Talos Energy to Acquire QuarterNorth Energy for $1.29 Billion

(Reuters) — Oil and gas company Talos Energy said it will acquire privately held QuarterNorth Energy in a $1.29 billion cash-and-stock deal to bolster its presence in Mexico.

QuarterNorth is a privately held U.S. Gulf of Mexico exploration and production company with ownership in six major fields. It will receive about 24.8 million shares of Talos's common stock and about $965 million in cash.

Talos said that the acquisition will add about 30 thousand barrels of oil equivalent per day (Mboe/d) for the full current year and about 69 million barrels of oil equivalent (MMBoe) in proved reserves. It also expects the acquisition to improve its base decline rate by approximately 20%.

"(Low decline rate) requires a little lower reinvestment rate particularly for next year, maybe even into 2025 and that's going to generate a lot of free cash flow," Talos CEO Timothy S. Duncan said in a conference call on Tuesday.

More than a dozen companies including Chevron and Repsol had quit offshore oil and gas exploration areas in Mexico last year after disappointing results. Only a handful of companies made significant finds in the areas which included Talos.

"We're one of those companies that's been a survivor in the Gulf of Mexico. We've made it through multiple downturns...more scale and more diversity, a higher level of EBITDA is going to attract more investors and we're trying to bring people back to thinking about offshore," Duncan said.

The company said it expects annual run-rate savings of about $50 million by year-end 2024.

The transaction is value accretive and strategic to Talos' overall strategy of building a large-scale offshore E&P company, Stifel analysts said in a note.

The deal is expected to close by the end of the first quarter of the current year.

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