Based in Hamilton, Bermuda Kosmos Energy (proposed KOS) is scheduling a $510 million IPO with a market capitalization of $6.3 billion at a price-range mid-point of $17 for Wednesday May 11, 2011. The IPO Calendar includes nine others for this week.
SUMMARY -- KOS estimates Jubilee Field Phase 1 daily gross production to reach the 120,000 barrels of oil per day design capacity of the FPSO facility used to produce from the field, in the third quarter of 2011.
VALUATION & CONCLUSION -- KOS is just now developing an income stream from past, extensive deep water oil and gas exploration. KOS’s estimated proved reserves are based on an $80 per barrel price of oil - that is less than the current price of oil.
Given the apparent momentum that KOS is developing, KOS offers a unique opportunity to participate in deep water oil and gas exploration off the west coast of Africa. KOS is priced at 7.5 times book value.
KOS Valuation Metrics
BUSINESS -- KOS is an independent, deep water oil and gas exploration and production company focused on under-explored regions in Africa. The current asset portfolio includes world-class discoveries and partially de-risked exploration prospects offshore Ghana, as well as exploration licenses with significant hydrocarbon potential onshore Cameroon and offshore Morocco.
KOS currently holds five licenses from Ghana, Cameroon and Morocco. KOS is the operator under three of these licenses.
DISCOVERIES -- KOS’s asset portfolio consists of seven discoveries including the Jubilee Field, which was one of the largest oil discoveries worldwide in 2007 and the largest find offshore West Africa in the last decade.
Other discoveries include Mahogany East, Odum, Tweneboa, Enyenra, Teak and Tweneboa Deep offshore Ghana, which have geologic characteristics similar to the Jubilee Field.
In addition, KOS has identified 18 additional prospects offshore Ghana, 10 additional prospects in Cameroon and 19 additional prospects offshore Morocco. KOS expects to make new discoveries and to define additional prospects as our team continues to develop its current asset portfolio and identify and pursue new high-potential assets.
JUBILIEE FIELD -- KOS’s plan for developing the Jubilee Field provides visible, near-term cash generation and long-term growth opportunities. KOS estimates Jubilee Field Phase 1 daily gross production to reach the 120,000 barrels of oil per day design capacity of the FPSO facility used to produce from the field, in the third quarter of 2011.
Within the next few years, KOS intends to expand upon the Jubilee Field Phase 1 development with three additional phases that are designed to maintain production and cash flow from partially de-risked locations.
ESTIMATED PROVED RESERVES -- Projected Net Revenues, Standardized Measure: $1.520 billion, at a projected oil price of $79.70 per barrel. On Friday, May 6 Brent crude dipped towards $107 a barrel and U.S. crude fell below $97. Standardized Measure represents the present value of estimated future cash inflows to be generated from the production of proved oil and natural gas reserves, net of future development and production costs.
KOS did not have any proved reserves prior to the fiscal year ended December 31, 2009. S-1 page 107
FIVE EXPLORATION LICENSES -- Each of KOS’s five exploration licenses is governed by related petroleum or license agreements.
. In July 2004, Kosmos signed the WCTP Petroleum Agreement.
. In July 2006, Kosmos signed the DT Petroleum Agreement. In 2006, Anadarko (APC) farmed in to the WCTP Block and DT Block while Tullow and Sabre farmed in to the WCTP Block.
. Following the discovery of the Jubilee Field, on July 13, 2009 Kosmos and the other WCTP and DT block partners signed the UUOA, which governs the interests in and development of the Jubilee Field and created the Jubilee Unit from portions of the WCTP Block and the DT Block.
. In November 2005, Kosmos farmed in to the Kombe-N'sepe License Agreements.
. In November 2006, Kosmos signed the Ndian River Production Sharing Contract.
. In May 2006, Kosmos signed the Boujdour Offshore Petroleum Agreement and in September 2010, KOS entered a memorandum of understanding with ONHYM to enter a new petroleum agreement covering the highest potential areas of this block under essentially the same terms as the original petroleum agreement.
Kosmos has also entered numerous agreements ancillary to the operation of the license agreements or otherwise necessary to conduct Kosmos's oil and natural gas exploration, development and production activities.
OIL/GAS EXPLORATION HISTORY -- KOS established a new, major oil province in West Africa with the discovery of the Jubilee Field offshore Ghana in 2007. Subsequently, Kosmos participated in the discovery of five additional discoveries offshore Ghana. Kosmos's leadership of the Jubilee Unit partners enabled the Jubilee Field Phase 1 Plans of Development to be approved by Ghana's Ministry of Energy in July 2009.
The Jubilee Phase 1 Plan of Development (PoD) committed to delivering an approximately $3.3 billion project capable of producing 120,000 barrels of oil per day. The Kosmos-led execution of the Jubilee Phase 1 Plan of Development resulted in first oil on November 28, 2010. This 42-month timeline from discovery to first oil is a record for a deepwater development at this water depth in West Africa.
EXXON MOBIL (XOM) -- In 2009, Kosmos entered into a commercial agreement to sell KOS Ghanaian assets to Exxon Mobil Corporation. On August 16, 2010, ExxonMobil terminated the Sale and Purchase Agreement ("SPA") KOS had entered with them on June 28, 2010, in accordance with the terms of the SPA.
ExxonMobil provided no explanation for the termination and was not contractually obligated to do so under the terms of the SPA. From the date of the commercial agreement with ExxonMobil through December 31, 2010, KOS spent $630 million developing Jubilee Phase 1 and de-risking these assets, made the Enyenra, Teak and Tweneboa Deep discoveries offshore Ghana and drilled six successful appraisal wells on the Mahogany East, Odum and Tweneboa discoveries.
DIVIDENDS -- none planned.
CORPORATE RE-ORGANIZATION -- Kosmos Energy Ltd. is a Bermuda exempted company that was formed for the purpose of making this offering. Kosmos Energy Holdings will become wholly-owned by Kosmos Energy Ltd.
USE OF PROCEEDS of $478 million:
. $175.0 million for development in Ghana;
. 225.0 million for exploration and appraisal in Ghana;
. $30.0 million for exploration and appraisal in Cameroon;
. $30.0 million for new ventures to expand our license portfolio (including geological and geophysical expenses); and
. $40.0 million in unallocated funds which are available for additional drilling and licensing costs and activities.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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