A U.S.-based oil and gas company, Kosmos Energy, has confirmed that it is in early discussions for a potential all-share acquisition of Tullow Oil, a West Africa-focused energy firm.
This was contained in a statement by the Tullow on Thursday, as reported by Reuters.
The announcement came just days after Tullow’s CEO, Rahul Dhir, stepped down on December 4.
Kosmos has until January 2025, to decide whether to make a firm offer or declare that it will not proceed with the acquisition, in accordance with regulatory requirements.
Meanwhile, Tullow earlier addressed media speculation about the takeover talks, stating there is “no certainty of any offers being made or of the terms of any potential offers.”
On their part, Kosmo said in a statement that the primary discussion is ongoing.
Panmure Liberum analyst Ashley Kelty told Reuters that the deal made sense, highlighting the shared assets in West Africa. Kelty also noted that Kosmos Energy has a more diverse asset portfolio and a stronger balance sheet.
“This would be a sensible deal, given the shared assets in West Africa, and with Kosmos having a more diverse asset base and healthier balance sheet, would have the ability to take on the mountain of debt Tullow labours under,” Kelty said.
Market Implication of the potential acquisition
The merger of the two companies would mark the latest move in a wave of energy industry consolidations, as boards aim to enhance performance through increased scale and cost reductions.
The combined entity, based on 2024 guidance, would produce over 130,000 barrels of oil equivalent per day (boepd) across operations in Mauritania, Senegal, Ghana, and Equatorial Guinea along Africa’s west coast, as well as the U.S. Gulf of Mexico.
Kosmos Energy, based in Dallas, Texas, has a market capitalization of $1.75 billion, while Tullow Oil’s market cap stands at 379.3 million pounds ($480.50 million).
Tullow Oil reported total production of 63,700 barrels of oil equivalent per day (boepd) in the first half of 2024, while Kosmos pumped 65,400 boepd in the third quarter.
Both companies operate in offshore energy hubs, with Kosmos having production operations in Ghana, Equatorial Guinea, and the deepwater U.S. Gulf of Mexico.
If the acquisition materializes, it would create a significant Atlantic Margin exploration and production (E&P) player.
Following the news, Tullow Oil’s shares rose 5.6%, while Kosmos Energy’s shares dropped nearly 14.7% in afternoon trading.
Kosmos Energy’s final decision regarding the acquisition will be announced by the January 2025 deadline.
