Kosmos To Buy Rival, Despite Deeper Loss
US independent Kosmos Energy has agreed to buy smaller US producer Deep Gulf Energy, whilst acknowledging it went much deeper into the red in the second quarter.
Kosmos said August 6 it is to acquire the US Gulf producer, adding it expects this will generate significant free cash flow, enabling it to pay a dividend to shareholders starting 1Q2019. It is buying the company from US-based private equity firm First Reserve and other shareholders for a total of $1.225 billion, subject to certain adjustments.
The deal will add some 25,000 barrels of oil equivalent per day (of which 85% oil), increasing Kosmos’ 2018 pro forma production by 50% to 70,000 boe/d, and will add some 80mn boe of 2P reserves, thus increasing Kosmos’ to some 280mn boe.
In its latest results also August 6, Kosmos made a net loss of $103.3mn in 2Q2018, twelve times more than its $8.5mn loss in 2Q2017, at a time when most producers reaped profits from higher oil prices. Cash settlements of commodity derivatives accounted for $37.5mn of the 2Q2018 loss, while unsuccessful exploration wells offshore Suriname (targeting oil) represented a further $44.6mn.
CEO Andrew Inglis emphasised the positive: "The business continued to perform well during the second quarter with strong production from our high-margin production assets in Ghana and Equatorial Guinea.” It produces mainly oil but also some gas offshore West Africa, including from stakes in the Tullow-operated Jubilee and TEN fields offshore Ghana. Other parts of the business continued to make progress against key objectives, the CEO said.
The [now BP-operated] Tortue floating LNG project offshore Mauritania and Senegal is moving forward with front end engineering design (Feed) for phase 1 of the project progressing on schedule, that gas marketing operations from “a range of potential buyers” were being evaluated, and that partners expect to make a final investment decision (FID) around end-2018, aiming for first gas in late 2021, he added.
BP CEO Bob Dudley also said last week that an FID on Tortue phase 1 is expected in 4Q2018.