London-listed oil and gas company Kosmos Energy has partially completed the previously announced sale of its frontier offshore oil and gas exploration assets to Shell, with the South Africa transaction expected to complete in 2021.
Under the agreement first announced in September, Shell agreed to buy Kosmos' interests in Suriname, Sao Tome & Principe and Namibia and South Africa.
Shell agreed to acquire Kosmos' 45% interest in PEL0039 block offshore Nambia; 45% interest in Block NCUD in South Africa; 33,33% in Block 42 in Suriname. In São Tomé & Príncipe Shell agreed to acquire Kosmos' shares in the following blocks: Block 6 / 25%; Block 11 / 35%; Blocks 10 & 13 / 35%.
Kosmos said Thursday it had completed the sale of Suriname, Sao Tome & Principe, and Namibia stakes to Shell for approximately $95 million, plus future contingent payments of up to $100 million. The transfer of interests in South Africa is expected to take place in 2021.
The agreement includes contingent payments of $50 million payable upon each commercial discovery from the first four exploration wells drilled across the asset portfolio, capped at $100 million in aggregate. When the deal was first announced in September, three of the four wells were planned for 2021. It's not clear if this schedule is still on.
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 will use up to one-third of the initial proceeds for what it said were 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," Kosmos said.