Kosmos Energy (NYSE:KOS) has achieved success in the exploration of various areas located offshore Ghana, and represents a play on higher risk exploratory offshore and onshore drilling here. The company also has interests in several oil and gas concessions in Morocco and Cameroon.
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Initial Public Offering
Kosmos Energy went public in May 2011, selling 34.5 million shares to the public at $18 per share. The deal was priced at the top end of the range and saw strong interest from investors, leading the company to increase the size of the offering as well. Kosmos Energy ended up raising gross proceeds of approximately $683 million in the offering. The stock has drifted downward with the market during the summer, settling in around $16 per share.
Kosmos Energy has been most active in Africa, where the company has interests in the West Cape Three Points and Tano Deepwater licenses.
West Cape Three Points
Kosmos Energy is the operator of the West Cape Three Points license, which comprises approximately 370,000 gross acres. The company discovered the Jubilee field here in 2007, as well as several other important discoveries since then. The most recent success was the Makore-1 exploration well, which found net oil pay in two separate formations.
Production from the phase one development of the Jubilee field began in late 2010, and is expected to reach maximum gross capacity of 120,000 barrels of oil per day by the third quarter of 2011.
Kosmos Energy owns a 30.875% working interest in this license, which is also owned by Anadarko Petroleum (NYSE:APC), the Ghana National Petroleum Corporation and several other oil and gas companies.
Tano Deepwater block
Kosmos Energy is also involved with the Tano Deepwater license on a non-operated basis and owns an 18% working interest here. The company has reported several successful wells into different formations here and is planning to conduct an appraisal drilling program.
Offshore West Africa is a popular area for oil and gas exploration and development. Hess Corporation (NYSE:HES) is also active here and reported a successful well in June 2011. The well encountered nearly 500 feet of oil and gas play in three separate zones.
Kosmos Energy owns interests in two license areas in onshore Cameroon. The company drilled an exploratory well on the Kombe-N'sepe block in 2011 and plugged and abandoned the well after non commercial quantities of natural gas were found. Kosmos Energy plans to drill another exploratory well on the Ndian River block in 2012.
Kosmos Energy has a 75% working interest in the Boujdour Offshore block in the Aaiun Basin of Morocco. This basin is considered a frontier area with a limited history of exploration by the industry.
Exxon Mobil (NYSE:XOM) drilled a non-commercial well nearby in the late 1960s, while predecessor companies now owned by Statoil (NYSE:STO) and Suncor Energy (NYSE:SU) conducted previous activity in Morocco. Neither company currently mentions any activity in Morocco.
Repsol YPF(Pink Sheets:REPYY) is active in Morocco and reported an offshore natural gas discovery in 2009. The company has interest in four offshore blocks.
Kosmos Energy has 46 future exploration targets on its various concession areas in Ghana, Cameroon and Morocco. Most of the 2011 and 2012 exploration will be conducted in Ghana, with Cameroon and Morocco targeted in 2013 and later.
The Bottom Line
Kosmos Energy is a higher risk play for those energy investors that want to diversify away from the consensus industry trend towards onshore shale and unconventional development with low geological risk. The company has thrived so far in the difficult and complex exploration needed to bring value to investors. (For additional reading, take a look at ETFs Provide Easy Access To Energy Commodities.)
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