(Alliance News) - Kosmos Energy Ltd on Wednesday said that it has entered an agreement with a unit of Royal Dutch Shell PLC to farm down a portfolio of exploration assets for up to USD200 million.
Shell's unit BV Dordtsche Petroleum Maatschappij will acquire Kosmos's participating interest in blocks offshore Sao Tome & Principe, Suriname, Namibia and South Africa.
The consideration consists of an upfront cash payment of USD100 million, plus contingent payments of USD50 million payable upon each commercial discovery from the first four exploration wells drilled across the assets, capped at USD100 million in total. Three of the four wells are currently planned for 2021.
Kosmos said it plans to use up to one-third of the initial proceeds to test two high-quality infrastructure-led exploration prospects in the US Gulf of Mexico, each offering hub scale potential with a low-cost, lower-carbon development scheme. The remainder of the proceeds will be used by the company to reduce borrowings.
Following completion of the farm out agreement, Kosmos will retain an exploration portfolio with over six billion barrels of gross resource potential in the US Gulf of Mexico and west Africa. Kosmos also expects to realise USD125 million in savings over the next two years as a result of the Shell deal.
The farm-out agreement is expected to close in the final quarter of 2020.
Shares in Kosmos were up 5.0% at 93.70 pence each in London on Wednesday morning. Class A shares of Shell were up 2.0% at 1,086.80p, while class B were up 1.9% at 1,043.20p.
By Tapan Panchal; tapanpanchal@alliancenews.com
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