Kosmos Energy acquires additional Ghana interests for $550m
Kosmos Energy, a leading oil and gas exploration and production company, has announced that it has acquired an additional 18% interest in the Jubilee oil field, in addition to an 11% interest in the Tweneboa-Enyenra-Ntomme (TEN) oil fields in Ghana.
The acquisition of the interests from the Occidental Petroleum Corporation (OXY) was for a purchase price of $550 million, the company announced on Wednesday, October 13.
According to the company, the consideration due to OXY at completion was approximately $460 million after taking into account closing adjustments.
Commenting on the purchase, the Chief Executive Officer (CEO) of Kosmos Energy, Andrew Inglis, said, “this is a compelling transaction for Kosmos that accelerates our strategic delivery and is expected to provide long-term sustainable cash flow from fields where we have a deep understanding of the value and future upside.
Mr Inglis said, the company was expecting the additional Ghana interests to generate around $1 billion of incremental free cash flow by the end of 2026 at $65 Brent with upside given current prices.
“We plan to use the additional cash flow from these assets to reduce absolute debt levels and fund our growth in liquefied natural gas (LNG),” he added.
He explained that, financially, the transaction was highly accumulative across all key metrics, including free cash flow, and accelerates our committed path to deleveraging the balance sheet.
“With significant net asset value accretion for the company, we believe that this transaction will deliver substantial returns to our shareholders,” the Kosmos Energy CEO stated.
The transaction creates a simplified and aligned partnership in both the Jubilee and TEN fields, with both Kosmos and the Ghana National Petroleum Corporation (GNPC) increasing their ownership.
The partnership is committed to investing in both fields to maximize the value of the assets and reduce the carbon intensity of operations for the benefit of all stakeholders.”
Interests acquired
Kosmos has acquired an additional 18.0% interest in the Jubilee field and an additional 11.0% interest in the TEN fields in Ghana. This transaction increases Kosmos’ interests in Jubilee to 42.1% and in TEN to 28.1%.
The transaction is subject to a 30-day pre-emption period, which, if fully exercised, could reduce Kosmos’ ultimate interest in Jubilee by 3.8% to 38.3%, and in TEN by 8.3% to 19.8%. Prior to closing the transaction, OXY resolved certain historical tax claims related to the sold interests.
Using Kosmos’ year-end 2020 reserves report, prepared by independent reserve auditor Ryder Scott, estimated 2P reserves being acquired as part of today’s transaction were approximately 104 million barrels of oil equivalent at year-end 2020.
The assets being acquired have a proved and probable (2P) post-tax NPV10 valuation of around $1.6 billion. The acquired assets are currently producing approximately 17,000 barrels of oil per day net and are expected to generate approximately $325 million of EBITDAX in 2022 at $65 Brent.
Kosmos has worked closely with the operator and joint venture partners in 2021 to drive higher reliability and improve operational performance in Ghana.
Significant progress has been made with new wells delivering higher production, high levels of FPSO uptime, near-record water injection and materially higher gas off take.
Transaction Financing
The transaction has an effective date of April 1, 2021. The government of Ghana has approved the transaction, which closed on October 13, 2021.
To fund the transaction, Barclays and Standard Chartered Bank have provided Kosmos with a $400 million bridge loan, which the Company expects to refinance with the proceeds from a future senior notes offering.
The remaining consideration was funded from available liquidity, which the Company expects to re-finance with the proceeds from the equity offering of approximately $100 million announced today.
The Company plans to provide updated full-year 2021 guidance alongside third quarter 2021 results to take account of this transaction and the impact of the recent hurricane-related downtime in the Gulf of Mexico.
With Gulf of Mexico production now returned to pre-hurricane levels, we expect the impact of the unplanned downtime to be approximately 4,000 barrels of oil equivalent per day in the third quarter or 1,000 barrels of oil equivalent to the full year compared to our previous production forecasts for 2021.
Barclays is acting as financial adviser to Kosmos on the transaction with Slaughter and May serving as Kosmos’ legal counsel on the transaction.
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