The United States-based oil and gas company announced on Wednesday that Shell will acquire its participating interest in blocks offshore São Tomé & Príncipe, Suriname, Namibia, and South Africa.
Kosmos Energy currently holds stakes in six blocks offshore São Tomé & Príncipe with Shell already partnering the firm in two of the blocks. They are Blocks 5, 6, 10, 11, 12 and 13, and Shell is currently a partner in Blocks 6 and 11.
Kosmos holds stakes in Block 42 and 45 in Suriname and one in Namibia (PEL 039) and another in South Africa (Northern Cape Ultra-Deep Block). Shell is the operator of the latter two and holds the same stake as Kosmos in the blocks; 45%.
The consideration is an upfront cash payment of about a $100 million, with contingent payments of $50 million payable upon each commercial discovery from the first four exploration wells drilled across the assets, set at an aggregate of $100 million. Three out of the four wells are currently scheduled for 2021.
Kosmos says it aims to use about one-third of the initial proceeds to test two high-quality infrastructure-led exploration prospects in the Gulf of Mexico with each offering hub scale potential with a low-cost, lower-carbon development scheme. The remainder of the proceeds will be used to reduce the company’s outstanding under its credit facilities.
The transaction is expected to be closed in the fourth quarter of 2020 with an effective date of September 1st2020. It is subject to government approvals and other conditions. After the transaction is completed, Kosmos will retain an exploration portfolio with over six billion barrels of gross resource potential in the Gulf of Mexico and West Africa. The transaction is also to generate about $125 million in total savings across capital expenditures, general and administrative expenses over the next two years.
The Chairman and Chief Executive Officer of Kosmos Energy, Andrew G. Inglis said, “With this transaction, we are continuing to focus our exploration portfolio on proven basins that offer superior returns with shorter payback and significant resource potential.”
“The proceeds enable Kosmos to accelerate high graded exploration opportunities while strengthening the balance sheet, positioning Kosmos to create additional shareholder value. The contingent payments locked into the agreement with Shell ensure we retain upside from frontier exploration with no further investment.”