A tie-up between Premier Oil (PMO) and private equity backed Chrysaor will create the largest independent oil company in London and sent shares in Premier up 12.6% to 17.1p.

Though to put this rise in context, in their heyday in the early 2010s the shares traded at more than 500p.

The deal will create a combined entity with production of 250,000 barrels of oil equivalent per day and assets in the North Sea, Indonesia, Vietnam, the Falkland Islands and Mexico.

Premier’s previous plan to raise £410 million and load up on more debt to acquire assets from BP (BP.) has been scrapped.

With Chrysaor paying off Premier’s onerous borrowings of more than £2 billion as part of the transaction, existing shareholders in Premier will be left with just 5.45% of the enlarged group.

The plan going forward is to take advantage of cost synergies and to make use of Premier’s £3.15 billion of UK tax losses.

AJ Bell investment director Russ Mould said: ‘After a long period where it felt like the business was, by necessity, being run in the interests of its creditors rather than its shareholders Premier Oil has effectively been put out of its misery.

‘The company’s problems date all back to 2014 and the oil price crash which occurred that year. It simply had taken on too much debt when oil prices were above $100 per barrel and has been running to stand still ever since.

‘Against this backdrop the tie-up with private equity-backed operator Chrysaor is more of a rescue mission than a merger of equals.’


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Issue Date: 06 Oct 2020