Houston-based Talos Energy Inc. has announced a significant move in the oil and gas industry with its strategic acquisition of QuarterNorth Energy Inc. for $1.29 billion. This transaction, consisting of 24.8 million shares of Talos’s common stock and approximately $965 million in cash, is set to bolster the company’s presence in the U.S. Gulf of Mexico and expand its deepwater footprint.
Key Highlights of the Deal:
➡️ Financial Accretion: The acquisition is immediately accretive to the company’s key financial metrics, with over 65% accretion on 2024E and 2025E Free Cash Flow Per Share, and more than 15% on Cash Flow Per Share. It is also accretive on Net Asset Value Per Share, Proved Reserves Per Share, and 2024E and 2025E Production Per Share.
➡️ Enhanced Asset Base: QuarterNorth brings to Talos an average daily production of approximately 30,000 barrels of oil equivalent per day (Boe/d), inclusive of planned downtime. QuarterNorth’s assets are primarily in deepwater, consisting of six major fields. This acquisition is expected to improve Talos’s base decline rate by about 20%, thereby enhancing production stability and lowering reinvestment rates.
➡️ Operational Synergies: Talos anticipates annual run-rate synergies of approximately $50 million, consisting of operational and administrative cost reductions. These synergies are expected to be realized by the end of 2024.
➡️ Governance and Approvals: The senior management team of Talos will remain unchanged, with the addition of one independent director to Talos’s Board of Directors. The deal, expected to close by the end of the first quarter of 2024, is subject to customary closing conditions, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
➡️ Strategic Significance: The acquisition aligns with Talos’s strategy of executing transactions that create shareholder value. It not only enhances the corporate asset quality and operational scale but also provides a robust platform for future growth in the Gulf of Mexico.
Industry Implications:
This acquisition is a significant move by Talos Energy in the oil and gas sector, especially given the current market conditions. Talos CEO Timothy S. Duncan highlighted the company’s resilience and success in the Gulf of Mexico, noting the potential for increased investor interest and improved financial performance following this acquisition. Analysts from Stifel remarked on the transaction’s strategic value to Talos’s overall strategy of building a large-scale offshore exploration and production company.
Conclusion:
Talos Energy’s acquisition of QuarterNorth represents a strategic step in strengthening its position in the Gulf of Mexico. With the deal enhancing key financial metrics, asset quality, and operational scale, Talos is poised for continued growth and success in the competitive oil and gas industry.
Read More: Talos Energy Makes Commercial Discoveries in GoM
