Oct. 6 2009 – U.S. oil giant ExxonMobil has bought Kosmos Energy’s stake in oil blocks offshore Ghana that contain large oil discoveries … The deal marks the first entry by one of the world’s major oil companies into what is proving to be a significant new oil province and may pave the way for further acquisitions.
Analysts at Morgan Stanley put a value of $3.3 billion to $5 billion on Kosmos’ stake in the blocks.
ExxonMobil declined to comment. Kosmos was not immediately available to comment.
The Kosmos blocks contain the Jubilee field, which is operated by Tullow and is estimated to hold between 1.2 billion and 1.8 billion barrels of oil equivalent. A separate discovery offshore Sierra Leone last month by Anadarko, at the western extreme of the same geological formation that contains Jubilee, signaled the potential for further multi-billion barrel discoveries stretching eastward for 1,100 kilometers through the waters of the Ivory Coast and Liberia.
“The Ghanaians should be very pleased. They’ve got an embryonic oil industry,” and now they have the involvement of one of the largest, most experienced and technically qualified oil companies …
A large number of major international and state-owned oil and gas companies were among potential buyers of this strategic asset. These companies have been informed by letter that Kosmos has entered into an exclusive arrangement with ExxonMobil, the person said.
Kosmos holds 30.875% of the West Cape Three Points Block and 18% of the Deepwater Tano block. Its partners are Tullow Oil PLC (TLW.LN) and Anadarko Petroleum Corp. (APC).
Jubilee field straddles both blocks and Tweneboa discovery in Deepwater Tano is thought to be another large oil reservoir.
Here is a map, with a bit more info from Kosmos Energy.
Today, Oct. 7, Reuters updates:
ACCRA, Oct 7 (Reuters) – State-run Ghana National Petroleum Corp (GNPC) is studying an agreement by Exxon Mobil (XOM.N) to buy Kosmos Energy’s stake in the Jubilee oil field in Ghana before passing it to the energy ministry for its blessing, a Ghanaian government source said on Wednesday.
“GNPC is required to look at the entire deal as negotiated,” said the government source involved in the energy sector.
“The idea is to ensure that it is the best offer not only in monetary terms but also it should come with the technical expertise,” the source told Reuters.
The Jubilee field is one of the largest oil finds in West Africa in the past decade.
Sources close to the matter said on Tuesday Exxon had agreed to buy a stake which analysts have previously valued at up to $5 billion.
Under the Ghanaian vetting process for the deal, the energy ministry will pass it on to President John Atta Mills’ cabinet for approval, the government source said without giving a timeframe for a decision.
From the Dallas Morning News:
Exxon Mobil Corp. is in talks to buy a stake in a massive oil field off the coast of Ghana for around $4 billion from Dallas’ Kosmos Energy LLC, according to media reports and a person familiar with the deal.
Kosmos, a privately held oil and gas company that focuses on West Africa, sent a letter to other bidders terminating the process, according to a knowledgeable industry source, and entered exclusive talks with Irving oil giant Exxon. A sale would require approval from Ghana’s government, said two people familiar with the process.
Ghana is set to become West Africa’s newest oil exporter in late 2010, when output begins at the Jubilee field. The deal comes at a time when Exxon’s oil production has declined and the company has said it might fail to meet its 2009 target for 2 percent output growth.
Exxon, Kosmos and the private equity companies involved in the negotiations declined to comment publicly on the deal.
“Exxon Mobil routinely evaluates potential development opportunities around the world. We do not comment on the details of commercial discussions or opportunities,” Exxon spokesman Patrick McGinn said in an e-mail.
Kosmos is led by James Musselman, former chief executive at Triton Energy Ltd. Triton discovered oil off the coast of Equatorial Guinea and was sold to Hess Corp., then known as Amerada Hess Corp., in 2001.
Musselman and his partners started Kosmos in late 2003 after raising $800 million from private equity investors Blackstone and Warburg Pincus.
The Jubilee sale marks the company’s first asset sale. Rather than producing oil, Kosmos’ business model is finding oil fields and selling them.
Blackstone Group LP (BX) and Warburg Pincus LLC’s stake in Kosmos Energy has turned out to be black gold, indeed.
The agreed-to sale of the company’s stake in several oil discoveries off the coast of Ghana to Exxon Mobil Corp. (XOM) for $4 billion represents a cash on cash return of approximately four times for the two buyout firms over a period of five years or so.
Blackstone declined to comment on the deal’s internal rate of return; Warburg Pincus could not be reached for comment. The two firms own most of the company, with Warburg Pincus holding the larger share, at 55%. Management also owns a small stake.
The two initially invested $300 million in the business in 2004 to help it explore for oil and gas in West Africa. Upon the 2008 discovery of the Jubilee field, one of the larger recent finds off the West African coast, they put in an additional $500 million.
It was a big bet in a geographic region that other oil companies had scoured for years with little luck. But Warburg Pincus and Blackstone were willing to place their faith in Kosmos Chief Executive Jim Musselman and his team, who had delivered a home run for private equity before. The Kosmos team had previously led Triton Energy Ltd., a company backed by Hicks Muse Tate & Furst Inc. that was sold to Amerada Hess Corp. in 2001. Hicks made back $1 billion on that $350 million 1998 investment.
It is fairly common for private equity firms to provide capital to experienced management teams in the oil and gas industry, allowing them to develop resources to the point where the company can go public or draw the interest of a larger strategic player. That model is now being seen increasingly in emerging markets as well as private equity firms expand their global reach.
Another major player off the coast of West Africa, Cobalt International Energy Inc., filed for a $1.15 billion initial public offering last month. That company is backed by First Reserve Corp., Carlyle/Riverstone, Goldman Sachs Group Inc. and Kern Partners Ltd., and in April partnered up with French oil giant Total S.A. (TOT) to prospect for oil in the U.S. Gulf of Mexico’s deepwater.
First Reserve also recently set up a new venture in Southeast Asia, KrisEnergy Holdings Inc., to explore for oil and gas, committing $500 million to support it.
Older deals include a $35 million 2008 investment by Emerging Capital Partners in Ocean & Oil Investments Ltd., a Nigerian investment company; and a $380 million investment led by Pine Brook Road Partners LLC in 2007 in Asia Pacific Exploration Consolidated LP.
The sharks are out in full force. Ghana will need to swim like a dolphin. As most readers here already know, the problem with the oil resource curse is not just that it keeps people poor, it actively makes them poorer than if there was no oil.
You can see a range of Ghanaian reaction in the comments to the original article on GhanaWeb, here are some samples:
Idiots in Govt writes: Yes, let’s go for the big boys. They may not give you as much on the side but they will do a good job. Good Job Mills.
Sir Jay writes: with America company now on board, Ghanaians must tightened their belts and hope for the worst for Ghana. just look at the Ogoniland and its people and it will not be hard to see what Exxonmobil is capable of doing.
Now the future is bleak.
I am scared !!!!!!!!!
American boy writes: ExxonMobile is quite possibly the worst company you’d want coming into your country.
I guarantee you this will happen. There will be a few, maybe 100 corrupt Ghanaians who will get rich from the oil.
Everyone else will not even know oil was discovered anywhere and will continue to be poor.
Unfinished Vision writes: Let the rip off begin — I mean resume.
Diamond replies to Unfinished Vision: Strong message with a humorous twist.
All we have to do is to tell them what we want. If they do not like it, we can seek other partners.
Nobody is totally safe, but maybe the Chinese? Russians?
Boy, I pain for Ghana.
Is there hope in any direction?
The Saudis, the Emirates, the Kuwaitis?
Can anyboby give us an honest deal?
Can any of our politicians work for us?
Mabey & Johnson (Ghana), Scancem (Ghana), British Aerospace (Tanzania), Haliburton (Nigeria).
Annex writes: These guys are such bad news. They are so tied to the U.S imperialism, I feel so sad for Ghana. They will influence our politics and corrupt are leaders. NDC are proving to be worse capitalists than NPP. It may true Obama showed up because of oil.
DRAGON alexandria.VA writes: they are the cause of nigerias oil calamity.environmental degradation,pollution,corruption etc..mills be careful with this company
Nana Kwame writes: Exxon/Mobil is a unscrupulous oil predator. Ghana should not rejoice because of their interest.
It is about time GNPC raises enough funds from China, remember China has a $1.95 trillion foreign reserves to lend, so that we buy this Exxon/Mobil interests out of the venture.
Exxon/Mobil is just a gigantic oil predator and parasitic company. It simply has not got the development interests of developing countries at heart.
emmanuel writes: Why should this be any surprise? The purpose of ANY corporation is to make money for the stockholders. If you don’t like that then try communism and see where that gets you.
If Exxon had priorities other than making money for the shareholders then it would have gone bankrupt a long time ago. It is a damn successful and well-run company–in fact it is the biggest corporation in the world.
Should corporations have limits placed on how they do business to protect citizens and employees from abuse? Absolutely. Just make sure that Exxon does things in manner prescribed by law (and if they are allowed to get away with such things in Ghana then whose fault is it, really?
Kaakyie_Nua writes: This is the same Exxon/Mobil which packed up, sold its assets to Total and left town rather unceremonously. The question our politicians should be asking is this: Why do they want back in?
U see they got the daylight kicked out of them by Hugo Chavez and so they want to weasel their way back into Ghana and take advantage of us again.
While Ghana is open and receptive to mutually beneficial foreign investments, Prof. Mills and his team should make it abundantly clear to all commers including Exxon/Mobil that the “rules of the game” have changed and that the benefits of the oil find should should be enjoyed, first and foremost, by Ghanaians particularly the local inhabitants. For this to happen they should take steps to prevent excessive “Flipping” that is commonplace in the oil industry.
If Exxon/Mobil has come back to stay, then they are welcomed to help us develop our oil industry. If this is not the case, then they will be better off somewhere else. Perhaps in Alaska their own backyard.
Lin writes: I am an American and know how American corporatons operate. Ghana
is in the driver’s seat now. But if it isn’t careful it will be riding in the back seat and the driver won’t be a chauffeur. Before the game begins be sure they ante up and above all cut the cards. Also stop the ngame from time to time and get a new deck.
Ogyam writes: what is all these? can someone explain? just confused. SIMPLE!!
Kaakyie_Nua writes: Have done their bit and the “big players” the likes of Exxon/Mobil etc have come in to take over.
They have paid Tullow a decent price plus handsome profit for the leg work they have done.
The trouble for Ghana is that the value of this find on paper has shot up substantially when nothing has changed in terms of the physical assets on the ground.
Look, I am sure made all kinds of promises to the local residents and the govt and we live to see if Exxon/Mobil will honour all of them.
Look at it this way: Instead of the corner mechanic servicing ur automobile, u have a delearship taking care of it. Do u think ur maintenance costs are going to be lower? Remmember the R&D operations take place in the home country and the local operations have no say how much they have to pay headquarters in the States.
True a similar thing would have transpired under Tullow but to a much lesser degree. U see size matters a lot in business dealings.
JO ZONGO writes: I think that´s good news as well. Most experienced and qualified companies can help our stuation more in. But where from this infomation? GHANAIAN NEWS or GHANA NEWS?
Nana Kwame asks: When was the last time the CEOs of the major oil companies helped you?
Pastor Ernest Opoku Agyeman writes: I think in dealing with the contract of the oil, political divisions should be set aside. The focus should be Ghana and the people of Ghana. Secondly, the managers representing Ghana should be careful in dealing with every aspect of the wording of the contract and consider inflation in the next 50 to 100 years. We should not forgotten the timber, gold, diamonds, bauxite contracts that did not help Ghana due to the fact that our people did not think about the future before undertaking that contract. All the politicians must come together and think through what the benefits or development shall we need from these companies. Next…
Big Talk writes: 10 %.Can you beleive this? And they have started taking loans even before their ……%.
No Wonder writes: It looks good yet it’s a death warrent to many folks to come. This is a company whose dealings has cost so many human lives and burn the earth around the globe including their own home country, talk to the Alaskan, south Americans – Amazon forest etc. Now they are coming to Ghana and will support both political parties like they do in their own homeland but in our case they will do what they do best take the oil out send the funds back in arms – weapons so we could distroy ourselves. Look at Nigeria etc. so before we go out singing and dancing please listen to the tune and watch the drummers carefully before they change the beat on you.