Kosmos Energy Announces Results of Pontoenoe-1 Well and Provides Operational and Financial Update
Kosmos
Energy (NYSE: KOS)(LSE: KOS) announced today that it has completed
drilling the Pontoenoe-1 exploration well in Block 42 offshore Suriname.
Pontoenoe-1 was designed to test late Cretaceous reservoirs in a
stratigraphic trap charged from oil mature Albian and
Cenomanian-Turonian source kitchens. The well was located offshore
Suriname approximately 280 kilometers northwest of Paramaribo in
approximately 2,497 meters of water and has been drilled to a total
depth of approximately 6,194 meters.
The prospect was fully tested but did not discover commercial
hydrocarbons. High-quality reservoir was encountered, but the primary
exploration objective proved to be water bearing. Kosmos believes there
was evidence of a working source kitchen and the prospect failed due to
a lack of trap. The well will now be plugged and abandoned and the well
results integrated into the ongoing evaluation of the remaining
prospectivity in Kosmos’ acreage position.
Andrew G. Inglis, chairman and chief executive officer, said: “We are in
the early stages of exploring the emerging Suriname-Guyana basin, and
given the indications of a mature source, quality cretaceous reservoir,
and the independent nature of the prospectivity we believe there is
significant remaining potential in Block 42. Our current plan is to test
the next prospect in 2020.”
Kosmos holds rights in the Block 42 contract area under a production
sharing contract with the Government of Suriname’s Staatsolie
Maatschappij Suriname N.V. (“Staatsolie”). The block ranges in water
depth between approximately 2,000 and 2,500 meters and covers an area of
over 6,000 square kilometers gross. Kosmos (33.3 percent) is the
exploration operator of Block 42 and is joined by its partners Hess
(NYSE:HES) (33.3 percent) and Chevron (NYSE:CVX) (33.3 percent).
In addition, Kosmos today provides an operational and financial update
in advance of releasing its third quarter 2018 results given the closure
of the Deep Gulf Energy (“DGE”) acquisition on September 14, and the
incorporation of the assets into Kosmos’ third quarter results from
closure to quarter end:
BUSINESS UPDATE
Kosmos continues its evolution into a full-cycle exploration and
production company positioned to deliver sustainable growth from a
balanced portfolio. For the full year 2018, Kosmos expects to generate
substantial free cash flow and remains on track to meet the Company’s
previously communicated year-end 2018 net leverage target. This strong
cash flow generation will allow Kosmos to initiate a dividend in the
first quarter of 2019.
Production Optimization & Exploitation – well work and infill drilling
Ghana production continues to grow
Production in Ghana continues to grow following the Jubilee turret
remediation work and the new wells brought online at both Jubilee and
TEN during the quarter.
At Jubilee, production averaged approximately 94,500 barrels of oil per
day (bopd) for the quarter, delivering two cargos net to Kosmos, as
expected. One new producer well at Jubilee was brought online in the
third quarter, with a second expected in the fourth quarter. Production
from these wells, together with enhancements to gas handling capacity,
is expected to increase Jubilee production towards the FPSO nameplate
capacity of 120,000 bopd.
At TEN, production averaged approximately 62,600 bopd for the quarter,
delivering one cargo net to Kosmos, as expected. One new producer well
at Ntomme came online in August. Kosmos expects this well to support
current production levels of approximately 70,000 bopd through the end
of the year when a second new production well is due to be brought
onstream to increase production towards the FPSO nameplate capacity. The
TEN FPSO has previously been tested at rates above the 80,000 bopd
nameplate capacity, and Kosmos expects to further test this capacity in
2019 as additional wells come onstream.
The Partnership approved a second rig in Ghana, which arrived in
late-September. The second rig will be used for drilling operations,
with the current rig set up for a continuous completion program. Taking
advantage of low rig rates in the current environment enables the
Partnership to accelerate the addition of new wells in Ghana, increasing
production towards FPSO capacity sooner, with the goal of maintaining
gross production from Jubilee and TEN of 180,000 to 200,000 bopd over
the next three years.
Equatorial Guinea on track for one-year payback
Production in Equatorial Guinea averaged approximately 42,500 bopd in
the third quarter, and with strong performance in the first half of the
year the company remains on track to meet guidance for the year of
43,000 bopd. The installation of electrical submersible pumps (“ESP”) to
increase artificial lift capacity and enhance production is expected to
begin early in the fourth quarter. As of the end of the third quarter,
Kosmos has received approximately $208 million in dividends from the
Kosmos-Trident joint venture (90 percent of the purchase price) and
remains on track for a one-year payback.
Gulf of Mexico delivering early growth
At Odd Job (Kosmos 55% WI), a second development well was brought online
in late September and connected to the Delta House Floating Production
System (FPS), providing near-term growth at the field. A third Odd Job
well was drilled in May, exceeding pre-drill resource estimates, and is
expected to start production through existing subsea infrastructure to
the Delta House FPS by early 2020.
Gulf of Mexico production during the period from transaction close until
the end of the third quarter averaged approximately 24,000 barrels of
oil equivalent per day (boepd). Production in the Gulf of Mexico during
the third quarter, including periods prior to the transaction closing,
was approximately 24,200 boepd.
Short-Cycle Production Growth – infrastructure-led exploration
Gulf of Mexico short-cycle tie-back strategy delivering results
As part of the DGE transaction, Kosmos acquired a portfolio of
short-cycle growth assets, including a high-quality inventory of
exploration prospects. During the third quarter, the Nearly Headless
Nick prospect (Kosmos 21.95% WI) was successfully drilled to a total
depth of 5,807 meters (19,052 feet) and encountered 26 meters (85 feet)
of net pay in the Middle Miocene objective. Nearly Headless Nick is a
sub-sea tie back, which is expected to be brought online through the
Delta House facility in 2020, adding near-term reserves and production
growth. Early delivery of this short-term growth opportunity highlights
the value of the DGE acquisition.
Competition for basin access remains near historical lows and, in
August, Kosmos expanded its inventory as one of the most active
participants in Gulf of Mexico Lease Sale 251 with apparent high bids on
seven deepwater blocks. These blocks include three with low risk
prospects and one with a Wilcox discovery relinquished by a major. As
part of the Company’s strategy to expand its position in the Gulf of
Mexico, in the third quarter Kosmos incurred approximately $50 million
of exploration expense to acquire seismic over new prospective areas and
to re-license seismic over existing fields.
Equatorial Guinea seismic acquisition to identify short-cycle
tie-back prospects complete
During the quarter, Kosmos continued acquiring seismic over Blocks S, W,
EG-21 and EG-24 and the company will process the seismic with the
objective of high grading prospects for drilling in 2019.
Development of World-Scale Discoveries – Potential for multiple LNG
hubs provides long-term growth
Tortue Phase 1 targeting FID around year-end
In partnership with BP, the Company continues to make progress in
Senegal and Mauritania with the Tortue LNG development. The first phase
Unit Development Plan has been submitted to the energy ministries of
both countries and all parties are aligned and actively working to
achieve a final investment decision (FID) around year-end.
Longer-Cycle Frontier Exploration – Potential for hub-scale
discoveries creates future optionality
Kosmos continues to advance its frontier exploration program with a
strong portfolio of high-impact exploration opportunities for long-term,
sustainable growth and expects to be active in 2019 with a number of
exploration and appraisal opportunities. Kosmos maintains an active new
ventures and seismic acquisition program to enable drilling in 2020 and
beyond.
Financial Update
Balance sheet remains strong, supported by disciplined capital
allocation
Excluding the DGE acquisition purchase price, Kosmos now expects 2018
capital expenditures to total approximately $400 million. This amount
includes Kosmos’ original 2018 budget of approximately $300 million, as
well as $100 million in the Gulf of Mexico. As referenced above, the
Gulf of Mexico capital budget is comprised of approximately $50 million
of seismic expenditures and $50 million of drilling and completion
expenditures.
For the full year 2018, Kosmos expects to generate substantial free cash
flow and is on track to meet the Company’s previously communicated
year-end 2018 net leverage target. This strong cash flow generation will
allow Kosmos to initiate a dividend in the first quarter of 2019. Kosmos
exited the quarter with net debt of approximately $2.0 billion and
liquidity of approximately $650 million.
The following table provides a current estimate of operational and
financial performance for the third quarter of 2018, including the stub
period inclusive of the Company’s Gulf of Mexico assets. Exploration
expense includes approximately $12 million of unsuccessful well costs
attributed to Suriname drilling.
Third Quarter Financial Update
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Kosmos
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Gulf of Mexico
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Total
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Equatorial Guinea
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Production
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Production
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Gross (Bopd)
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Gross (Bopd)
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42,500
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Jubilee
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94,500
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TEN
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62,600
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Net Sales
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Volume (Mboe)
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2,850
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-
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2,950
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Net Sales
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Cargos
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3
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Oil (MBbls)
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2,920
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-
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2,950
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290
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-
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320
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3,210
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-
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3,240
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NGLs (MBbls)
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27
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-
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33
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27
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-
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33
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Revenue ($MM)
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$210
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-
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$220
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Gas (MMcf)
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290
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-
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310
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290
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-
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310
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Oil Equivalent (Mboe)
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2,920
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-
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2,950
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365
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405
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3,285
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-
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3,355
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Opex ($/boe)
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$13.75
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-
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$15.75
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Cargos
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3
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DD&A ($/boe)
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$10.50
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-
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$12.50
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Basis Difference Amortization ($/boe)
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$13.75
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-
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$15.75
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Revenue ($MM)
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$216
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-
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$220
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$22
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-
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$26
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$238
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-
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$246
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Income tax expense (benefit) ($/boe)
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$16.00
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-
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$18.00
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Opex ($/boe)
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$15.00
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-
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$19.00
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$10.00
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-
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$12.00
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$15.00
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-
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$18.00
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% Cash
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0%
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Facilities modifications ($MM)
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$10
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-
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$12
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$10
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-
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$12
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G&A ($MM)
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$24
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-
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$26
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$1
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-
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$3
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$25
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-
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$29
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% Cash
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65%
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100%
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65%
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Exploration expense ($MM)
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$36
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-
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$40
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$48
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-
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$52
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$84
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-
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$92
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DD&A ($/boe)
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$23.00
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-
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$26.00
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$23.00
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-
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$27.00
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$23.00
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-
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$26.00
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Interest expense, net ($MM)
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$20
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-
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$25
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Derivatives (gain) loss, net ($MM)
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$44
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-
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$50
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$8
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-
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$12
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$52
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-
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$62
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Income tax expense (benefit) ($/boe)
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Current
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$3.50
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-
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$5.50
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Deferred
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$4.75
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-
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$6.75
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Cash settlements on commodity derivatives ($MM)
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$44
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-
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$48
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$3
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-
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$5
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$47
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-
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$53
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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 production offshore Ghana, Equatorial Guinea and Gulf of Mexico,
a competitively positioned Tortue gas project in Mauritania and Senegal
and a sustainable exploration program balanced between proven basins
(Gulf of Mexico and 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.
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