Kosmos Energy, a U.S.-based oil and gas company, has decided to end its pursuit of acquiring Tullow Oil. The abrupt announcement, made on Tuesday, sent Tullow’s shares plummeting by 10%, with no clear explanation provided for the withdrawal.
This decision comes less than a week after both companies disclosed preliminary discussions about a merger. The proposed deal had aimed to create a robust West Africa-focused energy producer.
In contrast, Kosmos Energy’s stock soared by nearly 13% in pre-market trading following the news, reflecting investor confidence in its decision to walk away.
The acquisition, if finalized, would have resulted in a combined production capacity of over 130,000 barrels of oil equivalent per day by 2024. The merger promised a geographic reach spanning Mauritania, Senegal, Ghana, Equatorial Guinea, and the U.S. Gulf of Mexico.
“There was a compelling rationale given the shared assets in Ghana and potential operational synergies,” commented James Hosie, a research analyst at Shore Capital Stockbrokers.
However, he noted that such a deal required Ghanaian government approval and creditor support from both firms, which posed significant challenges. Both Kosmos and Tullow are heavily indebted and share partnerships in key Ghanaian oil fields.
Kosmos had initially set a deadline of January 9, 2025, to formalize its offer but reserved the right to revisit the decision under specific conditions.
Meanwhile, Tullow reaffirmed its confidence in its standalone business, stating it is well-positioned to strengthen its capital structure.
Analysts described the acquisition attempt as opportunistic, coming on the heels of Tullow’s search for a new CEO. Current CEO Rahul Dhir is set to step down next year.
