Tullow Oil shares are sinking as US rival Kosmos Energy abandons its takeover

Tullow Oil shares tumbled on Tuesday after Kosmos Energy abandoned its takeover 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 why, and left question marks over the future of West Africa-focused Tullow.

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

Tullow has been fighting to overcome a huge debt mountain, which it hopes will be reduced to $1.4 billion by the end of the year.

According to LSEG data, its valuation has fallen from around £15 billion at its 2012 peak to a market capitalization of just £339 million today.

The group was busy extracting large oil fields in Ghana and Uganda in the 1990s, but that came to an abrupt end. Debts skyrocketed after a number of failed exploration attempts.

The global race to net zero has also become increasingly damaging, with Tullow gradually winding down its exploration efforts in recent years to focus on effectively managing existing assets.

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

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

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

Tullow Oil shares fell 10.6 per cent to 20.84p by midday. The share has lost more than 40 percent in the past year.