TRADE FINANCE: NATURAL RESOURCES
independent E&P company. The transaction was a reverse takeover under the Financial Conduct Authority’s (FCA’s) Listing Rules for Premier Oil.5
The new group has now become the largest independent oil and gas producer in UK North Sea waters with a proforma production of 254 thousand barrels of oil equivalent per day (H1 2020), and reserves of 695MMboe (2P).
Over the past few years, the former Chrysaor entity had consistently reduced greenhouse gas (GHG) emission intensity across its assets, and it has an additional target for further reductions. The new merged company has committed to continue Chrysaor’s legacy of industry- leading ESG objectives by reinforcing its health and safety standards, and taking part in ambitious projects on the path to a net zero UK economy in terms of GHG emissions by 2035. Measures to achieve this include pioneering blue hydrogen with carbon capture and storage using depleting North Sea fields.
Combined group assets are located mainly in the UK (91%), as well as Indonesia (5%) and Vietnam (4%). The new group has a cash-generative diversified UK business and operates with a lower carbon intensity than the average UK oil and gas producer.
Transaction structure
Deutsche Bank joined as a lender in a sustainability-linked seven-year US$4.5bn RBL refinancing transaction, which was signed in November 2020 in advance of the Chrysaor–Premier Oil merger. The RBL also includes a US$750m accordion, not pre-committed, to increase the facility size to US$5.25bn.
As noted, the merger was, in fact, a reverse takeover under the FCA’s Listing Rules for Premier Oil, in which Premier’s US$2.7bn of gross debt and other liabilities had to be repaid and cancelled. In addition, the new RBL amends and increases Chrysaor’s existing US$3bn RBL, and funds capital and operational expenditure of the new merged Harbour Energy entity.
Fully underwritten by Bank of Montreal, BNP Paribas, DNB Bank, and Lloyds Bank, this was very much a landmark deal, representing the first RBL to include ESG-linked KPIs in Europe. The structuring includes interest margin adjustments within a range of five basis points linked to
Visit us at
flow.db.com
For the first time we are also including ESG KPIs in our debt framework Teitur Poulsen,
Chief Financial Officer, Lundin Energy
pre-agreed carbon emissions and reductions targets – all verifiable by an independent ESG auditor.
solutions in UK projects and nature- based offsets in Southeast Asia, the new group’s strategy is to become a key energy player, with UK North Sea assets playing a pivotal role in its energy transition. It has announced a goal of 30% reduction in GHG emissions by 2025, with a further 20% reduction by 2028 and a net zero scope 1 and 2 emission by 2035. By way of background, the three scopes of GHG emissions, according to the leading GHG Protocol Corporate Standard,6
Path to net zero by 2035 Leveraging Chrysaor’s ESG legacy of pioneering in CO2
are:
• Scope 1 – Direct emissions from company-owned and controlled resources.
• Scope 2 – Indirect emissions from the generation of purchased energy from a utility provider.
• Scope 3 – Indirect emissions not included in scope 2 that occur in the value chain of the reporting company, including both upstream and downstream emissions.
Scope 1 and 2 are mandatory to report, whereas scope 3 is voluntary and the hardest to monitor. However, companies successfully reporting all three scopes will gain a sustainable competitive advantage.
Before the merger, Chrysaor was a founding partner of the major Acorn CCS and Hydrogen Project at the St Fergus gas terminal in North East Scotland. This comprises a partnership with Shell and Total that is led by Pale Blue Dot Energy and supported by the UK and Scottish governments and the European Union. This North Sea based-project, now under the auspices of Harbour Energy, is essential
capture and storage
for meeting the Scottish and UK governments’ net zero targets. The first phase of Acorn is targeting storage of 340,000 tonnes of carbon a year from the St Fergus gas terminal. A second phase, with the production of ‘blue’ hydrogen, could see the capture and storage of much larger volumes.
Harbour also has a foothold in the UK’s green energy plans through the Acorn project stake and the Humber Zero project. “We do have a focus on ESG and we have made a commitment to be net zero by 2035, we take that very seriously,” said CEO Linda Cook in an interview with the Financial Times on 1 April 2021.7
She
confirmed that part of the plan is to snap up any assets the oil majors are offloading, as they streamline their portfolios and increase the focus on renewable energy. The newspaper noted that “since October, when Harbour and Premier first agreed their deal, oil has risen from about US$40 a barrel to US$65.”
Asset electrification projects are underway to assess low-carbon electricity supply options to power platforms. However, the company is mindful of its new shareholders, so the focus is on cash generation while ensuring investment is sustained for the long-term energy transition.
“Despite the engaged energy transition, hundreds of billions of US$ per annum of investments continue to be required in the oil and gas upstream sector just to meet forecast demand over the next two decades,” says Yann Ropers, Deutsche Bank’s Head of London for Natural Resources Finance, with global responsibility for RBL finance.
He adds: “We remain committed to our North Sea clients in their ESG transition and development of long-term solutions for CO2
emissions reduction (such as carbon capturing and other carbon offset solutions). Lundin and Harbour are role models in their sector when it comes to environmental ambitions. The energy transition is a journey, and each step counts.”
Sources 1
See
https://bit.ly/3tyNKZg at
iea.org
2 See
https://bit.ly/3y05SyE at
flow.db.com 3 See
https://bit.ly/3uzMIxt at
lundin-energy.com 4 See
https://bit.ly/3f2geoS at
lundin-energy.com 5 See
https://bit.ly/3f2gi86 at
offshore-energy.biz 6 See
https://bit.ly/2RFYuaO at
ghgprotocol.org 7 See
https://on.ft.com/3hgpqbN at
ft.com
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