Kosmos Energy (NYSE/LSE: KOS) announced today that the company
has entered into an agreement to acquire Deep Gulf Energy (“DGE”)1,
a leading deepwater company operating in the Gulf of Mexico, from
First Reserve and other shareholders for a total consideration of
$1.225 billion, subject to certain adjustments. By acquiring DGE,
Kosmos adds to its deepwater Atlantic Margin portfolio an
established business with attractive assets and a strong record of
growing production and reserves through infrastructure-led
exploration. This immediately accretive acquisition enhances the
scale of the company and is expected to generate significant free
cash flow, enabling Kosmos to return cash to shareholders through a
dividend, beginning in the first quarter of 2019.
Transaction Highlights
- Immediately accretive:
- Acquisition EV / 2018 estimated
EBITDAX: 3.4x vs. Kosmos at 6.4x2
- Acquisition EV / 2018 estimated 2P
reserves: approximately $15 per barrel of oil equivalent (boe) vs.
Kosmos at approximately $21 per boe
- Adds approximately 25,000 barrels of
oil equivalent per day (boed) production (~85% oil), with an
estimated reserves to production ratio of 8.8, growing 2018 pro
forma production by 50% from approximately 45,000 to 70,000
boed
- Adds estimated 2P reserves of
approximately 80 million barrels of oil equivalent3 (MMboe),
increasing total 2P reserves by 40% from over 200 MMboe to
approximately 280 MMboe
- Adds experienced deepwater Gulf of
Mexico management team with track record of delivering short-cycle,
high-margin production
- Attractive acquisition with NPV-10
breakeven of approximately $48.00 per barrel WTI
- Low asset retirement obligation of
approximately $100 million undiscounted
- Enables commencement of dividend
payment in the first quarter of 2019, underpinned by expected
production growth and sustainable free cash flow
Andrew G. Inglis, chairman and chief executive officer, said:
“With this acquisition, Kosmos continues to grow into a larger,
more balanced exploration and production company, with increasingly
diversified production, a pipeline of world-class development
projects, and a portfolio of short- and longer-cycle exploration
opportunities. Over the last four years, Kosmos has doubled
production, and this acquisition creates the platform to double
production again in the next four years. With many competitors
leaving the Gulf of Mexico to chase onshore shale plays, a huge
opportunity has opened in the basin. The best deepwater assets can
compete with the best of shale, and now is a good time to enter the
Gulf of Mexico. This highly complementary transaction is
immediately accretive – delivering sustainable production and free
cash flow growth, and enabling dividend payments to begin in the
first quarter of 2019.”
Transaction Details
Under the terms of the transaction, Kosmos will acquire DGE for
total consideration of $1.225 billion, comprised of $925 million in
cash and $300 million in Kosmos common shares issued to First
Reserve, management, and other DGE shareholders. Kosmos intends to
fund the cash portion of the purchase price with borrowings under
its existing credit facilities. In connection with the transaction,
Kosmos has received $200 million of additional firm commitments to
increase its reserves-based loan facility capacity.
The acquisition is expected to close around the end of the third
quarter 2018, subject to receipt of regulatory approval and the
satisfaction of customary closing conditions.
Evercore Inc. and Goldman Sachs & Co. LLC acted as financial
advisors to Kosmos.
Conference Call & Webcast Information
Kosmos will discuss the acquisition on the Company’s second
quarter 2018 earnings conference call on Monday, August 6, 2018 at
10:00 a.m. CDT.
Dial-in telephone numbers:U.S. / Canada:
+1.877.407.3982International: +1.201.493.6780Webcast:
investors.kosmosenergy.com
A slide presentation will be made available on the Investors
page of Kosmos’ website at www.kosmosenergy.com immediately after
this news release is issued. A replay of the webcast will be
available on the website for approximately 90 days following the
event.
Note:
- Includes Deep Gulf Energy LP, Deep Gulf
Energy II, LLC and Deep Gulf Energy III, LLC (collectively
“DGE”)
- Acquisition EBITDAX based on Kosmos’s
internal estimates which assume pricing based on the July 26, 2018
NYMEX WTI strip of $67.32 per barrel in 2018. Kosmos enterprise
value calculated using Kosmos’s July 30, 2018 closing price and
second quarter 2018 net debt. Kosmos EV / EBITDAX multiple
calculated using Bloomberg consensus EBITDAX.
- Estimated 2P reserves as of June 30,
2018
About Kosmos Energy
Kosmos is a well-capitalized, pure play deepwater oil and gas
company with growing production, a pipeline of development
opportunities and a balanced exploration portfolio along the
Atlantic Margins. Our assets include growing production offshore
Ghana and Equatorial Guinea, a competitively positioned Tortue gas
project in Mauritania and Senegal, and a sustainable exploration
program balanced between proven basins (Equatorial Guinea),
emerging basins (Mauritania, Senegal and Suriname) and frontier
basins (Cote d'Ivoire and Sao Tome and Principe). As an ethical and
transparent company, Kosmos is committed to doing things the right
way. The company’s Business Principles articulate our commitment to
transparency, ethics, human rights, safety and the environment.
Read more about this commitment in the Kosmos 2017 Corporate
Responsibility Report. For additional information, visit
www.kosmosenergy.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All
statements, other than statements of historical facts, included in
this press release that address activities, events or developments
that Kosmos expects, believes or anticipates will or may occur in
the future are forward-looking statements. Kosmos’ estimates
and forward-looking statements are mainly based on its current
expectations and estimates of future events and trends, which
affect or may affect its businesses and operations. Although Kosmos
believes that these estimates and forward-looking statements are
based upon reasonable assumptions, they are subject to several
risks and uncertainties and are made in light of information
currently available to Kosmos. When used in this press release, the
words “anticipate,” “believe,” “intend,” “expect,” “plan,” “will”
or other similar words are intended to identify forward-looking
statements. Such statements are subject to a number of assumptions,
risks and uncertainties, many of which are beyond the control of
Kosmos, which may cause actual results to differ materially from
those implied or expressed by the forward-looking statements.
Further information on such assumptions, risks and uncertainties is
available in Kosmos’ Securities and Exchange Commission (“SEC”)
filings. Kosmos undertakes no obligation and does not intend to
update or correct these forward-looking statements to reflect
events or circumstances occurring after the date of this press
release, except as required by applicable law. You are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date of this press release. All
forward-looking statements are qualified in their entirety by this
cautionary statement.
Inside Information
This announcement contains inside information. The person
responsible for arranging the release of this announcement is Jamie
Buckland, Vice President, Investor Relations and Rhys Williams,
Senior Manager, Investor Relations.
Non-GAAP Financial Measures
EBITDAX, Adjusted net income (loss) and Adjusted net income
(loss) per share are supplemental non-GAAP financial measures used
by management and external users of the Company's consolidated
financial statements, such as industry analysts, investors, lenders
and rating agencies. The Company defines EBITDAX as net income
(loss) plus (i) exploration expense, (ii) depletion,
depreciation and amortization expense, (iii) equity-based
compensation expense, (iv) unrealized (gain) loss on commodity
derivatives (realized losses are deducted and realized gains are
added back), (v) (gain) loss on sale of oil and gas
properties, (vi) interest (income) expense, (vii) income
taxes, (viii) loss on extinguishment of debt,
(ix) doubtful accounts expense and (x) similar other
material items which management believes affect the comparability
of operating results. The Facility EBITDAX definition includes 50%
of the EBITDAX adjustments of Kosmos-Trident International
Petroleum Inc. The Company defines adjusted net income (loss) as
net income (loss) after adjusting for the impact of certain
non-cash and non-recurring items, including non-cash changes in the
fair value of derivative instruments, cash settlements on commodity
derivatives, gain on sale of assets, and other similar non-cash and
non-recurring charges, and then the non-cash and related tax
impacts in the same period.
We believe that EBITDAX, Adjusted net income (loss), and
Adjusted net income (loss) per share and other similar measures are
useful to investors because they are frequently used by securities
analysts, investors and other interested parties in the evaluation
of companies in the oil and gas sector and will provide investors
with a useful tool for assessing the comparability between periods,
among securities analysts, as well as company by company. Because
EBITDAX, Adjusted net income (loss), and Adjusted net income (loss)
per share excludes some, but not all, items that affect net income,
these measures as presented by us may not be comparable to
similarly titled measures of other companies.
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version on businesswire.com: https://www.businesswire.com/news/home/20180805005021/en/
Kosmos EnergyInvestor RelationsJamie Buckland+44 (0) 203
954 2831jbuckland@kosmosenergy.comorRhys
Williams+1-214-445-9693rwilliams@kosmosenergy.comorMedia
RelationsThomas
Golembeski+1-214-445-9674tgolembeski@kosmosenergy.com
Kosmos Energy (LSE:KOS)
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