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NorthAmOil: Talos to purchase QuarterNorth for $1.29bn

Houston-based Talos Energy will buy QuarterNorth Energy for $1.29bn cash and stock.

Talos executives said the deal would add about 30,000 barrels of oil equivalent per day (boepd) from offshore US Gulf of Mexico assets for the entire 2024, averaging around 75% oil from around 95% operated assets.

“The addition of QuarterNorth's overlapping deepwater portfolio with valuable operated infrastructure will increase Talos's operational breadth and production profile while enhancing our margins and cash flow,” Talos president and CEO Timothy Duncan said in a statement.

"We're one of those companies that's been a survivor in the Gulf of Mexico. We've made it through multiple downturns ... more scale and more diversity, a higher level of EBITDA is going to attract more investors and we're trying to bring people back to thinking about offshore," he said in a conference call.

Talos said it expects to have annual run-rate savings of around $50mn by the end of 2024.

The purchase is value accretive and in line with Talos' longer-term strategy of building a large-scale offshore E&P company, said Stifel analysts in a note, Reuters reported.

QuarterNorth's producing assets include six major US Gulf of Mexico fields, of which 95% are deepwater.

Talos said it expects the transaction to increase its base decline rate by around 20% and increase reserves beyond its current production, both from producing probable zones and from near-term development opportunities in 2024-25.

Privately held QuarterNorth, also based in Houston, is the successor of Fieldwood Energy, which had sought bankruptcy in 2020. Some of the creditors of Fieldwood went on to form QuarterNorth in 2021 when they purchased most of Fieldwood's assets for $1bn.