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Talos, Stone to merge in $1.9B stock deal

Written by  Karen Boman Tuesday, 21 November 2017 08:46

Talos Energy LLC and Stone Energy Corp. will merge in an all-stock deal, creating an exploration and production company with a significant acreage footprint in the deepwater US Gulf of Mexico and shallow waters offshore Mexico.

 

The merged company, to be called Talos Energy,  will have an initial equity market capitalization of approximately US$1.9 billion and an enterprise value of approximately $2.5 billion, based on Stone's stock price of $35.49 on 20 November, 2017, and the terms of the proposed transaction.

The combined company will have estimated 2017 average daily production of approximately 47 Mboe and proved reserves of 136 MMboe as of June 30, 2017, based on SEC prices, Stone reported today (21 November). In the Gulf of Mexico, the company will hold over 1.2 million combined gross acres, of which about 160,000 acres is offshore Mexico.

The Zama oil discovery, operated by Talos, was the first private sector offshore exploration well in the history of Mexico, and was previously disclosed as having between 1.4-2 billion gross barrels of original oil in place.

Two recent discoveries, Tornado II and Rampart, also will provide the merged company near-term opportunities for growth. In October, Talos reported success with its Tornado II drilling program, saying the results would add to its Phoenix resource in the Green Canyon area in the deepwater Gulf. In September, Stone reported that its partner, Deep Gulf Energy III, had encountered hydrocarbon pay at the Rampart Deep well at Mississippi Canyon Block 116, 8.5mi south of the Pompano field.

Additionally, the combined company expects to achieve up to $25 million in annual pre-tax synergies from supply chain management and other operational efficiencies by year end 2018.

"The combined talent, technical resources and balance sheet of the resulting company will allow us to accelerate development of our own robust project inventory while also giving us the horsepower to pursue compelling transactional and exploration opportunities. We fully expect to achieve material operating synergies and maximize capital efficiency going forward,” Timothy S. Duncan, Talos' CEO, said in a 21 November statement.  

In February this year, Stone successfully completed a financial restructuring and emerged from Chapter 11 bankruptcy.

The new company will have increased financial flexibility, in part through its expected new $1 billion credit facility with an expected $600 million in initial borrowing capacity, and no material long term note maturities until 2022. 

Duncan will serve as CEO of Talos Energy with additional members of current Talos and Stone management serving in other key leadership roles. 

Talos will be headquartered in Houston, with additional offices in Lafayette and New Orleans. The new company is expected to trade on the New York Stock Exchange under the new ticker symbol TALO. The transaction is expected to close in late Q1 or early in Q2 2018.

In June 2014, Stone sold non-core Gulf of Mexico conventional shelf assets to Talos for $200 million in cash in $117 million in future undiscounted liabilities.

Read more:

Talos makes major "historic" oil find off Mexico

Talos adds to Phoenix resource

DGE III hits at Rampart Deep

Stone Energy sells non-core GOM assets

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