Kosmos Energy Priced IPO at the Top of the Range

by: Trent Tillman
Kosmos Energy Ltd (NYSE:KOS) priced its 33 million share IPO at $18.00, the top of the indicated range. Original terms were 30M shares at $16-18. All of the shares were primary shares offered by the company. Proceeds are expected to be used to fund capital expenditures, and in particular the company's exploration and appraisal drilling program and development activities through 2013. Citi (NYSE:C), Barclays (NYSE:BCS), Credit Suisse (NYSE:CS), BNP Paribas (OTCQX:BNPQY) and Societe Generale (OTCPK:SCGLY) are lead underwriters for the offering.
Founded in 2003 and backed by private Equity firms Warburg Pincus and The Blackstone Group, Kosmos is spearheaded by founding partners Brian Maxted, W. Greg Dunlevy and Paul Dailly. These co-founders successfully explored and developed oil and gas reserves in West Africa, while with Triton Energy Ltd. (OTC:TRAE). Neither Warburg Pincus nor Blackstone are selling on the offering, and they will own approximately 41.8% and 34.2% respectively of the shares post offering.
In 2007, Kosmos discovered the largest deepwater late cretaceous find in West Africa, the Jubilee Field. This field is expected to produce 120k bopd by the third quarter of 2011, with a net interest to Kosmos of 28,200 bopd. Tullow OIL (OTCPK:TUWLF) is the partner and unit operator in the Jubilee find. Jubilee was the first of seven discoveries offshore Ghana. The current portfolio also includes 19 prospects in 3 play types in Morocco (approx 4.9Bboe), and 10 prospects in 3 play types in Cameroon (approx 1.2Bboe).
Kosmos is clearly taking advantage of the current high oil prices to make its IPO debut. The company states that at current strip prices, and an estimated 28,200 bopd net from the Jubilee field production, they anticipate approximately $1 billion of EBITDAX per year. They anticipate significant EBITDAX from Jubilee for the next 8 to 10 years.
The first four months of 2011 showcased a number of high profile Private Equity backed deals, including HCA Holdings Inc. (NYSE:HCA), Kinder Morgan Inc. (NYSE:KMI), Nielson Holdings (NYSE:NLSN), American Asset Trust (NYSE:AAT), and GNC Holdings (NYSE:GNC). Combined these companies have raised approximately $9.2 billion. All five companies were met with strong investor demand, with first day gains between 3.4% and 8.7%. All but one of these companies (KMI) are currently above their IPO prices. Kosmos looks to continue the trend and take advantage of the current high oil prices, as their shares opened up 8.3% at $19.50 in Wednesday morning trading. The offering was described as multiple times oversubscribed.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in KOS over the next 72 hours.