Citigroup acted as lead financial advisor and UBS Investment Bank as financial advisor to Talos in the transaction. Vinson & Elkins LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal counsel to Talos. Petrie Partners Securities, LLC acted as financial advisor to Stone in the transaction and Akin Gump Strauss Hauer & Feld LLP acted as legal counsel to Stone.
Talos Energy LLC (“Talos”) and Stone Energy Corporation (NYSE: SGY; “Stone”) today announced that their Boards of Directors have unanimously approved the combination of Talos and Stone in an all-stock transaction that will create a premier offshore-focused exploration and production company. The company will be named Talos Energy, Inc. and is expected to trade on the New York Stock Exchange (“NYSE”) under the new ticker symbol “TALO.”
Under the terms of the transaction, each outstanding share of Stone common stock will be exchanged for one share of Talos Energy, Inc. common stock and the current Talos stakeholders will be issued an aggregate of approximately 34.2 million common shares. At closing, Talos stakeholders will own 63% of the combined company, with Stone shareholders owning the remaining 37%. Based on Stone’s stock price of $35.49 on November 20, 2017 and the terms of the proposed transaction, Talos Energy, Inc. will have an initial equity market capitalization of approximately $1.9 billion and an enterprise value of approximately $2.5 billion.
The combination will create a leading offshore independent E&P company and a leader in the Gulf of Mexico with a large, high quality asset base and leading cost profile. The combined company will have estimated 2017 average daily production of approximately 47 Mboe and proved reserves of 136 MMboe as of June 30, 2017 based on SEC prices.
The combined company will also benefit from a deep inventory of identified exploration and development prospects and a significant acreage footprint in the Gulf of Mexico, including over 1.2 million combined gross acres, of which approximately 160,000 acres is offshore Mexico. The Zama oil discovery, operated by Talos, was the first private sector offshore exploration well in the history of Mexico and was previously disclosed as having between 1.4 billion and 2.0 billion gross barrels of original oil in place. Additionally, the combined company expects to achieve up to $25 million in annual pre-tax synergies from supply chain management and other operational efficiencies by year end 2018.
The new company will have increased financial flexibility, in part through its expected new $1 billion credit facility with an expected $600 million in initial borrowing capacity, and no material long term note maturities until 2022. Upon closing, the combined company’s pro forma unrestricted cash, undrawn credit facility and ability to access public capital markets will provide flexibility to pursue additional attractive growth opportunities. The combined company is expected to have a pro forma net debt-to-2017E EBITDA ratio of 1.4x and approximately $325 million to $375 million in liquidity at closing. Talos Energy, Inc. will be well-positioned as the counterparty of choice for drilling and consolidation opportunities in the Deepwater Gulf of Mexico.
The V&E corporate team was led by partners Steve Gill, Lande Spottswood and Dan Komarek with associates Bobak Fatemizadeh, Connor Long, Jeff Shah and Julia Tong. Partners David Peck, Wendy Salinas, Stephen Jacobson and Jason McIntosh, counsel Katherine Mull and associates Curt Wimberly and Gina Hancock advised on tax and executive compensation/benefits issues. Also advising were counsel Damien Lyster; partner Boyd Carano and senior associate Alan Alexander; senior associate Brandon Tuck; partner Brian Moss and senior associate Guy Gribov; and partner Neil Imus.
The Akin Gump team advising Stone Energy was led by oil and gas partner John Goodgame (Picture) and senior counsel Rebecca Tyler (M&A), Alison Chen (tax), David Sweeney (oil and gas), Michael Stamer (financial restructuring), Jaisohn Im (finance), David Quigley (environment and natural resources), Paul Butler (litigation), Robin Schachter (executive compensation/employee benefits) and Paul Hewitt (antitrust), Andrew Oelz (environment and natural resources), Aimee Adler (executive compensation/employee benefits), Brian Patterson (labor and employment), Anne Borkovic (international trade), Mary Lovely, Michelle Moreland, Leana Garipova, John McEntire, Allyson Li and Niki Roberts (oil and gas), Scott Friedman (labor and employment), Shane Sullivan (oil and gas) and Stacy Kobrick (antitrust).
Involved fees earner: Stephen Gill – Vinson & Elkins LLP; Dan Komarek – Vinson & Elkins LLP; Lande Alexandra Spottswood – Vinson & Elkins LLP; Bobak Fatemizadeh – Vinson & Elkins LLP; Connor Long – Vinson & Elkins LLP; Jeffrey Shah – Vinson & Elkins LLP; Julia Tong – Vinson & Elkins LLP; David Peck – Vinson & Elkins LLP; Wendy Trahan Salinas – Vinson & Elkins LLP; Jason McIntosh – Vinson & Elkins LLP; Curt Wimberly – Vinson & Elkins LLP; Stephen Jacobson – Vinson & Elkins LLP; Katherine Mull – Vinson & Elkins LLP; Gina Hancock – Vinson & Elkins LLP; Damien Lyster – Vinson & Elkins LLP; Boyd Carano – Vinson & Elkins LLP; Brian Moss – Vinson & Elkins LLP; Neil Imus – Vinson & Elkins LLP; Brandon Tuck – Vinson & Elkins LLP; John Goodgame – Akin Gump; Rebecca Tyler – Akin Gump; Alison Chen – Akin Gump; David Sweeney – Akin Gump; Mary Lovely – Akin Gump; Michelle Moreland – Akin Gump; Leana Garipova – Akin Gump; John McEntire – Akin Gump; Allyson Li – Akin Gump; Nicole Roberts – Akin Gump; Shane Sullivan – Akin Gump; Michael Stamer – Akin Gump; Jaisohn Jungbin Im – Akin Gump; David Quigley – Akin Gump; Andrew Oelz – Akin Gump; Paul Butler – Akin Gump; Anne Borkovic – Akin Gump; Robin Schachter – Akin Gump; Aimee Adler – Akin Gump; Brian Glenn Patterson – Akin Gump; Scott Friedman – Akin Gump; Paul Hewitt – Akin Gump; Stacy Kobrick – Akin Gump;