Leading oil and gas companies, including BP and Royal Dutch Shell, 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, 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 finding new cornerstone investors after the COVID-19 pandemic helped to drive down oil prices to 30-year lows, sources involved in the talks told Reuters.
Those efforts drew no interest, the sources said on condition of anonymity.
Chrysaor swiftly stepped in in July with an offer to creditors to buy Premier as part of a debt settlement. CEO Tony Durrant reluctantly accepted it after pressure mounted.
With the completion of the deal later this year, Chrysaor will publicly list and become the largest North Sea producer.
Premier's debt-holders and shareholders were short-changed but avoided greater losses that would have followed had Premier fallen into bankruptcy.
The spotlight now turns to some of Premier's London-listed rivals that face similar difficulties.
"This deal is a good example of the consolidation that needs to happen to the oil & gas sector, we need bigger companies with bigger asset bases and stronger balance sheets," said Martin Copeland, managing director at RBC, which advised Premier in the deal.
"There are other public oil and gas explorers with heavy debt loads ...this could be a blueprint for similar deals," Copeland added.
Tullow Oil and North Sea producer Enquest, both seen as ground-breaking firms during the oil price boom a decade ago, face shareholder pressure to reduce debt and sell assets after their share value has collapsed along with oil prices.
Both their share prices rose sharply on Tuesday, with Tullow gaining around 18% and EnQuest up 10%.
Tullow, in turmoil after technical issues at its flagship field in Ghana and disappointing exploration results in Guyana, is struggling with $3 billion in debt and a market capitalisation of $280 million (215.6 million pounds).
EnQuest, with net debt of around $1.35 billion in September and a market capitalisation of $298 million, has agreed with its lenders on a pre-emptive waiver of its liquidity test for the rest of 2020.
Both EnQuest and Tullow declined to comment.
"The UK sector is ripe for consolidation. The last time the industry truly underwent a period of mega-consolidation was in the late 1990s," said Wood Mackenzie analyst Greig Aitken.
FACTBOX-Changing ownership of North Sea oil and gas
(Editing by Barbara Lewis)
By Ron Bousso, Shadia Nasralla and Clara Denina