Bold Moves By Talos Energy Separate This Wildcatter From The Pack

In what some industry observers are calling an “ingenious move,” Houston-based Talos Energy recently inked a deal to merge with Stone Energy Corp. of Lafayette. It’s an interesting transaction because it gives Talos Energy access to a combination of U.S. deepwater Gulf blocks and shallow water Mexican blocks of exploration territory.

That’s only part of the advantages of the Big Stone deal. For example, it was the leverage Talos CEO Tim Duncan needed to take his company public. Each share of Big Stone common stock became a share for Talos. After the transaction closed, Talos gained a credit facility agreement that brought $600 million –and $300 million of that is immediately available.

The Talos Big Stone deal also significantly strengthened the infrastructure profile of Talos.

The Big Stone merger dovetails with the recent Talos Energy acquisition of Whistler Energy II, a company that recently filed for bankruptcy, but which held golden opportunity to bolster Talos Energies financial and infrastructure profile. The $52 million transaction gave Talos control over a company that has assets which include the production of 1,900 boepd.

The Whistler arrangement included a $77 million cash collateral release, money that had been used to secure the surety bonds of Whistler. That money does not need to be replaced. When all is said and done, Talos gets $31 million. The seller entitled to $46 million. Furthermore, Talos was bolstered by a $7 million cash balance via Whistler — and this essentially provided a $14 million cash consideration to Talos.

Talos Energy was formed in 2012 by Duncan, a man eager to create a different kind of energy exploration company. Duncan is keen on Gulf Water exploration — an area many other companies consider too risky or with certain potentials assets that are deemed “unreachable.”

But Talos Energy is determined to boldly go where other energy developers will not. So far, the strategy appears to be paying off.

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