Deep Gulf Energy is being sold by private equity firm First Reserve for over US$1.2 billion to Kosmos Energy. The US Gulf of Mexico transaction marks Kosmos’ entry into the recovering region.
The move illustrates the economic conditions in the Gulf region, where rising oil prices are reviving the capital-intensive deepwater industry. Kosmos also has operations in Latin America and Africa.
“With many competitors leaving the Gulf of Mexico to chase onshore shale plays, a huge opportunity has opened in the basin,” Kosmos’ chairman and CEO, Andrew Inglis, said. “The best deepwater assets can compete with the best of shale, and now is a good time to enter the Gulf of Mexico,” he added.
“Over the last four years, Kosmos has doubled production, and this acquisition creates the platform to double production again in the next four years,” Inglis said.
The company will pay US$925 million in cash and US$300 million in Kosmos common shares. The transaction is expected to close in the third quarter of 2018.
For Bermuda-headquartered Kosmos, the transaction adds roughly 25,000 boepd of output, of which about 85% is oil. The assets have an estimated reserves-to-production ratio of 8.8, and are anticipated to boost Kosmos’ 2018 pro forma production by 50% from around 45,000 boepd to 70,000 boepd.
The assets hold total proven and probable ( 2P) reserves of 80 million boe, and will increase Kosmos’ 2P reserves by 40% to roughly 280 million boe, it said.
In the second quarter of 2018, the upstream company generated a net loss of US$103.3 million, or US$0.26 per diluted share, compared with a net loss of US$8.5 million or US$0.02 per diluted share in the same quarter of 2017.
Kosmos said that it thought significant cash flow would be generated by the new assets, and that it should thus be able to pay a dividend to shareholders starting in the first quarter of 2019.
The purchase is also anticipated to provide it with both short- and long-cycle exploration opportunities.