Talos Energy, one of the most active oil and gas producers in the Gulf of Mexico, announced Thursday that it is acquiring private operator EnVen Energy for $1.1 billion in a stock-and-cash deal.
The deal, which involves $212.5 million in cash and 43.8 million shares of Talos, will result in a combined company 66 percent owned by Talos shareholders. Reuters reported last July that Talos and EnVen, both headquartered in Houston, were discussing a merger to create a larger footprint in deepwater exploration and take advantage of operational synergies. The deal, which Talos describes as immediately deleveraging, also includes $50 million in EnVen debt, resulting in an estimated year-end net-debt ratio of less than 0.8x. The deal is expected to close during the fourth quarter of 2022.
Vinson & Elkins serves as outside counsel to Talos, along with financial advisors J.P. Morgan and KeyBanc Capital Partners. Davis Polk & Wardwell counsels EnVen (led by William Chudd), with financial advice provided by Intrepid Partners. Gibson Dunn & Crutcher, in turn, is advising Intrepid.
The V&E corporate team was led by partner Lande Spottswood and senior associates Alex Robertson and Jackson O’Maley with assistance from associates Ximena Kuri, Jordan Fossee, David S. Smith, Tushar Parashar, Chase Browndorf, Cole Leveque, and Dean Dixon. Also advising were partners David Peck and Jason McIntosh, senior associate Curt Wimberly and associate Keleigh Carver (tax); partner Shane Tucker, senior staff attorney Katherine Mull and associate Matt Green (executive compensation/benefits); partner Shay Kuperman and associates Zach Parker and Kene Obi (energy transactions/projects); partners Guy Gribov and Tzvi Werzberger, senior associate Carter Olson and associate Joe Higdon (finance); partner Matt Dobbins, senior associate Rachel Comeskey, and associate Kelly Rondinelli (environmental); partner Damien Lyster and associates Bree Sinclair and Reagan Lutter (energy regulatory); partner Darren Tucker, counsel David Smith, and senior associate Evan Miller (HSR); and partner Thomas Wilson and counsel Alex Bluebond (employment/labor).
“This transaction adds significant scale and diversity to our business through logical, in-basin expansion with an excellent strategic fit,” said Tim Duncan, Talos president and CEO, in a statement announcing the deal.
“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.”
The acquisition doubles Talos’ deepwater facility footprint, including key infrastructure elements currently owned by EnVen in Talos’ operating areas, and adds 40 percent in production.
EnVen currently produces about 24 thousand barrels of oil per day in the Gulf of Mexico, including 95% from deepwater regions. The company operates five major deepwater facilities with significant open capacity and an acreage footprint of 420,000 gross acres in core deepwater areas open to development. And EnVen’s infrastructure is backed by more than $160 million in restricted cash and receivables reserved against future abandonment obligations.