Assets Acquired at Compelling Valuation With a
Significant Enhancement to the Five-year Plan
Kosmos Energy (NYSE/LSE: KOS) (“Kosmos” or the “Company”)
announced today that it has acquired an additional 18.0% interest
in the Jubilee field and an additional 11.0% interest in the TEN
fields in Ghana from Occidental Petroleum (“OXY”) for a purchase
price of $550 million with an effective date of April 1, 2021.
Consideration due to OXY at completion was approximately $460
million after taking into account closing adjustments.
Key Highlights
- Accelerates Kosmos’ strategic delivery
- Delivers near-term cash generation from high-margin oil with
the acquired assets expected to generate ~$1 billion of free cash
flow by year-end 2026 at $65/barrel Brent
- Underpins transition to balanced oil and gas portfolio
- Acquiring assets at a compelling valuation
- 2P reserves expected to deliver ~3x purchase price at
$65/barrel Brent
- Simplified partnership with the aligned objective to maximize
the value of the assets
- Limited integration risk or incremental G&A costs
- Highly accretive across all key metrics
- Attractive acquisition price drives significant net asset value
accretion
- Cash consideration equivalent to ~1.4x 2022E EBITDAX of the
assets being acquired at $65/barrel Brent
- Expected payback of less than 3 years at $65/barrel Brent
- Resilient at lower oil prices with all key metrics accretive at
$45/barrel Brent
- Enhances free cash flow and accelerates de-leveraging
- Significant free cash flow generation expected to accelerate
de-leveraging (targeting less than 2.0x net debt/EBITDAX by
year-end 2022 at $65/barrel Brent) and fund remaining Tortue
capital expenditure to first gas
- Supports Kosmos’ ESG agenda
- Growing investment in Africa aligned with Kosmos’ objective to
support the “Just Transition” and deliver tangible economic and
social benefits in Ghana
- Partnership working to drive down CO2 emissions and enabling
development of gas resources to provide lower cost, lower carbon
power
Andrew G. Inglis, Chairman and Chief Executive Officer of Kosmos
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.
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.
Financially, 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.”
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 billion1. 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
offtake.
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.
Conference Call and Webcast Information
Kosmos will host a conference call and webcast to discuss
today’s announcement on October 14, 2021 at 9:00 a.m. Central time
(10:00 a.m. Eastern time). The live webcast of the event can be
accessed on the Investors page of Kosmos’ website at
http://investors.kosmosenergy.com/investor-events. The dial-in
telephone number for the call is +1-877-407-0784. Callers in the
United Kingdom should call 0 800 756 3429. Callers outside the
United States should dial +1-201-689-8560. A slide presentation to
accompany the webcast will be available on the company website
shortly.
About Kosmos Energy
Kosmos is a full-cycle deepwater independent oil and gas
exploration and production company focused along the Atlantic
Margins. Our key assets include production offshore Ghana,
Equatorial Guinea and U.S. Gulf of Mexico, as well as a world-class
gas development offshore Mauritania and Senegal. Kosmos is listed
on the New York Stock Exchange and London Stock Exchange and is
traded under the ticker symbol KOS. As an ethical and transparent
company, Kosmos is committed to doing things the right way. The
Company’s Business Principles articulate our commitment to
transparency, ethics, human rights, safety and the environment.
Read more about this commitment in our Corporate Responsibility
Report. For additional information, visit www.kosmosenergy.com.
Non-GAAP Financial Measures
EBITDAX, free cash flow and net debt are supplemental non-GAAP
financial measures used by management and external users of the
Company's consolidated financial statements, such as industry
analysts, investors, lenders and rating agencies. The Company
defines EBITDAX as Net income (loss) plus (i) exploration expense,
(ii) depletion, depreciation and amortization expense, (iii) equity
based compensation expense, (iv) unrealized (gain) loss on
commodity derivatives (realized losses are deducted and realized
gains are added back), (v) (gain) loss on sale of oil and gas
properties, (vi) interest (income) expense, (vii) income taxes,
(viii) loss on extinguishment of debt, (ix) doubtful accounts
expense and (x) similar other material items which management
believes affect the comparability of operating results. The Company
defines free cash flow as net cash provided by operating activities
less oil and gas assets, Other property, and certain other items
that may affect the comparability of results. The Company defines
net debt as the sum of notes outstanding issued at par and
borrowings on the RBL Facility, Corporate revolver, and GoM Term
Loan less cash and cash equivalents and restricted cash.
We believe that EBITDAX, free cash flow, Net debt and other
similar measures are useful to investors because they are
frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in the oil and
gas sector and will provide investors with a useful tool for
assessing the comparability between periods, among securities
analysts, as well as company by company. EBITDAX, free cash flow,
and net debt as presented by us may not be comparable to similarly
titled measures of other companies.
This release also contains certain forward looking non GAAP
financial measures, including free cash flow. Due to the forward
looking nature of the aforementioned non GAAP financial measures,
management cannot reliably or reasonably predict certain of the
necessary components of the most directly comparable forward
looking GAAP measures, such as future impairments and future
changes in working capital. Accordingly, we are unable to present a
quantitative reconciliation of such forward looking non GAAP
financial measures to their most directly comparable forward
looking GAAP financial measures. Amounts excluded from these non
GAAP measures in future periods could be significant.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that Kosmos
expects, believes or anticipates will or may occur in the future
are forward-looking statements. Kosmos’ estimates and
forward-looking statements are mainly based on its current
expectations and estimates of future events and trends, which
affect or may affect its businesses and operations. Although Kosmos
believes that these estimates and forward-looking statements are
based upon reasonable assumptions, they are subject to several
risks and uncertainties and are made in light of information
currently available to Kosmos. When used in this press release, the
words “anticipate,” “believe,” “intend,” “expect,” “plan,” “will”
or other similar words are intended to identify forward-looking
statements. Such statements are subject to a number of assumptions,
risks and uncertainties, many of which are beyond the control of
Kosmos, which may cause actual results to differ materially from
those implied or expressed by the forward-looking statements.
Further information on such assumptions, risks and uncertainties is
available in Kosmos’ Securities and Exchange Commission (“SEC”)
filings. Kosmos undertakes no obligation and does not intend to
update or correct these forward-looking statements to reflect
events or circumstances occurring after the date of this press
release, except as required by applicable law. You are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date of this press release. All
forward-looking statements are qualified in their entirety by this
cautionary statement.
Management does not provide a reconciliation for forward looking
non GAAP financial measures where it is unable to provide a
meaningful or accurate calculation or estimation of reconciling
items and the information is not available without unreasonable
effort. This is due to the inherent difficulty of forecasting the
occurrence and the financial impact of various items that have not
yet occurred, are out of our control or cannot be reasonably
predicted. For the same reasons, management is unable to address
the probable significance of the unavailable information. Forward
looking non GAAP financial measures provided without the most
directly comparable GAAP financial measures may vary materially
from the corresponding GAAP financial measures.
1 Based on independent reserves auditor at YE20 post tax. Brent
Oil price deck: $65.00 flat
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211013006145/en/
Investor Relations Jamie Buckland +44 (0) 203 954 2831
jbuckland@kosmosenergy.com
Media Relations Thomas Golembeski +1-214-445-9674
tgolembeski@kosmosenergy.com
Kosmos Energy (NYSE:KOS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Kosmos Energy (NYSE:KOS)
Historical Stock Chart
From Apr 2023 to Apr 2024