Tullow Oil keeps Capricorn merger plans and €200m cash flow guidance

Some Capricorn investors argue the all-share deal, which requires 75% support, undervalues their business

Africa-focused Tullow Oil said on Wednesday it would stick to the current form of its all-share merger plan with Capricorn Energy, shrugging off criticism from some Capricorn investors who say the deal undervalues the company.

Capricorn's board supports the merger, but the group also said last week it was exploring alternative deals after unnamed parties expressed interest.

Capricorn shareholders Madison Avenue, Legal & General IM and Schroders, as well as some other investors, have come out against the merger plan.

The deal requires approval from at least 75 per cent of Capricorn shareholders, a threshold that might be in jeopardy if hedge fund investors who have been critical of the deal turn their derivative investments into direct shareholdings.


Tullow on Wednesday reiterated its guidance for full-year free cash flow of $200 million (€200 million) at an oil price of $95 a barrel after recording $205 million negative cash flow in the first half after an acquisition and an arbitration payment.

Tullow, which had a market capitalisation of about $835 million as of Tuesday, had net debt of about $2.3 billion at the end of the first half. It forecasts its net debt to core profit ratio, or gearing, to fall to 1.5 times by year-end.

The Irish-founded group announced earlier this week that it had decided to quit the Dublin stock market after 33 years ahead of the Capricorn merger. — Reuters