By Ron Bousso, Shadia Nasralla and Clara Denina
LONDON, Oct 6 (Reuters) – Premier Oil’s takeover by private equity-backed Chrysaor marks the end of an 86-year oil wildcatter and could herald wider consolidation provided there are willing buyers in a sector whose outlook is highly uncertain.
Leading oil and gas companies, including BP BP.L and Royal Dutch Shell RDSa.L, want to sell large parts of their portfolios to prepare for a shift towards renewable energy.
The impact of COVID-19 has also hit the hydrocarbon industry particularly hard because of its impact on demand and oil and gas prices.
Faced with ballooning debt, smaller exploration and production (E&P) companies, such as Africa-focused Tullow Oil and North Sea producer Ithaca Energy, also want to sell assets or partner with an investor.
But the pool of buyers is small.
A handful of private equity firms, such as Chrysaor, backed by Harbour Energy, and HitecVision, as well as a small number of listed companies, such as Serica Energy SQZ.L, are the most likely purchasers, analysts and multiple industry sources said.
Private equity firms see opportunities to make money by cutting costs, betting on higher oil prices in the coming years as investments shrink leading to lower output.
They put money into oil and gas fields to extend their lives, when larger companies might be reluctant to spend more on assets no longer big enough to make a difference in a major portfolio.
“The sector in general is ripe for consolidation,” Harbour CEO Linda Cook told a conference call. She is expected to become CEO of the merged Chrysaor-Premier entity.
The reverse takeover announced on Tuesday needs shareholder backing and regulatory approval.
Premier’s takeover follows months of wrangling with its creditors, who tried to ease a $2.7 billion debt burden by