Tullow Oil Share Discussion Threads

[waldron] 01/6/2022 09:06

Jamie Ashcroft

08:51 Wed 01 Jun 2022


Tullow Oil and Capricorn Energy agree to merge


Tullow Oil PLC (LSE:TLW) and Capricorn Energy PLC (LSE:CNE, OTC:CRNZF) have agreed to merge to create “a leading African energy company with a material and diversified asset base and a portfolio of investment opportunities delivering visible production growth.”

Capricorn shareholders will receive 3.8068 new Tullow shares in the deal, which will see them together own some 47% of the new company whilst Tullow’s owners will own the other 53%.

It will comprise low-cost producing assets and a deep portfolio of incremental high return investment opportunities in Ghana, Egypt, Gabon and Côte d'Ivoire, the companies said in a statement.

Specifically, it will have Tullow’s major resource development project in Kenya along with Capricorn's Egypt portfolio which has opportunities to develop self-funded production growth via infill drilling and low-cost exploration. Further afield, upside remains through exploration assets in Guyana and Mauritania.

Together, the new company will have some 96,000 barrels oil equivalent production per day from a base of reserves and resources measuring 343mln and 696mln barrels respectively.

Wednesday’s statement highlights some US$50mln of pre-tax net cash cost synergies resulting from the combination of the businesses.

It is expected to have US$1.8bn of liquidity. Cumulative pre-financing free cash flows are forecast at around US$2.4bn over the 2022-2025 period, based on a US$75 per barrel crude oil price, and it expects to deliver “rapid deleveraging” in the future.

Dividends will resume – presently Tullow has no distributable reserves and is therefore currently unable to pay dividends – as a capital restructuring will take place alongside the merger.

It is anticipated that a base annual dividend of US$60mln will be paid out per year.

Tullow chief executive Rahul Dhir will be chief executive of the combined company, whilst Capricorn chief financial officer will take the CFO role. Tullow chiar Phuthuma Nhleko will be chairperson whilst Nicoletta Giadrossi will be senior independent director.

Simon Thomson, Capricorn’s chief executive, will become chair of the Integration Steering Committee to help with the integration of the two companies.

“The boards of Tullow and Capricorn believe the combination has compelling strategic, operational and financial rationale, with the ability to deliver substantial benefits to shareholders, host nations and other stakeholders,” the companies said in a joint statement.

“The combination represents a unique opportunity to create a leading African energy company, listed in London, with the financial flexibility and human resource capability to access and accelerate near-term organic growth, add new reserves and resources cost-effectively, generate significant future returns for shareholders, and pursue further consolidation.”;

[xxnjr] 01/6/2022 09:00

Sorry ofc i meant CFO, not CEO!!! I can't multi-task.

On the call Rahul mentioned looking at 2nd rig for Gh possibly 2023 2nd half (or was it 1st half, sorry forgot already)

Mood music of the analysts seemed quite positive.

I'm also a CNE holder so it doesn't really diversify my risk!

Was happy the guy in the centre seemed to be in pole position, with the guy on the left answering quite a few of the questions, with the guy on the right having minimal input. Saying this as a CNE shareholder. Make of that what you will.

[nigelpm] 01/6/2022 08:58

CFO I think you mean?

[thommie] 01/6/2022 08:43

Jeah, quite strange to be announced as New cfo and to lose it just a few moments later. But Im sure he will get some millions for not having to work and can chill in the sun instead :)

[xxnjr] 01/6/2022 08:30

Maybe not a good day for the ENQ CEO who was joining TLW as their new CEO?

[thommie] 01/6/2022 08:21

Didnt see that coming as well. I dont have a clue about capricorn, but I heard they have the cash to improve our balance sheet and tlw has the assets for organic growth.It makes the ship more steady and secure again. I guess it's a smart move. The 2nd rig for ghana might be announced soon after the shareholders voted in favour of the deal, enabling to drill out the ghana potential.It's better to give some potential away in a merger than to pay 80% of profits to the creditors.But in the end it will finally enable tullow to unlock its intrinsic value.It might also influence the potential kenya farm out deal, as it gives tlw the option to say no to bad offers, as they could be able to develop kenya on their own without farming down if needed. Though I hope they will still farm down!

[oilretire] 01/6/2022 08:21

Link to download the presentation here, not had a chance to look at it yet.hTtps://www.capricornenergy.com/all-share-combination/

[cumnor] 01/6/2022 08:05

Make no mistake, excellent and canny move by Rahul. This will interest larger O&G funds with Tlw debt no longer an issue-back to industry norm levels-and dividends with prospects of extra payouts very likely with POO likely to remain over $75 ((base case) for a long time yet.

[subsurface] 01/6/2022 08:02

presentation just started XX

[xxnjr] 01/6/2022 07:59

Just seen it. Haven't read the RNS yet. 1st thoughts.

Didn't see that coming.
Happy its not onshore Nigeria which would have been an ESG disaster!

Reduces dependence on Ghana which is good. The Egyptian assets are quite good only issue I can see is that at times Gov.EG are sometimes slow payers when their backs are against the wall which may happen again with Ukraine effects (high food prices etc).

Stronger combined balance sheet should help Tullow refinance their bonds.

Not sure why CNE have thrown the towel in though.

[casino444] 01/6/2022 07:48

It’s a lame duck at the moment seems just to be drifting between 50/60 with no dividend , maybe this is better news ?? I really don’t know

[mccracken227] 01/6/2022 07:44

Excuse ignorance but will more shares be issued and possibly diluted?

[orchestralis] 01/6/2022 07:40

Easy to say when it just turned red

[wolfofhounslow] 01/6/2022 07:35

Red now as expected

[janhar] 01/6/2022 07:03

Gets balance sheet in order, gives growth opportunities and possibility of dividends. Also enlarged company improves liquidity

[franky15] 01/6/2022 06:50

Good deal or not ? What do we think

[mirabeau] 01/6/2022 06:28

I bet TLW hive off their marginal assets to repay debt

[crazi] 01/6/2022 06:24

"The Tullow Board intends to address this issue by taking such steps, which may include a capital restructuring of the Tullow Group"

Keep your eye on that one...

[orchestralis] 01/6/2022 06:23

Or positive?

[officerdigby] 01/6/2022 06:23

I think this good news. But I'm a non holder. Long term could be very good

[orchestralis] 01/6/2022 06:21

Big drop coming?

[mmt1] 31/5/2022 15:11

what happened today?