Kosmos Energy to farm down offshore African exploration assets to Shell

Kosmos Energy has signed a deal worth up to $200 million with Dordtsche Petroleum Maatschappij (Shell), a fully-owned subsidiary of Royal Dutch Shell, to farm down interests in a portfolio of frontier exploration assets in Africa.

The consideration for the US oil and gas company is made up of an upfront payment of nearly $100 million and future contingent payments of up to $100 million.

As per the agreement terms, Shell will acquire the participating interest of  Kosmos Energy in blocks offshore São Tomé & Príncipe, Namibia, Suriname, and South Africa.

The US oil and gas company’s contingent payments of $50 million will be payable upon each commercial discovery made via the drilling of the first four exploration wells across the assets. The contingent payments are capped at $100 million in aggregate.

According to Kosmos Energy, three of the four exploration wells in the assets are currently planned for next year.

The US oil and gas company said that it intends to use up to a third of the initial proceeds to evaluate a couple of high-quality infrastructure-led exploration prospects in the Gulf of Mexico. Each of the prospects is said to have hub scale potential with a low-cost, lower-carbon development scheme, said Kosmos Energy.

The remainder of the proceeds will be used by Kosmos Energy for reducing outstanding debt under its credit facilities.

Andrew G. Inglis – Kosmos Energy chairman and CEO 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.”

Upon closing of the deal, Kosmos Energy will retain a focused exploration portfolio with more than six billion barrels of gross resource potential in the Gulf of Mexico and West Africa.

The closing of the deal, which is subject to receipt of government approvals and meeting of customary conditions, is likely to occur in Q4 2020.