Kosmos To Acquire Interest In EG-24 Block From Ophir Energy

Kosmos Energy Ltd. (NYSE:KOS) recently made a farm-out agreement with Ophir Energy (LON:OPHR) Plc OPHRY regarding the EG-24 block exploration license, located in Equatorial Guinea. The deal will expand Kosmos’ presence in the region.

Deal Details

Per the accord, Kosmos is expected to obtain 40% non-operated interest in the block and cover Ophir Energy's costs on a block-wide 3D seismic survey during the first exploration period. Moreover, Kosmos is expected to partially fund Ophir Energy’s cost for a well, if they determine to dig one during EG-24 license's second period. Ophir Energy will receive a proportional share of past costs in the block from Kosmos. The deal now awaits government of Equatorial Guinea’s approval.

Shearwater Geoservices' high-capacity 3D seismic vessel, Polar Marquis will start seismic operations on May 14, 2018. An oil company of Equatorial Guinea, GEPetrol has ownership stakes of 20% in the EG-24 license.

Kosmos’ Benefits

Kosmos has valuable knowledge as well as previous experience in the region as it has worked in the Rio Muni Basin, which will add value to the project. The company operates in the adjacent W, S and EG-21 exploration blocks. Notably, the company's operations in these blocks can provide infrastructure tie-backs to the Block EG-24 project, if required.

Moreover, the deal — which can diversify the company’s existing production base — is in line with the company’s 2018 work program for Equatorial Guinea. Kosmos intends to maximize the existing resource value in the region and find new resources that can support the company’s 2019 tie-back focused drilling.

Per 2018 guidance, the company expects capital expenditure to be $300 million, of which a total of $130 million is dedicated toward seismic expenses and new ventures.

Price Performance

Kosmos has lost 1.4% in the past year against the 13.6% gain of its industry.

Zacks Rank and Other Stocks to Consider

Kosmos has a Zacks Rank #2 (Buy). Investors interested in the Energy sector can opt for other top-ranked stocks in the same space like Nine Energy Service, Inc. (NYSE:NINE) and CNOOC Limited (NYSE:CEO) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Nine Energy Service is an onshore service provider. For 2018, the bottom line is likely to be up 33.4%. In the last reported quarter, the company delivered a positive earnings surprise of 6.3%.

Hong Kong-based CNOOC is an integrated energy company. The company’s top line for 2018 is anticipated to improve 49% year over year, while its bottom line is expected to increase 83.3%.

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