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Tullow Oil, Capricorn Energy agree to merge in all-share combination

Posted: June 2, 2022 at 12:00 pm   /   by   /   comments (0)

Tullow Oil and Capricorn Energy PLC have agreed to merge in an all-share combination, Tullow Oil said in a June 1 announcement.

The combine would result in a diversified pan-African upstream portfolio underpinned by low-cost producing assets, with a deep portfolio of incremental high-return investment opportunities in Ghana, Egypt, Gabon, and Côte d’Ivoire, Tullow said.

Capricorn holds development, production, and exploration assets with interests in the UK, Egypt, Israel, Mauritania, Mexico, and Suriname.

The combined company would hold reserves and resources of 343 MMboe and 696 MMboe with 2021 production of 96,000 boe/d.

Capricorn shareholders will receive 3.8068 new Tullow shares for each Capricorn share held, with Capricorn shareholders owning 47% and Tullow shareholders owning 53% of the combined company on completion. The deal is expected to be implemented through a court-sanctioned scheme of arrangement.

The combined group is expected to realize pre-tax net cash cost savings of $50 million on an annual run-rate basis by the second anniversary of the deal completion through the reduction of duplicate costs, Tullow said.

Phuthuma Nhleko, currently chair of Tullow, is expected to become chair of the board of the combine. Nicoletta Giadrossi, currently chair of Capricorn, will become senior independent director. Rahul Dhir, chief executive officer of Tullow, will become chief executive officer. James Smith, chief financial officer of Capricorn, will become chief financial officer. Simon Thomson, chief executive officer of Capricorn, will step down and become chair of the integration steering committee.

The board will include a further five non-executive directors drawn from both companies—two from Tullow and three from Capricorn.

Headquarters is expected to be at Tullow’s existing offices in London with a retained premise in Edinburgh.

Completion of the deal is subject to, amongst other things, receipt of necessary antitrust or regulatory consents, governmental approvals or consents, material pre-emption rights or similar rights in jurisdictions in which companies operate.

New pan-African oil giant in town as Tullow, Capricorn merge

Tullow and Capricorn in big oil merger: UK-listed energy firm Tullow Oil is merging with Capricorn Energy — formerly Cairn Energy — in an all-stock transaction that Reuters has valued at some USD 827 mn.

Why do we care? Capricorn has had a presence in Egypt ever since it acquired Shell’s oil and gas assets in the Western Desert with partner Cheiron under an agreement worth up to USD 926 mn. Those assets will form the second largest item on the newly merged company’s balance sheet, after Tullow’s flagship Ghanaian oil fields, according to Reuters. The new, larger group will be an “important supplier of gas in Egypt and Ghana,” the companies said.

How it will work: Capricorn shareholders will receive just under four Tullow shares for each Capricorn share they hold, Tullow announced in a disclosure to the London Stock Exchange. Upon completion of the transaction, Tullow shareholders will own 53% of the merged entity, while Capricorn shareholders will hold the remaining 47%.

Business as usual in Egypt: “No changes are expected in the operating asset organizations across the combined group” including Egypt, according to the disclosure.

Egypt a “low-cost, self-funded” market: The group’s portfolio will consist of “incremental high return investment opportunities” in Ghana, Egypt, Gabon and Côte d’Ivoire, according to the statement. Capricorn’s Egypt portfolio offers the chance for “self-funded growth production” through low-cost exploration “whilst championing electrification and decarbonisation initiatives.”

ADVISORS: Morgan Stanley and Rothschild & Co acted as Capricorn’s financial advisers, while PJT Partners and Barclays advised Tullow. Slaughter and May and Shepherd and Wedderburn LLP are legal advisers to Capricorn, and Herbert Smith Freehills LLP is Tullow’s legal adviser.

(Sources: Oil & Gas Journal,