Shares in Tullow Oil, the Irish founded exploration company, staged a tentative rally on Wednesday morning, after slumping more than 11 per cent in the previous session after US oil and gas group Kosmos Energy dropped its bid interest in the business.
Kosmos’ announcement, which did not give a reason, came less than a week after the companies said they were in early talks for a potential deal that would have created a West Africa-focused producer. Kosmos’s shares soared in New York on news that it had walked away.
Shares in Tullow rallied almost 3 per cent to nearly 21 pence in early trading in London on Wednesday, bouncing off a four-year low reached in the previous session.
News of Kosmos’s interest last week came days after Rahul Dhir said he was stepping down as chief executive of Tullow.
Market sentiment towards Tullow and Kosmos had been volatile on Friday, as investors digested news of the potential tie-up. While Tullow’s shares initially jumped, they soon began to trade lower as investors became concerned about the $4 billion of combined debt the merged entity would have.
Tullow’s net debt peaked at $4.8 billion at the end of 2016. The company saw its share price plunge about 85 per cent in the 18 months before Mr Dhir took charge in 2020, amid a series of drilling and production disappointments, exits of its then chief executive and exploration director, massive asset writedowns and warnings about potential cash shortfalls.
Asset sales and cost-cutting – together with higher oil prices – had helped Tullow pull off a make-or-break $1.8 billion debt refinancing in 2021 and chip away at its debt mountain, but it will still need to refinance about $1.3 billion of bonds due to mature in 2026
Tullow, which was founded by one-time Aer Lingus accountant Aidan Heavey in 1985, closed its Dublin office in 2020 as part of a round of corporate restructuring and quit the Irish stock market last year. It had moved its domicile to the UK two decades ago.
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