Once a prominent player in the London oil market, Tullow Oil is currently exploring an all-share takeover possibility with American oil and gas producer Kosmos Energy, which is actively involved in West Africa.

Kosmos Energy, headquartered in Texas and publicly traded in both New York and London, has initiated very preliminary talks with Tullow, although it has clarified that there is no guarantee that a formal offer will materialize.

Both entities hold interests in the Jubilee and Ten oilfields located off the Ghanaian coast, with Tullow serving as the operator of these fields.

The Jubilee field accounted for approximately half of Tullow’s average net production, which was 62,700 barrels of oil equivalent per day last year. Kosmos holds nearly 39 percent of the Jubilee oilfield and a 20 percent stake in the Ten field, while Tullow owns 40 percent and 54 percent, respectively.

Currently, Tullow’s market capitalization exceeds £300 million, a decline from a peak valuation exceeding £14 billion, influenced by noteworthy early exploration successes followed by significant setbacks leading to increased debt. As of June, Tullow reported a net debt of $1.7 billion.

Recently, Tullow announced that its chief executive Rahul Dhir, who took the helm amid plummeting oil prices due to the pandemic, will depart next year, with the company actively seeking a new leader.

One analyst commented, “Tullow is currently directionless with Rahul stepping down and lacking a clear successor,” further emphasizing the company’s struggles with significant debt and absence of distinct growth initiatives.

Additionally, Tullow is entangled in a tax dispute with Ghanaian authorities, with a ruling anticipated by the end of this year.

According to takeover regulations, Kosmos has until January 9 to either proceed with a bid for Tullow or withdraw from negotiations.

Tullow shares have experienced a 16 percent increase since the week’s beginning, though they fell by 2½p, or 9.8 percent, concluding at 23½p on Friday. Conversely, shares of Kosmos Energy dropped by 20p, a decrease of 7.1 percent, ending at 261p in London.