Premier Oil and Chrysaor Announce Proposed Merger

Source: 10/6/2020, Location: Europe

Premier and Harbour have reached agreement with Harbour’s UK operating company Chrysaor, regarding a proposed all share merger between Premier and Chrysaor (the “Combined Group”) and the reorganisation of Premier’s existing debt and cross-currency swaps (together, the “Transaction”).

The Transaction will create the largest independent oil and gas company listed on the London Stock Exchange with combined production of over 250 kboepd (as at 30 June 2020). In addition, the Combined Group will have a strong balance sheet and significant international growth opportunities.

Key highlights

- Premier to merge with Chrysaor through a reverse takeover; London listing retained

- The Transaction is expected to result in Premier’s stakeholders owning up to 23 per cent of the Combined Group and Harbour and other Chrysaor shareholders owning at least 77 per cent

- Premier’s shareholders are expected to own up to 5.45 per cent1 of the Combined Group

- Chrysaor’s largest shareholder, Harbour, is expected to own up to 39.021 per cent of the Combined Group

- Premier’s approximately US$2.7 billion of total gross debt and certain hedging liabilities will be repaid and cancelled on completion

- A cash payment of US$1.232 billion will be made to financial creditors of Premier and its subsidiaries (together, the “Premier Group”) and Premier Group’s cross-currency hedge counterparties (the “Existing Creditors”); Premier’s approximately US$400million of letters of credit will be refinanced; Existing Creditors will also receive shares in the Combined Group

- The Combined Group’s Board of directors will comprise 11 directors including six independent non-executive directors and three executive directors including Linda Z. Cook (currently CEO of Harbour) who will be CEO of the Combined Group and Phil Kirk (currently CEO of Chrysaor) who will be President of the Combined Group and CEO Europe; the two other non-executive directors will be appointed by Harbour

- The Transaction is subject to regulatory approvals and approval by Premier’s shareholders and the Existing Creditors

Rationale and benefits of the Transaction

- The Boards of Directors of Premier and Harbour believe the Transaction will:

- Bring together two complementary businesses to create the largest London-listed independent oil and gas company by production and reserves

- Combined production as at 30 June 2020 of over 250 kboepd and combined 2P reserves of 717 mmboe as at 31 December 2019

- Combined 2020 H1 revenue of US$1.76 billion and H1 EBITDAX of US$1.27 billion

- Competitive operating costs of US$10.5/boe in H1 2020

- Sector leading strategies to reduce the carbon footprint of their operations

- Result in a Combined Group with significant scale and diversification, through the combination of material operated and non-operated cash generative production hubs in the UK North Sea

- Create a business with a stable platform for future growth and the ability to fund and realise value from its development portfolio and international exploration projects

-:Transform Premier’s financial position, delivering a Combined Group with a strong and sustainable financing structure with resilience to compete in a lower commodity price environment; anticipated combined accounting net debt (excluding Letters of Credit) of approximately US$3.2 billion on completion

- Create substantial cost and tax synergies, accelerating the use of Premier’s c. US$4.1 billion of UK tax losses and unlocking significant value for shareholders

- Create a combined business with the potential to offer a meaningful dividend for shareholders over time

Conditions to closing

The Transaction is subject, amongst other things, to regulatory, shareholder and Existing Creditors’ approval.

Since the Transaction constitutes a reverse takeover for the purposes of the Listing Rules, Premier will need to seek shareholder approval and re-admission of its ordinary shares upon completion to the Official List of the FCA and to trading on the main market of the London Stock Exchange. Premier will in due course send a prospectus and circular to its shareholders convening a general meeting to approve the Transaction.

Premier’s Board intends to provide its unanimous and unconditional recommendation to Premier’s shareholders to vote in favour of the Transaction, as the Premier directors intend to do in respect of their own beneficial holdings of Premier’s shares, representing approximately 0.12 per cent of the existing share capital of Premier as at 5 October 2020, being the last practicable date prior to publication of this announcement.

Roy Franklin, Chairman of Premier, commented:

“The Board intends to recommend unanimously this transaction to shareholders as being in the best interests of shareholders and the company. This will mark a new and exciting chapter in Premier’s history.”

Tony Durrant, CEO of Premier, commented:

“There is significant industrial, commercial and financial logic to creating an independent oil and gas company of this size with a leading position in the UK North Sea. The transaction will also provide the Combined Group with a solid foundation from which to pursue a fully funded international growth strategy.”

Linda Cook, CEO of Harbour, commented:

“This transaction is the next step in Harbour’s aspiration to develop a new independent E&P company with global relevance. It significantly advances our leading position in the North Sea, where we will continue to re-invest, and expands our geographic footprint to Asia and Latin America. We are excited by the Premier assets in these regions and view them as the foundations upon which to build material portfolios and further diversify the company.”

Phil Kirk, CEO of Chrysaor, commented:

“Through this deal we will become the UK’s largest London-listed independent E&P, by all key metrics. With our combined organisation and operatorship of a large part of our now international portfolio, we will have the ability to deliver value safely, and play our part in the energy transition.”

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