Talos Energy (NYSE:TALO) announced that it would sell a 49.9% stake in its Mexican subsidiary to Grupo Carso, a unit of billionaire Carlos Slim, for $124.75 million. The oil exploration and production company said that the deal price gives a minimum valuation of about $250 million to its subsidiary, including the 17.4% stake in the Zama, a conventional oil field in Mexico.
Per the agreement, Talos Energy will receive $74.85 million at the closing of the deal (planned to close within the third quarter of 2023). Further, it will get the remaining $49.9 million at first production.
The company’s CEO, Timothy S. Duncan, said that the joint venture would benefit from Carso’s commercial experience and critical presence in Mexico. Duncan added that the deal “establishes a baseline Zama valuation for Talos shareholders” and provides upfront cash. Also, the company’s shareholders could benefit from the valuation upside as it moves towards its first production.
Earlier, Talos Energy submitted the Zama Unit Development Plan for approval and formed an Integrated Project Team to manage the operations of Zama.
Talos Energy delivered lower-than-expected bottom-line results earlier this month. Meanwhile, it reduced the full-year average daily production, citing delays in the first production from new wells and unplanned downtime.
Following the guidance update, Stifel analyst Nathaniel Pendleton reduced the price target on TALO stock to $22 from $24. However, he reiterated a Buy rating.
Is TALO Stock a Buy or Hold?
With five unanimous Buy recommendations, TALO stock commands a Strong Buy consensus rating on TipRanks. Further, analysts’ average price target of $22.6 implies 76.56% upside potential.
