Kosmos Energy Sells Frontier Exploration Assets in $200 Million Farm-down to Shell

Kosmos Energy Ltd. on Sept. 9 agreed to sell select frontier exploration assets in a farm-down worth up to $200 million as the Dallas-based company continues to focus on proven basins with superior returns and shorter payback.

In a company release, Kosmos said it entered an agreement with a subsidiary of Royal Dutch Shell Plc to farm down interests in its portfolio of frontier exploration assets. The consideration consists of an upfront cash payment of approximately $100 million, plus future contingent payments of up to $100 million.

Under the terms of the agreement, Shell will acquire Kosmos’ participating interest in blocks offshore São Tomé & Príncipe, Suriname, Namibia and South Africa. Kosmos expects to realize approximately $125 million in total savings across capex and general and administrative expenses over the next two years as a result of the transaction, according to the company release.

“The contingent payments locked into the agreement with Shell ensure we retain upside from frontier exploration with no further investment,” Andrew G. Inglis, Kosmos Energy’s chairman and CEO, added in a statement.

Kosmos, a full-cycle deepwater independent E&P company focused along the Atlantic Margins, is listed on the New York and London stock exchanges. The company’s key assets include production offshore Ghana, Equatorial Guinea and U.S. Gulf of Mexico (GoM), as well as a gas development offshore Mauritania and Senegal.

The proceeds from the farm-down enable Kosmos to accelerate high-graded exploration opportunities, according to Inglis.

Post completion of the farm-down transaction, Kosmos will retain a focused exploration portfolio with over six billion barrels of gross resource potential in the GoM and West Africa.

“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,” he said.

Kosmos expects to close the transaction in fourth-quarter 2020. The sale will have an effective date of Sept. 1 and is subject to customary conditions including government approvals.

The transaction’s contingent payments are comprised of $50 million payable upon each commercial discovery from the first four exploration wells drilled across the assets, capped at $100 million in aggregate. Three of the four wells are currently planned for 2021.