Talos Energy LLC continues its expansion in Mexican waters with the announcement of its latest acquisition of one-time competitor Stone Energy Corp.
Stone Energy has had to deal with several financial problems in recent years. In a statement about the coming merger, chairman Neal Goldman noted that with more than a billion dollars in debt and a recent bankruptcy filing, Stone had to consider its options moving forward. Though many companies bid to take possession of Stone, ultimately it was Talos, helped along with advisers Citigroup and UBS Investment Bank, that won them over.
Shares in the company are set to be divided in favor of Talos stakeholders, giving them 63 percent of controlling shares, leaving investors in Stone to retain 37 percent. Overall, Stone has been valued at an estimated $2.5 billion.
CEO for Talos, Timothy Duncan, said seeking out Stone for a potential merger is in keeping with the company’s efforts to expand offshore exploration in the Gulf of Mexico. With a new set of resources and personnel experienced in Stone’s territory, Talos expects to ramp up production and initiate new partnerships in the industry in 2019.
When the merger is completed, Duncan will continue in his role as CEO, but there will be changes to the organization of the board. Just six chairpersons will come from the old Talos board, the remaining four seats will be left open to bring in leadership from Stone.
Houston will remain the base of operations for the newly expanded Talos. Stone facilities in Lafayette and New Orleans will be incorporated into the merger and converted to carry out other business functions.
2013 was the last time Talos acquired a competitor. Energy Resource Technology GOM Inc., formerly part of Helix Energy Solutions, was acquired for $620 million and was part of Talos when it won a bid from the Mexican government to extend exploratory efforts into their waters. That territory was determined to produce a potential two billion barrels of oil during an assessment of the Gulf in July 2017.
When normal business resumes in the coming year, Talos will have access to another 1.2 million acres in the Gulf of Mexico, allowing for the possible production of 47 thousand barrels of oil.
The merger is set to finalize by the end of the year, and by the second quarter of 2019 the company will begin operations under the name Talos Energy Inc.