US independent Talos Energy has made a major play in the deep-water US Gulf of Mexico with definitive agreements to acquire EnVen Energy for $1.1 billion in cash and shares.
Talos said the key highlights of the acquisition include:
- adding 24,000 barrels of oil equivalent per day of production of which 80% is oil and 90% is operated;
- increasing production by 40% and gross acreage by 35%, doubling Talos’ operated deep-water facility footprint and adding key infrastructure in existing Talos operating areas;
- about $460 million of 2022 estimated adjusted Ebitda and about $170 million of 2022 estimated free cash flow;
- EnVen’s proven plus probable reserves of 78 million barrels of oil equivalent.
Talos chief executive Timothy Duncan said: “This transaction adds significant scale and diversity to our business through logical, in-basin expansion with an excellent strategic fit.
“EnVen’s high-margin, oil-weighted assets in key deep-water regions, operated infrastructure and significant overlapping acreage footprint will enhance our ability to accelerate shareholder value creation.
“The acquisition is financially attractive, expanding our operating margins and increasing free cash flow per share while immediately improving our credit profile before accounting for significant expected cost synergies,” he added
Talos said EnVen operates numerous platforms, including five major deep-water facilities with significant open capacity and that it holds an acreage footprint of 420,000 gross acres in core deep-water areas for future infrastructure-led development, exploitation and exploration opportunities.
The five big offshore production platforms are Brutus/Glider, Lobster, Cognac, Neptune and Prince.
EnVen's infrastructure is backed by $160 million in restricted cash and receivables reserved against future abandonment obligations.
Talos said EnVen’s assets add material scale and diversity to Talos’ footprint. On a pro forma basis, Talos expects to be more than 70% oil-weighted, more than 75% operated and more than 80% focused in deep-water regions.
There are no anticipated changes to Talos’ senior management resulting from the transaction. Tim Duncan will remain chief executive and will retain one seat on the expanded board of directors, which will include six Talos directors, and Shandell Szabo and Richard Sherrill who are both independents from the EnVen board of directors.
Timing and approvals
The transaction, which is expected to close around the end of 2022, is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the approval of Talos and EnVen shareholders.
Riverstone Holdings, which owns 15% of Talos, has executed a support agreement in favour of the transaction. A majority of EnVen shareholders have agreed to provide their written consents in favour of the transaction.
Both Talos and EnVen boards have unanimously approved the transaction.