Talos to buy EnVen for $1.1bn

December 2022 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

December 2022 Issue

In one of the most significant deals in the Gulf of Mexico in recent years, independent oil and gas company Talos Energy Inc. is to acquire private upstream exploration and production operator EnVen Energy Corporation for $1.1bn.

Under the terms of the definitive agreement, the transaction consists of 43.8 million Talos shares and $212.5m in cash, including the assumption of EnVen’s net debt upon closing, currently estimated at approximately $50m.

The transaction is well-aligned with Talos’s strategy focused on value creation through the acquisition and development of conventional resources in close proximity to underutilised infrastructure applying Talos’s vast seismic inventory and advanced reprocessing. Moreover, Talos expects to be more than 70 percent oil-weighted, more than 75 percent operated and more than 80 percent focused in deepwater regions.

With operations focused on the Gulf of Mexico, EnVen operates numerous platforms, including five major deepwater facilities with significant open capacity, and holds an acreage footprint of approximately 420,000 gross acres in core deepwater areas for future infrastructure-led development, exploitation and exploration opportunities. Its infrastructure is backed by approximately $160m in restricted cash and receivables reserved against future abandonment obligations.

Following completion of the transaction, Talos shareholders will own approximately 66 percent of the pro forma company and EnVen’s equity holders will own the remaining 34 percent. In addition, Talos expects to generate at least $30m in annual run-rate synergies from the deal, mainly through general and administrative cost reductions.

“This transaction adds significant scale and diversity to our business through logical, in-basin expansion with an excellent strategic fit,” said Timothy S. Duncan, president and chief executive of Talos. “EnVen’s high-margin, oil-weighted assets in key deepwater regions, operated infrastructure and significant overlapping acreage footprint will enhance our ability to accelerate shareholder value creation.”

The transaction has been unanimously approved by each company’s board of directors.

“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,” added Mr Duncan. “The enhanced cash flow profile will provide us with increased capital allocation optionality, including additional high-impact subsea tie-back opportunities, opportunistic acquisitions, accelerating our low-carbon initiatives and positioning Talos for a potential shareholder return of capital programme in the future.”

A technically driven independent exploration and production company, Talos is focused on safely and efficiently maximising long-term value through its operations in the US and offshore Mexico – both through upstream oil and gas exploration and production and the development of carbon capture and sequestration opportunities.

The transaction is expected to close by the end of 2022, 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.

Serving as lead financial adviser to Talos is J.P. Morgan Securities LLC, with KeyBanc Capital Markets Inc. also serving as a financial adviser. Vinson & Elkins LLP is serving as legal adviser to Talos. Intrepid Partners, LLC is serving as financial adviser to EnVen, and Davis Polk & Wardwell LLP is serving as legal adviser.

Mr Duncan concluded: “We are excited for the numerous benefits that this transaction provides and look forward to closing around the end of 2022.”

Fraser Tennant