Tullow Oil is struggling to overcome a credibility problem, with the scars of an overambitious and risky expansion emblazoned on the oil producer’s balance sheet. An all-share merger with its peer, Capricorn Energy, should hasten the reduction in leverage and recovery in free cashflows.
High debt and burdensome interest costs have prevented Tullow from capitalising on the steep rally in the oil price over the past 12 months, with the shares underperforming oil and gas peers. A tie-up with Capricorn would cut Tullow’s net debt of $2.1 billion at the end of last year, to $1.1 billion as part of a combined company, boosted by the near $700 million in cash on Capricorn’s balance sheet after a windfall settlement of a long-running tax dispute in
