Kosmos closes farm down of exploration assets to Shell

Kosmos Energy has closed the previously announced transaction with Shell to farm down interests in Suriname, Sao Tome & Principe, and Namibia for approximately $95 million, plus future contingent payments of up to $100 million.

The two companies entered into the agreement to farm down interests in Kosmos’ portfolio of frontier exploration assets in September 2020.

Kosmos held stakes in six blocks offshore São Tomé & Príncipe – Blocks 5, 6, 10, 11, 12, and 13. Shell was already its partner in Blocks 6 and 11.

The company also held stakes in Block 42 and 45 in Suriname and one in Namibia (PEL 039) and one in South Africa (Northern Cape Ultra-Deep Block). In the latter two, Shell is the operator of the block with a 45 per cent stake.

In an update on Thursday Kosmos said that the transfer of interests in South Africa is expected to take place in 2021.

Andrew G. Inglis, Kosmos Energy’s chairman and chief executive officer said: “We are pleased to complete this transaction with Shell on schedule. The proceeds enable Kosmos to strengthen the balance sheet while accelerating high graded exploration opportunities in proven basins.

“The contingent payments locked into the agreement with Shell ensure we retain upside from frontier exploration with no further investment”.

Kosmos said it has allocated up to one-third of the initial proceeds for two high-quality infrastructure-led exploration prospects in the Gulf of Mexico, each offering hub scale potential with a low-cost, lower-carbon development scheme.

The first test on the Winterfell prospect is currently drilling with results expected early next year. The company expects to use the remainder of the proceeds to reduce borrowings outstanding under its credit facilities.

Post completion of the transaction, Kosmos retains a focused exploration portfolio with over six billion barrels of gross resource potential in proven basins in West Africa and the Gulf of Mexico.