Houston-based Occidental has agreed to sell its interests in two Ghana offshore fields for $750 million to Kosmos Energy ($550 million) and Ghana National Petroleum Corporation (GNPC) ($200 million).
The sale to Kosmos closed upon signing and the sale to GNPC is expected to close in the fourth quarter of 2021. The transaction includes Occidental’s interests in both the Jubilee and TEN fields, which combined had second quarter 2021 net production of 22 thousand barrels of oil equivalent per day, Occidental said on Wednesday.
The company classified the Ghana operations as held for sale, as of 30 June 2021. Separately, Occidental settled certain tax claims related to historical operations.
“With this transaction, we have achieved our post-Colombia divestiture target,” said President and Chief Executive Officer, Vicki Hollub. “Proceeds from the Ghana asset sale will be applied to debt reduction. Combined, our divestiture program and free cash flow generation have enhanced our ability to reduce debt, as evidenced by the $4.5 billion we have repaid year to date.”
In a separate statement on Wednesday, Kosmos said it has acquired an additional 18 per cent interest in the Jubilee field and an additional 11 per cent interest in the TEN fields in Ghana from Occidental for a purchase price of $550 million with an effective date of 1 April 2021. Consideration due to OXY at completion was approximately $460 million after taking into account closing adjustments.
The deal will increase Kosmos’ interests in Jubilee to 42.1 per cent and in TEN to 28.1 per cent. However, the transaction is subject to a 30-day pre-emption period, which, if fully exercised, could reduce Kosmos’ ultimate interest in Jubilee by 3.8 per cent to 38.3 per cent, and in TEN by 8.3 per cent to 19.8 per cent.
Andrew G. Inglis, Chairman and Chief Executive Officer of Kosmos said: “We expect the additional Ghana interests to generate around $1 billion of incremental free cash flow by the end of 2026 at $65 Brent with upside given current prices. We plan to use the additional cash flow from these assets to reduce absolute debt levels and fund our growth in LNG.”
Inglis added: “The transaction creates a simplified and aligned partnership in both the Jubilee and TEN fields, with both Kosmos and GNPC increasing their ownership. The partnership is committed to investing in both fields to maximize the value of the assets and reduce the carbon intensity of operations for the benefit of all stakeholders.”
According to Kosmos, the estimated 2P reserves being acquired as part of the transaction were approximately 104 million barrels of oil equivalent at year-end 2020. The Ghana assets being acquired have a proved and probable (2P) post-tax NPV10 valuation of around $1.6 billion. The acquired assets are currently producing approximately 17,000 barrels of oil per day net and are expected to generate approximately $325 million of EBITDAX in 2022 at $65 Brent.
Kosmos secures loan for Ghana deal
To fund the transaction, Barclays and Standard Chartered Bank have provided Kosmos with a $400 million bridge loan, which the company expects to refinance with the proceeds from a future senior notes offering. The remaining consideration was funded from available liquidity, which the company expects to re-finance with the proceeds from the equity offering of approximately $100 million announced on Wednesday.
Namely, Kosmos has launched a registered underwritten public offering of 37,500,000 shares of common stock. In addition, Kosmos intends to grant the underwriters a 30-day option to purchase up to an additional 5,625,000 shares of common stock at the public offering price less underwriting discounts.
The Jubilee field straddles both the West Cape Three Points and Deepwater Tano blocks. The first production came in late 2010, just three and a half years from the initial discovery. The Deepwater Tano Block is adjacent to the West Cape Three Points block in the Tano Basin offshore Ghana. The production from Tweneboa, Enyenra, and Ntomme (TEN) began in 2016.
Earlier this year, Tullow, as the operator, started a multi-year, multi-well drilling campaign offshore Ghana following the beginning of drilling of the first well at the Jubilee field. The campaign consists of two Jubilee production wells, one Jubilee water injector well, and one TEN gas injector well.