The once-celebrated London-listed oil producer Tullow Oil has entered early-stage discussions regarding a potential all-share takeover by American counterpart Kosmos Energy, highlighting significant shifts in the energy sector landscape.
Texas-based Kosmos Energy confirmed its approach to Tullow Oil, emphasising the preliminary nature of talks and noting there remains no certainty of a formal offer materialising. The potential merger would unite two major stakeholders in West African oil assets, particularly the crucial Jubilee and Ten oilfields off Ghana’s coast.
The strategic importance of these assets cannot be understated, with the Jubilee field alone accounting for approximately half of Tullow’s net production, averaging 62,700 barrels of oil equivalent daily in the previous year. Kosmos currently holds a 39 per cent stake in Jubilee and 20 per cent in Ten, while Tullow maintains 40 per cent and 54 per cent ownership respectively.
Tullow’s market capitalisation has experienced a dramatic decline from its peak of £14 billion to merely £300 million, following a series of operational setbacks that have resulted in substantial debt accumulation. The company’s net debt position stood at $1.7 billion as of June’s end, presenting significant challenges for future growth.
The timing of these discussions coincides with the announced departure of Tullow’s Chief Executive, Rahul Dhir, who joined during the pandemic-induced oil price crash. Industry analysts describe the company as “rudderless” amid leadership uncertainty and mounting debt concerns, complicated further by an ongoing tax dispute with Ghanaian authorities.
Under UK takeover regulations, Kosmos must declare its intentions by January 9, either proceeding with a formal bid or withdrawing from negotiations. Market reaction has been notably negative, with Tullow’s shares declining 9.8 per cent to 23½p, while Kosmos Energy saw its London-listed shares fall 7.1 per cent to 261p.
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