New York-listed Talos Energy has inked an agreement to acquire compatriot QuarterNorth Energy in a $1.29 billion deal, potentially widening its deep-water asset base in the Gulf of Mexico.
Talos' acquistion of privately-held QuarterNorth is the latest in a wave of consolidation that has reshaped the oil and gas sector, after megadeals last year by ExxonMobil to buy Pioneer Natural Resources and Chevron to acquire Hess.
Talos confirmed the deal on Monday and said the “board of directors of both Talos and QuarterNorth have unanimously approved the transaction”.
The consideration for the transaction consists of 24.8 million shares of Talos's common stock and approximately $965 million in cash, Talos said.
“The transaction is expected to close by the end of the first quarter of 2024, subject to certain customary closing conditions and regulatory approvals,” it noted. “The transaction is immediately accretive to Talos shareholders on key metrics and is expected to accelerate de-leveraging of Talos's balance sheet.”
QuarterNorth is a US Gulf of Mexico player with ownership in multiple prolific offshore fields.
Talos said the acquisition would add production of approximately 30,000 barrels of oil equivalent per day expected for the full year 2024, averaging about 75% oil from about 95% of operated assets.
QuarterNorth has proven reserves of 69 million barrels of oil equivalent, 75% of which are weighted to oil. Production comes through seven separate offshore production facilities, and Talos estimated that EBITDA margins are $45 per boe.
“QuarterNorth's assets will provide additional scale from high-quality deep-water assets with a favourable base decline profile along with attractive future development opportunities,” Talos stated.
The fields in QuarterNorth's portfolio include a 50% operator interest in the Katmai discovery in the Green Canyon region. Talos described Katmai as a premier deep-water field "poised to deliver stable, consistent production and significant free cash flow".
Other fields are Big Bend, Galapagos, Genovesa and Gunflint, "each with strong production histories with nominal declines, and future development potential", said Talos.
Significant milestone
Talos chief executive Timothy Duncan said the acquisition “marks one of Talos's most significant milestones,” as it builds a large-scale offshore exploration and production company.
“The addition of QuarterNorth's overlapping deep-water portfolio with valuable operated infrastructure will increase Talos's operational breadth and production profile while enhancing our margins and cash flow,” he stated.
