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Talos Energy Confirms $1.29 Billion Takeover of QuarterNorth Energy
01/28/2024
- The transaction boosts daily production by 30 thousand barrels of oil equivalent.
- Adds 69 million barrels in proved reserves, valued at $1.7 billion.
- Ensures high-margin, low-decline production with low reinvestment.
- Improves key financial metrics and free cash flow.
- Targets $50 million annual synergies and a stronger balance sheet by 2024.
Houston-based Talos Energy Inc. has made a deal to buy QuarterNorth Energy Inc. for $1.29 billion. QuarterNorth is a company that explores and produces oil in the Gulf of Mexico and owns parts of several big offshore fields. This purchase will add more high-quality deepwater assets to Talos's business, which are expected to bring steady production and new opportunities for growth. The deal should immediately benefit Talos's shareholders and help the company reduce its debt faster.
“The addition of QuarterNorth's overlapping deepwater portfolio with valuable operated infrastructure will increase Talos's operational breadth and production profile while enhancing our margins and cash flow.”
- Talos president and chief executive officer Timothy S. Duncan
The payment for this deal includes 24.8 million shares of Talos stock and about $965 million in cash. The boards of both Talos and QuarterNorth have agreed to this deal. They expect to complete the deal by the end of the first quarter of 2024, as long as they meet certain standard conditions and get the necessary approvals from regulators.
Key points
- The deal will increase oil production by about 30,000 barrels a day in 2024, with most of it coming from assets the company controls.
- It adds reserves of around 69 million barrels of oil, worth about $1.7 billion.
- The production is profitable and doesn't need much reinvestment, which should lead to strong cash flow over the long term.
- It will improve important financial measures like cash flow and the value of the company's shares.
- The company expects to save about $50 million annually by the end of 2024.
- The deal should strengthen the company's finances, with a debt-to-equity ratio of 1.0 or less by the end of 2024.
Talos Energy's recent deal to acquire QuarterNorth is set to boost its oil production and financial strength. In 2024, Talos expects QuarterNorth to produce about 30,000 barrels of oil equivalent each day, mostly from deepwater operations across six major fields.
This acquisition is strategic for Talos, likely to lower its costs and stabilize production. QuarterNorth doesn't just add to current production levels; it also brings the potential for more oil reserves shortly, with development opportunities lined up for 2024 and 2025. Additionally, the deal includes valuable drilling opportunities that will enhance Talos's existing projects.
A significant part of this deal is QuarterNorth's involvement in the Katmai field in the Green Canyon area, where it has a 50% interest. This field is already producing a good amount of oil and is expected to do even better in the next few years, especially after planned upgrades and new wells are completed. QuarterNorth also has interests in several other productive fields with strong histories and potential for future development.
Expectations
Talos is looking to save around $50 million annually from this deal, thanks to cost reductions in operations and administration. These savings are expected to start showing in 2024 and reach their full potential by the end of the year. The acquisition also opens up opportunities for further cost savings and efficiency improvements in asset management and drilling operations, adding even more value beyond the initial $50 million in expected savings.
About Talos Energy
Talos Energy, trading as TALO on the New York Stock Exchange, is an innovative and independent energy company. They focus on two main areas: exploring and producing oil and gas and developing low-carbon solutions to reduce emissions. Talos operates in the United States and offshore Mexico, using its extensive experience in offshore operations and technical expertise. Their goal is to create long-term value while prioritizing safety and efficiency.
About QuarterNorth Energy
QuarterNorth Energy specializes in offshore oil extraction, managing several oil production sites in the Gulf of Mexico. QuarterNorth has stakes in the Big Bend, Galapagos, Genovesa, and Gunflint fields. These assets are recognized for their robust production records, minimal decline rates, and potential for future development.
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