The Chrysaor-Premier Oil mega merger won’t mark the end of Chrysaor’s acquisition spree, according to the top consultant at Westwood Global.
Arindam Das said the reverse takeover, “solidifies and consolidates” Chrysaor’s position as the largest producer in the UKCS, ahead of the likes of Total and BP.
It follows other major deals in recent years for Chrysaor, which completed one with Shell in 2017 and another £2billion deal with ConocoPhillips two years later.
Premier Oil brings brand new production – like the incoming Tolmount field – and new international areas for Chrysaor.
However, a “key challenge” for the combined entity will be to “arrest the declining production profile” on mature assets, meaning more deals could be on the cards.
Mr Das, group head of consulting at Westwood Global, said Chrysaor has “spent quite a bit of money” buying production with Conoco and improving those assets, but a different strategy might now follow.
He said: “I don’t think this is necessarily the end in terms of their capital spending programme.
“The key challenge for them is to arrest the declining production profile. I think part of that could be spending money to buy assets that are further ahead of the curve in terms of not quite being at the production development stage, but more in the exploration and appraisal stage.”
Mr Das said he thinks Chrysaor will “look closely” at the potential for a mix of assets.
“I think what we might see is a change in direction, perhaps in early-stage opportunities around exploration and appraisal, which then helps them fill up the hopper towards the back-end, where they start to see the decline in profile”, he said.
“They will be focussed, I think, or they should be focussed on addressing that.”
The deal also brought an abrupt cancellation to Premier Oil’s acquisition of the Andrew assets and Shearwater stake from BP, which, after renegotiations, is the third hurdle for that deal since it was announced in January.
Premier boss Tony Durrant has said he expects further talks with BP, though Chrysaor hasn’t yet commented.
Mr Das said: “Whether the transaction is going to attract another buyer remains to be seen. I think every buyer is going to look at it from a ‘fit’ perspective – fit against their portfolio, their strategic objectives and how that might play out.”
Andrew and the Shearwater stake will already have been accounted for in BP’s divestment strategy by 2035, Mr Das pointed out.
It comes amid other M&A opportunities in the North Sea, such as ExxonMobil’s portfolio and CNOOC’s Scott platform, though Mr Das does not expect a “huge wave” of deals in the current environment.
He added: “I think BP will certainly try to find a buyer for that, but I think the challenge in the market today is that there are a lot of assets, you’ve got Exxon’s portfolio in there, in the market. So whether the transaction will actually consummate another buyer remains to be seen.
“Shearwater is obviously operated by Shell, but I understand Exxon has a stake so it therefore forms part of the Exxon divestment plan.
“So there could be other buyers who could look into it, but whether they could get the sufficient level of interest in the interim and the right price is still up in the air and remains to be seen, given the considerable volume of assets in the market today.”