Tullow Oil and Capricorn Energy agree on all-stock merger deal

Tullow Oil and Capricorn Energy (formerly Cairn Energy) have agreed earlier this week on an all-stock merger deal worth over $800m. The combination of both companies will create one of Africa’s leading independent energy companies, and confirms the strong rise of M&A deals in Africa this year.

The deal is likely to be implemented as a Court-sanctioned scheme of arrangement under which Tullow Oil would acquire all of the issued and to be issued shares of Capricorn Energy. Upon completion, Capricorn Energy shareholders would hold some 47% of the new combined group, and Tullow Oil’s shareholders the remaining 53%.

While the name of the new combined company is yet to be revealed, it would sit on some 343m barrels of oil equivalent (boe) of reserves (2P) and 696m boe of resources with a production of some 96,000 boepd. The company would still be listed in London and be one of the largest Africa-focused energy independents.

A Portfolio of Incremental, High-Return Investment Opportunities

The new group will be present across lucrative assets in Ghana, Egypt, Gabon, and Côte d’Ivoire.

Capricorn Energy notably entered Egypt in 2021 when it acquired Shell’s onshore assets in the Western Desert along with its consortium partner Cheiron. The gas-rich fields represent some 36,500 boepd of output for Capricorn Energy, with significant opportunity to deliver self-funded growth production via infill drilling and low-cost exploration.

In Ghana, Tullow Oil’s success stories continues deliver returns while generating local value via the producing Jubilee and TEN fields where a drilling campaign is ongoing until 2025. New development wells are notably planned, especially at Jubilee South-East. Tullow Oil also has non-operated interests in key producing fields such as Espoir in Côte d’Ivoire or Tchatamba and Ezanga in Gabon. In 2021, the company’s working interest production averaged 59,200 boepd.

Infrastructure-led exploration will be executed across these assets over the coming years, with opportunities to unlock additional reserves and maintain production decline. The wells will be reported within Hawilti’s Exploration Watch, available within the Hawilti+ Terminal.

New Plays in Frontier Basins

The new group could also be a key pioneer in the development of reserves in Kenya, Mauritania and Latin America notably.

Tullow Oil is a partner in Project Oil Kenya, where a final investment decision (FID) is expected in 2023. The onshore project would deliver 120,000 bopd at peak and be Kenya’s first oil venture.

Meanwhile, Capricorn Energy is hopeful that its C7 Block offshore Mauritania could yield success soon. The Dauphin-1 exploratory well could notably be drilled there in a couple of years.

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