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Thursday, 2 June 2022

New pan-African oil giant in town as Tullow, Capricorn merge

Tullow and Capricorn in big oil merger: UK-listed energy firm Tullow Oil is merging with Capricorn Energy — formerly Cairn Energy — in an all-stock transaction that Reuters has valued at some USD 827 mn.

Why do we care? Capricorn has had a presence in Egypt ever since it acquired Shell’s oil and gas assets in the Western Desert with partner Cheiron under an agreement worth up to USD 926 mn. Those assets will form the second largest item on the newly merged company’s balance sheet, after Tullow’s flagship Ghanaian oil fields, according to Reuters. The new, larger group will be an “important supplier of gas in Egypt and Ghana,” the companies said.

How it will work: Capricorn shareholders will receive just under four Tullow shares for each Capricorn share they hold, Tullow announced in a disclosure (pdf) to the London Stock Exchange. Upon completion of the transaction, Tullow shareholders will own 53% of the merged entity, while Capricorn shareholders will hold the remaining 47%.

Business as usual in Egypt: “No changes are expected in the operating asset organizations across the combined group” including Egypt, according to the disclosure.

Egypt a “low-cost, self-funded” market: The group’s portfolio will consist of “incremental high return investment opportunities” in Ghana, Egypt, Gabon and Côte d'Ivoire, according to the statement. Capricorn’s Egypt portfolio offers the chance for “self-funded growth production” through low-cost exploration “whilst championing electrification and decarbonisation initiatives.”

ADVISORS: Morgan Stanley and Rothschild & Co acted as Capricorn’s financial advisers, while PJT Partners and Barclays advised Tullow. Slaughter and May and Shepherd and Wedderburn LLP are legal advisers to Capricorn, and Herbert Smith Freehills LLP is Tullow’s legal adviser.

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