Talos Energy LLC and Stone Energy Corp, two U.S. exploration and production companies focused on the Gulf of Mexico, announced on Tuesday plans to merge and create a new company valued around $2.5 billion including debt, sending Stone’s shares down nearly 13 percent.
“The idea of a reverse merger works very well for us, as we get a lot of talented people into the company and also use a structure which gets us to the public equity markets”, said Timothy Duncan, chief executive of Talos, who will retain the title under the combined company, to be named Talos Energy Inc.
Stone shares will be exchanged for Talos stock on a one-for-one basis, while Talos’ existing stockholders will be issued 34.2 million shares to give them 63 percent of the combined company, according to a statement.
Assent from both Stone’s shareholders and holders of its 2022-maturing debt is required. Investment firms Franklin Advisers and MacKay Shields, who own 53 percent of Stone’s equity, have provisionally pledged to back the transaction.
Stone went through bankruptcy proceedings during the oil price downturn after mid-2014 during which debt holders received equity stakes in the reorganized company.
Offshore producers were particularly hard hit by this price drop, given the higher costs of extracting oil this way versus many onshore fields.
For Talos, the deal provides the company with a route to a stock exchange listing, after its attempts to undertake an initial public offering were stymied by market turbulence.
Sources told Reuters in October 2014 that the firm, backed by private equity firms Apollo Global Management and Riverstone Holdings, had hired banks to implement the flotation.
The combined company will have average daily production of 47,000 barrels of oil equivalent (BOE) and proven reserves of 136 million BOE, located in the deepwater Gulf of Mexico and shallow coastal areas of Mexico, the statement said.
Source: Reuters
