A Strong Exploration Portfolio

This interview was published on Year of Investment.

In an exclusive interview with Africa Oil & Power, Vice-President and Country Manager of Kosmos Energy Equatorial Guinea, Fidel Envo, shares latest developments for the company in the lead up to COVID-19, and the impact of recent block extensions and current market conditions on planned drilling programs.

What have been the key developments for Kosmos Energy in Equatorial Guinea in the past twelve months, giving particular weight to the state of emergency produced by the COVID-19 pandemic?

Kosmos was very active in Equatorial Guinea during the 12-month period before the COVID-19 pandemic, and our production is unaffected today thanks to the rapid response by the government of Equatorial Guinea and by our partner, Trident Energy. Before the pandemic, in October 2019, Kosmos announced the results of the S- 5/ST exploration well, which encountered approximately 39 meters of net oil pay in good-quality reservoir. The S-5 discovery, later renamed Asam, is located within tie-back range of the Ceiba FPSO. Work is ongoing to establish the scale of the discovered resource and evaluate the optimal development solution.

Kosmos continues to mature additional infrastructure-led exploration opportunities in Blocks S, W, EG-21, and EG-24. In March 2020, the final processing of a new 3D seismic survey was completed. Technical work using the survey data is yielding interesting exploration leads, which we will mature in the coming years.

In addition, Kosmos and its partner Trident Energy, who operates the Ceiba and Okume production facilities, pursued activities aimed at optimizing production from the fields. As a result, the fields produced around 36,200 bpd gross / 11,600 bpd net during the first quarter of 2020.

Our production in Equatorial Guinea is currently unaffected by COVID-19. The operator, along with the Ministry of Mines and Hydrocarbons and Ministry of Health, reacted quickly with appropriate measures to protect staff and offshore personnel. Some of the 2020 work program (e.g. ESPs) has been deferred as a result of the COVID-19 pandemic.

What is the current status of 2020/2021 drilling programs?

COVID-19 travel restrictions, border closures, social distancing requirements and mandated office closures in the various countries in which we operate have affected some of our business operations and delayed projects. In addition, the impact of COVID-19 has decreased demand for oil, which has also resulted in significant declines in oil prices. In this context, we have deferred the 2020 Equatorial Guinea drilling program and the ESP program.

The MMH recently announced the provision of two-year block extensions and a relaxation of CapEx requirements for E&P companies. How will this, along with current market conditions, impact Kosmos Energy’s evaluation of new exploration opportunities in Equatorial Guinea?

We appreciate the Ministry’s acknowledgement of the unprecedented turmoil in the oil and gas industry. Further, we value the Ministry’s leadership in starting a conversation about how to help the industry in Equatorial Guinea withstand the lower oil price environment we are in today and position it for a comeback in the future. The extensions embody this forward thinking. Kosmos is working closely with the Ministry on the extensions for Blocks EG-21, EG-24, S and W.

How can upstream and frontier exploration remain attractive, when bringing discoveries into production may not be profitable in the short- to medium-term?

Without the burden of drillship obligations or relinquishment deadlines, now is the time to focus on completing the technical work required to be drill-ready when the macro environment enables a return to activity. It takes time to methodically work through large volumes of seismic data, categorizing all the different types of exploration leads identified. It also takes time to fully quantify the risks associated with reservoir, charge, and trap against each of those leads. We strongly believe there is additional oil to be found in the Rio Muni basin and we are working hard to be prepared to find it when industry conditions improve.

In light of recent developments, how would Kosmos Energy characterize its outlook for 2020 and beyond?

During this challenging period, the health and safety of our employees and contractors continues to be our primary concern. We have taken decisive actions to protect the business in 2020 and position it for potential increased activity in 2021 and beyond. We believe we have a differentiated portfolio of low-cost, low decline, conventional assets that are well positioned for the future. We are positive about the outlook, both in Equatorial Guinea and in our global portfolio.

What will the exploration landscape look like in Equatorial Guinea post-COVID-19?

We continue to believe the Rio Muni basin offshore Equatorial Guinea is under- explored. New data and analysis continue to strengthen this belief. While there is little doubt the COVID-19 pandemic has impacted the pace of exploration, it has not diminished the quality of the exploration portfolio and the excitement we have for our future in Equatorial Guinea.

Forward‐Looking Statements

This Question and Answer dialogue (“Q&A”) contains forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

All statements, other than statements of historical facts, included in this Q&A that address activities, events or developments that Kosmos expects, believes or anticipates will or may occur in the future are forward‐looking statements. Kosmos’ estimates and forward‐looking statements are mainly based on its current expectations and estimates of future events and trends, which affect or may affect its businesses and operations.

Although Kosmos believes that these estimates and forward‐looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to Kosmos. When used in this Q&A, the words “anticipate,” “believe,” “intend,” “expect,” “plan,” “will” or other similar words are intended to identify forward‐looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of Kosmos (including, but not limited to, the impact of the COVID‐19 pandemic), which may cause actual results to differ materially from those implied or expressed by the forward‐looking statements.

Further information on such assumptions, risks and uncertainties is available in Kosmos’ Securities and Exchange Commission (“SEC”) filings. Kosmos undertakes no obligation and does not intend to update or correct these forward‐looking statements to reflect events or circumstances occurring after the date of this Q&A except as required by applicable law. You are cautioned not to place undue reliance on these forward‐looking statements, which speak only as of the date of this Q&A. All forward‐looking statements are qualified in their entirety by this cautionary statement.

The opinions stated in this piece are those of the author.