Serica Energy said yesterday it is buying fellow North Sea operator Tailwind Energy in a shares-and-cash deal worth £367million.
Tailwind - backed by commodities and energy group Mercuria - has been steadily expanding in the North Sea in recent years, while high-performing Serica has been seeking a deal to bolster its portfolio.
Energy Voice says that completion of the deal, expected in March, will put Serica in the top-10 club of producers in the UK North Sea.
Serica will make a cash payment of £58.7million and issue 111million new ordinary shares.
It will also take on Tailwind's net debt of £277million.
Mercuria, Tailwind's largest shareholder, will become a strategic investor in Serica with a 25.2% holding and will nominate two new non-executive directors to the board.
Joining senior management
Mitch Flegg and Tony Craven-Walker will remain as CEO and chairman of Serica respectively, while Tailwind CEO Steve Edwards will join the senior management.
All current Tailwind employees will be offered positions in the enlarged group.
The deal will create a combined portfolio of 104million barrels of oil equivalent.
The combined group will create a balanced spread of production from two main hubs - Serica's Bruce and Tailwind's Triton.
Mr Flegg said: "I am excited by the announcement of this transaction and by the possibilities it brings for Serica in terms of a new phase of growth.
"The transaction achieves our strategic objective of materially increasing the scale and diversity of our UKCS portfolio of assets.
Organic investment opportunities
"The Tailwind portfolio also brings multiple organic investment opportunities for further material near-term growth in reserves and production.
"Following this transaction, Serica will retain its competitive strengths of a strong balance sheet, positive cash flow and low decommissioning cost obligations.
"Moreover, through the introduction of Mercuria as a new strategic investor, we will be differentially positioned to take advantage of the opportunities we expect to arise through industry consolidation, the North Sea Transition Deal and potentially overseas."
Tailwind was founded in 2016 by a management team boasting a total of more than 200 years of experience in investment and exploration and production.
It bought Shell and ExxonMobil's stakes in the Triton cluster in September 2018.
The firm followed that deal up by swooping for the UK business of Houston-headquartered oil and gas firm EOG Resources later that year.
Mr Edwards added: "Since inception in 2016, Tailwind has been driven by creating value for its stakeholders - acquiring and exploiting high-quality production and development opportunities on the UKCS. Our value growth and delivery over that period have been exceptional, resulting from smart M&A and consistent delivery of high-value organic projects."