Talos Energy Inc. announced they will acquire EnVen Energy Corporation (EnVen), a private operator in the deepwater U.S. Gulf of Mexico, for $1.1 billion.
The strategic transaction expands Talos's Gulf of Mexico operations with high margin, oil-weighted assets, is accretive to Talos shareholders on 2023E Free Cash Flow per Share and is immediately de-leveraging.
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 estimated at approximately $50.0 million at year-end 2022. Following the transaction, Talos shareholders will own approximately 66% of the pro forma company and EnVen's equity holders will own the remaining 34%. 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.
Key Transaction Highlights:
- Adds ~24 thousand barrels of oil equivalent per day ("MBoe/d") of production (>80% oil, >90% operated).
- Increases production by 40% and gross acreage by 35%, significantly increasing operational scale and diversity.
- Doubles Talos's operated deepwater facility footprint, adding key infrastructure in existing Talos operating areas.
- ~$460 million of 2022E Adj. EBITDA (~$630 million unhedged) and ~$170 million of 2022E Free Cash Flow.
- >13% accretive to Talos shareholders on 2023E Free Cash Flow per Share.
- Implied enterprise value representing 2.4x 2022E hedged Adj. EBITDA (1.7x unhedged), a discount to Talos's current metrics.
- Immediately de-leveraging, with estimated year-end pro forma net debt ratio3 of less than 0.8x.
- At least $30 million in expected annual run-rate synergies to be achieved in 2023.
- Reduces Talos's GHG Emissions Intensity with deepwater operating footprint.
- Enhances Board of Directors with 7 fully independent directors plus Talos CEO.
- Talos will introduce a proposal to eliminate its classified election structure such that all directors are elected annually.
Talos President and Chief Executive Officer Timothy S. Duncan commented, "This transaction adds significant scale and diversity to our business through logical, in-basin expansion with an excellent strategic fit. EnVen's high-margin, oil-weighted assets in key deepwater regions, operated infrastructure and significant overlapping acreage footprint will enhance our ability to accelerate shareholder value creation. The acquisition is financially attractive, expanding our operating margins and increasing Free Cash Flow per Share while immediately improving our credit profile before accounting for significant expected cost synergies. The enhanced cash flow profile will provide us with increased capital allocation optionality, including additional high-impact subsea tie-back opportunities, opportunistic acquisitions, accelerating our low-carbon initiatives and positioning Talos for a potential shareholder return of capital program in the future. We are excited for the numerous benefits that this transaction provides and look forward to closing around year end."
