Tullow Oil will acquire Capricorn Energy in an all-stock deal worth 656.9 million pounds (US$826.7 million), keeping a focus on African reserves amid soaring energy prices.

Investors in Capricorn, formerly known as Cairn Energy, will receive 3.8068 Tullow shares for each share they hold, the companies said on June 1. Reuters calculated the value.

“The combination represents a unique opportunity to create a leading African energy company, listed in London, with the financial flexibility and human resource capability to access and accelerate near-term organic growth,” the companies said.

The Russia-Ukraine war has sent crude oil and gas prices higher as sanctions on Moscow squeeze supplies.

The combined group, to be led by Tullow boss Rahul Dhir and majority owned by the West-Africa focused firm, is expected to have an output of 96,000 boe/d, with pro forma reserves of 343 million boe.

Tullow’s flagship offshore oil fields in Ghana will make up the biggest share of the new group’s reserves and production, three-quarters of which will be oil and one-quarter gas.

The larger company, which is expected to have a new name, will have production across Africa, including Egypt, Gabon and Ivory Coast.

The merger will offer annual savings of $50 million and investors in the new group will get an annual dividend of $60 million, ending a payout drought for Tullow shareholders.

Shares in Tullow, which last closed at a price of 54.60 pence each, reversed initial losses to trade about 0.6% higher by 0759 GMT. Capricorn Energy shares were up 0.7%. The wider oil and gas index fell 0.6%.

Morgan Stanley and Rothschild & Co. were Capricorn’s financial advisers, while PJT Partners and Barclays advised Tullow. The boards of both energy companies backed the deal.

Separately, energy services provider Wood Plc agreed to sell its consulting unit for $1.9 billion.

($1 = 0.7946 pounds)

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