North Sea merger creates firm producing 250,000 barrels of oil a day

North Sea players Premier Oil and Chrysaor have agreed a merger to create the biggest independent exploration and production company on the London Stock Exchange.

The North Sea has seen a flurry of acquisitions and mergers in recent years as the sector matures.

The deal will see the formation of a producer churning out some 250,000 barrels of oil and its gas equivalent per day – more than an eighth of the UK total.

The merger, structured as a reverse takeover, is subject to regulatory approvals and approval by shareholders and creditors. It should mark the end of a testing period for Premier Oil, which has spent much of the past year attempting to restructure its debt.

Chrysaor’s largest shareholder, Harbour, is expected to own up to 39 per cent of the combined group.

Premier said the deal would 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 project”.

The firm will not now proceed with its previous plans to buy some North Sea fields from BP. The oil major said it would consider its options for the stakes in the Andrew and Shearwater fields following Premier’s takeover.

Tony Durrant, chief executive of Premier, said: “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.”

Chrysaor chief executive Phil Kirk added: “Through this deal we will become the UK’s largest London-listed independent E&P [exploration and production firm], by all key metrics.”

Stuart Lamont, investment manager at Brewin Dolphin, noted: “After a particularly volatile period for Premier Oil shareholders, the deal with Chrysaor should provide a degree of certainty following years of speculation about the company’s future.

“While Premier shareholders will be heavily diluted by the agreement, the merger effectively solves Premier’s longstanding debt problem which had become a perennial drag on the company.”

The combined group’s board of directors will comprise 11 directors including six independent non-executive directors. Linda Cook, currently chief executive of Harbour, who will be CEO of the combined business.

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