Kosmos Energy Acquires Additional Ghana Interests for $550 Million
Kosmos Energy has acquired an additional 18.0% interest in the Jubilee field and 11.0% interest in the TEN fields in Ghana from Occidental Petroleum for $550 million. The assets are expected to generate approximately $1 billion in free cash flow by the end of 2026 at $65/barrel Brent. This acquisition simplifies Kosmos' partnerships in these fields and is highly accretive, with a projected payback of less than three years. The transaction supports Kosmos' ESG goals and aims to deleverage the balance sheet.
- Acquisition expected to generate ~$1 billion in free cash flow by 2026 at $65/barrel Brent.
- Significant net asset value accretion with estimated 2P reserves delivering ~3x purchase price.
- Projected payback period of less than 3 years at $65/barrel Brent.
- Simplified partnership structure to maximize asset value.
- Expected to accelerate de-leveraging to less than 2.0x net debt/EBITDAX by year-end 2022.
- Transaction subject to a 30-day pre-emption period that could reduce acquired interests.
- Dependence on Brent prices; lower prices could impact profitability.
Assets Acquired at Compelling Valuation With a Significant Enhancement to the Five-year Plan
Key Highlights
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Accelerates Kosmos’ strategic delivery
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Delivers near-term cash generation from high-margin oil with the acquired assets expected to generate
~ of free cash flow by year-end 2026 at$1 billion /barrel Brent$65 - Underpins transition to balanced oil and gas portfolio
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Delivers near-term cash generation from high-margin oil with the acquired assets expected to generate
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Acquiring assets at a compelling valuation
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2P reserves expected to deliver ~3x purchase price at
/barrel Brent$65 - Simplified partnership with the aligned objective to maximize the value of the assets
- Limited integration risk or incremental G&A costs
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2P reserves expected to deliver ~3x purchase price at
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Highly accretive across all key metrics
- Attractive acquisition price drives significant net asset value accretion
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Cash consideration equivalent to ~1.4x 2022E EBITDAX of the assets being acquired at
/barrel Brent$65 -
Expected payback of less than 3 years at
/barrel Brent$65 -
Resilient at lower oil prices with all key metrics accretive at
/barrel Brent$45
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Enhances free cash flow and accelerates de-leveraging
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Significant free cash flow generation expected to accelerate de-leveraging (targeting less than 2.0x net debt/EBITDAX by year-end 2022 at
/barrel Brent) and fund remaining Tortue capital expenditure to first gas$65
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Significant free cash flow generation expected to accelerate de-leveraging (targeting less than 2.0x net debt/EBITDAX by year-end 2022 at
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Supports Kosmos’ ESG agenda
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Growing investment in
Africa aligned with Kosmos’ objective to support the “Just Transition” and deliver tangible economic and social benefits inGhana - Partnership working to drive down CO2 emissions and enabling development of gas resources to provide lower cost, lower carbon power
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Growing investment in
We expect the additional
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
Using Kosmos’ year-end 2020 reserves report, prepared by independent reserve auditor
Kosmos has worked closely with the operator and joint venture partners in 2021 to drive higher reliability and improve operational performance in
Transaction Financing
The transaction has an effective date of
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
Barclays is acting as financial adviser to Kosmos on the transaction with
Conference Call and Webcast Information
Kosmos will host a conference call and webcast to discuss today’s announcement on
About
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
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’
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:
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