Kosmos Energy entered Equatorial Guinea with a splash by acquiring Hess' 85% stake in two long-producting oil fields for US$650 million, as well as signing production sharing contracts (PSCs) for three other blocks in the Rio Muni basin, the country's Ministry of Mines and Hydrocarbons confirmed today (23 October).
Hess’ exit from Equatorial Guinea comes after nearly two decades of operations at the Ceiba field and Okume complex, in the Rio Muni basin, which began producing in 2000 and 2006, respectively. Hess' partners in the fields, Tullow Oil (15%) and national oil company GEPetrol (5%, carried interest), will remain. The sale is expected to close by year's end.
During the first half of 2017, Hess said that net production from the its assets in Equatorial Guinea averaged 28,000 bo/d. Hess celebrated 200 MMbbl of oil last year at Okume, located in about 1600ft of water and about 150mi south of Bioko Island in the Gulf of Guinea. The Okume Complex consists of the Elon, Okume, Oveng and Ebano reservoirs. Hess said at the time that it had drilled 48 producing wells and completed three distinct seismic campaigns since production began in December 2006.
CEO John Hess said that the sale is part of the company's strategy to refocus its portfolio. Hess said the company has been investing in higher return assets and divesting, "more mature, higher cost assets."
"Proceeds from asset sales, along with cash on our balance sheet, are expected to fund the development of our truly world class investment opportunity offshore Guyana," John Hess said in a statement.
In addition to picking up Hess' assets in Equatorial Guinea, Kosmos signed three PSCs – the company's first within the country – with the Ministry of Mines and Hydrocarbons and GEPetrol for Block EG-21, Block S and Block W, offshore Rio Muni.
Block EG-21, which spans 2495sq km, was offered for tender during the EG Ronda 2016 oil and gas licensing round. Block S (covering 1245sq km) and Block W (covering 2254sq km) were previously operated by CNOOC and PanAtlantic Energy, respectively, and were negotiated directly with Kosmos. Kosmos will hold 80% stake in all blocks, and GEPetrol will control the remaining 20%.
“We thank Hess for its years of service, for its input of technology, knowledge and financing, and above all for its careful stewardship of these important national resources,” said Minister of Mines and Hydrocarbons H.E. Gabriel Mbaga Obiang Lima. “Now, Kosmos Energy brings a new sense of action and commitment to the Ceiba and Okume fields. We are delighted to welcome our new partners as investors and producers, as well as explorers in blocks S, W and EG-21 in the same region. This deal is nothing less than historic, and shifts focus towards the hugely promising Rio Muni basin.”
The PSCs are based on Equatorial Guinea’s model, and stipulate minimum work programs that comprise a first exploratory period of three years, which include acquiring seismic data; a second exploratory period of two years, which includes drilling an exploratory well; and the possibility of two one-year extensions, which include requirements to conduct seismic interpretation and drill another exploration well, respectively, the Ministry said.
According to the Ministry, the purchase of Hess’ assets combined with the new licenses make Kosmos the biggest petroleum explorer by acreage and the sole producer in Equatorial Guinea’s Rio Muni southern maritime area.
The report of the sale between Hess and Kosmos came after the news that Hess (along with its partners) and the ministry reached a $220 million settlement on tax issues related to the companies' interests in the Ceiba and Okume oil fields. The settlement cleared a path toward today's sell to Kosmos.
Photo from Hess.
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