With goals of making exploration success stories, bringing oil and gas developments online faster and cutting costs, Dallas-based Kosmos Energy and British major BP have strengthened their relationship offshore West Africa.
The two have formed an exploration alliance that covers the Atlantic Margin. The alliance, which Kosmos Energy CEO Andy Inglis spoke about during the company’s second-quarter 2017 call with analysts Aug. 7, builds upon the agreement announced in December 2016 that focuses on exploration offshore Mauritania, Senegal and Gambia.
“This alliance will leverage Kosmos’ regional exploration knowledge, ideas and concept generation capability together with BP’s deepwater development ability as well as the aboveground relationships and reputations of both companies,” Inglis said. “For Kosmos, the alliance enhances our ability to explore more efficiently by leveraging the technical resources of BP and reducing cycle times in the event of exploration success.”
The deeper partnership was formed as the oil and gas industry works to keep exploration efforts alive following spending cuts caused by lower commodity prices. The world’s supply of energy resources still exceeds demand, but some fear a medium-term shortfall could be looming as reserves deplete and exploration investment hit record lows while demand inches up.
But the Atlantic Margin has proven to be one of the industry’s shining stars, with explorers striking hydrocarbons in frontier basins. The Atlantic Margin-focused Kosmos is a clear leader, having struck with partner BP a 120-m (394-ft) hydrocarbon column in May with the Yakaar-1 well offshore Senegal. Kosmos, which operates the Greater Tortue Complex offshore Mauritania-Senegal, has a 100% success rate in the basin and continues to add natural gas resources.
Forming partnerships is one way companies have worked toward common goals during the downturn. For Kosmos, it’s about being able to “build a sustainable portfolio that works in a sub-$50 world.”
“Today is an important time to go out and seize those opportunities,” Inglis said. In addition to drawing on BP’s technical resources, “there is clear an opportunity to do more because the upfront costs are lower.”
He sees the move as a positive that speaks well for the relationship formed in 2016. The partnership, announced in December, gave BP a “leadership position in an emerging world-class, low-cost gas basin with advantaged access to global gas markets,” BP said in a news release.
“We believe our expertise in integrating the gas value chain, together with a talented exploration partner in Kosmos, along with the support of the Mauritanian and Senegalese governments brings together all the elements needed to create a new LNG hub in Africa,” BP CEO Bob Dudley said in the December statement.
Although Inglis on Aug. 7 said the 50:50 Atlantic Margin partnership will target new areas and selected geographies across the Atlantic Margin, he was cautious not to spill details. Inglis was also mum on the location and timing of the first exploration prospect under the agreement.
“I don’t want to give away all of the thinking,” Inglis said when questioned by analysts. He referred to Kosmos’ core area of expertise, which is focused on the Late Cretaceous stratigraphic play theme. “This is about leveraging that knowledge, conceptual thinking, with the deeper technical resource base of BP and the ability to split [costs] upfront … and then be able to move a bit faster.”
On Aug. 7, Kosmos reported a net loss of $8.5 million for second-quarter 2017, an improvement from the net loss of $108.3 million about a year earlier. Oil revenue increased to about $136 million, up from about $46 million.
The company said its exploration expenses fell to $20 million, compared to $36 million for the same quarter in 2016. The lower costs resulted from geologic and geophysical expenses, Kosmos said.
Kosmos also lowered its capital spending by $50 million to $100 million for the year, as costs associated with the Jubilee Field offshore Ghana fell. Kosmos is a partner in the Tullow Oil-operated Jubilee.
“We remain focused on the things that have brought Kosmos success today, which is deep knowledge of the Cretaceous. We’ve managed to leverage our thinking from a Ghana perspective into Mauritania-Senegal,” Inglis added. “We’ve leveraged that thinking in terms of the basin floor fans, the quality of reservoir outboard, into our concept in Sao Tome. How do we apply similar thinking in other geographies? It’s very much about staying disciplined and being able to move a little faster than if we were just doing it ourselves.”
Velda Addison can be reached at email@example.com.