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Talos Energy to acquire Stone Energy to form new E&P company

Talos Energy LLC agreed to acquire Stone Energy Corp. to form Talos Energy Inc., which will have an initial equity market capitalization of about $1.9 billion and an enterprise value of about $2.5 billion, according to a Nov. 21 news release.

The goal of the merger is to create a "premier" offshore independent exploration and production company, said Talos Energy CEO Timothy Duncan. "We will have two core areas in the deepwater U.S. Gulf of Mexico ... and the outstanding new Zama discovery located in the shallow waters of offshore Mexico," he said.

The combined company is estimated to have an average daily production of about 47,000 barrels of oil for 2017 and proved reserves of 136 million barrels of oil equivalent as of June 30. Talos Energy Inc. is expected to trade on the NYSE under "TALO." Talos Energy LLC stakeholders will own 63% and Stone Energy shareholders will own 37% of Talos Energy Inc. at the closing of the merger, expected late in the first quarter or early in the second quarter of 2018.

Duncan will lead the new company as its CEO, with Talos and Stone management members serving in other leadership roles. The new company's board will comprise six members designated by Talos Energy and four by Stone Energy from their current board, with Stone Energy Chairman Neal Goldman serving as nonexecutive chairman.

Citigroup acted as lead financial adviser for Talos Energy in the deal and UBS Investment Bank as financial adviser. Vinson & Elkins LLP and Paul Weiss Rifkind Wharton & Garrison LLP acted as legal counsel.

Petrie Partners Securities LLC served as financial adviser to Stone in the deal, while Akin Gump Strauss Hauer & Feld LLP acted as legal counsel.