Tracey Henderson, Senior Vice President, Exploration from Kosmos Energy at Africa E&P Summit 2019

Interview Conducted by Our Summit Journalist, Ed Reed



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ER: What is it about deepwater African exploration that attracts a US company?

TH: Opportunities. There’s a lot of interesting opportunities and some of the biggest fields around are in Africa. If you look at the evolution over time, companies moved into the Gulf of Mexico, they came from the onshore, into the shelf and then into the deeper waters. Companies look at where else to go to make money and Africa is one of the most attractive regions in the world, with top-class basins.

ER: Is the future looking brighter for exploration?

TH: A lot of that is in line with the oil price trend. After the 2014 downturn there was a real retrenching of companies, they were just really trying to work on the balance sheets and focus more on low risk, proven tie-back type exploration in their heartlands, if you will. While the oil price has not spiked back up, there has been a degree of stability that has made companies more comfortable and businesses are looking more attractive at US$50 per barrel, and then better at US$60 and now we’re around US$70 and things seem to have stabilised. Africa is opportunity rich, as I mentioned in my talk this morning. We’re in the fortunate positon of having an asset [Jubilee in Ghana] that sustained us during the low price times, at US$40 per barrel. That has put us in an advantageous position and we were able to begin investing in exploration a little earlier than others.

ER: What does Kosmos have to bring in IOCs, like BP and Shell?

TH: There are good synergies between what Kosmos does and what supermajors bring to the table. We have a reputation as being a top tier explorer, with an experienced team, which we’ve proved in Equatorial Guinea, in Ghana, in Mauritania-Senegal. I think companies look at us and our experience of exploring new basins and think that where we’re going may be worthwhile. It’s easier with a company the size of Kosmos, from a risk perspective a small company can take advantage of opportunities faster. What the supermajors bring to Kosmos is development capacity. We don’t aspire to be a standalone deepwater developer. It’s beneficial for both sides.

ER: Are the big companies becoming more interested in investing at an earlier stage?

TH: Yes absolutely. We are seeing the likes of ExxonMobil, Total, Shell, Chevron, BP, all becoming very active earlier on. It's beneficial for Kosmos to have a development partner at sites, even early, so that we can walk through the entire process from the start, together. Then if there is success, we've got a built-in development partner. We’re active with BP, for instance, with exploration plans in Sao Tome & Principe and in Cote d’Ivoire. We are finding there is a definite desire to come earlier in the exploration cycle.

ER: The deal in Equatorial Guinea seems like a coming home for Kosmos, with those assets somewhat neglected over the years. What has changed there?

TH: The assets were bought by Amerada Hess and they saw it as a producing asset, so they didn’t focus on additional exploration around those producing fields, Okume and Ceiba. We think a little differently there, we’ve made a big bet. We’ve gone in and picked up those producing assets and it’s been incredibly successful, in terms of the time in which we’ve made back the money we paid for them. We’re working there with Trident Energy, which is made up of former Perenco people, who know how to sweat the production. What I’m most excited about, though, is the exploration opportunities. New 3D and new technologies give reason for optimism. We have ability to go back and look at things that we potentially missed back in the 90s, which is pretty exciting. Sao Tome is similar to Equatorial Guinea. There are oil seeps on both islands in Sao Tome and it seems to be a similar type as that seen in Equatorial Guinea. We’ve got a position there and hopefully it all pays off.

ER: How does the Tortue LNG plan fit into your portfolio? It seems like an odd fit.

TH: It is and it isn’t. The news that we had discovered gas there was not met with jubilant praise. As the industry adage says, ‘if you find gas, and it’s big gas, you can monetise it’. Flash forward four years and we’ve seen that FLNG can work. Investors had been sceptical about it, given the lack of working examples, but now we can see it in Cameroon, the Coral South plan in Mozambique. It’s coming to be accepted. We announced in March, at our Capital Markets Day, that we were planning to sell down some of our equity in the Tortue project. BP, which has a much longer time horizon, has been keen to move beyond Phase 1 at the project to Phases 2 and 3. There’s potential for Yakaar to be developed and if the Orca well is successful that would also play a part. Kosmos, on a good day, is a US$2.7 billion company. We want to stay in it but we want to reduce our involvement to a level that’s sustainable. Reducing our stake will cover our costs but also allow us to stay in it.