Talos Boosts Oil Output with EnVen Acquisition

As oil prices drop in the face of global recession, Talos Energy announced its acquisition of EnVen Energy. The deal is valued at $1.1 billion and expected to close later this year. It contemplates that Talos will pay for EnVen, which operates deep water oil rigs in the Gulf of Mexico, with a combination of cash, equity, and assumption of debt.

According to the companies’ joint press release, “EnVen’s high-margin, oil-weighted assets in key deepwater regions, operated infrastructure and significant overlapping acreage footprint will enhance our ability to accelerate shareholder value creation.” The deal adds approximately 24 thousand barrels of oil equivalent per day to Talos’s production. In addition to being the world’s largest consumer of oil, the United States is also the largest producer, producing 11.2 million barrels per day.

Top Oil Producers

Source: Forbes

Oil prices have declined as the US dollar has surged. The dollar reached a two decade high against a basket of currencies this week as the Federal Reserve aggressively hikes interest rates in its bid to counter inflation. Even though the U.S. economy shows signs of weakness, the world’s economy likewise is in turmoil and a “flight to safety” has propelled the dollar to new heights. The dollar has never been stronger vs. the British Pound.

US Dollar vs. Pound Sterling

Source: Google

The world’s commodity prices are priced in dollars, so this means oil has become relatively more expensive in markets using other currencies – thereby decreasing demand and placing downward pressure on oil prices.

Political instability has exacerbated volatility in energy prices. This week the Nord Stream pipelines were damaged in a suspected sabotage. Regardlesss of the cause, the act cuts off Russia’s supply of natural gas to Europe. Russia had suspended shipments in August in response to Western sanctions but the explosions ensure the gas will not flow again ahead of the cold winter months. This situation has led European nations to seek alternative fuel sources, including oil.

According to Matterhorn’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions, Talos was advised by Vinson & Elkins LLP and financial advisers J.P. Morgan Securities LLC and KeyBanc Capital Markets Inc. EnVen was advised by Davis Polk & Wardwell LLP and financial adviser Intrepid Partners, LLC.