Kosmos Energy IPO could transform company into producer

Texas-based oil and gas explorer Kosmos Energy’s recent IPO filing could signal the explorer’s looking to transform itself into a producer on the strength of the the massive Jubilee oilfield off the coast Ghana. Kosmos, which plans to trade under the ticker KOS, recently shot down a $5 billion offer from Chinese and Ghanaian oil companies to buy the company’s 23 percent stake in the Jubilee field, according to the Wall Street Journal.

Kosmos plans to use the bulk of cash from the IPO for new exploration in deep waters off the African coast through 2013. With five deep-water discoveries under its belt, the company’s been at the forefront of exploration at depths up to 35,000 feet – far deeper than explorers were attempting just a few years ago.

Still, the relatively small size of the company’s IPO at $500 million could indicate Kosmos is testing the market’s appetite for an even larger IPO down the road. A bigger IPO would help fund the company’s transformation from explorer to producer.

Kosmos’ management has a long history of drilling success. The company was founded in 2003 by managers from Triton Energy – a company that was eventually acquired by Hess Corporation (NYSE:HES). Brian F. Maxted took the reins as CEO after James C. Musselman retired last month. Maxted formerly served as COO for Kosmos.

The company reported a net loss of $180.2 million for the nine months ended Sept. 30, 2010. Now that oil’s flowing at Jubilee, though, Kosmos has a steady revenue source on its relatively small investment of $1 billion developing the field. Low costs and lots of oil could translate into big returns when the company goes public.

“It would be like they won the lottery,” Oppenheimer & Co. analyst Fadel Gheit told the Journal.



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