Talos Energy acquiring Stone Energy in nearly $2B merger

Houston-based offshore oil and gas producer Talos Energy said Tuesday it will acquire Lafayette, La.-based, fellow producer Stone Energy in a nearly $2 billion merger.

The Talos Energy LLC merger with Stone will create a new company, Talos Energy Inc., that trades under the “TALO” stock ticker. The deal is expected to close in the second quarter of 2018.

Talos CEO Timothy Duncan will remain CEO of Talos, which will maintain its Houston headquarters and keep offices in Lafayette and New Orleans. A 10-person corporate board will have six Talos members and four from Stone.

Talos will own 63% of the combined company and Stone shareholders will hold 37%. Stone’s combined shares were valued on Wall Street Monday at $710 million. Talos said the combined company will have a Wall Street market capitalization value of $1.9 billion, Kallanish Energy reports.

Talos this summer made the so-called Zama discovery offshore Mexico after the company successfully won some of the first offshore bids in Mexico’s energy reform process that opened offshore blocks up to foreign investors.

“This combination represents an important step in our goal of becoming the premier offshore exploration and production company,” Duncan said. “We will have two core areas in the deepwater U.S. Gulf of Mexico and the outstanding new Zama discovery located in the shallow waters of offshore Mexico.”

The combined company will include pro forma estimated 2017 average daily production of roughly 47,000 barrels of oil equivalent (BOE/d), and pro forma proved reserves of 136 million barrels of oil-equivalent (MMBOE) as of June 30, which are 69% oil and 74% located in the Deepwater Gulf of Mexico.

Talos was founded five years ago with the financial backing of private equity firms Apollo Global Management and Riverstone Holdings.

Stone Energy filed for bankruptcy protection last year amid the collapse in oil prices before emerging earlier in 2017.

Stone chairman Neal Goldman called the deal the successful culmination of the company’s bankruptcy restructuring. Stone already had sold off most of its onshore assets, leaving it as a Gulf-focused company.

Citigroup acted as lead financial advisor and UBS Investment Bank as financial advisor to Talos in the transaction. Vinson & Elkins and Paul, Weiss, Rifkind, Wharton & Garrison served as legal counsel.

Petrie Partners Securities acted as financial advisor to Stone in the transaction and Akin Gump Strauss Hauer & Feld served as legal counsel.