Kosmos in 'very preliminary' talks over Tullow takeover

(Sharecast News) - Kosmos Energy has confirmed it is in "very preliminary" talks with Tullow Oil about a possible takeover of the oil and gas exploration company. In a very brief statement, it said there can be no certainty that any offer will be made, nor as to the terms on which any offer might be made.

Kosmos said it reserves the right to vary the form and/or mix of the offer consideration and to vary the transaction structure.

"A further announcement will be made as and when appropriate," it added.

Under takeover rules, Kosmos has until 1700 GMT on 9 January 2025 to either announce a firm intention to make an offer or walk away.

The statement from Kosmos came after Tullow put out its own statement confirming recent press speculation.

Shore Capital analyst James Hosie said: "The two companies share the same core assets - the Jubilee and TEN fields offshore Ghana - so there is a natural operational fit and Kosmos will have a clear understanding of the opportunities within the assets.

"A transaction would give Kosmos operatorship of both fields and create scope for operational synergies. We assume any transaction would require the support of the Ghanaian government. We suspect the approach may be somewhat opportunistic, coming soon after news of Tullow's upcoming leadership change.

"From a Tullow perspective, a potential tie-up with Kosmos could be a route to addressing its balance sheet with it needing to refinance the circa $1.3bn of secured loan notes that mature in 2026.

"Kosmos itself has $2.7bn of net debt (as at end-Q3 FY24F) with a ND/EBITDAX ratio of 2.2x but has been able to access debt markets recently (issuing $500m of 7-year loan notes in September 2024) and has circa $700m of available liquidity.

"Overall, we see a key obstacle to agreeing a deal being finding a structure that satisfies both companies' shareholders and creditors and leaves the business with a robust capital structure."