It will produce close to 100,000 barrels per hour and have a pipeline of growth in Kenya, Ghana, Egypt and Gabon. There are also exploration opportunities in Guyana, Mauritania, and Ghana.
Tullow Oil PLC (LSE: TLW), and Capricorn Energy PLC (LSE: CNE) have merged to form “a leading African energy company with an extensive and diverse asset base as well as a portfolio of investment options that delivers visible production growth.”
Capricorn shareholders will be able to receive 3.8068 Tullow shares as part of the deal. This will give them 47% ownership, while Tullow’s owners will own 53%.
The companies stated in a statement that the fund will include low-cost producing assets as well as a deep portfolio with incremental high return investment opportunities in Ghana, Gabon, Gabon, and Cote d’Ivoire.
It will include Tullow’s major resource-development project in Kenya and Capricorn’s Egypt portfolio. These assets offer opportunities for self-financed production growth through infill drilling, low-cost exploration, and infill drilling. There are also potential upsides in Guyana, Mauritania and other exploration assets.
The new company will produce 96,000 barrels of oil equivalent per day together from a base of resources and reserves measuring 343mln, and 696mln barrels, respectively.
Wednesday’s statement focuses on the pre-tax cash cost synergies that result from the merger of the businesses. It is estimated that there are approximately US$50mln.
It will have US$1.8bn in liquidity. It is expected to have US$1.8bn of liquidity. This forecast is based on cumulative pre-financing cash flows.
Dividends will be resumed – currently, Tullow does not have distributable reserves, and cannot pay dividends. As a result of the merger, a capital restructuring will occur.
A base annual dividend of US$60mln is expected to be paid each year.
Rahul Dhir, chief executive at Tullow, will become the chief executive of the combined firm. Capricorn’s chief financial officer will assume the role of CFO. Phuthuma Nhleko, Tullow chair, will assume the role of chairperson. Nicoletta Giadrossi, current Capricorn chair will serve as a senior independent director.
Simon Thomson, Capricorn’s chief executive officer, will be the chair of the Integration steering committee. This is to assist with the integration of both companies.
In a joint statement, the companies stated that they believe the combination offers compelling strategic, financial, and operational rationales, which can deliver substantial benefits for shareholders, host countries, and other stakeholders.
“The combination offers a unique opportunity for a leading African energy company to be listed in London with the financial flexibility, human resource capability, and financial flexibility to access and accelerate near term organic growth, add new resources and resources cost-effectively and generate significant future returns to shareholders. It also allows us to pursue further consolidation.”
