U.S.-based oil and gas company Talos Energy has entered into a series of definitive agreements to acquire a broad portfolio of U.S. Gulf of Mexico producing assets, exploration prospects, and acreage from affiliates of ILX Holdings, Castex Energy, and Venari Resources for $640 million.
Specifically, Talos has signed definitive agreements to acquire all producing assets, primary term acreage and prospects of ILX Holdings, all producing assets and certain primary term acreage and prospects of ILX Holdings II, all primary term acreage and prospects of ILX Holdings III and certain subsidiaries of the Castex 2014 and Castex 2016 entities, Talos said in a statement on Tuesday.
In a separate transaction, Talos executed a purchase and sale agreement and closed on the acquisition of all primary term acreage and prospects from Venari Resources.
The acquired assets produced approximately 19 thousand barrels of oil equivalent per day (MBoe/d) during the third quarter of 2019 and had proved and probable (2P) reserves of approximately 68 million barrels of oil equivalent (MMBoe) as of the effective date of July 1, 2019. 83% of the Proved reserves are considered Proved Developed.
In addition, the transaction includes over 40 identified exploration prospects located on a total acreage footprint of approximately 700,000 gross acres. Closing of the ILX acquisitions and Castex acquisitions are expected in the first quarter of 2020.
The acquired assets are expected to generate approximately $150 million of free cash flow in 2019, from an estimated $210 million in adjusted EBITDA and projected capital spending of approximately $60 million.
Funding sources for the transaction consist of $250 million in new Talos shares to be issued to sellers at closing and cash from existing sources of liquidity. As part of the regular fall redetermination, the company’s borrowing base has been increased from $850 million to $950 million effective December 10, 2019, and will be further increased to $1,150 million at closing of the ILX Acquisitions and Castex acquisitions.
‘Unique transaction’
Talos President and Chief Executive Officer, Timothy S. Duncan . commented, “What makes this transaction unique is the combination of high-margin production and a deep portfolio of prospects. As we consider the full scale of the pro forma business, the combined cash flow profile and the significant exploration portfolio, we are excited about the tremendous potential to build long-term value, not only from these assets alone but from the optimization of the combined asset base, high-grading of investment opportunities, follow-on business development and M&A activity.”
The net consideration at closing of the ILX acquisitions and Castex acquisitions is expected to be funded with the issuance of new Talos shares and cash from existing sources of liquidity. Talos will issue 11.0 million shares to sellers at closing, or $250 million in equity consideration based upon the volume-weighted average price for the 30 trading days ending December 5, 2019.
The ILX acquisitions and Castex acquisitions were unanimously approved by a sub-set of the company’s board of directors comprised of representatives unaffiliated with Riverstone Holdings and the acquired assets. Simultaneous with the execution of definitive documentation, affiliates of Apollo Global Management and Riverstone Holdings, which collectively control approximately 63% of the company’s outstanding common stock, provided their stockholder approvals.
Spotted a typo? Have something more to add to the story? Maybe a nice photo? Contact our editorial team via email .
Also, i f you’re interested in showcasing your company, product or technology on Offshore Energy Today, please contact us via our advertising form where you can also see our media kit.