Dr Yusif sulemana, an energy expert and Senior Oil Production Specialist at Petroleum Development Oman, has suggested that the merger between Tullow and Capricorn is expected to boost investment and spur production in Tullow’s oil fields in Ghana.

This merger consolidates the company’s potential to continue to invest in its Ghana assets, and other assets in Africa. In terms of its operations, this should be a strong leverage for Tullow to stand its ground as investments within the oil and gas industry continue to shrink.

“…Operationally and financially, the combined company should do better than probably, an individual company. For the reason being that, the oil and gas industry is facing a peculiar situation; there is a bit of capital discipline in the world of hydrocarbons.

“Players, especially those in the oil and gas industry have to adopt strategic moves to be able to make sure that they have the financial wherewithal to champion the required investment needed to churn out [increased] barrels of oil into their production basket.”
Dr Sulemana

Despite rising oil prices above $100 per barrel, the ongoing capital discipline in the oil and gas industry has caused a deep lull in upstream activities worldwide, Dr Sulemana said. This requires oil and gas companies to act strategically to ensure operations somewhat glide along and not phase out, he added.

Particularly, the merger is expected to speed up investment into the world of hydrocarbons as investments are constrained. “Once investment is sped up, the believe is that we will be able to increase the production of hydrocarbons,” Dr Sulemana said.

“After 10 years, we have not been able to produce 200,000 barrels of oil per stream day and that is so unfortunate. The hope is that such a move will be able to help Ghana to catapult our combined production portfolio to go far beyond 200,000 barrels and even probably, it will reach half a million barrel mark.”
Dr Sulemana

M&A’s Declining in O&G Industry

Mergers and acquisitions (M&A’s) are not a new phenomenon in the oil and gas industry. However, such investment routes are also bogged with constraints. Mostly, due to the advantages of economies of scale and an accompanied rise in oil prices, companies tend to merge. Currently, M&A activity, which typically follows oil prices, remains well below pre-pandemic levels, according to Deloitte 2022 oil and gas outlook.

“While the ongoing capital discipline of O&G companies is the primary reason behind the lull in upstream M&A activity, limited visibility of buyers into the carbon profile of sellers or their assets is a growing factor.”
Deloitte 2022 O&G outlook

Tullow’s merger with Capricorn Energy, is an all-share deal that will create an Africa-focused but London-listed oil and gas group with a market value of more than £1.4 billion ($1.79 billion).

Both companies said they believe the deal would create a “stronger, more resilient” African energy company that would be able to deliver sustainable shareholder returns. The combined group will have 1 billion barrels of oil projects spread across countries including Ghana, Egypt, Gabon and Côte d’Ivoire and Latin America.

Tullow’s Investment in Ghana Assets

Prior to this merger, Tullow has demonstrated strong believe in its Ghana operations, and increased potential to shore up investments in its assets; remaining upbeat on its future production plans of the Jubilee and TEN oil fields.

In 2021, the company rolled out planned investment of $4.4 billion into the country’s oil fields to drill 50 wells in the next decade. At Jubilee, the company brought onstream two water injection wells and are in the process of completing two more wells.

This will develop a gross combined reserve of 17 mmstb within the core Jubilee area. The drilling programme also included two key strategic wells at TEN which will help define the future of this high potential development. Tullow’s Rahul Dhir said in a statement.

In Q1 2022, Tullow successfully pre-empted the Kosmos-Occidental deal in Ghana for $118 million in March 2022 increasing its net share of daily production from Jubilee and TEN by an expected 4,000 bopd on an annualised basis in 2022.

“Tullow has been focusing on the African continent and I think Ghana has been a key investment point for Tullow. So for Ghanaians, it should be of special interest to us because of the strategic investment that Tullow is championing within our shores and the hope is that the combined portfolio will provide value to key stakeholders like Ghana.”
Dr Sulemana