In a bold move to broaden its footprint in the Gulf of Mexico, Talos Energy is laying down a cool $1.29 billion to snap up QuarterNorth Energy. According to information surfaced by the Houston Chronicle, the hefty transaction is a mix of $965 million in cash and a sweetener of 24.8 million Talos shares.
The market didn't exactly cheer the news, with Talos' stock tripping over itself by around 5% following the announcement. But Talos could have the last laugh, padding out their production by about 30,000 barrels of oil equivalent per day. It's a gutsy power play after they welcomed deepwater driller EnVen into the fold just last year for a cool $1.1 billion. "We’ve coveted some of these assets for some time, in part because they have some newer wells, anchored by a discovery called Katmai, producing at very high rates and very low declines," Talos CEO Tim Duncan reportedly bragged on an investor call, according to a transcript by S&P Capital IQ.
Over at Hydrocarbon Processing, it's noted that the acquisition isn't just about bulking up—it's also about keeping the decline rate in check, improving it by a sharp 20%. This might just give Talos the edge they need, especially when QuarterNorth's calling card includes a bow of six major fields in the Gulf of Mexico.
Not one to mince words, Duncan asserted in the statement obtained by Hydrocarbon Processing, "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." Besides, while Chevron and Repsol have backed away from offshore exploration in Mexico after finding zilch, Talos is holding its ground. They, alongside Grupo Carso, clutch a 17.4% stake in the formidable Zama project, with enough crude to push out up to 190,000 barrels per day.
Talos is looking to seal the deal by the time the first quarter curtain drops, touting an expected $50 million in annual savings from trimming operational and administrative fat. Once the ink dries, Talos will boast an ashore 69 million barrels in proved reserves under their belt. As the oil game in the Gulf swells, the pressure is on to manage assets like a tight ship, and Talos is betting big that their latest acquisition is a stride in the right direction.
