A possible takeover by Kosmos Power Ltd. might resolve Tullow Oil Plc’s stability sheet points, however debt refinancing could be a problem, in accordance with analysts.
Each corporations acknowledged early merger talks on Thursday, following media hypothesis. Collectively, they’d create an Africa-focused explorer with manufacturing exceeding 120,000 barrels of oil equal a day. Underneath stock-exchange guidelines, Dallas-based Kosmos should announce whether or not or not it is going to make a suggestion by Jan. 9.
The discussions emerge days after Tullow Chief Govt Officer Rahul Dhir stated he would step down after 4 years on the helm. Whereas he refocused on the legacy property in West Africa and bettering the indebted agency’s funds, Tullow’s shares have slumped 39% this yr.
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The strategy by Kosmos could also be “considerably opportunistic” because of the management change, James Hosie, an analyst at Shore Capital Group, stated in a observe. Whereas a deal presents a solution to deal with the stability sheet, a construction that appeases each shareholders and collectors stays a “key impediment,” he stated.
Tullow, headquartered in London, amassed billions of {dollars} in debt from its free-spending days as a wildcatter. A part of that requires refinancing, in accordance with Bloomberg Intelligence analyst Will Hares.
“A deal would resolve Tullow’s stability sheet points, however should deal with its imminent refinancing of its 2026 $1.4 billion notes,” Hares stated.
Tullow’s shares fell 10% in London on Friday, paring this week’s achieve to 11%.
Whereas Kosmos has operations spanning a wider swath of the continent, together with a liquefied pure fuel undertaking with BP Plc in Senegal, it’s already a accomplice with Tullow in key fields in Ghana.
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