Talos Energy Inc. is acquiring EnVen Energy Corp. for $1.1 billion to raise Talos' Gulf of Mexico production by 40%.
The purchase of EnVen, a private operator, increases Talos' operated deepwater facility footprint 2 times, expanding key infrastructure in existing Talos operating areas. Almost 80% of the assets will be deepwater, with Talos operating more than 75% of the acreage it holds interests in.
During a conference call on September 22, it was announced that the EnVen purchase “just checks a lot of boxes” in terms of scale, assets, similar strategies, and what Talos is doing from a technology standpoint.
The acquisition is anticipated to close by the end of the year and generate $30 million or more annually in synergies related to general and administrative cost reductions. Moreover, it extends the company's Gulf of Mexico footprint with acreage Talos has previously attempted to purchase.
EnVen holds 78 MMboe of 2P reserves and 420,000 gross acres in the Gulf of Mexico. The deal also includes about 24,000 boe/d to Talos' production stream.
EnVen operates the Brutus/Glider asset in 2,900 feet to 3,243 ft water depth with 100% interest. The production facility has a gross capacity of 120,000 bbl/d. EnVen's operated Lobster Field in 775 ft of water and a gross oil capacity of 80,000 bbl/d. EnVen holds 67% working interest in the field.
The EnVen-operated Cognac Field in 1,023 ft of water has a gross oil capacity of 30,000 bbl/d. The company holds 63% interest in that field. EnVen manages Neptune with 65% interest. With a gross oil capacity of 50,000 bbl/d, the field is in 4,250 ft water depth.
Prince, which EnVen manages with 100% interest, is in 1,500 ft of water and has a gross oil capacity of 50,000 bbl/d. EnVen holds a 50% interest in the Chevron Corp.-operated Petronius Field in 1,754 ft water depth. It has a gross oil capacity of 60,0000 bbl/d.
The combination of Talos and EnVen deepwater facilities will encourage more subsea tieback activity for unused capacity at the various production units.
EnVen had around three dozen subsea tieback ideas rolling through their inventory. Talos would pull together those ideas during planning for the 2023, 2024, and 2025 spending programs.
Consideration for the transaction consists of 43.8 million Talos shares and $212.5 million in cash, plus the assumption of EnVen's net debt upon closing, currently valued to be $50 million at year-end 2022.
The transaction has been unanimously approved by each company's board of directors. Closing is expected by year-end 2022, subject to customary closing conditions. Following the transaction, Talos shareholders will get about 66% of the pro forma company and EnVen's equity holders will get the other 34%.
The company said the agreement implies a valuation of about 2.4x 2022 estimated hedged adjusted EBITDA with the transaction more than 13% accretive to Talos shareholders on 2023E free cash flow per share. Talos anticipates the transaction to be immediately de-leveraging at closing, with year-end 2022 leverage of less than 0.8x. Additionally, Talos will have no near-term maturities.
