Caracal unveils £1.08bn merger with TransGlobe

 
Suzie Neuwirth

AFRICA-FOCUSED oil explorers Caracal Energy and TransGlobe yesterday said they have agreed to a $1.8bn (£1.08bn) merger, which will create the third largest independent oil producer in Africa.

The deal will expand FTSE-listed Caracal’s reach beyond Chad into Yemen and Egypt and add a lower-risk drilling programme to its portfolio.

The newly merged company will operate under the Caracal name and be led by Caracal’s chief executive Gary Guidry, along with a combination of Caracal’s and Transglobe’s current executive teams.

“This transaction will clearly benefit both companies and their shareholders, as the enhanced scale will expedite production growth and increase cash flow,” said Guidry. “Through the combination of complementary asset bases, we will create a solid regional platform for compounding reserves and production growth.”

After completion of the merger, which will take the form of a share swap, shareholders in Caracal will hold 65.6 per cent of the company and former TransGlobe shareholders will hold the remaining 34.4 per cent.

Caracal currently produces 14,000 barrels of oil per day, which will go up to 25,000 bopd after the deal. It is targeting between 31,000 and 34,000 bopd this year and is planning 30 to 42 exploration wells in Chad by 2016.

“We’re pursuing additional upside of over four billion barrels of [oil], aggressively targeted with a fully funded drilling program,” said Ross Clarkson, chief executive of Toronto and Nasdaq-listed TransGlobe.

“And as one of the largest independent oil producers in Africa, we will be well positioned for future value-enhancing growth.”

Caracal will seek a listing for the merged company on the Toronto Stock Exchange.

BEHIND THE DEAL
RBC CAPITAL MARKETS | JAKUB BROGOWSKI

1 Brogowski used to be a ski jump champion and competed in the World Juniors before a serious crash took him out of the sport and into banking.

2 He is a director in RBC’s London oil and gas investment banking team and brings over 11 years of experience in the industry, having completed over 40 financing and advisory assignments with a combined value of over $35bn (£21.1bn).

3 He began his banking career in Calgary, Canada and moved to London four years ago to expand his work on advisory assignments outside of North America.

Also advising...
Gordon Ritchie is another key player on the RBC team. First Energy Capital Corporation is acting as a strategic advisor. Stikeman Elliott is giving legal advice, headed up by Chris Nixon and Sandra Bates. Scotiabank is advising TransGlobe, with David Potter leading the team. Blake Cassels & Graydon is acting as TransGlobe’s legal counsel.