The transaction increases Kosmos’ interests in Jubilee to 42.1 percent and in TEN to 28.1 percent
Kosmos Energy has acquired additional 18 percent interest in the Jubilee field and 11 percent interest in the TEN fields in Ghana from Occidental Petroleum (“OXY”) for a purchase price of US$550 million.
The transaction increases Kosmos’ interests in Jubilee to 42.1 percent and in TEN to 28.1 percent, and prior to closing the transaction, OXY resolved certain historical tax claims related to the sold interests.
In a statement announcing the purchase, Kosmos said the deal was completed at compelling valuation with a significant enhancement to a five-year plan. And consideration due to OXY at completion was approximately US$460 million after taking into account closing adjustments.
“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.
We expect 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 LNG,” Andrew G. Inglis, Chairman and Chief Executive Officer of Kosmos said.
Financially, he said the transaction is highly accretive 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 transaction creates a simplified and aligned partnership in both the Jubilee and TEN fields, with both Kosmos and 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.”
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 acquired assets, the New York and London stock exchange-listed firm explained, have a proved and probable (2P) post-tax NPV10 valuation of around $1.6 billion. The 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 offtake,” it further noted.
It is expected that the purchase would accelerate Kosmos’ strategic delivery, offer near-term cash generation from high-margin oil with the acquired assets expected to generate US$1 billion of free cash flow by year-end 2026 at $65/barrel Brent and underpins transition to balanced oil and gas portfolio.
“Growing investment in Africa aligned with Kosmos’ objective to support the ‘just transition’ and deliver tangible economic and social benefits in Ghana,” the statement further read.
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, the statement said Barclays and Standard Chartered Bank have provided Kosmos with a US$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 an equity offering of approximately US$100 million.
The Jubilee field was discovered in June 2007. It is located 60km offshore between the Deepwater Tano and West Cape Three Points blocks in Ghana.
It had Tullow, Kosmos Energy and GNPC as its other equity partners prior to the latest transaction.
The Tweneboa, Enyenra, Ntomme (TEN) fields is located 25km away from the Jubilee field and was the first deepwater field developed in offshore in the country.
Some of its major partners include Tullow, Kosmos Energy, Occidental Petroleum and GNPC.