Offshore staff
HOUSTON — Talos Energy Inc. announced the execution of definitive agreements to acquire EnVen Energy Corp., a private operator in the deepwater US Gulf of Mexico (GoM), for $1.1 billion.
The strategic transaction expands Talos's GoM operations with high margin, oil-weighted assets, is accretive to Talos shareholders on 2023E free cash flow per share and is immediately de-leveraging.
Consideration for the transaction consists of 43.8 million Talos shares and $212.5 million in cash, plus the assumption of EnVen's net debt upon closing, currently estimated at approximately $50 million at year-end 2022. Following the transaction, Talos shareholders will own approximately 66% of the pro forma company and EnVen's equity holders will own the remaining 34%. The transaction has been unanimously approved by each company's board of directors.
The transaction is expected to close by year-end 2022.
The intended acquisition was first announced Aug. 1.
Key transaction highlights:
- Adds ~24 Mboe/d of production (>80% oil, >90% operated).
- Increases production by 40% and gross acreage by 35%, significantly increasing operational scale and diversity.
- Doubles Talos's operated deepwater facility footprint, adding key infrastructure in existing Talos operating areas.
- ~$460 million of 2022E Adj. EBITDA (~$630 million unhedged) and ~$170 million of 2022E free cash flow.
- >13% accretive to Talos shareholders on 2023E Free Cash Flow per Share.
- Implied enterprise value representing 2.4x 2022E hedged Adj. EBITDA (1.7x unhedged), a discount to Talos's current metrics.
- Immediately de-leveraging, with estimated year-end pro forma net debt ratio of less than 0.8x.
- At least $30 million in expected annual run-rate synergies to be achieved in 2023.
- Reduces Talos's GHG emissions intensity with deepwater operating footprint.
- Enhances board of directors with seven fully independent directors plus Talos CEO.
- Talos will introduce a proposal to eliminate its classified election structure such that all directors are elected annually.
Asset base aligned with Talos Strategy:
EnVen produces about 24 Mboe/d in the U.S. GoM, which is more than 80% oil-weighted, more than 90% operated and more than 95% from deepwater regions.
EnVen operates numerous platforms, including five major deepwater facilities with significant open capacity and holds an acreage footprint of about 420,000 gross acres in core deepwater areas for future infrastructure-led development, exploitation and exploration opportunities. EnVen's infrastructure is backed by more than $160 million in restricted cash and receivables reserved against future abandonment obligations.
Talos said the transaction is well-aligned with its strategy focused on value creation through the acquisition and development of conventional resources in close proximity to underutilized infrastructure applying Talos's vast seismic inventory and advanced reprocessing. EnVen's assets add material scale and diversity to Talos's footprint, already a leading public offshore independent in the US, Talos said. On a pro forma basis, Talos expects to be more than 70% oil-weighted, more than 75% operated and more than 80% focused in deepwater regions.
Leadership and governance
There are no anticipated changes to Talos senior management resulting from the transaction. Tim Duncan will remain CEO and will retain one seat on the expanded board of directors, which will include six Talos directors (CEO and five independents) and two independents from the EnVen board of directors, Shandell Szabo and Richard Sherrill.
Robert Tichio, the appointed Riverstone Holdings representative on Talos's board, will resign simultaneous with closing of the transaction.
Shandell Szabo is an independent director of EnVen and previously spent 19 years with Anadarko Petroleum Corp., most recently as the vice president of US Exploration. She has technical expertise in the deepwater GoM and other key basins.
Richard Sherrill is also an independent director of EnVen and is the president of Clean Aire Partners, a private energy transition company. He was previously the COO of Duke Energy Corp.
09.22.2022
