Royal Dutch Shell PLC will soon own a stake in Suriname’s oil exploration joint venture after securing a deal with Kosmos Energy to acquire its diverse portfolio of oil and gas exploration assets.
Last Wednesday, September 9, 2020, Kosmos Energy entered into an agreement with BV Dordtsche Petroleum Maatschappij (“Shell”), a wholly-owned subsidiary Shell, to sell its participating interest in blocks offshore Sao Tome & Principe, Namibia, South Africa, and Suriname.
As part of the deal, BV Dordtshce will offer a consideration of approximately US$100 million in cash payments to Kosmos Energy, plus US$50 million for each commercial discovery that it makes in wells it has secured from Kosmos Energy
Looking ahead, Kosmos Energy will use one-third of the proceeds from the sale to fund testing of high-quality exploration prospects closer to its Dallas, Texas headquarters — in the Gulf of Mexico. At the same time, the company will use the rest of the money to reduce debt from its existing credit facilities.
“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,” Kosmos Energy Chairman and Chief Executive Officer Andrew G Inglis explained.
“The contingent payments locked into the agreement with Shell ensure we retain upside from frontier exploration with no further investment,” he added.
Notwithstanding the earnings from the sale of its portfolios, Kosmos Energy’s exit from exploration in Suriname, Sao Tome, Namibia, and South Africa will result in US$125 million in savings from planned capital expenditure as well as general and administrative expenses.
Moreover, the company will shift its focus to active resources in the Gulf of Mexico, Ghana, and Equatorial Guinea.
Both parties expect to complete the transaction before the close of the calendar year, after receiving government approvals.