Harbour Energy was lauded as a future “go-to” name for oil and gas investors after making its debut on the London Stock Exchange yesterday.
Analysts at investment banks said Harbour brought much-needed scale and strengthen back to the London-listed exploration and production (E&P) sector.
Some named Harbour as a candidate for promotion into the FTSE 100 index and others raised the prospect of dividend payments starting next year.
Harbour chief executive Linda Cook described Thursday as a “landmark day” for the company and all those involved with its predecessors.
The business launched on Wednesday evening on completion of private-equity backed Chrysaor’s all-share merger with public company Premier Oil, which traces its roots back to 1934 in Scotland.
The deal created the largest UK-listed independent E&P company and UK North Sea producer.
The company has production of 200-215,000 barrels of oil equivalent per day, mostly from fields offshore UK.
It has operating costs of fewer than $15 per barrel and a free cash flow breakeven of $30-35.
On completion, it had net debts of £2 billion, but significant liquidity of £500 million.
Al Stanton, Edinburgh-based analyst at RBC Europe, said: “We expect Harbour to be a FTSE 250 constituent, and a move to the FTSE 100 seems likely.”
Mr Stanton also predicted further acquisitions in the UK for the business.
Under the leadership of founder Phil Kirk, Chrysaor pulled off a number of big deals in recent years, including a £3bn swoop for Shell’s interests in 10 North Sea fields in 2017.
A £2bn purchase of US oil giant ConocoPhillips’ UK business followed in 2019.
In October 2020, Chrysaor agreed a reverse takeover of Premier Oil and the reorganisation of the latter’s debts.
The reorganisation was completed on Wednesday, heralding the launch of Harbour.
The enlarged business adopted its name from Chrysaor’s largest shareholder, Harbour, an energy investment vehicle formed by US-based EIG Global Energy Partners.
Its 925m existing ordinary shares and 17.5bn new shares were admitted to trading on the LSE at 8am under the ticker symbol “HBR” yesterday.
Most of the shares are locked in for six to 12 months, but about 23% — held largely by former Premier shareholders and creditors — are not subject to any lock ups.
Werner Riding, analyst at Peel Hunt, said the shares may experience short-term volatility as creditors decide whether to hold or sell.
Mr Riding does expect Harbour’s shares to stabilise as the business builds “a new institutional following”.
He said: “We see Harbour becoming the ‘go-to’ name in the UK-listed E&P space for investors looking to increase their sector weight.”
James Carmichael, energy analyst at Berenberg, said: “The 18% shareholding made up of Premier creditors, without any associated lockups, is likely to drive near-term volatility.
“Over the longer-term, management’s ability to source material international M&A opportunities will be key to adding further scale to the UK’s largest listed E&P.
“Overall, Harbour offers significantly improved balance sheet strength, cash flow generation, and income potential compared to Premier as a standalone business.”
Nathan Piper, head of oil and gas research at Investec Securities, said: “Harbour Energy certainly brings much needed scale and balance sheet strength back to the London listed E&P sector.
“The performance over the coming months should determine if there is the appetite for the high-quality management team and strong cash flows that Harbour offers the market.”
Shares opened at 19p and closed at 20.64p.
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