Kosmos to pay fine

May 11,, 2011 (Front Page)

KOSMOS Energy has agreed to pay a fine of $15 million to the Ghana Government for disclosing data on the Jubilee oil field without the government’s consent.
That followed the peaceful resolution of a dispute between the Government of Ghana and Kosmos.
The fine also includes the company’s spillage of low toxicity crude on the high seas.
According to sources close to the company, Kosmos was expected to raise $500 million through the floating of shares on the US stock market, part of the amount of which would be used to pay the fine, as well as expand the company’s operations in Ghana.
They disclosed that the company had resolved its differences with the government and looked forward to a “long and fruitful relationship with it which will, in the long run, reap benefits for both parties”.
The Minister of Energy, Dr Joe Oteng-Agyei, confirmed the resolution of the differences but declined to give details, pointing out that “the government will always protect the interest of Ghanaians”.
According to him, Kosmos had publicly disclosed its intention to float its shares, as well as pay the fine, adding, “For that reason, let us leave it at that.”
Kosmos Energy and its partners discovered oil in commercial quantities in June 2007 and they are currently lifting oil from the oil field.
The government has so far been paid US$112,189,575.52, being Ghana’s share of the first lifting of oil from the Jubilee Field.
The money has so far been paid to the Bank of Ghana (BoG) following the first lifting of oil on April 13, 2011.
The amount represented the five per cent royalty portion of the total first lifting of crude oil by all partners for the period.
Kosmos’s Initial Public Offering (IPO) Prospectus filed with the SEC on Thursday, April 14, 2011 stated that it would use proceeds of the IPO to fund capital expenditure.
It further disclosed in the document that it would make a $15 million payment to the Ghana National Petroleum Corporation (GNPC) upon the successful completion of the IPO, pursuant to the settlement agreement entered into with the GNPC to resolve past disputes and for general corporate purposes.
The company estimated that its net proceeds from the sale of 30,000,000 common shares in that offering would be approximately $477.7 million, after deducting estimated offering expenses.
Each share is going for $17.
“We intend to use the net proceeds from this offering, available cash and borrowings under our commercial debt facility to fund our capital expenditures and in particular our exploration and appraisal drilling programme and development activities through early 2013, our related operating expenses, to make a $15 million payment to the GNPC upon the successful completion of this offering, pursuant to the settlement agreement we entered into with the GNPC to resolve our past disputes and for general corporate purposes,” it pointed out in its prospectus to the SEC.
“We estimate that we will incur approximately $500 million of capital expenditures for the year ending December 31, 2011. This capital expenditure budget consists of: $175 million for development in Ghana; $225 million for exploration and appraisal in Ghana; $30 million for exploration and appraisal in Cameroon; $30 million for new ventures to expand our licence portfolio (including geological and geophysical expenses), and $40 million in unallocated funds which are available for additional drilling and licensing costs and activities,” it added.
Kosmos further stated that the ultimate amount of capital it would expend might fluctuate materially based on market conditions and the success of its drilling results.
“Our future financial condition and liquidity will be impacted by, among other factors, our level of production of oil and natural gas and the prices we receive from the sale thereof, the success of our exploration and appraisal drilling programme, the number of commercially viable oil and natural gas discoveries made, the quantities of oil and natural gas discovered, the speed with which we can bring such discoveries to production and the actual cost of exploration, appraisal and development of our oil and natural gas assets,” the document added.