Current Report Filing (8-k)
July 02 2020 - 05:50PM
Edgar (US Regulatory)
0001509991 false 0001509991 2020-06-26
2020-06-26 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported):
June 26, 2020
KOSMOS ENERGY LTD.
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
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001-35167 |
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98-0686001 |
| (State or other jurisdiction of
incorporation) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
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8176 Park Lane
Dallas,
Texas
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75231 |
| (Address of Principal Executive
Offices) |
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(Zip Code) |
Registrant’s telephone number, including area code:
214-445-9600
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
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☐ |
Written communications pursuant
to Rule 425 under the Securities Act (17 CFR 230.425) |
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☐ |
Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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☐ |
Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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☐ |
Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934:
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Title of each
class |
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Trading symbol(s) |
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Name of each exchange on which
registered |
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Common Stock, $0.01 Par Value |
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KOS |
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New York Stock Exchange
London Stock Exchange
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (17
CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR §240.12b-2).
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 1.01. Entry into a Material Definitive Agreement
On June 26, 2020, Kosmos Energy Gulf of Mexico Operations, LLC
(“Kosmos GOM”), a subsidiary of Kosmos Energy Ltd.
(“Kosmos Energy”), and Trafigura Trading LLC
(“Trafigura”) entered into a Prepayment Agreement (the
“Prepayment Agreement”) for up to $200 million
of crude oil
sales related primarily to a portion of Kosmos GOM’s 2022 and 2023
production, with $150 million committed by
Trafigura.
As provided in the Prepayment Agreement, the following is a summary
of the key terms:
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· |
Prepayments: Trafigura agrees
to initially pay Kosmos GOM $50 million (the “Initial
Prepayment”) for the purchase of crude oil from Kosmos GOM.
The volume of crude oil that Kosmos GOM will sell to Trafigura per
month will be determined in accordance with the volumetric
calculation model described in the Prepayment Agreement (the
“Volume Model”). Kosmos GOM and Trafigura will obtain crude
oil pricing and all other information necessary to provide the
inputs into the Volume Model, which include the then-current price
per barrel of crude oil based on market pricing, hedging
assumptions, charges on the prepayments, and a buffer
threshold. |
Additionally, upon the satisfaction of certain conditions provided
in the Prepayment Agreement, Kosmos GOM may elect for Trafigura to
prepay for two additional prepayment tranches of crude oil in the
amount of $100 million on September 30, 2020 (the “First
Additional Prepayment”) and $50 million on or before March 31,
2021 (the “Second Additional Prepayment,” and together with
the First Additional Prepayment, the “Additional
Prepayments”). The Additional Prepayments together with the
Initial Payment are referred to herein as the “Prepayments.”
If any portion of the Additional Prepayments is remitted to Kosmos
GOM, the total volume of crude oil that Kosmos GOM will sell to
Trafigura shall be recalculated in accordance with Volume Model.
Kosmos GOM will sell and deliver crude oil to Trafigura each month
for no more than 60 months following the funding of the Initial
Prepayment, such final delivery date being the “Final Delivery
Date.”
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· |
Crude Oil Volumes: Based upon
the price per barrel of crude as of June 26, 2020, the volume of
crude oil that would be deliverable to Trafigura for the Initial
Prepayment of $50 million is estimated at two (2) million
barrels, largely produced in 2022 and 2023; provided, however, that
in the event that, prior to the Final Delivery Date, the market
value of the crude oil volumes delivered in consideration for the
Initial Prepayment (the “Delivered Value”) is equal to $57.5
million, the obligations of Kosmos GOM will be considered fully
satisfied and no additional volumes will be required to be
delivered to Trafigura with respect to the amount of the Initial
Prepayment. |
Further, if Kosmos GOM elects to receive any portion of the
Additional Prepayments, then the total volume of crude oil to be
sold shall be recalculated by the Volume Model using the amount of
Additional Prepayments remitted, plus any remaining volumes to be
delivered with respect to the Initial Prepayment. If Additional
Prepayments are made, then maximum valuation thresholds will be
calculated for such Additional Prepayments. Upon Trafigura
receiving the Delivered Value in the amount of such thresholds,
then the obligations of Kosmos GOM will be considered fully
satisfied with respect to the amount of such Additional
Prepayments, and no additional volumes will be required to be
delivered to Trafigura.
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· |
Marketing Agreements:
Additionally, Kosmos Energy has agreed to enter into two crude oil
marketing agreements with Trafigura: the first to commence in the
fourth quarter of 2020 and effective for an initial term of
thirty-three (33) months, and the second commencing in the first
quarter of 2021 and effective for an initial term of eighteen (18)
months, in each case, subject to certain considerations that may
either reduce or extend such initial terms. The marketing
agreements shall provide that Trafigura will market certain of
Kosmos Energy’s entitlements in its offshore Ghana producing
assets. |
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· |
Certain Liquidity Ratios:
During the term of the Prepayment Agreement, Kosmos Energy will be
required to maintain certain ongoing ratios, including, but
limited to, maintenance of (a) a liquidity ratio calculated as the
ratio of (1) the sum of (A) projected revenues of Kosmos Energy
from the sale of hydrocarbons over the four quarters beginning on
or after the calculation date, (B) the expected income from hedges
then in effect (but not less than zero), (C) its cash balance as of
the calculation date, and (D) the amount of the Prepayments
available under the Prepayment Agreement and any other committed
sources of capital of Kosmos Energy, to (2) the sum of all forecast
cash costs of Kosmos Energy over the four quarters beginning on or
after the calculation date (subject to a minimum threshold of 1.20
to 1.00) (the “Guarantor Liquidity Ratio”), and (b) a
liquidity ratio calculated as the ratio of (1) net cash flow of
Kosmos GOM over the immediately succeeding six (6) months from the
sale of the volumes of crude oil using certain agreed pricing
metrics and models set forth in the Prepayment Agreement, to (2)
the portion of the Prepaid Value to be delivered to Trafigura as
determined by the Volume Model for the same six (6) month period
(subject to a minimum threshold of 1.50 to 1.00) (the “GoM
Liquidity Ratio”). The Guarantor Liquidity Ratio shall be
tested as of the last day of each calendar quarter and the GoM
Liquidity Ratio shall be tested as of the date of the Prepayment
Agreement, the First Additional Prepayment, the Second Additional
Prepayment, the last day of each calendar quarter and upon the
incurrence of any debt obligations by Kosmos GOM. |
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Security Interest and
Guarantees: As a condition to Trafigura’s obligations,
Kosmos GOM will grant a mortgage interest in certain specified
production fields located in the Gulf of Mexico, and Kosmos Energy
has executed a performance guarantee to guarantee the crude oil
delivery obligations of Kosmos GOM under the Prepayment Agreement
and certain ancillary transaction documents entered into pursuant
to the Prepayment Agreement. Trafigura Group PTE. Ltd., a parent
company of Trafigura, has also executed an On-Demand Guarantee for
the benefit of Kosmos GOM to guarantee the obligations of Trafigura
under the Prepayment Agreement and certain ancillary transaction
documents entered pursuant to the Prepayment Agreement. |
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· |
Delivery Prior to Final Delivery
Date: Kosmos GOM will be required to deliver all of the
production prior to the Final Delivery Date upon the occurrence of
any of the following: (1) a change of control of Kosmos Energy or
Kosmos GOM, (2) the unenforceability or invalidity of the
underlying crude oil sales contracts or the Prepayment Agreement,
or (3) imposition of sanctions against Kosmos Energy or Kosmos GOM.
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The foregoing description of the Prepayment Agreement is not
complete and is qualified in its entirety by reference to the text
of the Prepayment Agreement, a copy of which will be filed as an
exhibit to Kosmos Energy’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2020.
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
The information set forth in Item 1.01 of this Form 8-K is
incorporated by reference to this Item 2.03.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
Date: July 2, 2020
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KOSMOS ENERGY
LTD. |
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By: |
/s/ Jason E. Doughty |
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Jason E. Doughty |
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Senior Vice President, General
Counsel and Corporate Secretary |
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