The Gulf of Mexico, languishing in the shadow of onshore shale plays, is getting new attention as oil prices hold near $70 a barrel and oil fields like the Permian Basin get more crowded and expensive.
Two merger proposals on Monday were the latest to show the increasing interest and activity offshore after the long downturn that followed the recent oil bust. In a major Gulf of Mexico transaction, Kosmos Energy of Dallas said it would pay $1.2 billion to acquire the Houston offshore exploration and production company Deep Gulf Energy. Meanwhile, Harvey Gulf International Marine of New Orleans moved to outbid Tidewater of Houston for the offshore energy services company GulfMark Offshore, also of Houston.
Pavel Molchanov, an energy analyst at Raymond James in Houston, said the dealmaking shows the growing interest in the Gulf of Mexico, even if it’s not the top priority for most of the bigger energy players.
“This is a classic example of a value buy,” Molchanov said. “It’s a little bit contrarian, but the good thing about a contrarian move is it’s cheaper.”
The acquisition of Deep Gulf would allow Kosmos, which operates almost exclusively in Africa and South America, to enter the Gulf of Mexico in a big way while diversifying its holdings in the slowly rebounding, but politically stable U.S. Gulf. Kosmos Chief Executive Andrew Inglis said Deep Gulf gives the growing company more diversification, exploration opportunities and a pipeline of quality development projects in the Gulf.
“With many competitors leaving the Gulf of Mexico to chase onshore shale plays, a huge opportunity has opened in the basin,” Inglis said. “The best deepwater assets can compete with the best of shale, and now is a good time to enter the Gulf of Mexico.”
Kosmos has doubled its oil and gas production in the last four years, and this deal should allow Kosmos to double again in the next four years, he said. Deep Gulf is controlled by the Connecticut private equity firm First Reserve, which provided funding at the company’s inception in 2005.
The sale is expected to close in September. Kosmos said it will pay $925 million in cash and another $300 million in its stock shares.
GulfMark, meanwhile, said it will investigate the bid from Harvey Gulf, which appears to offer $40 million more than Tidewater. Tidewater, which moved to Houston from New Orleans, said last month that it would pay $340 million for GulfMark in an all-stock deal. Both deals would combine marine vessel support companies for the oil and and gas industry in the Gulf of Mexico.
Harvey Gulf International Marine, which just emerged from bankruptcy in early July, proposed a reverse merger in which Harvey Gulf would technically be acquired by GulfMark, but the Harvey Gulf leadership and investors would control a majority of the combined company. This would allow Harvey Gulf, a private company, to trade on public stock exchanges under the GulfMark name and ticker.
GulfMark’s shareholders would own 41.2 percent of the combined GulfMark and Harvey Gulf company.
GulfMark said Monday that the Harvey Gulf alternative could be worth more than $380 million to its investors. GulfMark said it will review the proposal, but that its board of directors continues to believe that the idewater merger is in the best interest of shareholders. The Tidewater deal is still expected – at least for now – to close by the end of the year.