Kosmos will acquire Gulf of Mexico company using credit facility debt

By Devika Patel

Knoxville, Tenn., Aug. 6 – Kosmos Energy Ltd. has agreed to use borrowings under its existing credit facilities to acquire Deep Gulf Energy, a deepwater company operating in the Gulf of Mexico, from First Reserve and other shareholders.

Under the terms of the transaction, Kosmos will acquire Deep Gulf Energy for total consideration of $1,225,000,000, comprised of $925 million in cash and $300 million in Kosmos common shares issued to First Reserve, management and other Deep Gulf Energy shareholders.

Kosmos intends to fund the cash portion of the purchase price with borrowings under its existing credit facilities.

In connection with the transaction, Kosmos has received $200 million of additional firm commitments to increase its reserves-based loan facility capacity.

The company expects its leverage ratio will increase following the acquisition but plans “to rapidly de-lever” to around 1.2x at the end of 2019.

“Kosmos has always managed its balance sheet conservatively with disciplined capital allocation a critical part of executing our strategy,” chief executive officer and chairman of the board of directors Andrew G. Inglis said on the company’s second quarter ended June 30 earnings conference call on Monday.

“With the addition of the [Deep Gulf Energy] assets, our approach to capital allocation will not change.

“At the end of 2Q, our net debt to EBITDAX was around 1.6x, which increased around 2.2x taking into account the transaction.

“As a result of this deal, we expect our combined assets to generate substantial free cash flow allowing us to begin to rapidly de-lever by the end of this year to around 1.7x and through 2019, closing at around 1.2x at year-end 2019, well below where we were before this transaction” he said.

The acquisition is expected to close around the end of the third quarter 2018.

Kosmos exited the second quarter with approximately $1.3 billion of liquidity and $1,079,000,000 of net debt.

Cash and cash equivalents were $116,941,000 as of June 30, 2018, compared to $233,412,000 as of Dec. 31, 2017.

Kosmos is an oil and gas exploration and production company based in Dallas.

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