Premier Oil rescue wipes out investors

PreMIer Oil is to merge with a private equity rival, creating the North Sea’s biggest oil and gas producer but almost wiping out current shareholders.

The embattled British firm will effectively be taken over by Chrysaor in the rescue deal, which will eliminate its £2.3bn debt mountain and put new bosses in charge.

Premier will remain listed in London, however, with Chrysaor set to be reversed into it and given a stake of at least 77pc in the enlarged business.

And while creditors stand to get £950m in cash and at least 10.6pc of the new business, current shareholders will be left with just 5pc.

But yesterday roy Franklin, Premier’s chairman, said the board was ‘unanimously’ recommending the deal despite the significant dilution.

It sent shares surging by as much as 24pc, as analysts said the takeover would at least put the troubled firm on a stable footing. They later closed 1.8pc, or 0.28p, higher at 15.47p.

Premier chief executive Tony Durrant, who had tried to resist takeover approaches, said there was ‘a logic in putting the two companies together’ and insisted it would now be ‘a much better vehicle for our shareholders’.

The tie-up will create the largest independent oil and gas company listed on the London Stock exchange, producing upwards of 250,000 barrels of oil and gas per day – more than one eighth of the UK’s output.

Linda Cook, the boss of Chrysaor backer harbour energy and a former Shell executive, will be parachuted in to become the first woman chief executive of a major listed UK energy company. Chrysaor said the merger would significantly improve its position in the North Sea and that Premier’s assets in Asia and Latin America would also provide opportunities for growth.

‘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,’ Cook ( pictured) said.

Premier has been struggling since oil prices fell in 2014, taking a big chunk of income away just as it took on huge borrowings.

In a bid to tackle the problem, bosses proposed raising £410m with new shares and using the cash to buy some of BP’s North Sea assets and pay down debts.

But that move was blocked by creditors, including honk Kongbased hedge fund ArCM, which instead decided to back Chrysaor’s proposals.

russ Mould, investment director at AJ Bell, said this meant the deal became ‘ more of a rescue mission than a merger of equals’.

he added: ‘ Premier Oil has effectively been put out of its misery. The deal may create the largest independent UK oil company but existing shareholders will only own a very modest slice.’

The tie-up also comes as the oil industry is suffering from a major downturn because of the Covid19 pandemic, which has hammered demand and sent prices plummeting.

Concerns that the growing popularity of electric cars could prompt oil use to peak soon, as well as pressure from environmental campaigners, have also prompted major producers including BP and royal Dutch Shell to outline plans to shift to greener sources of energy. Both are axing thousands of jobs.

Chrysaor, backed by private equity firms harbour and eIG, has become a major North Sea producer by buying British fields from Shell and Conoco Phillips, and spending over £4bn since 2017.