Tullow Oil shares sink as US rival Kosmos Energy abandons takeover

Tullow Oil shares plunged on Tuesday after Kosmos Energy abandoned the takeover pursuit of its London-listed rival.

The two firms confirmed preliminary talks over an all-share takeover last week in the wake of media speculation, but Kosmos has now said it does not intend to make a formal offer.

Kosmos gave no explanation as to why, leaving question marks over the future of West Africa-focused Tullow.

It had been hoped the deal would offer compelling operational synergies as the pair share the same core assets – the Jubilee and TEN fields in offshore Ghana – and help repair Tullow’s balance sheet.

Tullow has been fighting to overcome an enormous debt pile, which it hopes to have reduced to $1.4billion by the end of the year.

It has seen its valuation plunge from some £15billion at its 2012 peak to a market capitalisation of just £339million today, according to LSEG data.

The group was on a winning streak of major oil field discoveries in Ghana and Uganda during the noughties, but this abruptly came to an end. Debts skyrocketed after a number of unsuccessful exploration attempt.

The global race to net zero has also increasingly been damaging, with Tullow in recent years gradually calling an end to its exploration efforts to focus on effectively managing existing assets.

Tullow’s existing strategy aims to have less than $1billion in net debt by 2025 and cash gearing below 1x in the near term.

Kosmos has production operations and exploration opportunities offshore Ghana, Equatorial Guinea and in the deepwater US Gulf of Mexico.

The US firm, which itself has $2.7billion of net debt, pumped 65,400 barrels of oil equivalent per day in the third quarter, compared to Tullow’s efforts of 63,700 barrels per day over the first half of the year.

Tullow Oil shares were down 10.6 per cent to 20.84p approaching midday. The shares have lost more than 40 per cent over the last year.