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(Alliance News) - Tullow Oil PLC and Capricorn Energy PLC on Wednesday said they have agreed to an all-share merger.
London-based Tullow said the combination with fellow FTSE 250 constituent and Edinburgh-based Capricorn will create an African-focused energy company with a material asset base and a portfolio of investment opportunities delivering visible production growth.
Under the deal terms, Capricorn shareholders will receive 3.8068 new Tullow shares for each Tullow share, giving Capricorn shareholders 47% of the enlarged firm.
"The boards of Tullow and Capricorn believe the combination has compelling strategic, operational and financial rationale, with the ability to deliver substantial benefits to shareholders, host nations and other stakeholders," Tullow said in the statement.
"The combination represents a unique opportunity to create a leading African energy company, listed in London, with the financial flexibility and human resource capability to access and accelerate near-term organic growth, add new reserves and resources cost-effectively, generate significant future returns for shareholders, and pursue further consolidation".
Tullow Oil is a West Africa-focused oil and gas producer.
Tullow Chair Phuthuma Nhleko is expected to become chair of the combined firm, with Capricorn Chair Nicoletta Giadrossi to become senior independent director. Tullow Chief Executive Rahul Dhir will become CEO, while Capricorn Chief Financial Officer James Smith will take on the CFO role.
The pair guided for pre-financing free cash flows of USD2.4 billion from 2022 to 2025 following the merger.
Commenting on the combination, Capricorn Chief Executive Officer Simon Thomson said: "Our two companies share a track record and continued vision of responsible energy production to support the economic and social development of our host communities. This combination will allow the two companies to accelerate investment in new opportunities across the continent, while retaining a resilient balance sheet and delivering attractive returns to shareholders."
Looking ahead, the combined group aim to achieve net zero targets by 2030 through emissions reduction programmes underway in Ghana, Gabon, Ivory Coast and Egypt and by offsetting hard to abate emissions through company-run nature-based solutions.
Following the deal, Capricorn suspended its previously announced USD200 million share buyback programme.
Tullow shares were up 1.8% at 55.60 pence each on Wednesday morning in London. Capricorn shares were up 1.9% at 202.00 pence each.
Tullow Oil has a market cap of about GBP795 million, while Capricorn has a market cap of about GBP645 million.
By Xindi Wei; xindiwei@alliancenews.com
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