One option under consideration would involve a full merger following a restructuring of Premier’s $2 billion in debt, the people said.

Premier confirmed it “has been in discussions with a number of third parties, including Chrysaor, regarding alternative forms of transactions to secure the long-term refinancing of the group’s debt facilities.” The terms discussed so far aren’t better for shareholders or creditors than those proposed back in August, it said Tuesday in a statement.

The situation is fluid and there’s no certainty a deal will materialize, according to Premier. Its shares jumped as much as 20% in London, the most in three months, and traded up 8.8% at 19.14 pence as of 2:22 p.m. local time. Premier’s market value has slumped 81% this year to about $228 million.

The oil and gas producer has spent most of the year laboring to restructure its debt, becoming embroiled in a public clash with its largest creditor, Asia Research & Capital Management. Although Premier struck a refinancing deal in August, it must raise at least $325 million in equity to extend its debt and complete a planned purchase of North Sea fields from BP Plc.

A refinancing agreement remains Premier’s preferred option for now, according to the people. In the event that it’s unable to satisfy terms with creditors, a deal with Chrysaor would be one possible option. Nevertheless, Chrysaor wouldn’t buy Premier without a reduction in its debt load, the people said.

Chrysaor declined to comment.

Despite the debt burden, Premier’s $4 billion of tax losses could be attractive to a potential buyer, the people said. Oil and gas companies operating in the U.K. can carry forward tax losses and offset them against future profits.

Chrysaor, a North Sea-focused business founded in 2007, made a big splash in the region in 2017 when it paid $3 billion for a package of assets from Royal Dutch Shell Plc. The company, backed by private equity firm Harbour Energy Ltd., has since become the No. 1 oil and gas producer in Britain, having bought assets from Spirit Energy in 2018, as well as ConocoPhillips’s UK division.

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