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Kosmos (KOS) to Sell $200M of Exploration Assets to Shell

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Kosmos EnergyLtd. (KOS - Free Report) recently entered into an agreement with one of Royal Dutch Shell’s (RDS.A - Free Report) wholly-owned subsidiaries to sell its certain offshore exploration assets in Africa and South America for up to $200 million.

Per the deal, Shell will acquire Kosmos' existing 45% stake at the PEL0039 block in Nambia; 45% interest at Block NCUD in South Africa and own 33.33% stake at Block 42 in Suriname. Shell will also buy Kosmos’ share in the following blocks of São Tomé & Príncipe, such as 25% in Block 6, 35% in Block 11 and 35% in Blocks 10 and 13.

The contract also comprises contingent payments of $50 million to be made upon each commercial discovery from the first four exploration wells drilled across the company’s asset portfolio, set at a maximum limit of $100 million in total. Three of the four well explorations are currently scheduled for next year.

The dual-listed (NYSE & London) Kosmos will utilize one-third of the initial sale proceeds of $100 million for examining two top-class infrastructure-led exploration prospects in the Gulf of Mexico.

Further the company plans to spend the remaining proceeds to lower the borrowings outstanding under its credit facilities. With this sale, Kosmos is looking forward to save nearly $125 million worth capital expenditures over the next two years.

The transaction is estimated to conclude by the end of this year with an effective date of Sep 1, 2020, and is contingent upon customary conditions including government consent.

Price Performance

Kosmos is an oil and gas explorer focused on offshore Ghana, Equatorial Guinea and the US Gulf of Mexico.

A glance at the company’s share price trend reflects that the stock has outperformed its industry in the past six months. Shares of Kosmos have declined 2.5% compared with the 10.9% decrease of its industry.

Zacks Rank & Key Picks

Kosmos currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Murphy USA Inc. (MUSA - Free Report) and SilverBow Resources Inc. (SBOW - Free Report) , each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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