Kosmos Energy has entered into an agreement with B.V. Dordtsche Petroleum Maatschappij (\u201cShell\u201d), a wholly-owned subsidiary of Royal Dutch Shell PLC, to farm down interests in a portfolio of frontier exploration assets for approximately $100 million, plus future contingent payments of up to $100 million.<\/p>\n
Under the terms of the agreement,\u00a0Shell\u00a0will acquire Kosmos\u2019 participating interest in blocks offshore S\u00e3o Tom\u00e9 & Pr\u00edncipe, Suriname,\u00a0Namibia, and\u00a0South Africa\u00a0(the \u201cAssets\u201d). The consideration consists of an upfront cash payment of approximately\u00a0$100 million, plus contingent payments of\u00a0$50 million\u00a0payable upon each commercial discovery from the first four exploration wells drilled across the Assets, capped at\u00a0$100 million\u00a0in aggregate. Three of the four wells are currently planned for 2021.<\/p>\n
Kosmos plans to use up to one-third of the initial proceeds to test two high-quality infrastructure-led exploration prospects in the\u00a0Gulf of Mexico, each offering hub scale potential with a low-cost, lower-carbon development scheme. The company expects to use the remainder of the proceeds to reduce borrowings outstanding under its credit facilities.<\/p>\n
Andrew G. Inglis, Kosmos Energy\u2019s chairman and chief executive officer said: \u201cWith 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\u00a0Shell\u00a0ensure we retain upside from frontier exploration with no further investment.\u201d<\/p>\n
Post completion of the transaction, Kosmos retains a focused exploration portfolio with over six billion barrels of gross resource potential in the\u00a0Gulf of Mexico\u00a0and\u00a0West Africa. Kosmos also expects to realize approximately\u00a0$125 million\u00a0in total savings across capital expenditures and general and administrative expenses over the next two years as a result of the transaction.<\/p>\n
Closing of the transaction is expected in the fourth quarter of 2020 with an effective date of\u00a0September 1, 2020\u00a0and is subject to customary conditions including government approvals.<\/p>\n","protected":false},"excerpt":{"rendered":"