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(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Bermuda
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98-0686001
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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Clarendon House
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2 Church Street
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Hamilton, Bermuda
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HM 11
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer ☒
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☐
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(Do not check if a smaller reporting company)
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Emerging growth company ☐
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Class
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Outstanding at August 1, 2018
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Common Shares, $0.01 par value
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|
398,403,309
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Page
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PART I. FINANCIAL INFORMATION
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PART II. OTHER INFORMATION
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“2D seismic data”
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Two-dimensional seismic data, serving as interpretive data that allows a view of a vertical cross-section beneath a prospective area.
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“3D seismic data”
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Three-dimensional seismic data, serving as geophysical data that depicts the subsurface strata in three dimensions. 3D seismic data typically provides a more detailed and accurate interpretation of the subsurface strata than 2D seismic data.
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“API”
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A specific gravity scale, expressed in degrees, that denotes the relative density of various petroleum liquids. The scale increases inversely with density. Thus lighter petroleum liquids will have a higher API than heavier ones.
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“ASC”
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Financial Accounting Standards Board Accounting Standards Codification.
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“ASU”
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Financial Accounting Standards Board Accounting Standards Update.
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“Barrel” or “Bbl”
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A standard measure of volume for petroleum corresponding to approximately 42 gallons at 60 degrees Fahrenheit.
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“BBbl”
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Billion barrels of oil.
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“BBoe”
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Billion barrels of oil equivalent.
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“Bcf”
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Billion cubic feet.
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“Boe”
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Barrels of oil equivalent. Volumes of natural gas converted to barrels of oil using a conversion factor of 6,000 cubic feet of natural gas to one barrel of oil.
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“Boepd”
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Barrels of oil equivalent per day.
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“Bopd”
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Barrels of oil per day.
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“Bwpd”
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Barrels of water per day.
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“Debt cover ratio”
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The “debt cover ratio” is broadly defined, for each applicable calculation date, as the ratio of (x) total long-term debt less cash and cash equivalents and restricted cash, to (y) the aggregate EBITDAX (see below) of the Company for the previous twelve months.
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“Developed acreage”
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The number of acres that are allocated or assignable to productive wells or wells capable of production.
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“Development”
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The phase in which an oil or natural gas field is brought into production by drilling development wells and installing appropriate production systems.
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“Dry hole”
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A well that has not encountered a hydrocarbon bearing reservoir expected to produce in commercial quantities.
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“EBITDAX”
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Net income (loss) plus (i) exploration expense, (ii) depletion, depreciation and amortization expense, (iii) equity‑based compensation expense, (iv) unrealized (gain) loss on commodity derivatives (realized losses are deducted and realized gains are added back), (v) (gain) loss on sale of oil and gas properties, (vi) interest (income) expense, (vii) income taxes, (viii) loss on extinguishment of debt, (ix) doubtful accounts expense and (x) similar other material items which management believes affect the comparability of operating results. The Facility EBITDAX definition includes 50% of the EBITDAX adjustments of Kosmos-Trident International Petroleum Inc.
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“E&P”
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Exploration and production.
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“FASB”
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Financial Accounting Standards Board.
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“Farm-in”
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An agreement whereby a party acquires a portion of the participating interest in a block from the owner of such interest, usually in return for cash and for taking on a portion of the drilling costs of one or more specific wells or other performance by the assignee as a condition of the assignment.
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“Farm-out”
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An agreement whereby the owner of the participating interest agrees to assign a portion of its participating interest in a block to another party for cash and/or for the assignee taking on a portion of the drilling costs of one or more specific wells and/or other work as a condition of the assignment.
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“Field life cover ratio”
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The “field life cover ratio” is broadly defined, for each applicable forecast period, as the ratio of (x) the forecasted net present value of net cash flow through depletion plus the net present value of the forecast of certain capital expenditures incurred in relation to the Ghana and Equatorial Guinea assets, to (y) the aggregate loan amounts outstanding under the Facility.
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“FPSO”
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Floating production, storage and offloading vessel.
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“Interest cover ratio”
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The “interest cover ratio” is broadly defined, for each applicable calculation date, as the ratio of (x) the aggregate EBITDAX (see above) of the Company for the previous twelve months, to (y) interest expense less interest income for the Company for the previous twelve months.
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“Loan life cover ratio”
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The “loan life cover ratio” is broadly defined, for each applicable forecast period, as the ratio of (x) net present value of forecasted net cash flow through the final maturity date of the Facility plus the net present value of forecasted capital expenditures incurred in relation to the Ghana and Equatorial Guinea assets, to (y) the aggregate loan amounts outstanding under the Facility.
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June 30,
2018 |
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December 31,
2017 |
||||
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(Unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$
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116,941
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$
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233,412
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Restricted cash
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20,377
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56,380
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Receivables:
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||||
Joint interest billings, net
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68,006
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134,565
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Oil sales
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73,700
|
|
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—
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Related party
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2,610
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|
|
780
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Other
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13,501
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25,616
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Inventories
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71,085
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71,861
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Prepaid expenses and other
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33,638
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9,306
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Derivatives
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18,053
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1,682
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Total current assets
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417,911
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533,602
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Property and equipment:
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Oil and gas properties, net
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2,253,815
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2,310,973
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Other property, net
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9,249
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6,855
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Property and equipment, net
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2,263,064
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2,317,828
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Other assets:
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Equity method investment
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151,310
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236,514
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Restricted cash
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9,168
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15,194
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Long-term receivables - joint interest billings
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28,981
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34,941
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Deferred financing costs, net of accumulated amortization of $15,320 and $13,951 at June 30, 2018 and December 31, 2017, respectively
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1,141
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2,510
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Deferred tax assets
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20,763
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22,517
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Derivatives
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10,421
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39
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Other
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684
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29,458
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Total assets
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$
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2,903,443
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$
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3,192,603
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Liabilities and shareholders’ equity
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Current liabilities:
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Accounts payable
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$
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128,471
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$
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141,787
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Accrued liabilities
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145,600
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219,412
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Derivatives
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162,329
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67,531
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Total current liabilities
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436,400
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428,730
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Long-term liabilities:
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Long-term debt, net
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1,167,775
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1,282,797
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Derivatives
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83,733
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30,209
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Asset retirement obligations
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70,122
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66,595
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Deferred tax liabilities
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392,918
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476,548
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Other long-term liabilities
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8,364
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10,612
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Total long-term liabilities
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1,722,912
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1,866,761
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Shareholders’ equity:
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|
|
|
|
|
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Preference shares, $0.01 par value; 200,000,000 authorized shares; zero issued at June 30, 2018 and December 31, 2017
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—
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—
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Common shares, $0.01 par value; 2,000,000,000 authorized shares; 407,557,090 and 398,599,457 issued at June 30, 2018 and December 31, 2017, respectively
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4,076
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3,986
|
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Additional paid-in capital
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2,015,463
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2,014,525
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Accumulated deficit
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(1,226,701
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)
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(1,073,202
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)
|
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Treasury stock, at cost, 9,263,269 and 9,188,819 shares at June 30, 2018 and December 31, 2017, respectively
|
(48,707
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)
|
|
(48,197
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)
|
||
Total shareholders’ equity
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744,131
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|
|
897,112
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|
||
Total liabilities and shareholders’ equity
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$
|
2,903,443
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$
|
3,192,603
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Three Months Ended
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Six Months Ended
|
||||||||||||
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June 30,
|
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June 30,
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||||||||||||
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2018
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2017
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2018
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2017
|
||||||||
Revenues and other income:
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||||
Oil and gas revenue
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$
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215,191
|
|
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$
|
136,363
|
|
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$
|
342,387
|
|
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$
|
239,795
|
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Other income, net
|
282
|
|
|
10,161
|
|
|
263
|
|
|
58,695
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|
||||
Total revenues and other income
|
215,473
|
|
|
146,524
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|
|
342,650
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|
|
298,490
|
|
||||
Costs and expenses:
|
|
|
|
|
|
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|
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|
||||
Oil and gas production
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49,815
|
|
|
21,604
|
|
|
96,583
|
|
|
41,490
|
|
||||
Facilities insurance modifications, net
|
1,029
|
|
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(2
|
)
|
|
9,478
|
|
|
2,572
|
|
||||
Exploration expenses
|
77,481
|
|
|
19,982
|
|
|
98,674
|
|
|
125,696
|
|
||||
General and administrative
|
17,497
|
|
|
14,739
|
|
|
39,380
|
|
|
30,526
|
|
||||
Depletion and depreciation
|
74,289
|
|
|
72,441
|
|
|
128,566
|
|
|
107,419
|
|
||||
Interest and other financing costs, net
|
18,870
|
|
|
19,465
|
|
|
44,564
|
|
|
36,251
|
|
||||
Derivatives, net
|
140,272
|
|
|
(25,411
|
)
|
|
178,750
|
|
|
(63,268
|
)
|
||||
(Gain) loss on equity method investments, net
|
(16,100
|
)
|
|
6,426
|
|
|
(34,796
|
)
|
|
6,426
|
|
||||
Other expenses, net
|
938
|
|
|
2,008
|
|
|
4,643
|
|
|
2,770
|
|
||||
Total costs and expenses
|
364,091
|
|
|
131,252
|
|
|
565,842
|
|
|
289,882
|
|
||||
Income (loss) before income taxes
|
(148,618
|
)
|
|
15,272
|
|
|
(223,192
|
)
|
|
8,608
|
|
||||
Income tax expense (benefit)
|
(45,345
|
)
|
|
23,739
|
|
|
(69,693
|
)
|
|
45,916
|
|
||||
Net loss
|
$
|
(103,273
|
)
|
|
$
|
(8,467
|
)
|
|
$
|
(153,499
|
)
|
|
$
|
(37,308
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
(0.26
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.10
|
)
|
Diluted
|
$
|
(0.26
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of shares used to compute net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
396,826
|
|
|
387,952
|
|
|
396,218
|
|
|
387,634
|
|
||||
Diluted
|
396,826
|
|
|
387,952
|
|
|
396,218
|
|
|
387,634
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|||||||||||
|
Common Shares
|
|
Paid-in
|
|
Accumulated
|
|
Treasury
|
|
|
|||||||||||||
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Stock
|
|
Total
|
|||||||||||
Balance as of December 31, 2017
|
398,599
|
|
|
$
|
3,986
|
|
|
$
|
2,014,525
|
|
|
$
|
(1,073,202
|
)
|
|
$
|
(48,197
|
)
|
|
$
|
897,112
|
|
Equity-based compensation
|
—
|
|
|
—
|
|
|
18,213
|
|
|
—
|
|
|
—
|
|
|
18,213
|
|
|||||
Restricted stock awards and units
|
8,958
|
|
|
90
|
|
|
(90
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchase of treasury stock / tax withholdings
|
—
|
|
|
—
|
|
|
(17,185
|
)
|
|
—
|
|
|
(510
|
)
|
|
(17,695
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(153,499
|
)
|
|
—
|
|
|
(153,499
|
)
|
|||||
Balance as of June 30, 2018
|
407,557
|
|
|
$
|
4,076
|
|
|
$
|
2,015,463
|
|
|
$
|
(1,226,701
|
)
|
|
$
|
(48,707
|
)
|
|
$
|
744,131
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Operating activities
|
|
|
|
|
|
||
Net loss
|
$
|
(153,499
|
)
|
|
$
|
(37,308
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depletion, depreciation and amortization
|
133,289
|
|
|
112,521
|
|
||
Deferred income taxes
|
(81,876
|
)
|
|
41,017
|
|
||
Unsuccessful well costs
|
44,654
|
|
|
3,605
|
|
||
Change in fair value of derivatives
|
177,790
|
|
|
(58,944
|
)
|
||
Cash settlements on derivatives, net (including $(57.3) million and $24.3 million on commodity hedges during 2018 and 2017)
|
(56,221
|
)
|
|
19,417
|
|
||
Equity-based compensation
|
17,085
|
|
|
20,329
|
|
||
Loss on extinguishment of debt
|
4,056
|
|
|
—
|
|
||
Distributions in excess of equity in earnings
|
5,234
|
|
|
6,426
|
|
||
Other
|
449
|
|
|
2,514
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
(Increase) decrease in receivables
|
10,067
|
|
|
(28,251
|
)
|
||
(Increase) decrease in inventories
|
800
|
|
|
(6,038
|
)
|
||
(Increase) decrease in prepaid expenses and other
|
4,888
|
|
|
(17,459
|
)
|
||
Decrease in accounts payable
|
(13,316
|
)
|
|
(131,480
|
)
|
||
Increase (decrease) in accrued liabilities
|
(92,967
|
)
|
|
56,137
|
|
||
Net cash provided by (used in) operating activities
|
433
|
|
|
(17,514
|
)
|
||
Investing activities
|
|
|
|
|
|
||
Oil and gas assets
|
(92,650
|
)
|
|
(42,805
|
)
|
||
Other property
|
(2,815
|
)
|
|
(1,454
|
)
|
||
Return of investment from KTIPI
|
79,970
|
|
|
—
|
|
||
Proceeds on sale of assets
|
—
|
|
|
222,068
|
|
||
Net cash provided by (used in) investing activities
|
(15,495
|
)
|
|
177,809
|
|
||
Financing activities
|
|
|
|
|
|
||
Payments on long-term debt
|
(100,000
|
)
|
|
(200,000
|
)
|
||
Purchase of treasury stock / tax withholdings
|
(17,695
|
)
|
|
(1,945
|
)
|
||
Deferred financing costs
|
(25,743
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
(143,438
|
)
|
|
(201,945
|
)
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(158,500
|
)
|
|
(41,650
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
304,986
|
|
|
273,195
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
146,486
|
|
|
$
|
231,545
|
|
|
|
|
|
||||
Supplemental cash flow information
|
|
|
|
|
|
||
Cash paid for:
|
|
|
|
|
|
||
Interest
|
$
|
47,845
|
|
|
$
|
24,944
|
|
Income taxes
|
$
|
22,596
|
|
|
$
|
27,199
|
|
Non-cash activity:
|
|
|
|
|
|
||
Contribution to equity method investment
|
$
|
—
|
|
|
$
|
133,893
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Cash and cash equivalents
|
$
|
116,941
|
|
|
$
|
233,412
|
|
Restricted cash - current
|
20,377
|
|
|
56,380
|
|
||
Restricted cash - long-term
|
9,168
|
|
|
15,194
|
|
||
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows
|
$
|
146,486
|
|
|
$
|
304,986
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In thousands)
|
||||||||||||||
Revenue from contracts with customers - Ghana
|
$
|
213,841
|
|
|
$
|
140,915
|
|
|
$
|
341,878
|
|
|
$
|
244,355
|
|
Provisional oil sales contracts
|
1,350
|
|
|
(4,552
|
)
|
|
509
|
|
|
(4,560
|
)
|
||||
Oil and gas revenue
|
$
|
215,191
|
|
|
$
|
136,363
|
|
|
342,387
|
|
|
239,795
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Oil and gas properties:
|
|
|
|
|
|
||
Proved properties
|
$
|
1,676,732
|
|
|
$
|
1,653,616
|
|
Unproved properties
|
492,468
|
|
|
465,109
|
|
||
Support equipment and facilities
|
1,442,325
|
|
|
1,427,054
|
|
||
Total oil and gas properties
|
3,611,525
|
|
|
3,545,779
|
|
||
Accumulated depletion
|
(1,357,710
|
)
|
|
(1,234,806
|
)
|
||
Oil and gas properties, net
|
2,253,815
|
|
|
2,310,973
|
|
||
|
|
|
|
||||
Other property
|
43,906
|
|
|
39,405
|
|
||
Accumulated depreciation
|
(34,657
|
)
|
|
(32,550
|
)
|
||
Other property, net
|
9,249
|
|
|
6,855
|
|
||
|
|
|
|
||||
Property and equipment, net
|
$
|
2,263,064
|
|
|
$
|
2,317,828
|
|
|
June 30,
2018 |
||
|
(In thousands)
|
||
Beginning balance
|
$
|
410,113
|
|
Additions to capitalized exploratory well costs pending the determination of proved reserves
|
6,619
|
|
|
Reclassification due to determination of proved reserves
|
—
|
|
|
Capitalized exploratory well costs charged to expense
|
(796
|
)
|
|
Ending balance
|
$
|
415,936
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(In thousands, except well counts)
|
||||||
Exploratory well costs capitalized for a period of one year or less
|
$
|
35,513
|
|
|
$
|
67,159
|
|
Exploratory well costs capitalized for a period of one to two years
|
258,998
|
|
|
291,252
|
|
||
Exploratory well costs capitalized for a period of three to six years
|
121,425
|
|
|
51,702
|
|
||
Ending balance
|
$
|
415,936
|
|
|
$
|
410,113
|
|
Number of projects that have exploratory well costs that have been capitalized for a period greater than one year
|
5
|
|
|
5
|
|
|
June 30,
|
|
December 31,
|
||||
|
2018
|
|
2017
|
||||
|
(In thousands)
|
||||||
Assets
|
|
|
|
|
|||
Total current assets
|
$
|
164,997
|
|
|
$
|
179,070
|
|
Property and equipment, net
|
311,138
|
|
|
345,611
|
|
||
Other assets
|
544
|
|
|
567
|
|
||
Total assets
|
$
|
476,679
|
|
|
$
|
525,248
|
|
|
|
|
|
||||
Liabilities and shareholders' equity
|
|
|
|
||||
Total current liabilities
|
$
|
132,096
|
|
|
$
|
106,769
|
|
Total long-term liabilities
|
548,434
|
|
|
565,591
|
|
||
Shareholders' equity:
|
|
|
|
||||
Total shareholders' equity
|
(203,851
|
)
|
|
(147,112
|
)
|
||
Total liabilities and shareholders' equity
|
$
|
476,679
|
|
|
$
|
525,248
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||
|
(In thousands)
|
||||||
Revenues and other income:
|
|
|
|
|
|||
Oil and gas revenue
|
$
|
138,395
|
|
|
$
|
384,749
|
|
Other income
|
(170
|
)
|
|
117
|
|
||
Total revenues and other income
|
138,225
|
|
|
384,866
|
|
||
|
|
|
|
||||
Costs and expenses:
|
|
|
|
||||
Oil and gas production
|
23,332
|
|
|
75,033
|
|
||
Depletion and depreciation
|
21,881
|
|
|
75,951
|
|
||
Other expenses, net
|
(73
|
)
|
|
(152
|
)
|
||
Total costs and expenses
|
45,140
|
|
|
150,832
|
|
||
|
|
|
|
||||
Income before income taxes
|
93,085
|
|
|
234,034
|
|
||
Income tax expense
|
33,620
|
|
|
83,251
|
|
||
Net income
|
$
|
59,465
|
|
|
$
|
150,783
|
|
|
|
|
|
||||
Kosmos' share of net income
|
$
|
29,733
|
|
|
$
|
75,392
|
|
Basis difference amortization(1)
|
13,633
|
|
|
40,596
|
|
||
Equity in earnings - KTIPI
|
$
|
16,100
|
|
|
$
|
34,796
|
|
(1)
|
The basis difference, which is associated with oil and gas properties and subject to amortization, has been allocated to the Ceiba Field and Okume Complex. We amortize the basis difference using the unit-of-production method.
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Outstanding debt principal balances:
|
|
|
|
|
|
||
Facility
|
$
|
700,000
|
|
|
$
|
800,000
|
|
Senior Notes
|
525,000
|
|
|
525,000
|
|
||
Total
|
1,225,000
|
|
|
1,325,000
|
|
||
Unamortized deferred financing costs and discounts(1)
|
(57,225
|
)
|
|
(42,203
|
)
|
||
Long-term debt, net
|
$
|
1,167,775
|
|
|
$
|
1,282,797
|
|
(1)
|
Includes
$40.9 million
and
$23.6 million
of unamortized deferred financing costs related to the Facility and
$16.3 million
and
$18.6 million
of unamortized deferred financing costs and discounts related to the Senior Notes as of
June 30, 2018
and
December 31, 2017
, respectively.
|
|
Payments Due by Year
|
||||||||||||||||||||||||||
|
Total
|
|
2018(2)
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||
Principal debt repayments(1)
|
$
|
1,225,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
525,000
|
|
|
$
|
—
|
|
|
$
|
700,000
|
|
(1)
|
Includes the scheduled principal maturities for the
$525.0 million
aggregate principal amount of Senior Notes issued in August 2014 and April 2015 and the Facility. The scheduled maturities of debt related to the Facility are based on, as of
June 30, 2018
, our level of borrowings and our estimated future available borrowing base commitment levels in future periods. Any increases or decreases in the level of borrowings or increases or decreases in the available borrowing base would impact the scheduled maturities of debt during the next five years and thereafter. As of
June 30, 2018
, there were
no
borrowings under the Corporate Revolver.
|
(2)
|
Represents payments for the period
July 1, 2018
through
December 31, 2018
.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In thousands)
|
||||||||||||||
Interest expense
|
$
|
24,912
|
|
|
$
|
22,792
|
|
|
$
|
49,804
|
|
|
$
|
45,973
|
|
Amortization—deferred financing costs
|
2,283
|
|
|
2,551
|
|
|
4,723
|
|
|
5,102
|
|
||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
4,056
|
|
|
—
|
|
||||
Capitalized interest
|
(9,292
|
)
|
|
(7,376
|
)
|
|
(14,112
|
)
|
|
(16,935
|
)
|
||||
Deferred interest
|
166
|
|
|
634
|
|
|
(1,090
|
)
|
|
949
|
|
||||
Interest income
|
(843
|
)
|
|
(760
|
)
|
|
(1,791
|
)
|
|
(1,740
|
)
|
||||
Other, net
|
1,644
|
|
|
1,624
|
|
|
2,974
|
|
|
2,902
|
|
||||
Interest and other financing costs, net
|
$
|
18,870
|
|
|
$
|
19,465
|
|
|
$
|
44,564
|
|
|
$
|
36,251
|
|
|
|
|
|
|
|
Weighted Average Dated Brent Price per Bbl
|
|||||||||||||||||||||||
|
|
|
|
|
|
Net Deferred
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
Premium
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Term
|
|
Type of Contract
|
|
MBbl
|
|
Payable/(Receivable)
|
|
Swap
|
|
Sold Put
|
|
Floor
|
|
Ceiling
|
|
Call
|
|||||||||||||
2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
July — December
|
|
Swap with puts
|
|
3,000
|
|
|
$
|
—
|
|
|
$
|
56.75
|
|
|
$
|
43.33
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
July — December
|
|
Three-way collars
|
|
1,466
|
|
|
0.74
|
|
|
—
|
|
|
41.57
|
|
|
56.57
|
|
|
65.91
|
|
|
—
|
|
||||||
July — December
|
|
Four-way collars
|
|
1,503
|
|
|
1.06
|
|
|
—
|
|
|
40.00
|
|
|
50.00
|
|
|
61.33
|
|
|
70.00
|
|
||||||
July — December
|
|
Sold calls(1)
|
|
1,006
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65.00
|
|
|
—
|
|
||||||
July — December
|
|
Purchased Calls
|
|
1,000
|
|
|
1.88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70.00
|
|
||||||
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
January — December
|
|
Three-way collars
|
|
10,500
|
|
|
$
|
0.61
|
|
|
$
|
—
|
|
|
$
|
43.81
|
|
|
$
|
53.33
|
|
|
$
|
69.77
|
|
|
$
|
—
|
|
January — December
|
|
Sold calls(1)
|
|
913
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80.00
|
|
|
—
|
|
||||||
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
January — December
|
|
Sold calls(1)
|
|
4,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
80.00
|
|
|
$
|
—
|
|
(1)
|
Represents call option contracts sold to counterparties to enhance other derivative positions.
|
|
|
|
|
|
|
Weighted Average
|
||||||||
Term
|
|
Type of Contract
|
|
Floating Rate
|
|
Notional
|
|
Swap
|
|
Sold Call
|
||||
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
||||
July 2018 — December 2018
|
|
Capped swap
|
|
1-month LIBOR
|
|
$
|
200,000
|
|
|
1.23
|
%
|
|
3.00
|
%
|
|
|
|
|
Estimated Fair Value
|
||||||
|
|
|
|
Asset (Liability)
|
||||||
Type of Contract
|
|
Balance Sheet Location
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
(In thousands)
|
||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
||||
Derivative assets:
|
|
|
|
|
|
|
||||
Commodity(1)
|
|
Derivatives assets—current
|
|
$
|
17,119
|
|
|
$
|
665
|
|
Interest rate
|
|
Derivatives assets—current
|
|
934
|
|
|
1,017
|
|
||
Commodity(2)
|
|
Derivatives assets—long-term
|
|
10,421
|
|
|
39
|
|
||
Derivative liabilities:
|
|
|
|
|
|
|
||||
Commodity(3)
|
|
Derivatives liabilities—current
|
|
(162,329
|
)
|
|
(67,531
|
)
|
||
Commodity(4)
|
|
Derivatives liabilities—long-term
|
|
(83,733
|
)
|
|
(30,209
|
)
|
||
Total derivatives not designated as hedging instruments
|
|
|
|
$
|
(217,588
|
)
|
|
$
|
(96,019
|
)
|
(1)
|
Includes net deferred premiums payable of
$2.1 million
and net deferred premiums receivable of
$0.8 million
related to commodity derivative contracts as of
June 30, 2018
and
December 31, 2017
, respectively.
|
(2)
|
Includes net deferred premiums payable of
$0.9 million
and net deferred premiums receivable of
$0.1 million
related to commodity derivative contracts as of
June 30, 2018
and
December 31, 2017
, respectively.
|
(3)
|
Includes net deferred premiums payable of
$5.1 million
and
$5.6 million
related to commodity derivative contracts as of
June 30, 2018
and
December 31, 2017
, respectively.
|
(4)
|
Includes net deferred premiums payable of
$2.8 million
and
$4.8 million
related to commodity derivative contracts as of
June 30, 2018
and
December 31, 2017
, respectively.
|
|
|
|
|
Amount of Gain/(Loss)
|
|
Amount of Gain/(Loss)
|
||||||||||||
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
|
June 30,
|
|
June 30,
|
||||||||||||
Type of Contract
|
|
Location of Gain/(Loss)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
(In thousands)
|
||||||||||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commodity(1)
|
|
Oil and gas revenue
|
|
$
|
1,350
|
|
|
$
|
(4,552
|
)
|
|
$
|
509
|
|
|
$
|
(4,560
|
)
|
Commodity
|
|
Derivatives, net
|
|
(140,272
|
)
|
|
25,411
|
|
|
(178,750
|
)
|
|
63,268
|
|
||||
Interest rate
|
|
Interest expense
|
|
98
|
|
|
(92
|
)
|
|
451
|
|
|
236
|
|
||||
Total derivatives not designated as hedging instruments
|
|
|
|
$
|
(138,824
|
)
|
|
$
|
20,767
|
|
|
$
|
(177,790
|
)
|
|
$
|
58,944
|
|
(1)
|
Amounts represent the change in fair value of our provisional oil sales contracts.
|
•
|
Level 1 — quoted prices for identical assets or liabilities in active markets.
|
•
|
Level 2 — quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data by correlation or other means.
|
•
|
Level 3 — unobservable inputs for the asset or liability. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
|
(In thousands)
|
||||||||||||||
Senior Notes
|
$
|
509,685
|
|
|
$
|
535,264
|
|
|
$
|
507,600
|
|
|
$
|
542,472
|
|
Facility
|
700,000
|
|
|
700,000
|
|
|
800,000
|
|
|
800,000
|
|
||||
Total
|
$
|
1,209,685
|
|
|
$
|
1,235,264
|
|
|
$
|
1,307,600
|
|
|
$
|
1,342,472
|
|
|
|
|
Weighted-
|
|||
|
Service Vesting
|
|
Average
|
|||
|
Restricted Stock
|
|
Grant-Date
|
|||
|
Awards
|
|
Fair Value
|
|||
|
(In thousands)
|
|
|
|||
Outstanding at December 31, 2017
|
220
|
|
|
$
|
8.64
|
|
Granted
|
—
|
|
|
—
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Vested
|
(220
|
)
|
|
8.64
|
|
|
Outstanding at June 30, 2018
|
—
|
|
|
—
|
|
|
|
|
Weighted-
|
|
Market / Service
|
|
Weighted-
|
||||||
|
Service Vesting
|
|
Average
|
|
Vesting
|
|
Average
|
||||||
|
Restricted Stock
|
|
Grant-Date
|
|
Restricted Stock
|
|
Grant-Date
|
||||||
|
Units
|
|
Fair Value
|
|
Units
|
|
Fair Value
|
||||||
|
(In thousands)
|
|
|
|
(In thousands)
|
|
|
||||||
Outstanding at December 31, 2017
|
4,183
|
|
|
$
|
6.39
|
|
|
8,452
|
|
|
$
|
11.26
|
|
Granted(1)
|
2,125
|
|
|
6.92
|
|
|
7,439
|
|
|
12.35
|
|
||
Forfeited
|
(63
|
)
|
|
6.73
|
|
|
(37
|
)
|
|
10.04
|
|
||
Vested
|
(2,062
|
)
|
|
6.93
|
|
|
(9,350
|
)
|
|
13.75
|
|
||
Outstanding at June 30, 2018
|
4,183
|
|
|
6.33
|
|
|
6,504
|
|
|
8.91
|
|
(1)
|
The restricted stock units with a combination of market and service vesting criteria include
4.9 million
shares granted as a result of the 2014 and 2015 awards achieving
200%
of their respective market performance conditions.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In thousands)
|
||||||||||||||
Bermuda
|
$
|
(15,890
|
)
|
|
$
|
(16,759
|
)
|
|
$
|
(31,961
|
)
|
|
$
|
(32,940
|
)
|
United States
|
1,682
|
|
|
1,382
|
|
|
3,315
|
|
|
2,794
|
|
||||
Foreign—other
|
(134,410
|
)
|
|
30,649
|
|
|
(194,546
|
)
|
|
38,754
|
|
||||
Income (loss) before income taxes
|
$
|
(148,618
|
)
|
|
$
|
15,272
|
|
|
$
|
(223,192
|
)
|
|
$
|
8,608
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss
|
$
|
(103,273
|
)
|
|
$
|
(8,467
|
)
|
|
$
|
(153,499
|
)
|
|
$
|
(37,308
|
)
|
Basic income allocable to participating securities(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Basic net loss allocable to common shareholders
|
(103,273
|
)
|
|
(8,467
|
)
|
|
(153,499
|
)
|
|
(37,308
|
)
|
||||
Diluted adjustments to income allocable to participating securities(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted net loss allocable to common shareholders
|
$
|
(103,273
|
)
|
|
$
|
(8,467
|
)
|
|
$
|
(153,499
|
)
|
|
$
|
(37,308
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
396,826
|
|
|
387,952
|
|
|
396,218
|
|
|
387,634
|
|
||||
Restricted stock awards and units(1)(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted
|
396,826
|
|
|
387,952
|
|
|
396,218
|
|
|
387,634
|
|
||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.26
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.10
|
)
|
Diluted
|
$
|
(0.26
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.10
|
)
|
(1)
|
Our service vesting restricted stock awards represent participating securities because they participate in non-forfeitable dividends with common equity owners. Income allocable to participating securities represents the distributed and undistributed earnings attributable to the participating securities. Our restricted stock awards with market and service vesting criteria and all restricted stock units are not considered to be participating securities and, therefore, are excluded from the basic net
loss
per common share calculation. Our service vesting restricted stock awards do not participate in undistributed net losses because they are not contractually obligated to do so and, therefore, are excluded from the basic net
loss
per common share calculation in periods we are in a net loss position.
|
(2)
|
We excluded outstanding restricted stock awards and units of
11.4 million
and
13.0 million
for the
three
months ended
June 30, 2018
and
2017
, respectively, and
11.9 million
and
13.0 million
for the
six
months ended
June 30, 2018
and
2017
, respectively, from the computations of diluted net
loss
per share because the effect would have been anti-dilutive
.
|
|
Payments Due By Year(1)
|
||||||||||||||||||||||||||
|
Total
|
|
2018(2)
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||
Operating leases(3)
|
$
|
11,930
|
|
|
$
|
2,521
|
|
|
$
|
5,251
|
|
|
$
|
1,366
|
|
|
$
|
419
|
|
|
$
|
419
|
|
|
$
|
1,954
|
|
(1)
|
Does not include purchase commitments for jointly owned fields and facilities where we are not the operator and excludes commitments for exploration activities, including well commitments, in our petroleum contracts.
|
(2)
|
Represents payments for the period from
July 1, 2018
through
December 31, 2018
.
|
(3)
|
Primarily relates to corporate office and foreign office leases.
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Accrued liabilities:
|
|
|
|
|
|
||
Exploration, development and production
|
$
|
85,079
|
|
|
$
|
144,717
|
|
General and administrative expenses
|
20,178
|
|
|
31,124
|
|
||
Interest
|
20,331
|
|
|
20,457
|
|
||
Income taxes
|
2,539
|
|
|
17,423
|
|
||
Taxes other than income
|
3,906
|
|
|
3,270
|
|
||
Derivatives
|
12,394
|
|
|
825
|
|
||
Other
|
1,173
|
|
|
1,596
|
|
||
|
$
|
145,600
|
|
|
$
|
219,412
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In thousands)
|
||||||||||||||
(Gain) loss on disposal of inventory
|
$
|
(24
|
)
|
|
$
|
547
|
|
|
$
|
(24
|
)
|
|
$
|
547
|
|
Gain on insurance settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(461
|
)
|
||||
Disputed charges and related costs
|
626
|
|
|
1,209
|
|
|
2,961
|
|
|
2,439
|
|
||||
Other, net
|
336
|
|
|
252
|
|
|
1,706
|
|
|
245
|
|
||||
Other expenses, net
|
$
|
938
|
|
|
$
|
2,008
|
|
|
$
|
4,643
|
|
|
$
|
2,770
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
June 30, 2018 |
|
Six Months Ended
June 30, 2018 |
||||||||||||||||||||
|
Kosmos
|
|
Equity Method Investment - Equatorial Guinea(1)
|
|
Total
|
|
Kosmos
|
|
Equity Method Investment Equatorial Guinea
|
|
Total
|
||||||||||||
|
(In thousands, except per barrel data)
|
||||||||||||||||||||||
Sales volumes (MBbl):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Jubilee
|
1,900
|
|
|
—
|
|
|
1,900
|
|
|
2,897
|
|
|
—
|
|
|
2,897
|
|
||||||
TEN
|
995
|
|
|
—
|
|
|
995
|
|
|
1,932
|
|
|
—
|
|
|
1,932
|
|
||||||
Ceiba / Okume
|
—
|
|
|
950
|
|
|
950
|
|
|
—
|
|
|
2,830
|
|
|
2,830
|
|
||||||
|
2,895
|
|
|
950
|
|
|
3,845
|
|
|
4,829
|
|
|
2,830
|
|
|
7,659
|
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Oil and gas sales
|
$
|
215,191
|
|
|
$
|
69,198
|
|
|
$
|
284,389
|
|
|
$
|
342,387
|
|
|
$
|
192,375
|
|
|
$
|
534,762
|
|
Average sales price per Boe
|
74.32
|
|
|
72.84
|
|
|
73.96
|
|
|
70.90
|
|
|
67.98
|
|
|
69.82
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Costs:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Oil and gas production, excluding workovers
|
$
|
51,894
|
|
|
$
|
11,666
|
|
|
$
|
63,560
|
|
|
$
|
94,154
|
|
|
$
|
37,516
|
|
|
$
|
131,670
|
|
Oil and gas production, workovers
|
(2,079
|
)
|
|
—
|
|
|
(2,079
|
)
|
|
2,429
|
|
|
—
|
|
|
2,429
|
|
||||||
Total oil and gas production costs
|
$
|
49,815
|
|
|
$
|
11,666
|
|
|
$
|
61,481
|
|
|
$
|
96,583
|
|
|
$
|
37,516
|
|
|
$
|
134,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Depletion and depreciation
|
$
|
74,289
|
|
|
$
|
24,574
|
|
|
$
|
98,863
|
|
|
$
|
128,566
|
|
|
$
|
78,572
|
|
|
$
|
207,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Average cost per Boe:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Oil and gas production, excluding workovers
|
$
|
17.93
|
|
|
$
|
12.28
|
|
|
$
|
16.53
|
|
|
$
|
19.51
|
|
|
$
|
13.26
|
|
|
$
|
17.19
|
|
Oil and gas production, workovers
|
(0.72
|
)
|
|
—
|
|
|
(0.54
|
)
|
|
0.50
|
|
|
—
|
|
|
0.32
|
|
||||||
Total oil production costs
|
17.21
|
|
|
12.28
|
|
|
15.99
|
|
|
20.01
|
|
|
13.26
|
|
|
17.51
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Depletion and depreciation
|
25.66
|
|
|
25.87
|
|
|
25.71
|
|
|
26.61
|
|
|
27.76
|
|
|
27.05
|
|
||||||
Oil and gas production cost and depletion costs
|
$
|
42.87
|
|
|
$
|
38.15
|
|
|
$
|
41.70
|
|
|
$
|
46.62
|
|
|
$
|
41.02
|
|
|
$
|
44.56
|
|
(1)
|
For the
three and six
months ended
June 30, 2018
, we have presented our 50% share of the results of operations, including our basis difference which is reflected in depletion and depreciation. Under the equity method of accounting, we only recognize our share of the net income of KTIPI, which is recorded in (gain) loss on equity method investments, net in the consolidated statement of operations.
|
|
Three Months Ended
June 30, 2017 |
|
Six Months Ended
June 30, 2017 |
||||
|
(In thousands, except per barrel data)
|
||||||
Sales volumes (MBbl):
|
|
|
|
||||
Jubilee
|
1,919
|
|
|
3,895
|
|
||
TEN
|
996
|
|
|
996
|
|
||
|
2,915
|
|
|
4,891
|
|
||
Revenues:
|
|
|
|
||||
Oil and gas sales
|
$
|
136,363
|
|
|
$
|
239,795
|
|
Average sales price per Boe
|
46.78
|
|
|
49.03
|
|
||
|
|
|
|
||||
Costs:
|
|
|
|
||||
Oil and gas production, excluding workovers
|
$
|
21,045
|
|
|
$
|
40,992
|
|
Oil and gas production, workovers
|
559
|
|
|
498
|
|
||
Total oil and gas production costs
|
$
|
21,604
|
|
|
$
|
41,490
|
|
|
|
|
|
||||
Depletion and depreciation
|
$
|
72,441
|
|
|
$
|
107,419
|
|
|
|
|
|
||||
Average cost per Boe:
|
|
|
|
||||
Oil and gas production, excluding workovers
|
$
|
7.22
|
|
|
$
|
8.38
|
|
Oil and gas production, workovers
|
0.19
|
|
|
0.10
|
|
||
Total oil production costs
|
7.41
|
|
|
8.48
|
|
||
|
|
|
|
||||
Depletion and depreciation
|
24.85
|
|
|
21.96
|
|
||
Oil and gas production cost and depletion costs
|
$
|
32.26
|
|
|
$
|
30.44
|
|
|
Actively Drilling or
|
|
Wells Suspended or
|
||||||||||||||||||||
|
Completing
|
|
Waiting on Completion
|
||||||||||||||||||||
|
Exploration
|
|
Development
|
|
Exploration
|
|
Development
|
||||||||||||||||
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
||||||||
Ghana
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Jubilee Unit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
2.65
|
|
West Cape Three Points
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
0.62
|
|
|
—
|
|
|
—
|
|
TEN
|
—
|
|
|
—
|
|
|
1
|
|
|
0.17
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
0.85
|
|
Deepwater Tano
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
0.18
|
|
|
—
|
|
|
—
|
|
Mauritania
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
C8
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
0.84
|
|
|
—
|
|
|
—
|
|
Senegal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Saint Louis Offshore Profond
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
0.30
|
|
|
—
|
|
|
—
|
|
Cayar Profond
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
0.60
|
|
|
—
|
|
|
—
|
|
Total
|
—
|
|
|
—
|
|
|
1
|
|
|
0.17
|
|
|
9
|
|
|
2.54
|
|
|
16
|
|
|
3.50
|
|
|
Three Months Ended
|
|
|
||||||||
|
June 30,
|
|
Increase
|
||||||||
|
2018
|
|
2017
|
|
(Decrease)
|
||||||
|
(In thousands)
|
||||||||||
Revenues and other income:
|
|
|
|
|
|
|
|
|
|||
Oil and gas revenue
|
$
|
215,191
|
|
|
$
|
136,363
|
|
|
$
|
78,828
|
|
Other income, net
|
282
|
|
|
10,161
|
|
|
(9,879
|
)
|
|||
Total revenues and other income
|
215,473
|
|
|
146,524
|
|
|
68,949
|
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|||
Oil and gas production
|
49,815
|
|
|
21,604
|
|
|
28,211
|
|
|||
Facilities insurance modifications, net
|
1,029
|
|
|
(2
|
)
|
|
1,031
|
|
|||
Exploration expenses
|
77,481
|
|
|
19,982
|
|
|
57,499
|
|
|||
General and administrative
|
17,497
|
|
|
14,739
|
|
|
2,758
|
|
|||
Depletion and depreciation
|
74,289
|
|
|
72,441
|
|
|
1,848
|
|
|||
Interest and other financing costs, net
|
18,870
|
|
|
19,465
|
|
|
(595
|
)
|
|||
Derivatives, net
|
140,272
|
|
|
(25,411
|
)
|
|
165,683
|
|
|||
(Gain) loss on equity method investment, net
|
(16,100
|
)
|
|
6,426
|
|
|
(22,526
|
)
|
|||
Other expenses, net
|
938
|
|
|
2,008
|
|
|
(1,070
|
)
|
|||
Total costs and expenses
|
364,091
|
|
|
131,252
|
|
|
232,839
|
|
|||
Income (loss) before income taxes
|
(148,618
|
)
|
|
15,272
|
|
|
(163,890
|
)
|
|||
Income tax expense (benefit)
|
(45,345
|
)
|
|
23,739
|
|
|
(69,084
|
)
|
|||
Net loss
|
$
|
(103,273
|
)
|
|
$
|
(8,467
|
)
|
|
$
|
(94,806
|
)
|
|
Six Months Ended
|
|
|
||||||||
|
June 30,
|
|
Increase
|
||||||||
|
2018
|
|
2017
|
|
(Decrease)
|
||||||
|
(In thousands)
|
||||||||||
Revenues and other income:
|
|
|
|
|
|
|
|
|
|||
Oil and gas revenue
|
$
|
342,387
|
|
|
$
|
239,795
|
|
|
$
|
102,592
|
|
Other income, net
|
263
|
|
|
58,695
|
|
|
(58,432
|
)
|
|||
Total revenues and other income
|
342,650
|
|
|
298,490
|
|
|
44,160
|
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|||
Oil and gas production
|
96,583
|
|
|
41,490
|
|
|
55,093
|
|
|||
Facilities insurance modifications, net
|
9,478
|
|
|
2,572
|
|
|
6,906
|
|
|||
Exploration expenses
|
98,674
|
|
|
125,696
|
|
|
(27,022
|
)
|
|||
General and administrative
|
39,380
|
|
|
30,526
|
|
|
8,854
|
|
|||
Depletion and depreciation
|
128,566
|
|
|
107,419
|
|
|
21,147
|
|
|||
Interest and other financing costs, net
|
44,564
|
|
|
36,251
|
|
|
8,313
|
|
|||
Derivatives, net
|
178,750
|
|
|
(63,268
|
)
|
|
242,018
|
|
|||
(Gain) loss on equity method investment, net
|
(34,796
|
)
|
|
6,426
|
|
|
(41,222
|
)
|
|||
Other expenses, net
|
4,643
|
|
|
2,770
|
|
|
1,873
|
|
|||
Total costs and expenses
|
565,842
|
|
|
289,882
|
|
|
275,960
|
|
|||
Income (loss) before income taxes
|
(223,192
|
)
|
|
8,608
|
|
|
(231,800
|
)
|
|||
Income tax expense (benefit)
|
(69,693
|
)
|
|
45,916
|
|
|
(115,609
|
)
|
|||
Net loss
|
$
|
(153,499
|
)
|
|
$
|
(37,308
|
)
|
|
$
|
(116,191
|
)
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
(In thousands)
|
||||||
Sources of cash, cash equivalents and restricted cash:
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities
|
$
|
433
|
|
|
$
|
(17,514
|
)
|
Return of investment from KTIPI
|
79,970
|
|
|
—
|
|
||
Proceeds on sale of assets
|
—
|
|
|
222,068
|
|
||
|
80,403
|
|
|
204,554
|
|
||
Uses of cash, cash equivalents and restricted cash:
|
|
|
|
|
|
||
Oil and gas assets
|
92,650
|
|
|
42,805
|
|
||
Other property
|
2,815
|
|
|
1,454
|
|
||
Payments on long-term debt
|
100,000
|
|
|
200,000
|
|
||
Purchase of treasury stock
|
17,695
|
|
|
1,945
|
|
||
Deferred financing costs
|
25,743
|
|
|
—
|
|
||
|
238,903
|
|
|
246,204
|
|
||
Decrease in cash, cash equivalents and restricted cash
|
$
|
(158,500
|
)
|
|
$
|
(41,650
|
)
|
|
June 30, 2018
|
||
|
(In thousands)
|
||
Cash and cash equivalents
|
$
|
116,941
|
|
Restricted cash
|
29,545
|
|
|
Senior Notes at par
|
525,000
|
|
|
Drawings under the Facility
|
700,000
|
|
|
Net debt
|
$
|
1,078,514
|
|
|
|
|
|
Availability under the Facility
|
$
|
800,000
|
|
Availability under the Corporate Revolver
|
$
|
400,000
|
|
Available borrowings plus cash and cash equivalents
|
$
|
1,316,941
|
|
•
|
drill additional wells in the Jubilee and TEN Fields;
|
•
|
fund asset integrity projects at Jubilee;
|
•
|
execute exploration and appraisal activities in a number of our exploration license areas, including drilling one exploration well in Suriname; and
|
•
|
acquire and analyze seismic on existing licenses, pursue new ventures and manage our rig activities.
|
|
Payments Due By Year(4)
|
||||||||||||||||||||||||||
|
Total
|
|
2018(5)
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||
Principal debt repayments(1)
|
$
|
1,225,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
525,000
|
|
|
$
|
—
|
|
|
$
|
700,000
|
|
Interest payments on long-term debt(2)
|
462,831
|
|
|
47,060
|
|
|
91,272
|
|
|
92,280
|
|
|
91,776
|
|
|
52,603
|
|
|
87,840
|
|
|||||||
Operating leases(3)
|
11,930
|
|
|
2,521
|
|
|
5,251
|
|
|
1,366
|
|
|
419
|
|
|
419
|
|
|
1,954
|
|
(1)
|
Includes the scheduled principal maturities for the $525.0 million aggregate principal amount of Senior Notes issued in August 2014 and April 2015 and the Facility. The scheduled maturities of debt related to the Facility are based on the level of borrowings and the estimated future available borrowing base as of
June 30, 2018
. Any increases or decreases in the level of borrowings or increases or decreases in the available borrowing base would impact the scheduled maturities of debt during the next five years and thereafter.
|
(2)
|
Based on outstanding borrowings as noted in (1) above and the LIBOR yield curves at the reporting date and commitment fees related to the Facility and Corporate Revolver and the interest on the Senior Notes.
|
(3)
|
Primarily relates to corporate office and foreign office leases.
|
(4)
|
Does not include purchase commitments for jointly owned fields and facilities where we are not the operator and excludes commitments for exploration activities, including well commitments and seismic obligations, in our petroleum contracts.
|
(5)
|
Represents the period from
July 1, 2018
through
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
(Liability)
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
||||||||||||||
|
Years Ending December 31,
|
|
June 30,
|
||||||||||||||||||||||||
|
2018(5)
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
2018
|
||||||||||||||
|
(In thousands, except percentages)
|
||||||||||||||||||||||||||
Fixed rate debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Senior Notes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
525,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(535,264
|
)
|
Fixed interest rate
|
7.88
|
%
|
|
7.88
|
%
|
|
7.88
|
%
|
|
7.88
|
%
|
|
—
|
|
|
—
|
|
|
|
||||||||
Variable rate debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Facility(1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
700,000
|
|
|
$
|
(700,000
|
)
|
Weighted average interest rate(2)
|
5.45
|
%
|
|
5.92
|
%
|
|
6.07
|
%
|
|
6.12
|
%
|
|
6.46
|
%
|
|
6.75
|
%
|
|
|
|
|||||||
Capped interest rate swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Notional debt amount ($200,000)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
934
|
|
Cap
|
3.00
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|||||||
Average fixed rate payable(3)
|
1.23
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|||||||
Variable rate receivable(4)
|
2.22
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(1)
|
The amounts included in the table represent principal maturities only. The scheduled maturities of debt are based on the level of borrowings and the available borrowing base as of
June 30, 2018
. Any increases or decreases in the level of borrowings or increases or decreases in the available borrowing base would impact the scheduled maturities of debt during the next five years and thereafter. As of
June 30, 2018
, there were no borrowings under the Corporate Revolver.
|
(2)
|
Based on outstanding borrowings as noted in (1) above and the LIBOR yield curves plus applicable margin at the reporting date. Excludes commitment fees related to the Facility and Corporate Revolver.
|
(3)
|
We expect to pay the fixed rate if 1-month LIBOR is below the cap, and pay the market rate less the spread between the cap and the fixed rate if LIBOR is above the cap, net of the capped interest rate swaps.
|
(4)
|
Based on implied forward rates in the yield curve at the reporting date.
|
(5)
|
Represents the period
July 1, 2018
through
December 31, 2018
.
|
•
|
our ability to find, acquire or gain access to other discoveries and prospects and to successfully develop and produce from our current discoveries and prospects;
|
•
|
uncertainties inherent in making estimates of our oil and natural gas data;
|
•
|
the successful implementation of our and our block partners’ prospect discovery and development and drilling plans;
|
•
|
projected and targeted capital expenditures and other costs, commitments and revenues;
|
•
|
termination of or intervention in concessions, rights or authorizations granted by the governments of the countries in which we operate (or their respective national oil companies) or any other federal, state or local governments or authorities, to us;
|
•
|
our dependence on our key management personnel and our ability to attract and retain qualified technical personnel;
|
•
|
the ability to obtain financing and to comply with the terms under which such financing may be available;
|
•
|
the volatility of oil and natural gas prices;
|
•
|
the availability, cost, function and reliability of developing appropriate infrastructure around and transportation to our discoveries and prospects;
|
•
|
the availability and cost of drilling rigs, production equipment, supplies, personnel and oilfield services;
|
•
|
other competitive pressures;
|
•
|
potential liabilities inherent in oil and natural gas operations, including drilling and production risks and other operational and environmental risks and hazards;
|
•
|
current and future government regulation of the oil and gas industry or regulation of the investment in or ability to do business with certain countries or regimes;
|
•
|
cost of compliance with laws and regulations;
|
•
|
changes in environmental, health and safety or climate change or greenhouse gas (“GHG”) laws and regulations or the implementation, or interpretation, of those laws and regulations;
|
•
|
adverse effects of sovereign boundary disputes in the jurisdictions in which we operate;
|
•
|
environmental liabilities;
|
•
|
geological, geophysical and other technical and operations problems, including drilling and oil and gas production and processing;
|
•
|
military operations, civil unrest, outbreaks of disease, terrorist acts, wars or embargoes;
|
•
|
the cost and availability of adequate insurance coverage and whether such coverage is enough to sufficiently mitigate potential losses and whether our insurers comply with their obligations under our coverage agreements;
|
•
|
our vulnerability to severe weather events;
|
•
|
our ability to meet our obligations under the agreements governing our indebtedness;
|
•
|
the availability and cost of financing and refinancing our indebtedness;
|
•
|
the amount of collateral required to be posted from time to time in our hedging transactions, letters of credit and other secured debt;
|
•
|
the result of any legal proceedings, arbitrations, or investigations we may be subject to or involved in;
|
•
|
our success in risk management activities, including the use of derivative financial instruments to hedge commodity and interest rate risks; and
|
•
|
other risk factors discussed in the “Item 1A. Risk Factors” section of this quarterly report on Form 10-Q and our annual report on Form 10-K.
|
|
Derivative Contracts Assets (Liabilities)
|
||||||||||
|
Commodities
|
|
Interest Rates
|
|
Total
|
||||||
|
(In thousands)
|
||||||||||
Fair value of contracts outstanding as of December 31, 2017
|
$
|
(97,036
|
)
|
|
$
|
1,017
|
|
|
$
|
(96,019
|
)
|
Changes in contract fair value
|
(178,241
|
)
|
|
451
|
|
|
(177,790
|
)
|
|||
Contract maturities
|
56,755
|
|
|
(534
|
)
|
|
56,221
|
|
|||
Fair value of contracts outstanding as of June 30, 2018
|
$
|
(218,522
|
)
|
|
$
|
934
|
|
|
$
|
(217,588
|
)
|
|
|
|
|
|
|
Weighted Average Dated Brent Price per Bbl
|
|
Asset (Liability)
|
|||||||||||||||||||||||||
|
|
|
|
|
|
Net Deferred
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|||||||||||||||
|
|
|
|
|
|
Premium
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|||||||||||||||
Term
|
|
Type of Contract
|
|
MBbl
|
|
Payable/(Receivable)
|
|
Swap
|
|
Sold Put
|
|
Floor
|
|
Ceiling
|
|
Call
|
|
2018(2)
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
||||||||||
2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
July — December
|
|
Swap with puts
|
|
3,000
|
|
|
$
|
—
|
|
|
$
|
56.75
|
|
|
$
|
43.33
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(60,845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
July — December
|
|
Three-way collars
|
|
1,466
|
|
|
0.74
|
|
|
—
|
|
|
41.57
|
|
|
56.57
|
|
|
65.91
|
|
|
—
|
|
|
(19,443
|
)
|
|||||||
July — December
|
|
Four-way collars
|
|
1,503
|
|
|
1.06
|
|
|
—
|
|
|
40.00
|
|
|
50.00
|
|
|
61.33
|
|
|
70.00
|
|
|
(12,697
|
)
|
|||||||
July — December
|
|
Sold calls(1)
|
|
1,006
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65.00
|
|
|
—
|
|
|
(12,854
|
)
|
|||||||
July — December
|
|
Purchased Calls
|
|
1,000
|
|
|
1.88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70.00
|
|
|
6,898
|
|
|||||||
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
January — December
|
|
Three-way collars
|
|
10,500
|
|
|
$
|
0.61
|
|
|
$
|
—
|
|
|
$
|
43.81
|
|
|
$
|
53.33
|
|
|
$
|
69.77
|
|
|
$
|
—
|
|
|
$
|
(97,212
|
)
|
January — December
|
|
Sold calls(1)
|
|
913
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80.00
|
|
|
—
|
|
|
(4,172
|
)
|
|||||||
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
January — December
|
|
Sold calls(1)
|
|
4,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80.00
|
|
|
—
|
|
|
(18,197
|
)
|
(1)
|
Represents call option contracts sold to counterparties to enhance other derivative positions.
|
(2)
|
Fair values are based on the average forward Dated Brent oil prices on
June 30, 2018
which by year are:
2018
— $78.01;
2019
— $74.05 and
2020
— $69.28. These fair values are subject to changes in the underlying commodity price. The average forward Dated Brent oil prices based on August 1, 2018 market quotes by year are:
2018
— $72.20;
2019
— $70.83 and
2020
— $67.87.
|
|
Total Number
|
|
Average
|
|||
|
of Shares
|
|
Price Paid
|
|||
|
Purchased
|
|
per Share
|
|||
|
(In thousands)
|
|
|
|||
January 1, 2018—January 31, 2018
|
74
|
|
|
$
|
6.85
|
|
February 1, 2018—February 28, 2018
|
—
|
|
|
—
|
|
|
March 1, 2018—March 31, 2018
|
—
|
|
|
—
|
|
|
April 1, 2018—April 30, 2018
|
—
|
|
|
—
|
|
|
May 1, 2018—May 31, 2018
|
—
|
|
|
—
|
|
|
June 1, 2018—June 30, 2018
|
—
|
|
|
—
|
|
|
Total
|
74
|
|
|
6.85
|
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information.
|
|
|
Kosmos Energy Ltd.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date
|
August 6, 2018
|
|
/s/ THOMAS P. CHAMBERS
|
|
|
Thomas P. Chambers
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
Exhibit
Number
|
|
Description of Document
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
Page
|
|
ARTICLE 1 SCOPE AND DEFINITIONS
|
3
|
|
ARTICLE 2 PERIOD OF EXPLORATION AND RELINQUISHMENTS OF AREAS
|
11
|
|
ARTICLE 3 EXPLORATION WORK OBLIGATIONS
|
13
|
|
ARTICLE 4 ANNUAL WORK PROGRAMS AND BUDGETS
|
16
|
|
ARTICLE 5 EVALUATION OF A DISCOVERY AND PRODUCTION PERIOD
|
18
|
|
ARTICLE 6 CONDUCT OF PETROLEUM OPERATIONS
|
21
|
|
ARTICLE 7 ROYALTIES, RECOVERY OF PETROLEUM OPERATION COSTS, AND DISTRIBUTION OF PRODUCTION
|
28
|
|
ARTICLE 8 PARTICIPATION INTERESTS
|
30
|
|
ARTICLE 9 TAXES
|
31
|
|
ARTICLE 10 VALUATION OF CRUDE OIL
|
31
|
|
ARTICLE 11 BONUSES AND SURFACE LEASES
|
33
|
|
ARTICLE 12 OBLIGATIONS TO SUPPLY THE NATIONAL MARKET
|
34
|
|
ARTICLE 13 NATURAL GAS
|
35
|
|
ARTICLE 14 CUSTOMS REGULATIONS
|
38
|
|
ARTICLE 15 CURRENCIES
|
39
|
|
ARTICLE 16 BOOKS, ACCOUNTS, AUDITS, AND PAYMENTS
|
41
|
|
ARTICLE 17 TRANSFERS, ASSIGNMENTS, AND CHANGES OF CONTROL
|
42
|
|
ARTICLE 18 INDEMNIFICATION, LIABILITY, AND INSURANCE
|
44
|
|
ARTICLE 19 TITLE TO GOODS, EQUIPMENT, AND DATA
|
45
|
|
ARTICLE 20 CONFIDENTIALITY
|
46
|
|
ARTICLE 21 TERMINATION
|
47
|
|
ARTICLE 22 UNITIZATION
|
49
|
|
ARTICLE 23 NATIONAL CONTENT AND SOCIAL PROGRAMS
|
49
|
|
ARTICLE 24 DISMANTLING
|
53
|
|
ARTICLE 25 APPLICABLE LAW AND STABILITY
|
54
|
|
ARTICLE 26 RESOLUTION OF CONFLICTS AND ARBITRATION
|
55
|
|
ARTICLE 27 FORCE MAJEURE
|
56
|
|
ARTICLE 28 ASSISTANCE AND NOTIFICATIONS
|
57
|
|
ARTICLE 29 MISCELLANEOUS
|
59
|
|
ARTICLE 30 INTERPRETATION
|
60
|
|
ARTICLE 31 EFFECTIVE DATE
|
60
|
|
|
|
|
ANNEX A CONTRACT AREA
|
62
|
|
ANNEX B MAP OF THE CONTRACT AREA
|
63
|
|
ANNEX C ACCOUNTING PROCEDURE
|
64
|
|
ANNEX D GUARANTEE AGREEMENTS
|
78
|
|
(1)
|
THE REPUBLIC OF EQUATORIAL GUINEA (hereinafter referred to as the "State"), represented for the purposes of this Contract by the Ministry of Mines and Hydrocarbons (hereinafter referred to as the "Ministry"), represented for purposes of its execution by His Excellency Gabriel Mbaga OBIANG LIMA, in his capacity as Minister of Mines and Hydrocarbons.
|
(2)
|
GUINEA ECUATORIAL DE PETRÓLEOS (hereinafter referred to as the "National Company"), acting in exercise of its authority and in its own name for the purposes of this Contract and represented for purposes of its execution by Antonio OBURU ONDO, in his capacity as Director General; and
|
(3)
|
OPHIR EQUATORIAL GUINEA (EG-24) LIMITED (hereinafter referred to as the "Ophir Energy"), a company organized and existing under the laws of the British Virgin Islands under commercial registry number 1958060, with its registered office at Jayla Place, Wickhams Cay 1, Road Town, Tortola, VG1110, British Virgin Islands.
|
(A)
|
WHEREAS, all Hydrocarbons existing within the territory of the Republic of Equatorial Guinea, as stated in the Hydrocarbons Law, are national resources owned exclusively by the State;
|
(B)
|
WHEREAS, the State wishes to promote the development of Hydrocarbon deposits within the Contract Area and the Contractor desires to associate itself with the State with a view to accelerating the Development and Production of Hydrocarbons within the Contract Area;
|
(C)
|
WHEREAS, the Contractor has the technical and financial ability, as well as the professional skills necessary to carry out Petroleum Operations in accordance with this Contract and good practices of the international petroleum industry; and
|
(D)
|
WHEREAS the Parties wish to enter into this Contract in accordance with the Hydrocarbons Law, which allows for agreements to be entered into between the State and foreign investors in the form of a production sharing contract, through direct negotiation or by international public bidding,
|
1.1
|
Definitions
|
1.1.1
|
Joint Operating Agreement
or
JOA
means the joint operating agreement that rules the internal relations of the Parties making up the Contractor in carrying out Petroleum Operations in the Contract Area.
|
1.1.2
|
Calendar Year
or
Year
means a period of twelve (12) months beginning 1 January and ending 31 December of the same year according to the Gregorian Calendar.
|
1.1.3
|
Contractual Year
means a period of twelve (12) consecutive months according to the Gregorian Calendar from the Effective Date of this Contract or from the anniversary of the Effective Date.
|
1.1.4
|
Contract Area
or
Area
means the geographic area within the territory of Equatorial Guinea, which is the object of this Contract. This Contract Area will be described in Annex A and illustrated in Annex B, as it may be changed by relinquishments of the Contractor in accordance with this Contract.
|
1.1.5
|
Development and Production Area
means an area within the Contract Area encompassing the geographical extent of a Commercial Discovery that is subject to a Development and Production plan and corresponding budget in accordance with Article 5.5.
|
1.1.6
|
Evaluation Area
means an area within the Contract Area encompassing the geographical extent of a Discovery subject to an Evaluation work program and corresponding budget in accordance with Article 5.2.
|
1.1.7
|
Barrel
means a quantity or unit of measure of Crude Oil equal to 158.9874 liters (forty-two (42) United States gallons) at a temperature of fifteen point five six degrees (15.56°) Centigrade (sixty degrees (60°) Fahrenheit) and at one (1) atmosphere of pressure.
|
1.1.8
|
BEAC
means the Bank of Central African States.
|
1.1.9
|
Change in the Law
means, with respect to Article 25, any change in the laws, decrees, regulations, or standards of Equatorial Guinea and any Relevant Authority Law in force on the Effective Date, including those pertaining to any fiscal matters, taxes, customs, or currency control, any change in the interpretation or application of, or in the customs and practices related to these laws (the stipulations of this agreement are considered to conform with such interpretation and application from the date this Contract is signed), decrees, regulations, or standards of Equatorial Guinea and excludes those laws, decrees, regulations, or standards that are (i) related to health, safety, work, and the environment, (ii) consistent with international oil and gas industry standards and practices, and (iii) applied in a non-discriminatory manner.
|
1.1.10
|
Field
means a Discovery or set of Discoveries established as a Field in accordance with Article 5 and can be developed commercially, taking into account all pertinent operational, economic and financial information collected in carrying out the Evaluation work program or otherwise, in accordance with generally accepted practices of the international petroleum industry. A Field may consist of a Hydrocarbon deposit or multiple Hydrocarbon deposits grouped in or related to the same
|
1.1.11
|
CIF
has the meaning established in the publication of the International Chamber of Commerce, INCOTERMS 2000.
|
1.1.12
|
Affiliated Company
or
Affiliate
of any specific Person means any other Person directly or indirectly Controlling or Controlled by or under the direct or indirect common Control of such Person.
|
1.1.14
|
Contractor
means Ophir Energy and the National Company and will include the entities to which a Participation Interest under the Contract is legitimately transferred.
|
1.1.15
|
Contract
means this production sharing contract, including its Preamble and Annexes.
|
1.1.16
|
Material Contract
means a contract having a value over five hundred thousand Dollars ($500,000) with respect to Exploration Operations, or a million Dollars ($1M) with respect to Exploration Operations or Production Operations with (i) an Affiliate of the Technical Operator, when the contract has not previously and specifically been approved in an Annual Budget as a contract that should be carried out by an Affiliate, or (ii) a non-Affiliate of the Technical Operator. If law or regulation establishes a greater limit than that stipulated in this definition for the supervision of contracts by the State, this definition will be amended to reflect that limit.
|
1.1.7
|
Control
, when used with respect to a specified Person, means the power to direct, administer, and dictate the policies of such Person through ownership of a percentage of such Person's equity sufficient to hold a majority of voting rights in an ordinary shareholders meeting. The terms
Controller
and
Controlled
have meanings that correlate to the foregoing.
|
1.1.18
|
Development and Production Costs
means all costs, expenses, and obligations incurred by the Contractor in connection with Development and Production Operations in a Development and Production Area, excluding all Exploration Costs incurred in the Development and Production Area before any Field is established, and that are determined to be in accordance with this Contract and the Hydrocarbons Law.
|
1.1.19
|
Exploration Costs
means all costs, expenses, and other obligations that are non-recoverable costs incurred by the Contractor in connection with Exploration Operations in the Contract Area, including those identified in the Accounting Procedure, and that are determined to be in accordance with this Contract and the Hydrocarbons Law.
|
1.1.20
|
Petroleum Operations Costs
means Exploration Costs and/or Development and Production Costs (depending on the context) incurred by the Contractor in carrying out Petroleum Operations, as determined in accordance with this Contract and the Accounting Procedure.
|
1.1.21
|
Argus Crude
means the report published by the Argus company on the international crude oil market, including evaluation of the Crude Oil deposit located in the Contract Area.
|
1.1.22
|
Discovery
means a finding of Hydrocarbons by the Contractor whose existence within the Contract Area was unknown prior to the Effective Date, or Hydrocarbons within the Contract Area that had
|
1.1.23
|
Commercial Discovery
means a Discovery that the Contractor considers economically viable and in the interest of which submits for the approval of the Ministry a Development and Production Plan of the Discovery.
|
1.1.24
|
Days
means the days on which the offices of the Ministry are open to the public.
|
1.1.25
|
Working Day
means a day on which the banks of Malabo, Equatorial Guinea, and New York, USA, generally conduct commercial activities.
|
1.1.26
|
Dollars
or
$
means the legal tender of the United States of America.
|
1.1.27
|
Member State of CEMAC
means the country is a member of the Economic and Monetary Community of Central Africa.
|
1.1.28
|
Member State of OHADA
means the country is a member of the Organization for the Harmonization of Business Law in Africa.
|
1.1.29
|
Effective Date
means the date the Contractor receives ratification of this Contract, totally signed by the State, in accordance with the provisions of Article 31.
|
1.1.30
|
Brent Closing
means the quote published daily in the Platts Bulletin of the Crude Oil Market that reflects the price of a shipment of Brent North Sea mixed crude oil for a set period.
|
1.1.31
|
FOB
has the meaning stipulated in the publication of the International Chamber of Commerce, INCOTERMS 2000.
|
1.1.32
|
Reserve Fund
has the meaning attributed to it by Article 24.3.1.
|
1.1.33
|
Natural Gas
means those Hydrocarbons that at atmospheric conditions of temperature and pressure, are in a gaseous state, including dry gas, wet gas, and residual gas remaining after extraction, treatment, processing, or separation of liquid Hydrocarbons from wet gas, as well as gas or gases produced in association with liquid or gaseous Hydrocarbons.
|
1.1.34
|
Associated Natural Gas
means all Natural Gas produced from a deposit the predominant content of which is Crude Oil and that has been separated from Crude Oil in accordance with generally accepted practices of the international petroleum industry, including free gas cap, but excluding any liquid Hydrocarbons extracted from such gas either by normal field separation, dehydration, or in a gas plant
|
1.1.35
|
Net Natural Gas
has the meaning attributed to it by Article 13.3.5.
|
1.1.36
|
Non-Associated Natural Gas
means all gaseous Hydrocarbons extracted from Natural Gas deposits, and includes wet gas, dry gas, and residual gas remaining after the extraction of liquid Hydrocarbons from wet gas.
|
1.1.37
|
Equatorial Guinea
means the Republic of Equatorial Guinea.
|
1.1.38
|
Hydrocarbons
means all natural organic substances composed of carbon and hydrogen, including Crude Oil and Natural Gas that may be found and produced, or otherwise extracted and saved from the Contract Area.
|
1.1.39
|
Income Tax
means that tax levied on the each of the Parties making up the Contractor and all other pertinent Persons in accordance with the Tax Law.
|
1.1.40
|
Gross Revenues
means total income from sales of Total Disposable Production plus the equivalent monetary value of any other disposal of Total Disposable Production from the Contract Area during any Calendar Year.
|
1.1.41
|
Participation Interest
means for each Party constituting the Contractor, the undivided percentage share of such Party in the rights and obligations under this Contract, as specified in Article 1.3.
|
1.1.42
|
Participation Interest of the National Company
means the Participation Interest of the National Company as established in Article 1.3.
|
1.1.43
|
Hydrocarbons Law
means Law No. 8/2006 dated 3 November 2006 of Equatorial Guinea.
|
1.1.44
|
Relevant Authority Law
means any laws, codes, decrees, instruments or subordinate legislation, by-laws, regulations, declarations, rules, orders, statute, ordinances, normative acts and administrative acts of:
|
(f)
|
any other regional laws, codes, decrees, instruments or subordinate legislation, by-laws, regulations, declarations, rules, orders, statute, ordinances, normative acts and administrative acts (whether current or future and excluding Equatoguinean Law) applicable to the Parties in relation to the Project,
|
1.1.45
|
Environmental Law
means Law No. 7/2003 of 27 November of Equatorial Guinea and any law that amends or replaces it, including the International Treaties signed and ratified by the Republic of Equatorial Guinea.
|
1.1.46
|
Tax Law
means Law No. 4/2004 of 28 October 2004 of Equatorial Guinea, and any law that amends it or replaces it.
|
1.1.47
|
LIBOR
means the interest rate at which Dollar deposits of six (6) months' duration are offered in the London InterBank Market, as published in the Financial Times of London. The applicable LIBOR interest rate applicable for each month or part of the month within an interest period will be the interest rate published in the Financial Times of London on the last Working Day of the immediately preceding calendar month. If no such rate is quoted in the Financial Times of London during a period of five (5) consecutive Working Days, another rate (for example, the rate of exchange quoted in the Wall Street Journal) chosen by mutual agreement between the Ministry and the Contractor will apply.
|
1.1.48
|
Month of Commercialization of the Shipment
means the month that initiates two (2) calendar months before the month scheduled for the embarkation of a Crude Oil shipment.
|
1.1.49
|
Ministry
means the Ministry of Mines and Hydrocarbons of Equatorial Guinea, the entity responsible for supervising Petroleum Operations in coordination with other Government bodies within their respective areas of competence, and any successor.
|
1.1.50
|
Negligence
means any act or omission of an act by a person or entity (acting alone, together with another, or simultaneously) with the intention of causing harmful consequences, or with reckless imprudence or indifference to the harmful consequences that such person or entity knew or should have known would result for the safety, property, or interests of another person or entity from such an act or failure. Provided they satisfy the above parameters, such acts or omissions can include substantial deviations from the standards of behavior of a reasonable man, or of a prudent operator, guided by the standard practices of the industry and by those considerations that normally rule the conduct of human affairs, acting in the circumstances of the presumed bad behavior.
|
1.1.51
|
Dispute Notification
has the meaning attributed to it in Article 26.1.1.
|
1.1.52
|
Notification of Exploration Well
has the meaning attributed to it in Article 3.1.2.
|
1.1.53
|
Development and Production Operations
means all operations, other than Exploration Operations that are engaged in to facilitate the Development and Production of Hydrocarbons from the Contract Area to the Delivery Point, but excluding refining and distribution of Hydrocarbon products.
|
1.1.54
|
Exploration Operations
include geological and geophysical studies, aerial mapping, investigations relating to subsurface geology, stratigraphic test drilling, Exploration Wells, Evaluation Wells and related activities such as drill site preparation, surveying and all connected work carried out in relation to the Exploration for Hydrocarbon deposits in the Contract Area and their Evaluation until the Ministry approves a Development and Production Plan.
|
1.1.55
|
Petroleum Operations
means all operations related to Exploration, Development, Production, transportation, storage, conservation, dismantling, sale and/or other disposal of Hydrocarbons from the Contract Area to the Delivery Point and any other work or activities necessary or complementary to such operations; these operations and activities will be carried out in accordance with this Contract and the Hydrocarbons Law and will not include transport outside Equatorial Guinea.
|
1.1.56
|
Administrative Operator
means the National Company so designated in the Joint Operation Agreement.
|
1.1.57
|
The Technical Operator
will be Ophir Energy, as approved by the Ministry and so designated in the Joint Operation Agreement.
|
1.1.58
|
Party
or
Parties
means the party or parties to this Contract, as the context dictates.
|
1.1.59
|
Paying Party or Parties
will have the significance attributed to it (them) in Article 8.2.1.
|
1.1.60
|
Participation of the National Company Carried Forward
means the Participation Interest of twenty percent (20%) of the National Company that will be carried forward by the Contractor during the Exploration Period(s) in accordance with provisions of Articles 1.3 and 8.2 of this Contract.
|
1.1.61
|
Development and Production Period
means the period defined in Article 5.10.
|
1.1.62
|
Initial Exploration Period
means a period of four (4) Contract Years from the Effective Date, subdivided into two sub-periods of two (2) Contract Years within the First Exploration Sub-Period and two (2) Contract Years within the Second Sub-Period.
|
1.1.63
|
Extension Period
means the First Extension Period and the Second Extension Period, separately or together, as the context dictates. Each of these Extension Periods will be for a period of one (1) Contract Year.
|
1.1.64
|
Exploration Periods
means the Initial Exploration Period, an Extension Period, and any further extensions of them.
|
1.1.65
|
Person
means any individual, firm, company, corporation, society, trust, foundation, government, state or state agency, or any association or grouping (whether or not having a separate legal personality) or two or more of these.
|
1.1.66
|
Crude Oil
means Hydrocarbons produced at the wellhead in a liquid state at atmospheric pressure including asphalt and ozokerites, and the liquid Hydrocarbons known as condensates and/or Natural Gas liquids obtained from Natural Gas by condensation or extraction through field separation units.
|
1.1.67
|
Net Crude Oil
has the meaning attributed to it by Article 7.3.
|
1.1.68
|
Cost-Recovery Oil
has the meaning attributed to it in Article 7.2.1.
|
1.1.69
|
Development and Production Plan
has the meaning attributed to it in Article 5.5.1.
|
1.1.70
|
Platts
or
Platts Crude Oil Market Bulletin
refers to the daily publication of crude oil quotes that are customarily adopted by the petroleum industry to determine crude oil prices.
|
1.1.71
|
Well
means any opening in the ground or seabed made or being made by drilling or boring, or in any other manner, for the purpose of exploring and/or discovering, evaluating, or producing Crude Oil or Natural Gas, or for the injection of any fluid or gas into an underground formation other than a seismic hole.
|
1.1.72
|
Development Well
means a Well, other than an Exploration Well or an Evaluation Well, drilled with the purpose of producing or improving the Production of Hydrocarbons, including Exploration Wells and Evaluation Wells completed as production or injection Wells.
|
1.1.73
|
Evaluation Well
means a Well drilled after a Discovery, with the objective of delimiting and mapping the deposit, as well as to estimate the quantity of recoverable Hydrocarbons.
|
1.1.74
|
Exploration Well
means any Well whose sole objective is to verify the existence of Hydrocarbons or to study all the necessary elements that could lead to a Discovery.
|
1.1.75
|
Market Price
means the FOB price for Crude Oil calculated in accordance with Article 10.
|
1.1.76
|
Annual Budget
means the Contractor's approved expenditures with respect to an Annual Work Program.
|
1.1.77
|
First Extension Period
means the period of one (1) Contract Year beginning immediately after the conclusion of the First Exploration Sub-Period
|
1.1.78
|
First Exploration Sub-Period
means the first three (3) Contract Years of the Initial Exploration Period.
|
1.1.79
|
Accounting Procedure
means the accounting procedure contained in Annex C.
|
1.1.80
|
Total Disposable Production
means all Hydrocarbons produced and saved from a Development and Production Area minus the quantities used for fuel and transport in Petroleum Operations under Article 6.10.
|
1.1.81
|
Annual Work Program
means an itemized statement of the Petroleum Operations to be carried out in the Contract Area during a Calendar Year.
|
1.1.82
|
End Point of the Carry-Forward
has the meaning attributed to it by Article 1.3.1.
|
1.1.83
|
Delivery Point
means the point located within the jurisdiction of Equatorial Guinea at which Hydrocarbons reach (i) the inlet flange at the FOB export vessel, (ii) the loading facility metering station of a pipeline, or (iii) any other point within the jurisdiction of Equatorial Guinea as may be agreed to by the Parties.
|
1.1.84
|
Royalties
means a right of the State to Hydrocarbons extracted and saved from the Contract Area, and not utilized in Petroleum Operations for fuel or transport, in accordance with Article 6.10, based on percentages calculated as a function of the daily rate of the Total Disposable Production in accordance with Article 7.1.
|
1.1.85
|
Petroleum Operations
means all regulations promulgated by the Ministry observing and in accordance with the Hydrocarbons Law under Ministerial Order 4/2013 of 20 June 2013, and any regulations that may amend or replace them.
|
1.1.86
|
Minimum Retention
means the Technical Operator and its Affiliates will maintain a minimum balance on deposit in one or more of the banks that are operating in Equatorial Guinea selected by the operator, measured annually for each Calendar Year, in the following amounts:
|
(a)
|
Before the year following approval of the first Development and Production Plan, a deposit balance equal to ten percent (10%) of the current Annual Budget applicable to the Calendar Year;
|
(b)
|
After the year following approval of the first Development and Production Plan, and during each year that the development activities continue that were foreseen in that Development and Production Plan, a deposit balance equal to zero point five percent (0.5%)of the Annual Budget (excluding capital expenditure) applicable to the Calendar Year;
|
(c)
|
After the year following the year in which the development operations cease that were foreseen in the first Development and Production Plan, a deposit balance equal to five percent (5%) of the Annual Budget (excluding capital expenditure) applicable to the Calendar Year;
|
(d)
|
If at any time a subsequent Development and Production Plan is approved that requires a development operation, the required balance of the deposit will return to zero point five per cent (0.5%) of the Annual Budget (excluding capital expenditure) applicable to that Calendar Year, up to the year following the year during which the development operations foreseen in that Development and Production Plan cease;
|
1.1.87
|
Second Extension Period
means the period of one (1) Contract Year beginning immediately after the end of the Second Exploration Sub-Period.
|
1.1.88
|
Second Exploration Sub-Period
means the final two (2) Contract Year(s) of the Initial Exploration Period.
|
1.1.90
|
Tax
and
Taxes
means the coercive pecuniary contributions stipulated by Law, that the State, local entities and other public entities levy in exercise of their sovereign power.
|
1.1.91
|
Quarter
means a period of three (3) consecutive months beginning 1 January, 1 April, 1 July, or 1 October and ending 31 March, 30 June, 30 September, or 31 December, respectively.
|
1.2
|
Scope
|
1.2.1
|
This Contract is a production sharing contract awarded pursuant to Chapter IV of the Hydrocarbons Law. In accordance with the provisions of this Contract and the Hydrocarbons Law, the Ministry will be responsible for supervising Petroleum Operations in the Contract Area.
|
1.2.2
|
The State grants the Contractor the sole and exclusive right to carry out all Petroleum Operations in the Contract Area during the term of this Contract. In consideration of the above, the Contractor commits itself to:
|
(a)
|
be responsible to the State, in the capacity of independent contractor, for execution of the Petroleum Operations in accordance with this Contract, the Hydrocarbons Law, and the Petroleum Regulations;
|
(b)
|
provide all funds, machinery, equipment, technology, and personnel that are prudent and necessary to execute the Petroleum Operations; and
|
(c)
|
diligently, with due attention to good practices of the international petroleum industry execute at its exclusive responsibility and risk, all investments and contractual obligations necessary for carrying out the Petroleum Operations in accordance with this Contract.
|
1.2.3
|
All Costs of the Petroleum Operations will be recoverable and/or deductible for tax purposes in the manner established in this Contract and the Hydrocarbon Law.
|
1.2.4
|
During the term of this Contract, all Production obtained as a consequence of the Petroleum Operations will be shared between the parties in accordance with Article 7.
|
1.3
|
Participation Interests
|
1.3.1
|
On the Effective Date, the Participation Interests of the Parties making up the Contractor are as follows:
|
Ophir Energy
|
80
|
%
|
|
The National Company
|
20
|
%
|
("Carry Participation of the National Company")
|
Total
|
100
|
%
|
|
1.3.2
|
The National Company will have the option of acquiring an additional Participation Interest of ten percent (10%) if there is a Commercial Discovery in the Contract Area. This option will expire if it is not chosen to acquire this extra ten percent within ninety (90) days of the date when the State approves the first Development and Production Plan for that Commercial Discovery. If this option is selected, the National Company will acquire from the Contractor (not including the National Company) the additional Participation Interest, and all the past costs associated with that Participation Interest will be recoverable by the Contractor (not including the National Company) of the Cost-Recovery Oil attributable to that additional Participation Interest. That additional interest acquired by the National Company will be an interest with all the payment obligations, in that the National Company will pay its portion of the future costs attributable to such interest from the date of its selection and the revised Participation Interest of each Party will be as follows from that date.
|
Ophir Energy
|
70
|
%
|
|
The National Company
|
30
|
%
|
(20% + 10% additional) Participation Interest of Full
|
Payment Total
|
100
|
%
|
|
2.1
|
Initial Exploration Period
|
2.2
|
Extension periods
|
2.2.1
|
The Contractor may ask for up to two (2) extensions: the first is an extension of one (1) year to the First Sub-Period, and the second is an extension of one (1) year to the Second Sub-Period, .
|
2.2.2
|
For each Extension Period, the Contractor will present a request to the Ministry at least two (2) months before the expiration of the First Sub-Period, or as the case may be, the Second Sub-Period. The Ministry will not unreasonably deny or delay the granting of this extension, provided the Contractor has complied with all of its obligations in the Initial Exploration Period and the First Extension Period, as the case may be, and is in no way noncompliant with this Contract.
|
2.2.3
|
A map will be attached to each request for an extension, delineating the Contract Area the Contractor proposes to retain, as well as a report that specifies the work realized in the areas proposed for relinquishment since the Effective Date, and the results obtained from them.
|
2.2.4
|
If on the expiration of the Initial Exploration Period or any Extension Period, an Evaluation work program is under way, the Contractor will be entitled to the grant of an additional extension of the current Exploration Period necessary to complete the work in progress. Additionally, if Evaluation work has not been completed by the Contractor at the time a relinquishment comes due, as stipulated in Article 2.4, the obligation to relinquish will be suspended until the Contractor has completed the work, the commerciality is decided, and if applicable, establishment of a Field has been approved or denied. Any additional extension granted in accordance with this Article will not exceed one (1) Contract Year or a longer period that may be approved by the Ministry, plus the necessary period of time established under Article 5 for the evaluation of a Development and Production Plan and the Ministry's response.
|
2.2.5
|
In the previous case, the Contractor will ask the Ministry for an additional extension at least two (2) months before expiration of the Initial Exploration Period or the Extension Period in force at the time, as applicable.
|
2.3
|
Termination
|
(a)
|
not to enter the Second Sub-Period;
|
(b)
|
not to extend the Initial Exploration Period and no Field has been established during that period; or
|
(c)
|
to extend the Initial Exploration Period and no Field has been established during the Extension Period or any extension of it; or
|
(d)
|
to relinquish all its rights with respect to the entire Contract Area in accordance with what is established in Article 2.5,
|
2.4
|
Obligatory relinquishments
|
2.4.1
|
The Contractor must relinquish to the State forty percent (40%) of the initial surface area of the Contract Area on finalization of the Initial Exploration Period, twenty-five percent (25%) of the remaining area on finalization of the Second Extension Period, or if the Contractor does not ask for additional extensions, on finalization of the Initial Exploration Period or First Extension Period. To decide the area or areas the Contractor will relinquish, the following areas will be excluded for the purposes of the calculation:
|
(a)
|
areas designated as Evaluation Areas;
|
(b)
|
Development and Production Areas;
|
(c)
|
areas for which approval of a Development and Production Plan is pending, until a final decision is made;
|
(d)
|
the area of any Field, including those Fields that may be subject to unitization in accordance with Article 22; and
|
(e)
|
any area reserved for a possible Unassociated Natural Gas Evaluation with respect to which the Contractor is negotiating with the Ministry in accordance with the terms of Article 13.1.
|
2.4.2
|
On expiration of the final applicable extension period stipulated in accordance with Article 2.2, and subject to the provisions of Article 2.2.4, the Contractor will relinquish the rest of the Contract Area, with the exception of:
|
(a)
|
Development and Production Areas;
|
(b)
|
areas for which approval of a Development and Production Plan is pending, until a final decision is made;
|
(c)
|
the area of any Field, including those Fields that may be subject to unitization in accordance with Article 22; and
|
(d)
|
any area reserved for a possible Unassociated Natural Gas Evaluation with respect to which the Contractor is negotiating with the Ministry in accordance with the terms of Article 13.1.
|
2.5
|
Voluntary relinquishments
|
2.5.1
|
Subject to the Contractor's obligations established in Article 24 and the Hydrocarbons Law, the Contractor may at any time notify the Ministry with three (3) months' advance notice that it relinquishes all of its rights over all or any part of the Contract Area.
|
2.5.2
|
In no event will voluntary relinquishment of rights over all or any part of the Contract Area reduce the Contractor's obligations of Exploration established in Article 3.
|
2.6
|
Involuntary relinquishments
|
2.6.1
|
If the Contractor, during the First Exploration Sub-Period, fails to succeed in (i) acquiring, processing, and interpreting three thousand (3000) square kilometers of new 3D seismic data in accordance with Article 3.1.1(a), or (ii) acquiring existing 2D data and reprocessing it in accordance with Article 3.1.1(b), the Contractor will then relinquish all of its rights over the entire Contract Area at the end of the First Exploration Sub-Period.
|
2.6.2
|
If the Contractor, during the First Exploration Sub-Period:
|
2.6.3
|
This involuntary relinquishment will in no way exempt the Contractor from any of the obligations it may have under Article 24 of the Hydrocarbons Law.
|
2.7
|
Relinquishments in General
|
2.7.1
|
No relinquishment made by virtue of Articles 2.4 or 2.5 will relieve the Contractor of its obligation to pay accrued surface rentals, or to make due and payable payments incurred during Petroleum Operations executed up to the date of the relinquishment.
|
2.7.2
|
The Contractor will, in accordance with good oil field practice, put forward the geographical location of the part of the Contract Area that it proposes to retain. This area will have one or more continuous geometric forms that extend North to South and East to West and will be delimited at a minimum by one (1) minute of latitude or longitude or natural boundaries; moreover, this area will also be subject to the Ministry's approval.
|
3.1
|
Minimum Work Program
|
3.1.1
|
During the First Exploration Sub-Period, the Contractor must:
|
(a)
|
acquire, process, and interpret three thousand (3000) square kilometers of new 3D seismic information; and
|
(b)
|
buy all existing seismic data to combine with the new data acquired to generate models of the deposit, and shall pay for such data as follows:
|
3.1.2
|
If the Contractor completely fulfills all the obligations of the First Sub-Period, then it may, at its sole discretion, opt to enter into a Second Exploration Sub-Period. During the Second Sub-Period, the Contractor will drill one (1) Exploratory Well to a minimum depth reaching the farthest of the objectives below the mud line of the sea floor. The minimum expenditure for this period will be twenty five
million Dollars ($25MM).
|
3.1.3
|
If the Contractor decides to undertake the First Extension Period, it must conduct the seismic and geological studies. The minimum expenditure for the First Exploration Sub-Period and First Extension Period combined will be five million Dollars ($5MM)
.
|
3.1.4
|
The minimum expenditure for the Second Exploration Sub-Period and Second Extension Period combined will be twenty five
million Dollars ($25MM).
|
3.1.5
|
If the Contractor has drilled more than the minimum number of Exploratory Wells demanded of it in either of Articles 3.1.2 or 3.1.4, then the surplus that exceeds the obligatory amount at the end of the period in question will be transferred and considered part of the obligations of the next guaranteed period(s).
|
3.1.6
|
Subject to Article 31 of the Petroleum Regulations, when the work demanded under this Article 3 has been realized, observing good practices of the international petroleum industry, the obligation of minimum expenditure associated with that work will be considered fulfilled, irrespective of whether the actual cost of such work has represented more, less, or the same as the amount of the minimum expenditure obligation.
|
3.2
|
Minimum Depth of the Wells
|
3.2.1
|
Each of these Exploratory Wells must be drilled to the minimum depth specified above or to a lesser depth if the Ministry so authorizes in accordance with this Article, or if interrupting drilling is justified by one of the following reasons:
|
(a)
|
the economic basement is reached at a lesser depth than the minimum depth specified in the Contract;
|
(b)
|
further drilling is clearly dangerous because of abnormal pressure in the formation or for another reason;
|
(c)
|
rocky formations are encountered whose hardness makes it impracticable to continue drilling with appropriate equipment; or
|
(d)
|
hydrocarbon-bearing formations are encountered that require the installation of casings that exclude reaching the minimum contractual depth.
|
3.2.2
|
For purposes of Article 3.2.1, economic basement in and beneath which the geological structure or the physical sequence of the rocks do not have the necessary properties to accumulate hydrocarbons in commercial quantities and that moreover, reflects the maximum depth at which accumulations of this type can reasonably be expected to occur.
|
3.3
|
Cessation of drilling
|
3.4
|
Substitute Wells
|
(a)
|
drill a substitute Exploratory Well in the same or a different site to be agreed on with the Ministry: or
|
(b)
|
pay the Ministry an amount equal to the difference between twenty five million dollars ($25MM) and the amount of Exploration Costs effectively spent in connection with this Exploratory Well, which will be treated as if it were the finalization of the well, thus fulfilling the minimum work obligations with this Well.
|
3.5
|
Provision of Guarantees
|
3.5.1
|
On or before the Effective Date, each of the Parties making up the Contractor (other than the National Company) will provide to the State, guarantee acceptable to the Ministry, either (i) an Affiliate Company guarantee in the form stipulated in Annex D from an Affiliate Company or (ii) an irrevocable
standby
letter of credit from a first-class international financial institution in up to the amount of five million Dollars ($5MM)
,
which corresponds to the minimum expenditure obligations of the Contractor under this Contract for the First Exploration Sub-Period, and which will remain valid until the Contractor has complied with this obligation of minimum expenditures. In any case, the amount of the guarantee will be reduced as a function of sums expended that are related to the work obligations carried out to the degree that they are complete. If the Parties that make up the
|
3.5.2
|
Thirty (30) days before initiating drilling of the Exploratory Well demandable in the Second Exploration Sub-Period, the Contractor will provide the State, a guarantee acceptable to the Ministry either (i) an Affiliate Company guarantee in the form stipulated in Annex D from an Affiliate Company; or (ii) an irrevocable
standby
letter of credit from a first-class international financial institution up to the amount of twenty five million Dollars ($25MM)
,
which corresponds to the minimum expenditure obligations of the Contractor under this Contract for the Second Exploration Sub-Period, and which will remain valid until the Contractor has complied with this obligation of minimum expenditures.
|
3.6.1
|
Participation Interest of the National Company
|
4.1
|
Presentation of Annual Work Program
|
4.2
|
Form and Approval of the Annual Work Program
|
4.3
|
Execution of Petroleum Operations
|
4.4
|
Unbudgeted expenses
|
4.4.1
|
The Ministry and the Contractor recognize that the technical results acquired as work progresses, or certain unforeseen changes in circumstances, may justify modifying the approved Annual Work Program and corresponding Annual Budget. In such circumstances, the Contractor will promptly notify the Ministry of the proposed modifications. The Ministry will study these modifications and decide whether to approve them within a period of sixty (60) days of receiving the notification. If the Ministry neither approves nor rejects the proposed modifications within this sixty- (60-) day period the proposed modifications will be considered approved. Notwithstanding the foregoing, the Contractor will not in any case incur any expenditure that exceeds the approved Annual Budget by more than five percent (5%) without the prior approval of the Ministry. Expenditures exceeding the five percent (5%) tolerance will not be recoverable as a Petroleum Operations Cost or deductible for tax purposes. Where such approval is requested in connection with ongoing operations, the date of any approval will be considered to be prior to expenditure if the Ministry is aware of the excess and the continuation of operations after the time of that cost is verbally approved by the Ministry. In relation to emergencies or accidents, Articles 78.3 and 79 of the Regulations will apply.
|
4.4.2
|
At the time the Contractor reasonably believes that the limits of the Annual Budget will be exceeded, the Contractor will promptly notify the Ministry and provide the Ministry with full details of such excess expenditures, including the reasons for them.
|
4.4.3
|
The limitations stipulated in Article 4.4 will not affect the Contractor’s right to make expenditures in the event of an emergency or accident requiring urgent action in accordance with what is stipulated in Article 4.5.
|
4.4.4
|
Except as otherwise provided in Article 4.5, if the Contractor incurs any expenditure whose program and budget has not been approved within an Annual Work Program and corresponding Annual Budget or any amendment to them approved by the Ministry, then this expenditure will not be recoverable by the Contractor as a Petroleum Operations Cost.
|
4.5
|
Emergency or Accident
|
4.5.1
|
In the event of an emergency or accident requiring urgent action, the Contractor will follow all steps and take the measures as may be prudent and necessary in accordance with good practices of the international petroleum industry to protect its interests and those of the State and the property, life, and health of other Persons, the environment, and the safety of the Petroleum Operations. The Contractor will promptly inform the Ministry of such emergency or accident.
|
4.5.2
|
All of the related costs incurred by the Contractor in accordance with Article 4.5 will be recoverable as Petroleum Operations Costs in accordance with this Contract Nevertheless, costs incurred by the Contractor in cleaning up pollution or damage to the environment, if caused by the negligence or willful misconduct of the Contractor, its subcontractors or any Person acting on its or their behalf, will not be recoverable as a Petroleum Operations Costs.
|
5.1
|
Notification of Discovery
|
5.2
|
Evaluation Work Program
|
5.2.1
|
If the Contractor considers that the Discovery merits Evaluation it will diligently submit to the Ministry a detailed evaluation work program and corresponding budget no later than six (6) months following the date on which the Discovery was reported in accordance with Article 5.1 The evaluation work program, corresponding budget and designated Evaluation Area are subject to the review and approval of the Ministry in accordance with the procedures established in Article 4.
|
5.2.2
|
The rough draft of the evaluation work program will specify the estimated size of the Hydrocarbon reserves of the Discovery, the area to be designated as the Evaluation Area and will include all seismic, drilling, testing and evaluation operations necessary to carry out an appropriate evaluation of the Discovery. The Contractor will diligently undertake the approved evaluation work program, it being understood that the provisions of Article 4.4 will apply to the program.
|
5.2.3
|
The duration of the evaluation work program will not exceed twenty-four (24) months for Crude Oil and in the case of Natural Gas, the duration of the evaluation work program will be determined in accordance with the provisions of Article 13, unless otherwise approved by the Ministry. The Ministry's approval of the request will not be denied or delayed without reasonable justification.
|
5.3
|
Presentation of the Evaluation Report
|
5.3.1
|
Within six (6) months following completion of the evaluation work program and in any case, no later than thirty (30) days before expiration of the Initial Exploration Period, or the First Extension Period or the Second Extension Period, including all additional extensions in accordance with the provisions of Article 2.2, as the case may be, the Contractor will present a detailed report to the Ministry giving all the technical and economic information associated with the evaluated Discovery and that confirms, in the Contractor's judgment, whether such Discovery is a Commercial Discovery.
|
5.3.2
|
This report will include geological and petrophysical characteristics of the Discovery, estimated geographical extent of the Discovery, results of the production tests obtained from the formation, and a preliminary economic study with respect to exploitation of the Discovery.
|
5.4
|
Determination of Commerciality
|
5.5
|
Presentation and Approval of the Development and Production Plan
|
5.5.1
|
If the Contractor considers the Discovery or set of Discoveries to be a Field, it will submit for the approval of the Ministry a development and production plan (the "Development and Production Plan") for that Discovery or set of Discoveries within twelve (12) months following delivery of the report referred to in Article 5.3
|
5.5.2
|
The Ministry may propose amendments or modifications to the aforementioned Development and Production Plan, and also to the Development and Production Area that is the object of this Development and Production Plan, giving notice to the Contractor within ninety (90) days following receipt of the plan. Such notification will explain the reasons for the amendments or modifications proposed by the Ministry. In such case, the Ministry and the Contractor will meet as soon as possible to review the proposed amendments or modifications of the Ministry and establish the Development and Production Plan by mutual agreement.
|
5.5.3
|
If the Contractor and the Ministry do not reach a written agreement within one hundred eighty (180) days following the submission of amendments and modifications by the Ministry, or the Ministry notifies the Contractor that it does not approve the establishment of a Field, the Field will not be established and any extension granted under Article 2.2.4 with respect to the Discovery or set of Discoveries in question will be deliberated and decided by an internationally recognized expert named by the International Chamber of Commerce in accordance with its Rules for Expertise (ICC Expertise Rules). The decision of the expert will be restricted to whether the rejection by the Ministry of the establishment of a Field or the amendments and modifications to the Development and Production Plan by the Ministry are reasonable and customary and prudent in accordance with generally accepted practice of the international petroleum industry. The decision of the expert will be final and binding on the Parties, and if it cannot be enforced in accordance with the legislation of Equatorial Guinea, the only recourse will be to arbitration under Article 26 to arrive at a definitive and binding decision. The expert will determine the above within twenty (20) days from the date of his designation. The costs and expenses of the expert will be paid proportionately by the Parties.
|
5.6
|
Modifications to the Development and Production Plan
|
5.6.1
|
When the results obtained during Development and Production Operations require certain modifications to the Development and Production Plan, the plan may be modified using the same procedure provided for its initial approval. Subject to the provisions of Article 4.4, the Contractor may not incur any expenditure that exceeds the approved Development and Production Plan without prior approval of the Ministry; if prior approval is not obtained, such excess expenditures will not be recoverable by the Contractor as Petroleum Operations Costs or deductible for tax purposes.
|
5.6.2
|
During the period of Development and Production, the Contractor may propose to the Ministry revisions to the Development and Production Plan at any time that additional Development and Production Operations are under consideration. Such revisions will be submitted for the Ministry’s approval using the same procedure provided for the initial approval.
|
5.7
|
Number of Fields
|
5.8
|
Extension of the Field beyond the Contract Area
|
5.8.1
|
If, during work performed after approval of a Development and Production Plan, it appears that the geographical extent of a Field is larger than the Development and Production Area designated in accordance with Article 5.5, this will be so reported to the Ministry for enlargement of the Field by the Contractor to the additional area, provided that it is included in the Contract Area in effect at that time, and provided that the Contractor provides supporting evidence of the existence of the additional area for which it is applying.
|
5.8.2
|
If a Field extends beyond the boundaries of the Contract Area as delimited at any particular time, the Ministry may require the Contractor to exploit such Field in association with the contractor of the adjacent area in accordance with Article 22 of the Hydrocarbons Law and good practices of the international petroleum industry
|
5.8.3
|
When the area proposed to be unitized is not subject to any production sharing contract, such area will be the subject of new negotiations between the Parties to achieve an amendment to this Contract, it being understood that any award of an additional area must be in accordance with the Hydrocarbons Law.
|
5.9
|
Commencement and Execution of Development and Production Operations
|
5.9.1
|
The Contractor will commence Development and Production Operations within six (6) months of the approval date of the Development and Production Plan and will conduct these operations diligently.
|
5.9.2
|
The Contractor commits itself to conducting all Development and Production Operations in accordance with good practices of the international petroleum industry, this Contract, and the Hydrocarbons Law.
|
5.10
|
Duration of the Operations
|
5.10
|
The duration of the Development and Production period during which the Contractor is authorized to exploit a Field is twenty-five (25) Years from the date of approval of the Development and Production Plan for the Field.
|
5.10.2
|
The Development and Production period defined above may be extended for an additional period of five (5) Years with prior approval of the Ministry, which approval will not be denied or delayed without reasonable justification, if the Contractor presents a request to this effect to the Ministry at least one (1) Year prior to its expiration and on the condition that the Contractor has fulfilled all of its obligations under this Contract and that it can demonstrate that commercial Production from the Field is still possible after expiration of the initial Development and Production Period. The Contract can be extended for additional periods in accordance with the Hydrocarbons Law and Petroleum Regulations at the sole discretion of the Ministry.
|
5.11
|
The Contractor's Expenses and Financial Risks
|
5.12
|
Mandatory Relinquishment
|
(a)
|
has not presented, in accordance with Article 5.2, an evaluation work program and corresponding budget with respect to the Discovery within six (6) months of the date on which the Discovery has been reported to the Ministry; or
|
(b)
|
subject to the provisions of Article 13.1 with respect to Unassociated Natural Gas, does not establish the Discovery as a Field within one (1) Year after completion of evaluation work with respect to the Discovery.
|
5.13
|
Future Operations
|
6.1
|
Obligations of the Contractor
|
6.2
|
Joint Operating Agreement
|
6.3
|
Management of Petroleum Operations
|
6.4
|
Maximum Efficient Production Rate
|
6.5
|
Working conditions
|
6.6
|
Discovery of other minerals
|
6.7
|
Awarding of Contracts
|
6.7.1
|
The Contractor will award all contracts in accordance with the National Content Regulation promulgated by the Ministry in Ministerial Order No. 1/2014 of 26 September 2014, to the best qualified subcontractor or other Person, including Affiliates of the Contractor, as determined by cost and ability to comply with the provisions of the contract, provided the Contractor complies with Article 23.1.
|
(a)
|
call for bidding on the contract;
|
(b)
|
give preference to national companies the Contractor considers qualified;
|
(c)
|
before awarding a Material Contract, send a notification to the Ministry reporting that the Contractor intends to present an offer for the contract;
|
(d)
|
include the national companies on a list supplied by the Ministry and that the Contractor considers competent, on the list of bidders for the Material Contract;
|
(e)
|
add any Persons to the list so requested by the Ministry;
|
(f)
|
complete the bidding process within a reasonable time;
|
(g)
|
consider and analyze the details of the bids received;
|
(h)
|
prepare a competitive bid analysis and present to the Ministry stating the Contractor’s recommendation as to the Person to whom the contract should be awarded, the reasons, and the technical, commercial, and contractual terms to be agreed upon;
|
(i)
|
obtain the approval of the Ministry that will be considered as conceded if there is no response to a request for approval thirty (30) Days after receipt of a written request; and
|
(j)
|
provide the Ministry with a copy of the final executed contract.
|
6.7.2
|
To the extent that the Contractor imports and/or uses any services, materials, equipment, consumables, and other goods from outside Equatorial Guinea in conscious contravention of this Article or Article 23.1, or otherwise enters into a contract in contravention of these Articles, the costs will not be Petroleum Operations Costs and will not be costs that the Contractor can recover.
|
6.7.3
|
Together with the Annual Work Program, the Contractor will submit to the Ministry a list of the types of contracts or agreements for services that the Contractor foresees entering into during that Year, as well as details of those entered into in the previous Year. This list will include the value of those contracts, as well as the names, addresses, and telephone numbers where all the subcontractors of the Contractor and other Persons who have entered into these contracts. In addition, the Contractor will present to the Ministry quarterly a detailed list, including the names, addresses, and telephone contacts of the Contractor’s subcontractors and other Persons who have provided goods or services to the Contractor for the conduct of Petroleum Operations during the relevant Quarter.
|
6.8
|
Inspection of Petroleum Operations
|
6.8.1
|
All Petroleum Operations may be inspected and audited by the Ministry at such intervals as the Ministry considers necessary; nevertheless, only in exceptional cases will this be done outside regular working hours. The duly commissioned representatives of the Ministry will have the right, among others, to monitor Petroleum Operations and inspect all equipment, facilities, and materials relating to Petroleum Operations, provided that any such inspection will not unduly delay or impede Petroleum Operations, nor demand the use of housing necessary for operating personnel. The representatives of the Ministry inspecting and monitoring Petroleum Operations will comply with the safety standards of the Contractor, and whenever possible, will do so without incurring extra expenses for the Contractor.
|
6.8.2
|
For purposes of allowing exercise of the rights mentioned in the paragraph above, the Contractor will provide reasonable assistance to the representatives of the Ministry, including transportation and accommodation, when these are under the control of the Contractor. The Ministry will pay all expenses of transportation and housing of third parties, with the exception of what is established in Article 6.8.3,
|
6.8.3
|
In accordance with the Petroleum Regulations, all reasonable costs directly related to the technical inspection, verification, and audit of Petroleum Operations, or related to the exercise of the Ministry's rights under this Contract or the performance of the Contractor's obligations will be at the expense of the Contractor under tariffs that will be published and are applicable in general to all companies
|
(a)
|
outbound and return travel expenses for trips outside Equatorial Guinea;
|
(b)
|
local public transportation, when transportation in accordance with Article 6.8.2 is not available;
|
(c)
|
housing, when this is necessary to carry out official tasks and is not supplied under Article 6.8.2; and
|
(d)
|
per diems, which will be adjusted in accordance with the amounts assigned to the classification of each agent of the Ministry and published in the general budget law of the State approved for the corresponding Calendar Year, applicable to all companies in the Hydrocarbons extraction sector of Equatorial Guinea.
|
6.9
|
Supply of information to the Ministry:
|
6.9.1
|
The Contractor will keep the Ministry fully informed of the performance and status of Petroleum Operations, supplying information at reasonable intervals and as required under this Contract, and about all accidents or emergencies that may have occurred during these operations. Furthermore, the Contractor will provide the Ministry with all documentation and information that is required to be provided under this Contract and the Hydrocarbons Law and that may be requested by the Ministry from time to time.
|
6.9.2
|
The Contractor will keep the Ministry informed on a daily basis of the volumes of Hydrocarbons produced in the Contract Area.
|
6.10
|
Production of energy for own use
|
6.11
|
Equipment standards
|
6.12
|
Contractor's care and the environment
|
6.12.1
|
The Contractor will take all necessary and prudent steps in accordance with good practices of the international petroleum industry, the Hydrocarbons Law, and this Contract to:
|
(a)
|
prevent pollution and protect the environment and living resources;
|
(b)
|
ensure that any Hydrocarbons discovered or produced in the Contract Area are handled in a safe manner for the environment;
|
(c)
|
avoid causing damage to overlying, adjacent, and/or underlying formations that contain Hydrocarbon deposits;
|
(d)
|
prevent the ingress of water via Wells into strata that contain Hydrocarbons that are not specified in an approved Development and Production Plan;
|
(e)
|
avoid causing damage to overlying, adjacent, and/or underlying aquifers;
|
(f)
|
ensure that Petroleum Operations are carried out in accordance with this Contract, the Hydrocarbons Law, and all other laws of Equatorial Guinea;
|
(g)
|
take the precautions necessary to protect maritime transportation and the fishing industry, and to avoid contamination of the ocean and rivers;
|
(h)
|
drill and exploit each Field in a manner consistent with the approved Development and Production Plan for protection of the interests of Equatorial Guinea; and
|
(i)
|
ensure that damages caused by Petroleum Operations to Persons and property are promptly, fairly, and fully compensated.
|
6.12.2
|
If the Contractor's actions result in any pollution or damage to the environment, any Person, living resources, property or other type of damage, the Contractor will immediately take all prudent and necessary measures to remedy such damages and its effects and/or those measures the Ministry may order. If the pollution or damage is caused as a result of the negligence or willful misconduct of the Contractor, its subcontractors, or any Persons acting on its or their behalf, all costs related to that pollution or damage will not be recoverable as Petroleum Operations Costs. If the Contractor does not act promptly to control or clean up any pollution or repair any damage caused, the Ministry may, after giving the Contractor reasonable notice in the circumstances, carry out the actions that are prudent or necessary in accordance with this Article and Article 4.5 and all reasonable costs and expenses of those measures will be at the expense of the Contractor and will not be recoverable as Petroleum Operations Costs.
|
6.12.3
|
If the Ministry determines that any works or installations built by the Contractor or any activity undertaken by the Contractor threatens the safety of any Persons or property or causes pollution or harm to the environment, the Ministry will promptly advise the Contractor of its determination, and may require the Contractor to take all appropriate mitigating measures, consistent with generally accepted practices of the international petroleum industry, to repair any damage caused by the Contractor's conduct or activities. Furthermore, if the Ministry considers it necessary, it may demand that the Contractor suspend the affected Petroleum Operations totally or partially until the Contractor has taken the appropriate mitigating measures or repaired any damage.
|
6.12.4
|
The Contractor will undertake comprehensive environmental impact assessment studies before, during, and after major drilling operations. The Contractor will assume the costs of these studies and the costs will be recoverable This requirement is mandatory and the first study will be presented to the Ministry before drilling starts on the first Well in the Contract Area. However, an environmental impact assessment must also be completed before any seismic work in especially sensitive areas environmentally specified by the State.
|
6.13
|
Reinjection and Natural Gas Flaring
|
6.14
|
Design and identification of Wells
|
6.14.1
|
The Contractor will conform to the practices generally accepted in the international petroleum industry in the design and drilling of Wells, including their casing and cementation.
|
6.14.2
|
Each Well will be identified by a name or number agreed on with the Ministry, which will be indicated on all maps, plans and other similar records produced by or on behalf of the Contractor.
|
6.15
|
Vertical Projection Wells
|
6.16
|
Notification of Drilling Commencement
|
6.17
|
Construction of installations
|
6.18
|
Occupation of Land
|
6.18.1
|
In order to carry out Petroleum Operations, the Contractor will have the right to:
|
(a)
|
subject to the provisions of Articles 6.17 and 6.18.2, occupy the land necessary to carry out Petroleum Operations and connected activities, as stipulated in items (b) and (c) of this Article, including housing of personnel;
|
(b)
|
undertake or procure the undertaking of any infrastructure work necessary in normal technical and economic conditions for the carrying out of Petroleum Operations and associated activities such as transport, storage of equipment, materials and extracted substances, establishment of telecommunications equipment and communication lines necessary to carrying out Petroleum Operations at installations located both offshore and on land;
|
(c)
|
realize or ensure realization of the work necessary to supply water for personnel and installations in accordance with water supply regulations; and
|
(d)
|
extract and use or ensure the extraction and utilization of resources (other than Hydrocarbons) from the subsoil necessary for the activities stipulated in paragraphs (a), (b) and (c) above in accordance with applicable regulations.
|
6.18.2
|
Occupation of land as mentioned in Article 6.18.1 will become effective after the Ministry or other appropriate governmental authority approves the request submitted by the Contractor indicating and detailing the location of such land and how the Contractor plans to use it, taking the following into consideration:
|
(a)
|
if the land belongs to the State, the State will grant it to the Contractor for occupation and to build its fixed or temporary installations during the term of this Contract for a fee and on terms to be agreed and this amount will be considered a Petroleum Operations Cost;
|
(b)
|
if the land is private property by traditional or local right according to the Property Registry, then (i) if the occupation is merely temporary or transitory, or for right of way, the Contractor will reach an agreement with the relevant property owner and the property owner will reach an agreement with any occupant, tenant, or possessor with respect to the rental to be paid, and the resulting amounts will be considered recoverable Petroleum Operations Costs, or (ii) if the occupation is permanent, the Contractor will reach an agreement on matters related to the property's acquisition with the owner in question, and such amounts will be considered Petroleum Operations Costs;
|
(c)
|
if the Contractor and the relevant property owner or occupant, tenant, or possessor do not reach an agreement about the matters mentioned in paragraph (b) above, the Ministry will act as mediator between them, and if mediation fails to produce resolution of the case, the dispute will be resolved by the courts of Equatorial Guinea, unless recourse is had to the procedure described in paragraph (d) below;
|
(d)
|
the State may expropriate the land, subject to prior publication of a decree of compulsory expropriation followed by a fair and reasonable appraisal of the land by an expert appraiser. In such event, the Contractor will compensate the expropriated property owner in accordance with the value determined by the expert appraiser if the State has not done so; such amounts will be considered recoverable Petroleum Operations Costs;
|
(e)
|
relinquishment, in whole or in part, of the Contract Area, will not affect the Contractor’s rights under Article 6.18.1 to carry out building work and construction of installations, provided that such work and installations are directly related to other activities of the Contractor in the remainder of the Contract Area, as in the case of partial relinquishment, and covered by other production sharing contracts.
|
6.19
|
Residence of personnel
|
6.20
|
Collaboration of the Ministry
|
6.21
|
Opening a branch
.
|
7.1
|
Royalties
|
7.1.1
|
The Contractor will pay Royalties to the State from the first day of Production based on the daily Total Disposable Production from a Development and Production Area. The calculation will be determined according to the following table applicable for each tranche:
|
Daily Total Disposable Production
|
Royalty
|
|
(Barrels per day)
|
(%)
|
|
0 to 40,000
|
13
|
%
|
40,000 to 80,000
|
14
|
%
|
80,00 to 120,000
|
15
|
%
|
More than 120,000
|
16
|
%
|
7.1.2
|
The percentage that corresponds to the level of Production will be applied directly. Thus, for example, for a Production level of seventy-five thousand (75,000)
Barrels per day, fourteen percent (14%) would be paid, and the Royalty would be twelve thousand seven hundred fifty (12,750) Barrels.
|
7.2
|
Cost-Recovery Petroleum
|
7.2.1
|
After deducting Royalties, the Contractor will be entitled to up to sixty-five percent (65%) of the Total Disposable Production remaining in any Calendar Year for recovery of its Petroleum Operations Costs (Cost Recovery Oil).
|
7.2.2
|
The value of the portion of Total Disposable Production assigned to the Contractor’s recovered Petroleum Operations Costs will be determined in accordance with Article 10.
|
7.2.3
|
If, during any Calendar Year, the Petroleum Operations Costs not yet recovered by the Contractor in accordance with this Contract exceed the value of the maximum amount of available Cost Recovery Oil, the portion of Petroleum Operations Costs not recovered in the Year will be carried forward to the following Calendar Year for recovery purposes.
|
7.3
|
Net Crude Oil
|
Total Accumulated Production
(Million Barrels)
|
State Participation
(%)
|
Participation of the
Contractor
|
Less than or equal to 90
|
20%
|
80%
|
More than 90 and less than or equal to 200
|
30%
|
70%
|
More than 200 and less than or equal to 300
|
40%
|
60%
|
More than 300 and less than or equal to 400
|
50%
|
50%
|
More than 400
|
60%
|
40%
|
7.5
|
Price Obtained by the Contractor
|
7.5.1
|
If, in accordance with Article 7.4, the State requires the Contractor to purchase its share of Crude Oil, the State will advise the Contractor of its next scheduled shipment at least three (3) months in advance, and the Ministry and the Contractor will mutually agree on the terms and conditions of the
|
7.5.2
|
The Ministry will have the right to compare the price for its Crude Oil obtained from the Contractor with quotations from similar markets. If it is shown that the price obtained from the Contractor differs substantially from the quotations in similar markets, the Ministry will have the right to evaluate the Contractor’s sales and marketing operations, and if justified, to cancel any contract of sale between the State and the Contractor with respect to sales after the date on which it becomes aware of the situation, as well as also having the right to market Crude Oil on its own, without prejudice to any right that the State has against the Contractor.
|
7.6
|
Export of the Contractor's Share
|
7.7
|
Transfer of Ownership
|
8.1
|
Responsibility for Petroleum Operations Costs
|
8.2
|
Participation Interest of the State through the National Company under Chapter XVIII of the Hydrocarbons Law.
|
8.2.1
|
The National Company's Carried-Over Interest will be carried and paid in its totality by the Parties that make up the Contractor, with the exception of the National Company, ("Paying Partners") in accordance with the provisions of Article 1.3.1. After the Carry-Over Termination Point, the National Company will totally pay all costs and obligations that arise after the Carry-Over Termination Point that are attributable to its Participation Interest, the same as other members of the Contractor.
|
8.2.2
|
The costs, expenses, and obligations contracted by each Paying Party in relation to its payments and obligations for the Carried-Over Participation of the National Company will be recoverable by
|
8.2.3
|
In accordance with the provision of 8.2.2, such costs will also include: travel, stay, and maintenance of the delegation designated by the National Company.
|
9.1
|
Payment of Taxes
|
10.1
|
Calculation of Market Price
|
10.1.1
|
The selling price per unit of Crude Oil under this Contract will be the FOB Market Price at the Delivery Point, expressed in Dollars per Barrel and calculated in accordance with this Article 10.1. A Market Price will be established for each type of Crude Oil or Crude Oil blend, according to this Article 10.1.
|
10.1.2
|
The Market Price applicable to all liftings of Crude Oil sold to third parties in market conditions during a Quarter will be the agreed-to sales price, adjusted, if necessary, to reflect differences in the quality, gravity, delivery conditions, and terms of payment.
|
10.1.3
|
Before the period when Argus Crude quotes a price for the Field from which the Crude Oil is sold, the market price applicable to all liftings of crude oil sold to a Contractor’s Affiliate and subsequently sold to a third party will be the value received under the contract in market conditions with that third party, adjusted, if necessary, to reflect differences in the quality, gravity, delivery conditions, and terms of payment. If there is no Argus Quote for the Crude Oil produced, the Contractor and the Ministry will meet to establish a differential related to a marker of crude quoted in Argus to reflect the difference in quality and the commercial differences. The meeting will take place six months after the introduction onto the market, and all Persons constituting the Contractor who participate in the commercialization of the Crude Oil during this six-month period will participate in the meeting with the Ministry.
|
10.1.4
|
The market price applicable to all Crude Oil liftings sold to a Contractor's Affiliate after a quoted price has been established for one Quarter will be calculated by adding the average of the high and low Dated Brent quotes according to publication in five (5) consecutive editions of the Platts Bulletin of the crude oil market (including all corrections) after the date of the shipment's bill of lading to the average differential between Crude Oil sold and Dated Brent quotes that are published in Argus
|
A =
|
average of the high and low Dated Brent quotes, according to publication in five (5) consecutive editions of the Platts Bulletin of the Crude Oil Market (including all corrections) after the date of the bill of lading.
|
B =
|
average differential between the quality of crude oil sold and Dated Brent quotes published in Argus Crude for the period beginning the fifteenth (15th) day and ending the last day of the month of the Cargo's Marketing (inclusive).
|
10.1.5
|
The Market Price applicable to all liftings of Crude Oil for one Quarter equals the weighted average of the prices obtained by the Parties constituting the Contractor, with the exception of the National Company, for Crude Oil sold and valued in accordance with Articles 10.1.2, 10.1.3, and 10.1.4
|
10.1.6
|
The following transactions will be excluded from calculation of the Market Price:
|
(a)
|
sales between the providers of Crude Oil and the local market; and
|
(b)
|
sales for consideration other than payment in a freely convertible currency and sales wholly or partially made for reasons different from the usual economic incentives involved in Crude Oil sales on the international market (such as exchange contracts).
|
10.2
|
Disagreements about the Market Price
|
10.2.1
|
The Contractor and the Ministry will agree on the Market Price in accordance with this Article 10; if they are unable to agree on any matter concerning the Market Price of Crude Oil, either the Contractor or the Ministry may serve the other with a dispute notice. Within seven (7) days of the date of the dispute notice, the Ministry will establish a committee of two (2) Persons of which the Minister of Mines and Hydrocarbons or his delegate will be the President, and the other committee member will be a representative designated by the Contractor to represent it. The committee will meet and make a decision resolving any dispute under this Article 10 within thirty (30) days of the date of the dispute notice. The committee will decide the controversy unanimously.
|
10.2.2
|
If the committee has not reached a unanimous decision within the aforementioned thirty- (30-) day period, the dispute will be decided by an internationally recognized expert named by the International Chamber of Commerce in accordance with its Rules for Expertise (ICC Expertise Rules). The decision of the expert will be final and binding on the Parties, and if it cannot be enforced in accordance with the legislation of Equatorial Guinea, the only recourse will be to arbitration under Article 26 to arrive at a definitive and binding decision. The expert will determine the Market Price in accordance with the provisions of this Article 10 within twenty (20) days from the date of his
|
10.2.3
|
While the determination of the Market Price for a Quarter is pending, the Market Price provisionally applicable to a Quarter will be the Market Price of the preceding Quarter. Any necessary adjustment will be made no later than thirty (30) days after determination of the Market Price for the Quarter in question
|
10.3
|
Period for payment of the Market Price to the State if the Contractor commercializes the State's Crude Oil.
|
10.4
|
Auditing the Market Price
|
11.1
|
Contract signing bonus
|
11.2
|
Discovery Bonus
|
11.3
|
Production Bonuses
|
(a)
|
three million Dollars ($3MM) on the date Production of Crude Oil begins from a Development and Production Area;
|
(b)
|
three million Dollars ($3MM) when daily Production from a Development and Production Area first averages twenty thousand (20,000) Barrels per day for a period of sixty (60) consecutive days;
|
(c)
|
five million Dollars ($5MM) when daily Production from a Development and Production Area first averages forty thousand (40,000) Barrels per day for a period of sixty (60) consecutive days;
|
(d)
|
five million Dollars ($5MM) when daily Production from a Development and Production Area first averages sixty thousand (60,000) Barrels per day for a period of sixty (60) consecutive days;
|
(e)
|
five million Dollars ($5MM) when daily Production from a Development and Production Area first averages one hundred twenty thousand (120,000) Barrels per day for a period of sixty (60) consecutive days; and
|
11.4
|
Surface leasing
|
11.4.1
|
The Contractor will pay the State the following annual surface lease amounts:
|
(a)
|
one Dollar fifty cents ($1.50) annually per hectare of the Contract Area, or part thereof, during the Initial Exploration Period, the Extension Periods, or any extension of them; or
|
(b)
|
two Dollars ($2.00) annually per hectare for each Development and Production Area, for each Calendar Year or part thereof, during the term of the relevant Development and Production Period.
|
11.4.2
|
For the Year in which this Contract is signed, the surface lease payment established in Article 11.4.1(a) will be prorated from the Effective Date through 31 December of such Year and will be paid within thirty (30) days after the Effective Date. For succeeding Years, the surface lease payments established in Article 11.4.1(a) and (b) will be paid in advance not less than thirty (30) days before the beginning of each Calendar Year.
|
11.4.3
|
Surface lease payments will be calculated based on the surface of the Contract Area, and where applicable, of a Development and Production Area occupied by the Contractor on the date these surface leases are paid. To avoid doubt, this will exclude the surface of any relinquished areas. In the event of relinquishments made during a Calendar Year, the Contractor will have no right to be reimbursed for the surface lease payments already made.
|
12.1
|
Obligation to supply
|
12.2
|
Ministry Notification
|
13.1
|
Non-Associated Natural Gas
|
13.1.1
|
In the event of a Non-Associated Natural Gas Discovery, the Contractor will comply with the provisions of Article 5.2. However, if the Evaluation work program presented by the Contractor following the Discovery of Non-Associated Natural Gas has a duration exceeding that of the Initial Exploration Period or any of its extensions, the Contractor may request from the Ministry an extension of the relevant Exploration Period with respect to the Evaluation Area related to such Discovery for a period of up to four (4) Years starting from the expiration of the Initial Exploration Period or any of its Extension Periods, as appropriate. The Contractor will request the aforementioned extension at least sixty (60) days before the expiration of the period in question.
|
13.1.2
|
If the Contractor considers that the Non-Associated Natural Gas Discovery does not warrant Evaluation or further Evaluation, in conformity with the provisions of Article 5.12, the Ministry may, with ninety (90) days’ advance notice, require the Contractor to waive all of its rights over the Evaluation Area where the Discovery is located.
|
13.1.3
|
If after finishing the Evaluation work the Contractor does not notify the Ministry within thirty (30) days that the Non-Associated Natural Gas Discovery is not a Commercial Discovery, whether (i) as an autonomous discovery, or (ii) together with potential but undrilled accumulations in the Contract
|
13.1.4
|
If the Contractor is required to waive its rights under Article 13.1.2 or Article 13.1.3, it will be understood that the Contractor waives all its rights to the Hydrocarbons that this Non-Associated Natural Gas Discovery may produce, and the State will be empowered to carry out or have carried out all the Petroleum Operations relating to this Discovery, without compensation or indemnification to the Contractor, provided, however, that such work will not prejudice execution of the Contractor's other Petroleum Operations.
|
13.2
|
Associated Natural Gas
|
13.2.1
|
In the event that a Discovery of Crude Oil is considered to be a Commercial Discovery, the Contractor will state in the report referred to in Article 5.3 whether it considers that the Production of Associated Natural Gas is likely to exceed the quantities necessary for the requirements of Petroleum Operations relating to the Production of Crude Oil (including reinjection operations), and whether it considers that such excess is capable of being produced in commercial quantities. If the Contractor has informed the Ministry of the excess, the Ministry and the Contractor will jointly assess the possible markets and uses for this excess Associated Natural Gas.
|
13.2.2
|
In the event the Contractor should decide that Development of the excess Associated Natural Gas is justified, the Contractor will indicate all additional facilities necessary for the Development and Production of the excess in the Development and Production Plan, and its estimate of the related costs. The Contractor will then proceed with Development and Production of the excess in accordance with the Development and Production Plan presented to and approved by the Ministry under Article 5.5. A similar procedure will be applied if the sale or marketing of Associated Natural Gas is agreed on during the Production of a Field.
|
13.2.3
|
If the Contractor does not consider exploitation of the excess Associated Natural Gas justified and if the State at any time wishes to utilize it, the Ministry will notify the Contractor of the State's wish, in which event:
|
(a)
|
the Contractor will put all or part of the excess Associated Natural Gas that the State wishes to ship at the State's disposal free of charge at the outlet of the separation facilities of Crude Oil and Associated Natural Gas.
|
(b)
|
the State will be responsible for the resulting costs, responsibilities, and operations in all the additional installations of Crude Oil and Associated Natural Gas that are not included in the Contractor’s Development and Production Plan or all the additional installations and those already existing, including additional installations for the gathering, treatment, compression and transport; and
|
(c)
|
construction of the installations mentioned in item (b), together with the recuperation of this excess on the part of the State, will be carried out in accordance with generally accepted practices of the international petroleum industry, without holding back or reducing the Contractor's uncompensated production under the approved Development and Production Plan.
|
13.2.4
|
In no case may the operations carried out by the State with this Associated Natural Gas interfere with the Contractor's Petroleum Operations.
|
13.1.5
|
Any excess Associated Natural Gas that is not used in accordance with Articles 13.2.1, 13.2.2, and 13.2.3 will be reinjected by the Contractor in accordance with Article 6.14. Flaring of this Associated Natural Gas will be permitted only in accordance with the Hydrocarbons Act and will be subject to the approval of the Ministry. The Contractor may flare Associated Natural Gas without the approval of the Ministry in an emergency, provided all necessary efforts are made to reduce and extinguish the flaring of this Natural Gas as soon as it is commercially practical. Except in the case of gas flaring in an emergency or in connection with a short-term test, the Ministry has the right to collect (“offtake”), free of charge, in the wellhead or in the gas and oil separator all Natural Gas that would otherwise be flared or reinjected by the Contractor, being that the State will pay the costs resulting from such collection (“Offtake”) under the terms of Article 13.2.3.
|
13.3
|
Provisions common to Associated and Non-Associated Natural Gas
|
13.3.1
|
Each Party that makes up the Contractor will take, receive, and dispose of its right to the production of Natural Gas in accordance with the provisions of this Contract and the Hydrocarbons Law. Under the Hydrocarbons Law, the Ministry and the Contractor agree that in the case of Natural Gas Production, they will negotiate and agree separately on the sale and commercialization of Natural Gas.
|
13.3.2
|
The sales price of any Natural Gas to be sold on the domestic market will be determined by the Ministry in accordance with the Hydrocarbons Law. The sales price of any Natural Gas to be sold outside the national market will be that agreed between the Ministry and the Contractor to the extent permitted by applicable competition or antitrust laws. If required, the Ministry and the Contractor will proceed in good faith to negotiate a gas sales contract,
|
13.3.3
|
For the purposes of Articles 7.3 and 11.3, the quantities of Natural Gas available after deducting the quantities reinjected, flared, or necessary for the execution of oil operations will be expressed in number of barrels of Crude Oil, based on the equivalent energy content in BTU adjusted monthly by a commercially appropriate factor relating the price of Natural Gas to the price of Crude Oil in accordance with the provisions of Article 10.1, unless the Ministry and the Contractor reach a different agreement.
|
13.3.4
|
The provisions of Article 7.2 with respect to cost recovery will be applied with the necessary adjustments to the production of Natural Gas.
|
13.3.5
|
The amount of Natural Gas produced and retained in the Contract Area that is surplus after the Contractor has taken the portion corresponding to Petroleum Operations Cost Recovery in accordance with Article 13.3.4 will be known as Net Natural Gas.
|
13.3.6
|
The stipulations of this Contract applicable to Crude Oil will apply to Natural Gas, with the necessary adjustments, except where this Contract provides otherwise, including the [Parties'] right to freely withdraw, receive, and export their portion of Natural Gas and Natural Gas withdrawn as Petroleum Operations Cost Recovery, subject to Articles 12.1 and 13.3.4. To avoid doubt, the provisions of Article 13.3 will prevail when there is some kind of contradiction with other terms of this Contract.
|
13.3.7
|
Notwithstanding other provisions in this Article 13, in the case of a Natural Gas Discovery that is not commercial under the terms established in this Contract, the Contractor and the Ministry will reasonably undertake to agree on terms applicable to the development of the Natural Gas Discovery including Royalty percentages, cost recovery, and benefit-sharing that allow the Contractor to develop the Natural Gas Discovery in a commercially reasonable and viable manner.
|
14.1
|
Customs exemptions provided in this Contract
|
14.1.1
|
In tandem with Articles 63 and 64 of the Hydrocarbons Law, the Contractor will be permitted to import, re-export, and export, subject to Article 14.5, all goods, materials, machinery, equipment, and consumer goods directly necessary to properly carry out Petroleum Operations in its own name or in the name of its subcontractors or other Persons acting on its behalf, freely and exempt from all Customs duties, taxes, and fees that are not charges for the necessary services to administer Customs regulations.
|
14.1.2
|
For purposes of this Contract. the advantages the Contractor will enjoy under this Contract include, among others, the following exemptions:
|
(a)
|
All materials, products, machinery, equipment, and tools destined exclusively and effectively dedicated directly to Petroleum Operations and intended to be re-exported at the end of their use will be treated as imported under the conditions provided in the CEMAC Customs Code, as implemented by the Customs legislation of Equatorial Guinea. Importation in compliance with the standards governing Temporary Admission (TA) or Temporary Importation (TI) will be whichever is the case for the Contractor, when importation is for the Contractor or its subcontractors and Persons acting on their behalf, and any authorization necessary for those ends will be immediately conceded and extended by the corresponding Customs authorities;
|
(b)
|
Admission with exemption from all taxes and/or Customs duties of all material, products, machinery, equipment, and tools totally used and consumed in Equatorial Guinea, exclusively and effectively dedicated to the Operations of prospecting, Exploration, Development, and Production of Hydrocarbons under this Contract.
|
14.1.3
|
Except for the exemptions established in the preceding paragraphs of this Article 14, and the items referred to in Article 14.1.4 that are exemptions the Government can concede under the law, all goods, material, products, machinery, tools, and equipment imported or exported by the Contractor are subject to taxes and/or Customs duties, in accordance with provisions of the Customs legislation in force in Equatorial Guinea.
|
14.1.4
|
The Contractor will follow procedures for obtaining those exemptions provided in Decree 134/2015 of 2 November 2015. The Government will concede these exemptions as the law allows for purposes of importing all goods, materials, machinery, equipment, and consumer goods directly necessary to carry out Petroleum Operations in the Contractor's name or in the name of its subcontractors or other Persons acting on behalf of the Contractor or its subcontractors, in such a way that the importation of those items is free and exempt from all Customs duties, taxes, and fees that are not charges for the necessary services to administer Customs regulations.
|
14.2
|
Petroleum export rights
|
14.3
|
Export of goods and materials that were not transferred to the State
|
14.4
|
Customs documentation
|
14.5
|
Exclusion of penalties and fines from Petroleum Operations Costs
|
14.6
|
Imports and exports by foreign personnel
|
15.1
|
Exchange control laws
|
(a)
|
subject to compliance with the Retention Minimum, to collect, retain, or dispose of any proceeds outside Equatorial Guinea and the territory of another CEMAC Member State, including any proceeds from the sale of its or their share of Hydrocarbons to entities that are resident or not, including payment required by the State for Production, to be made in foreign currency and into bank accounts outside the territory of the CEMAC Member States;
|
(b)
|
to pay foreign subcontractors and expatriate employees of the Contractor outside of Equatorial Guinea, after deduction of the relevant taxes in Equatorial Guinea. For this purpose, the Contractor may freely open and use bank accounts in Dollars or in other currencies in banks of its choice in Equatorial Guinea and abroad. Notwithstanding the foregoing, while this Contract is in force the Contractor and each of its subcontractors carrying out Petroleum Operations in Equatorial Guinea will open and maintain one or more bank accounts in a banking institution authorized to operate in Equatorial Guinea the minimum balance of which will be, in the case of the Contractor, an amount equivalent to the Retention Minimum, and in the case of the subcontractors, the minimum amount set by the Ministry from time to time for all subcontractors working in Equatorial Guinea;
|
(c)
|
subject to compliance with the Retention Minimum, to transfer to accounts domiciled abroad those funds the Contractor or its subcontractors have imported into Equatorial Guinea, those the Petroleum Operations have generated, or that the sale or lease of goods or performance of services have provided under this Contract, including all surplus funds from their accounts domiciled in Equatorial Guinea;
|
(d)
|
to obtain loans abroad and perform whatever capital operations are necessary to carry out the activities that are the objects of this Contract, including the Affiliates, under reasonable market conditions, including the rate of interest and terms of repayment, that must be reported to the Ministry;
|
(e)
|
to collect and maintain abroad all the funds acquired or borrowed abroad, and to freely dispose of them, limited to the amounts that exceed the requirement of funds for their operations in Equatorial Guinea;
|
(f)
|
subject to compliance with the Retention Minimum, transfer any profits, dividends, or income resulting from their investment obtained and deposited in any bank account in Equatorial Guinea, as well as all surplus funds from the accounts domiciled in Equatorial Guinea to the bank accounts outside the territory of the CEMAC Member States; and
|
(g)
|
subject to compliance with the Retention Minimum, free movement of funds they own, according to the laws of Equatorial Guinea.
|
15.2
|
Freedom of exchange
|
16.1
|
Maintaining Records and Books
|
16.1.1
|
The Contractor will at all times maintain at its offices in Equatorial Guinea the original records and books of Petroleum Operations in accordance with all applicable regulations and the Accounting Procedure.
|
16.1.2
|
All records and books will be maintained in the Spanish and English languages and be denominated in Dollars. They will be backed up by detailed documents that show the receipts and expenses of the Contractor under this Contract. These records and books will be used to determine the Contractor's Gross Revenues, Petroleum Operations Costs and net profits, and to establish the Contractor’s Income Tax and other payment obligations. The records and books will also include the Contractor’s accounts showing sales of Hydrocarbons.
|
16.2
|
Presentation of accounts
|
16.3
|
Auditing by the Ministry
|
16.3.1
|
After notifying the Contractor, the Ministry may have experts of its choice or its own agents examine and audit any records and books relating to Petroleum Operations. The Ministry has a period of three (3) years from the date the Contractor presents its records and books to the Ministry in accordance with Article 16.2, to conduct examinations or audits with respect to that Calendar Year and submit its objections to the Contractor for any contradictions or errors found during the examinations or audits.
|
16.3.2
|
The Contractor will provide to the Persons designated by the Ministry any necessary assistance for the foregoing purpose and facilitate the performance of his or her duties. The Contractor will pay all reasonable costs incurred during these reviews and audits, and these will be recoverable as Petroleum Operations Costs. However, any costs incurred for the audit and inspection of accounting books and records outside of Equatorial Guinea due to the Contractor’s non-compliance with this Article 16 will be at the expense of the Contractor and will not be recoverable as a Petroleum Operations Cost or deductible for tax purposes.
|
16.3.3
|
In case of disagreement between the Ministry and the Contractor about the results of any examination or audit, the dispute will be determined by an internationally recognized expert appointed by the
|
16.4
|
Application of Article 16 to other audits
|
16.5
|
Currency and accounts for payments
|
16.5.1
|
Unless the Contract stipulates otherwise, all payments between the Parties will be made in Dollars. Subject to Article 16.4.2, when the Party receiving the payment is the State, payments will be made to the General Treasury of the State, and when the receiving Party is the Contractor, payments will be made to the bank account designated by the Contractor and reported to the Ministry.
|
16.5.2
|
All amounts paid to the Ministry in accordance with the Law and this Contract will be deposited in the accounts belonging wholly to the State and will be reported to the Contractor.
|
16.6
|
Coordination of payments and late payments
|
17.1
|
Transfer to an Equatoguinean Affiliate
|
17.2
|
Assignment, Transfer, Change of Control
|
17.2.1
|
The assignment, transfer, encumbrance, or other disposition of the rights and/or obligations of a Party constituting the Contractor will require the prior consent of the Ministry Any request for authorization will be accompanied by all information related to the assignment, transfer, encumbrance, or other disposition, including all legal instruments, in final draft form, to be used to carry out the proposed transaction, the identity of all parties to the transaction, the estimated value of the transaction, and whether the consideration is payable in kind, securities, cash, or other form. Such assignment, transfer, encumbrance, or other disposition, except those addressed in Article 17.2.4 (a), (b), or (c), will be subject to the payment of a non-recoverable, non-deductible fee and compliance with other reasonable requirements established in the authorization granted by the Ministry. The assignee and the assignor will be jointly and severally liable for the payment of such fee and for meeting any other requirements. The fee will be mutually agreed upon by the Parties and the Ministry. The assignment, transfer, encumbrance, or other disposition of the rights and/or obligations of a Party constituting the Contractor in accordance with Articles 17.2.4 (a) and 17.2.4 (c) will not be liable to any Tax.
|
17.2.2
|
All assignees must:
|
(i)
|
have the technical and financial capacity to comply with its obligations in accordance with this Contract:
|
(ii)
|
in relation to the interest assigned, accept and assume all of the terms and conditions of this Contract, the Joint Operating Agreement, and any other agreements relating to Petroleum Operations; and
|
(iii)
|
be an entity that the Ministry and each of the Parties constituting the Contractor can legally do business with, and be incorporated in Equatorial Guinea.
|
17.2.3
|
All profits resulting from any assignment, transfer, or other disposition of any rights and/or obligations under this Contract, regardless of the type and location of the transaction, will be subject to taxation in accordance with the Tax Law of Equatorial Guinea.
|
17.2.4
|
In accordance with Article 104 of the Hydrocarbons Law and Article 168 of the Petroleum Regulations, each of the Parties that constitute the Contractor will have the right to sell, concede, transfer, assign, or in any other way dispose of all or part of its rights and interests in the Contract:
|
(a)
|
to a wholly owned Affiliate;
|
(b)
|
to the beneficiary provided in Article 17.1;
|
(c)
|
to any of the partners only constituting the Contractor, with the prior consent in writing of the Ministry that cannot be denied or delayed without justification; or
|
(d)
|
to third parties, subject to the prior consent in writing of the Ministry that cannot be denied or delayed without justification.
|
17.3
|
Change of Control
|
17.4
|
Third-party financing
|
17.5
|
The National Company's first right of refusal
|
18.1
|
Liability and indemnification
|
18.1.1
|
The Contractor will be responsible to third parties under the legislation of Equatorial Guinea and other jurisdictions in which it operates for damages caused by the Contractor, its Affiliates, its subcontractors, and their respective directors, officers, employees, and any other Person who acts on their behalf in carrying out Petroleum Operations. The Contractor will indemnify, hold harmless, and compensate any Person, including the State, for any damage or loss that the Contractor, its Affiliates, its subcontractors and their respective directors, officers, employees, agents, or consultants, and any other Person acting on their behalf may cause to such Person or their property in carrying out Petroleum Operations. All costs incurred under this Article 18.1 caused by the negligence or willful misconduct of the Contractor, its Affiliates, its subcontractors or their respective directors, officers, employees, agents or consultants or any other Persons acting on their behalf will not be cost recoverable as Petroleum Operations Costs. All costs not generated by Negligence or willful misconduct will be recoverable as Petroleum Operations Costs and that recovery will be understood as being consistent with the interpretation and application of the Petroleum Regulations.
|
18.1.2
|
The Contractor will assume all liability, and exempt the State from any liability, in respect of any and all claims, obligations, losses, expenses (including attorneys’ fees), damages or costs of any nature resulting from the violation of any intellectual property rights of any kind caused by the Contractor, its Affiliates, or subcontractors as a result of or in relation to carrying out Petroleum Operations, regardless of the nature of the violation or of the way in which it may occur.
|
18.2
|
Joint and several liability
|
18.3
|
Insurance
|
(a)
|
any damage or loss to the assets used in Petroleum Operations;
|
(b)
|
pollution caused in the course of Petroleum Operations;
|
(c)
|
damages or losses to the property, or damage, bodily injury, or death suffered by any Person in the course of Petroleum Operations;
|
(d)
|
the cost of clean-up operations and salvage following an accident or upon dismantlement; and
|
(e)
|
the Contractor’s liability for its employees involved in Petroleum Operations.
|
18.3.2
|
The Contractor will require its subcontractors to carry insurance of the type and amount of coverage consistent with the generally accepted practices of the international petroleum industry.
|
18.3.3
|
The Contractor will place the insurance required under this Article 18.3.1 in accordance with Decree 56/2007 addressing insurance in the petroleum industry, provided the Equatoguinean insurance brokers and insurance companies that the Contractor uses in accordance with Decree 56/2007 are considered competent according to its criteria that they have the same financial solidity as the insurance brokers and companies available on the international market and that offer coverage at comparable prices.
|
19.1
|
Title to and use of the installations
|
19.1.1
|
All installations, facilities, goods, equipment, materials, or land acquired by the Contractor for Petroleum Operations will become property of the State from the point at which their costs are fully recovered by the Contractor. Nevertheless, the Contractor may continue using these installations, facilities, goods, equipment, materials, or land to carry out Petroleum Operations for the duration of this Contract and in accordance with the Hydrocarbons Law by a payment agreement negotiated and decided between the Contractor and the Ministry, if the Ministry does not waive the payment agreement for the Contractor. This payment will not be considered a Petroleum Operations Cost. The Contractor and the Ministry will agree on the mode and conditions of the installation, goods, equipment, materials, or land, the Contractor retaining the responsibility of ensuring that maintenance
|
19.1.2
|
Regardless whether the Contractor has recovered the relevant costs in accordance with this Contract, the State has the right to use the facilities, goods, equipment, materials, or land for its own purposes, provided that such use does not interfere with the Contractor’s Petroleum Operations.
|
19.1.3
|
The Contractor will not sell, assign, transfer, or otherwise dispose of these facilities, goods, equipment, materials, or land to any other Persons without prior approval from the Ministry.
|
19.1.4
|
The provisions of this Article 19.1 will not apply to any leased equipment, or to the Contractor’s equipment that is not charged to Petroleum Operations as a Petroleum Operations Cost.
|
19.1.5
|
If the Ministry does not wish to use any of the facilities, goods, equipment and materials referred to in this Article 19.1, it has the right to ask the Contractor to remove them at the Contractor’s own expense, and the Contractor will carry out any dismantling operations of these facilities, goods, equipment, and materials in accordance with this Contract and the Hydrocarbons Law, and based on the time established and conditions specified in the approved dismantling plan. When a Reserve Fund has been created, the Contractor will use it to pay for dismantling the installation. When a Reserve Fund has not been created, the cost of dismantling will be subject to tax deduction and recoverable as a Petroleum Operations Cost.
|
19.2
|
Ownership of Information
|
20.1
|
Disclosure of confidential information
|
20.1.1
|
The Parties agree that while this Contract is in force, all information relating to this Contract and the Petroleum Operations will be kept strictly confidential and may not be divulged by any of the Parties without mutual consent, except:
|
(a)
|
to an Affiliated Company;
|
(b)
|
to a governmental agency designated by the State or other entities or consultants of the Ministry;
|
(c)
|
to the degree that the data and information are required to be supplied in compliance with any applicable laws or regulations;
|
(d)
|
in conformity with the requirements of any stock exchange having jurisdiction over a Party or its Affiliate Controlled Company ;
|
(e)
|
where any data or information forms part of the public domain, unless this occurs as the result of noncompliance with this Contract; and
|
(f)
|
to employees, directors, officers, agents, advisors, consultants, or subcontractors of a Party constituting the Contractor or an Affiliate; and
|
(g)
|
to potential beneficiaries of a transfer or good-faith buyers.
|
20.1.2
|
During an additional period of two (2) years after termination of this Contract, only the Contractor will be obligated to comply with the above provisions.
|
20.2
|
Patents and intellectual property rights of the Contractor
|
20.3
|
Continuation of obligations
|
20.4
|
Disclosure of confidential information by the State and the Ministry
|
21.1
|
Termination by the State
|
(a)
|
substantial noncompliance by the Contractor (not attributable to any act or omission of the State or to any Person representing the State) with any of the provisions of this Contract or the Hydrocarbons Law;
|
(b)
|
delay by the Contractor (not attributable to any act or omission of the State or to any Person representing the State) in making any payment to the State over two hundred thousand Dollars ($200.000) that exceeds three (3) months, provided that the State has delivered written notice to the Contractor in the week before the expiry of such three (3) month period and that within thirty (30) days of such written notice such payment by the Contractor remains outstanding;
|
(c)
|
suspension of Development Operations on a Field for six (6) consecutive months, except when that suspension (i) has been approved by the Ministry in advance, or (ii) is due to an act or omission on the part of the State or of any Person representing the State, or (iii) results from Force Majeure;
|
(d)
|
if, after beginning Production of a Field, its exploitation is suspended for at least three (3) consecutive months, without prior authorization from the Ministry, except when such suspension (i) is due to an act or omission on the part of the State or of a Person representing the State, or (ii) results from Force Majeure;
|
(e)
|
when the Contractor fails to comply within the prescribed time period with an arbitration award in accordance with the provisions of Article 26, and the failure to comply is not attributable to any act or omission of the State or to any Person representing the State;
|
(f)
|
when a Well is drilled to an objective beyond the vertical planes of the limits of the Contract Area without the prior consent of the Ministry;
|
(g)
|
serious noncompliance with this Contract stemming from activities that are illegal or contrary to national or international law (not attributable to any act or omission of the State or to any Person representing the State);
|
(h)
|
in accordance with Article 2.3; or
|
(i)
|
with respect to one or more members of the Contractor, when that member of the Contractor, for reasons different from any action of the government that does not allow proper funding for this member, is declared bankrupt, or in liquidation as a result of financial insolvency, or enters into judicial or financial arrangements of insolvency with its creditors generally, except when the Contractor can provide the State with a new financial guarantee that is acceptable to the Ministry, at its sole discretion, and that guarantees the capacity of that Party to fulfill its obligations under this Contract. In this case, the other members of the Contractor may continue to constitute part of the Contract.
|
21.2
|
Notification of termination and grace period
|
21.2.1
|
The Ministry may declare this Contract terminated only after having served the Contractor with formal notice by registered mail, asking it to remedy the situation or noncompliance in question, and if the situation or noncompliance in question can be remedied, asking that the Contractor remedy it within thirty (30) Working Days from receipt of notice regarding payments due under Article 21.1(b) or within ninety (90) Working Days from receipt of such notice for all other remediable situations or violation. Otherwise, the effective termination date of this Contract will be the date the Contractor receives the abovementioned notice.
|
21.2.2
|
If the Contractor fails to comply with the notice within the period prescribed by Article 21.2.1 or fails to show within this period that it has begun to remedy the situation or noncompliance in question, and is promptly and diligently continuing to do so, the Ministry may pronounce ipso jure the termination of this Contract.
|
21.3
|
Termination against one Party
|
21.4
|
In cases of termination of the Contract decided by Article 21.1 c, d, e, or i, the National Company will have the option of continuing the Petroleum Operations in the Contract Area for a period of one (1) Year, presenting the corresponding Work and Budget Program. At the end of this period, the Ministry will be informed of its decision whether to continue the Petroleum Operations; if not, it will relinquish the Block and deliver it to the State. For purposes of this Article, the Technical Operator will deliver to the National Company all technical information about the block, including testimony, files, seismic information, data and reservoir studies, reports and information about all the Wells.
|
22.1
|
Obligation to unitize
|
22.1
|
Suspension of obligations
|
23.1
|
National content regulations
|
a)
|
before awarding a services contract, the Contractor will notify the Ministry of its need for these services;
|
b)
|
The Ministry will provide a list of national companies to the Contractor; The Contractor will support the Ministry by including the national companies on the list among those the Contractor considers competent in the biddings required in the framework of this Contract;
|
c)
|
in awarding the contracts, the Contractor will give preference to the national companies identified on the list that the Ministry delivers in accordance with Article 23.1(b), as specified in Decree 127/2004. If the Contractor does not consider these companies competent, the contract may be awarded to a foreign company, in accordance with Articles 12 and 13 of Ministerial Order 1/2014. The Contractor will notify the Ministry of the disqualification of any of the national companies, if necessary, describing the procedure that resulted in the disqualification.
|
d)
|
the foreign company winning the bid for the services contract will be notified by the Contractor of the conditions specified in Article 23.1(c).
|
e)
|
the Contractor will deliver to the Ministry at the end of July and January of each calendar Year a list of subcontractors who have delivered services in Equatorial Guinea during the previous period;
|
f)
|
in the contracts that imply delivery of services or supply of goods in Equatorial Guinea, the Contractor will include clauses that obligate the subcontractors to comply with the provisions of Ministerial Order 1/2014;
|
g)
|
the Contractor will organize workshops to raise awareness in the national companies about the requirements of the Technical Operator in service provision matters;
|
h)
|
the Contractor will notify the Ministry, which will inform all the other competent authorities, about the job vacancies and new positions for the execution of works in Equatorial Guinea;
|
i)
|
at the beginning of Development and Production Operations, the Contractor will submit to the Ministry and agree to a plan to hire national employees and train them, which includes assignments for their professional development in the offices of the Technical Operator with the possibility of joining the Technical Operations Team of Equatorial Guinea to achieve reasonable and feasible nationalization goals, and sending updated information to the Ministry on the implementation of that plan at the end of July and January of each subsequent year; and
|
j)
|
the Contractor will send the Ministry a description of the mechanisms used to evaluate the national employees.
|
23.2
|
Employment and training of Equatoguineans
|
23.2.1
|
At the beginning of Development and Production Operations in Block EG-24, the Technical Operator will ensure priority of employment for qualified Equatoguinean personnel at all levels of its organization, according to the following table and according to the aptitudes of the employees. For the purposes of the employment obligations under this Article, technicians nominated by the National Company will be employed as secondees to the Technical Operator provided that they have the required capacity and experience. The Technical Operator will train or contribute to the training of this personnel so that they can meet the requirements of any available position related to Petroleum Operations, including supervisory positions. Nevertheless, the Technical Operator will only have to employ the number of personnel necessary to carry out Petroleum Operations in a prudent and profitable manner.
|
POSITIONS
|
Percentage of national employees
|
Percentage of expatriate employees
|
Total number of employees
|
70%
|
30%
|
Technical and professional positions(Geologists and Engineers, Legal, Financial, Safety, Health, and Environment)
|
60%
|
40%
|
Supervisory and management positions
|
50%
|
50%
|
Technicians who work offshore (including Safety, Health, and Environment)
|
85%
|
15%
|
Support and administrative services
|
100%
|
0%
|
a)
|
one hundred and fifty thousand Dollars ($150,000.00) per Calendar Year during the Exploration Period; and
|
23.3.2
|
During the period in which the Contractor is producing Hydrocarbons in a Development and Production Area , the Contractor will provide all reasonable assistance as may be requested by the Ministry from time to time with the implementation and development of the National Technology Institute to train and develop mid- and upper-level personnel in the petroleum industry of Equatorial Guinea, in accordance with the Hydrocarbons Law, and to the degree permitted by the laws applicable to the members of the Contractor or its Affiliates.
|
23.4
|
Social Programs
|
23.4.1
|
During the period in force of this Contract, the Contractor will spend on Social Programs in Equatorial Guinea:
|
(a)
|
one hundred and fifty thousand dollars ($150,000.00) per Calendar Year during the Period of Exploration; and
|
(b)
|
two hundred and fifty thousand Dollars ($250,000.00) per Calendar Year during the Development and Production Period.
|
A)
|
one hundred fifty thousand Dollars ($150,000) per Calendar Year during the Period of Exploration;
|
B)
|
three hundred thousand dollars ($300,000) per Calendar Year during the Development and Production Period.
|
23.5
|
All of the preceding costs under this Article 23 are recoverable as Petroleum Operations Costs in accordance with the provisions of this Contract, except the costs referred to in Article 23.2.3.
|
23.6
|
Costs and Travel Expenses
|
24.1
|
Relinquishment or dismantlement
|
24.1.1
|
Subject to the provisions of Article 2.5.2, the Contractor may, at any time, relinquish and/or abandon any part of the Contract Area or any well not included in a Field, provided that the Ministry has been given at least three (3) months’ notice, so long as the Contractor has complied with all of its obligations under this Contract and has provided the Ministry, in a detailed manner, all information on the condition of any deposit, facilities, and equipment in that area, as well as any plan for the disposal or dismantling of those facilities and equipment, including all technical and financial information. All dismantling operations will be carried out in accordance with the Hydrocarbons Law.
|
24.1.2
|
The dismantling of a Field by the Contractor and the corresponding dismantling plan will require prior authorization from the Ministry in accordance with the Hydrocarbons Law. The Contractor will prepare and deliver to the Ministry a plan for the dismantling of all Wells, facilities, and equipment, the rehabilitation of the landscape and the continuation of oil operations, if applicable, in accordance with the Hydrocarbons Law.
|
24.1.3
|
Unless the Ministry decides to maintain the facilities and equipment in order to continue Petroleum Operations in accordance with Article 24.3.3, the Contractor is obligated to completely dismantle all Fields located in the Contract Area at the time of Contract termination or when a Field ceases to produce for more than one year.
|
24.2
|
Right of the Ministry
|
24.3
|
Reserve Fund
|
24.3.1
|
During the term of this Contract, the Contractor in accordance with the generally accepted standards of the oil industry, will be responsible for carrying out all necessary work with respect to abandonment (including removal, appropriate disposal, recycling in an alternative or novel manner, or salvage) of any of the Petroleum Operations’ installations, including but not limited to platforms, artificial structures, wellhead equipment, casing, and flow lines that are considered by the Ministry to be usable or are no longer required for future operations. The Contractor will submit detailed plans of work for such removal, disposal, or salvage to the Ministry for approval. Any costs incurred by the Contractor to remove, dispose of, or save these installations will be recoverable. For the purpose of establishing a financial mechanism to recover such costs in advance for the life of the Field, the Contractor and the Ministry will agree on the mechanism and modality to set aside a reserve in the Contractor's books as part of the disbursement for Petroleum Operations that would be considered
|
24.3.2
|
If the total amount of the Reserve Fund is greater than the real dismantling cost, the balance of the account will be attributed to the State, since the Contractor has received Cost-Recovery Oil corresponding to the account balance. Whatever portion of the balance for which the Contractor has not received the corresponding Cost-Recovery Oil will be distributed to the Contractor. If the balance of the Reserve Fund is less than the actual cost of the dismantling operations, the Contractor will be responsible for the missing amount and may impute such costs as Petroleum Operations Costs to future production in the Contract Area, if any.
|
24.3.3
|
If the Ministry decides to maintain the installations and equipment in order to continue with the Petroleum Operations after withdrawal of the Contractor, the reserve fund that is constituted in this way, together with the corresponding interest, will be made available to the Ministry to cover the subsequent dismantling. The Contractor will be exempt from any additional liability for dismantling with respect to these installations and equipment.
|
24.4
|
Continuation of the Operations
|
24.5
|
Protection of the Environment
|
25.1
|
This Contract and the Petroleum Operations carried out under this Contract will be governed by and interpreted in accordance with the laws and regulations of Equatorial Guinea, including the Hydrocarbons Law and the Petroleum Regulations.
|
25.2
|
In case of a Change in the Law and if, as a result of its implementation, the Change in the Law causes a significant reduction in economic rights or a significant increase in the economic obligations contained in or resulting from this Contract to the detriment of the Contractor or its shareholders,
|
26.1
|
Resolution of disputes and notification
|
26.1.1
|
If any dispute, claim, conflict or controversy (a "Dispute") between any of the Parties should arise from this Contract, or in relation to it, including any question regarding noncompliance, or its existence, validity, or termination, the Parties will take all reasonable measures to resolve the Dispute amicably. A Dispute will be understood to have arisen if one of the Parties notifies the other Parties, describing the nature of the Dispute and asking for a resolution ("Notification of Dispute").
|
26.1.2
|
If the Parties in question have not reached an amicable agreement within ninety (90) days of the date of the Notification of Dispute, unless all Parties extend the deadline, either of the Parties to the Dispute may submit the Dispute to resolution by final and binding arbitration by means of a notification of arbitration, and the arbitration will take place in accordance with the rules of the International Chamber of Commerce (ICC).
|
26.2
|
Headquarters and language of arbitration
|
26.3
|
Number and identity of the arbitrators
|
(a)
|
The claimant and respondent will each designate one arbitrator within thirty (30) days of the date on which the request for arbitration was submitted. If there is more than one claimant or more than one (1) respondent, then the claimants and/or the respondents collectively will each appoint a single arbitrator), by giving notice in writing of this designation to the other Party or Parties to the Dispute and ICC.
|
(b)
|
If either the claimant or the respondent fails to comply with the time limit in the preceding paragraph, ICC will appoint the arbitrator or arbitrators that have not yet been appointed, at the request of either the claimant or the respondent and after consulting the claimant and the respondent so far as possible. ICC will give notice in writing of such designation or designations to the claimant and the respondent.
|
(c)
|
The two (2) arbitrators so designated will, within thirty (30) days of their nomination agree on the person to be named as the President of the tribunal, and give notice of the designation to the claimant and the respondent, and ICC.
|
(d)
|
If the two (2) arbitrators fail to agree on the person of the President of the tribunal, ICC will name the President, at the request of either the claimant or the respondent, and after consulting the claimant and the respondent as much as possible. ICC, will give notice in writing of the nomination to the claimant and the respondent.
|
26.4
|
Rules of arbitration
|
26.5
|
Binding nature of the arbitration
|
26.6
|
Costs of the arbitration
|
26.7
|
Payment of the award
|
26.8
|
The arbitrators will apply Article 25.1.
|
27.1
|
Noncompliance with obligations
|
27.2
|
Definition of Force Majeure
|
(a)
|
it temporarily or permanently prevents a Party from meeting its obligations under this Contract;
|
(b)
|
it is unforeseeable, unavoidable and beyond the control of the Party that declares Force Majeure; and
|
(c)
|
it does not result from the negligence or willful misconduct of the Party that declares Force Majeure.
|
27.3
|
Notice of Force Majeure
|
27.4
|
Continuation of obligations
|
27.5
|
Cessation of Force Majeure
|
27.6
|
Continuation of Force Majeure
|
28.1
|
Assistance of the Ministry
|
28.1.1
|
The Ministry will facilitate, within the limits of its authority, and in accordance with the rules and procedures in effect in Equatorial Guinea, the performance of the Contractor’s activities by granting it all permits, licenses, and access rights that are reasonably necessary for the purposes of Petroleum Operations, and by making available to it all necessary services with respect to Petroleum Operations in Equatorial Guinea.
|
28.1.2
|
The Ministry will also facilitate and assist the Contractor, within its authority, and in accordance with the rules and procedures in effect in Equatorial Guinea, in obtaining all permits, licenses, or rights not directly related to Petroleum Operations, but that the Contractor may reasonably require for the purposes of meeting its obligations under this Contract.
|
28.2
|
Notifications and other communications
|
Telephone:
|
+ (240) 09-3567, 09-3405
|
Fax:
|
+ (240) 09-3353
|
Telephone:
|
+ (240) 09-6769
|
Fax:
|
+ (240) 09-6692
|
Telephone:
|
+(44) 20 7811 2400
|
Fax:
|
+(44) 20 7811 2421
|
29.1
|
Amendments
|
29.2
|
No Association
|
29.3
|
Entirety of agreement
|
29.4
|
Exemptions or waivers
|
29.5
|
Conflict of interest
|
29.5.1
|
Each of the Parties constituting the Contractor commits itself to avoiding any conflict of interest between its own interests (including the interests of Affiliates) and the interests of the other Parties in connection with activities contemplated under this Contract.
|
29.5.2
|
In the event of any conflict between the principal document of this Contract and its Annexes, the principal document will prevail. In the event of any conflict between this Contract and the Hydrocarbons Law, the Hydrocarbons Law will prevail.
|
29.6
|
Commercial transaction
|
30.1
|
The table of contents, headings, and subheadings used in this Contract are for convenience only and should not be interpreted as having any substantive significance or as indicating that all of the provisions of this Contract relating to any topic are to be found in any particular Article.
|
30.2
|
Any reference to the singular implies reference to the plural, and vice versa.
|
30.3
|
Any reference to the masculine gender includes a reference to the feminine gender, and vice versa.
|
30.4
|
Unless otherwise stipulated, reference to an Article or an Annex means an Article or Annex of this Contract.
|
30.5
|
The words
includes
and
including
mean includes and including without limiting the generality of the description preceding the term and are used in an illustrative and not limiting sense.
|
30.6
|
Any reference to a Person will be interpreted as including a reference to its successors, authorized transferees, and authorized transferors.
|
30.7
|
Any reference to a law or standard will be interpreted as a reference to such law or standard as it may have been or may be amended or repromulgated from time to time, or any subordinate legislation made or standard created, or may from time to time be created, under such law or standard.
|
30.8
|
Reference to this Contract or part thereof or any other document will be interpreted as a reference to it as it may be amended, supplemented, renewed, or replaced from time to time.
|
Signature:
|
|
/s/ Gabriel Mbaga Obiang Lima
|
Name: His Excellency
|
|
Gabriel Mbaga Obiang Lima
|
Position: Minister of Mines and Hydrocarbons
|
|
Minister of Mines and Hydrocarbons
|
Signature:
|
|
/s/ Antonio Oburu Ondo
|
Name:
|
|
Antonio Oburu Ondo
|
Title: Director General
|
|
Director General
|
Signature:
|
|
/s/ Nick Cooper
|
Name:
|
|
Nick Cooper
|
Title: Chief Executive Officer
|
|
Director
|
1.1
|
OBJECT
|
(a)
|
classify and define Petroleum Operations Costs; and
|
(b)
|
prescribe the form for preparing and submitting the financial statements of the Contractor in accordance with accounting principles in effect in Equatorial Guinea.
|
1.2
|
INTERPRETATION
|
1.3
|
ACCOUNTING RECORDS AND FORMS
|
1.3.1
|
In accordance with the provisions of Article 16.1 of the Contract, the Contractor will maintain in its office in Equatorial Guinea original, complete, true, and correct accounts, books, and records of the Production and disposition of Hydrocarbons, and all costs and expenses under the Contract, as well as all other records and data necessary or proper for the settlement of accounts in accordance with the laws of Equatorial Guinea, generally accepted accounting procedures, and generally accepted practices in the international petroleum industry and in accordance with the chart of accounts agreed to in conformance with Article 1.3.2 below
|
1.3.2
|
Within sixty (60) days from the Effective Date, the Contractor will submit to and discuss with the Ministry a proposed outline for the chart of accounts and the books, records, and reports in accordance with generally accepted standards and consistent with normal petroleum industry procedures and practices.
|
1.3.3
|
In addition to the generality of the foregoing, the Contractor will submit to the Ministry, at regular intervals, statements relating to the Petroleum Operations, including, but not limited to, the following:
|
(a)
|
monthly Production statement;
|
(b)
|
quarterly statement of Production value and prices;
|
(c)
|
statement of Petroleum Operations Costs;
|
(d)
|
annual statement of Petroleum Operations Cost not yet recovered;
|
(e)
|
Production participation statement;
|
(f)
|
annual end-of-year statement;
|
(g)
|
Annual Budget quarterly tracking statement;
|
(h)
|
statement of tangible goods subject to depreciation, and
|
(i)
|
quarterly statement of goods, materials, and property whose ownership is expected to be transferred to the State within three (3) months following the report, owing to total recuperation of their cost.
|
1.3.4
|
All reports and statements will be prepared in accordance with the Contract, the laws of Equatorial Guinea and any approved regulations conforming to them, and in accordance with generally accepted practices of the international petroleum industry.
|
1.4
|
LANGUAGE AND UNIT OF ACCOUNT
|
1.5
|
VERIFICATION AND AUDIT RIGHTS OF THE STATE
|
1.5.1
|
When the Ministry exercises its audit right under Article 16.3 of the Contract, it will provide notice to the Contractor at least sixty (60) days in advance of that audit, which will take place during regular business hours. The Contractor will make available to the Ministry all accounts, books, records, invoices, cash vouchers, debit notes, price lists, or any other documentation referring to Petroleum Operations. Furthermore, the auditors will have the right, in connection with such audit, to visit and inspect, at reasonable times, any of the Contractor’s sites, plants, facilities, warehouses, and offices that affect Petroleum Operations directly or indirectly, and to interview personnel associated with those Operations.
|
1.5.2
|
Any audit exceptions will be made in writing and reported to the Contractor within ninety (90) days of completion of the corresponding audit. Failure to give such exception by the Ministry will be considered an acknowledgement of the accuracy of the Contractor's books and accounts.
|
1.5.3
|
If the Contractor fails to respond to any notice of exception under Article 1.5.2 within ninety (90) days of receipt of such notice, the results of the audit will be considered valid and accepted by the Contractor. After that period of time, the Ministry’s exception will prevail.
|
1.5.4
|
Any adjustments resulting from an audit will be promptly applied to the Contractor's accounts; any adjustments to payments due will also be effected promptly.
|
1.5.5
|
If the Contractor and the Ministry are unable to reach final agreement on the proposed audit adjustments they will resolve the dispute in accordance with the provisions of Article 16.3.3 of this Contract.
|
1.6
|
CURRENCY EXCHANGE RATES
|
1.7
|
ACCOUNTING BASIS
|
1.8
|
REVIEW OF ACCOUNTING PROCEDURE
|
2.1
|
EXPLORATION COSTS
|
(a)
|
surveys and aerial, geophysical, geochemical, paleontological, geological, topographical, and seismic studies and their interpretation;
|
(b)
|
core hole drilling;
|
(c)
|
any labor, materials, supplies, and services used in drilling Exploration Wells and Evaluation Wells;
|
(d)
|
any facilities used solely in support of the purposes described in paragraphs (a), (b), and (c) above, including access roads and acquired geological and geophysical data, all separately identified; and
|
(e)
|
any other cost incurred in the Exploration and Evaluation of Hydrocarbons after the Effective Date but prior to the date of approval of a Development and Production Plan with respect to the relevant Field and not covered under Articles 2.2, 2.3, and 2.4 below.
|
2.2
|
DEVELOPMENT AND PRODUCTION COSTS
|
(a)
|
drilling Wells defined as Development Wells for purposes of producing from a Commercial Field, whether these Wells turn out to be dry or productive by nature, and drilling Wells for the injection of water or gas to enhance Hydrocarbon recovery;
|
(b)
|
completing Wells by way of installation of casing or equipment or otherwise after a Well has been drilled for the purpose of bringing the Well into use as a Development Well or a Well for the injection of water or gas to enhance Hydrocarbon recovery;
|
(c)
|
transportation and installation of tank storage facilities, pipelines, flow lines, production and treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems, offshore platforms, export terminals and piers, harbors, and related facilities, and access roads for development activities; and
|
(d)
|
engineering and design studies for facilities referred to in item (c).
|
2.3
|
OPERATIONS OR PRODUCTION COSTS
|
2.4
|
COMMERCIALIZATION COSTS
|
2.5
|
ASSIGNMENT OF GENERAL AND ADMINISTRATIVE COSTS
|
(a)
|
Before commercial Production:
|
Up to five million Dollars
|
$
|
5,000,000
|
|
4.0
|
%
|
Next seven million Dollars
|
$
|
7,000,000
|
|
2.0
|
%
|
Next ten million Dollars
|
$
|
10,000,000
|
|
1.0
|
%
|
Remaining balance
|
|
0.5
|
%
|
(b)
|
From commercial Production:
|
Up to five million Dollars
|
$
|
5,000,000
|
|
2.0
|
%
|
Next seven million Dollars
|
$
|
7,000,000
|
|
1.0
|
%
|
Next ten million Dollars
|
$
|
10,000,000
|
|
0.5
|
%
|
Remaining balance
|
|
0.25
|
%
|
2.6
|
Except as provided otherwise in the Contract, approved Petroleum Operation Costs described in Articles 2.1 to 2.5 of this Accounting Procedure will be recoverable by the Contractor in accordance with Article 7.2 of the Contract.
|
2.7
|
RECOVERY OF INTEREST
|
2.8
|
NONRECOVERABLE COSTS
|
(a)
|
signing bonus paid by the Contractor;
|
(b)
|
all Discovery bonuses paid by the Contractor;
|
(c)
|
all Production bonuses paid by the Contractor;
|
(d)
|
surface leases paid to the State;
|
(e)
|
interest on loans as provided by Article 2.7 of this Accounting Procedure;
|
(f)
|
any unapproved cost overruns exceeding the limits of Article 4.4 of this Contract;
|
(g)
|
all payments made to the State for failure to meet minimum Exploration work obligations in accordance with Article 3 of the Contract;
|
(h)
|
all fines and sanctions incurred for violating the laws and regulations of Equatorial Guinea;
|
(i)
|
all donations to the State or other similar expenses, unless otherwise agreed;
|
(j)
|
the State’s audit and inspection expenses incurred as a result of the failure to keep original documents in the Contractor’s offices in Equatorial Guinea;
|
(k)
|
all sanctions imposed on the Contractor under the Hydrocarbons Law or otherwise; and
|
(l)
|
costs related to assignments made by the Contractor to any of its Affiliates or other Persons.
|
(m)
|
Income tax and minimum rates charged for government services, other than Customs fees or the cost of charges for services such as costs paid by the Contractor under Article 6.8;
|
(n)
|
costs incurred to remediate damages, including pollution, caused by the Negligence or willful misconduct of the Contractor; and
|
(o)
|
costs incurred by the Contractor before signing the Contract, except those costs associated with negotiating the Contract, that will be considered historical costs and recoverable in accordance with the present Contract.
|
2.9
|
INSURANCE AND CLAIMS
|
2.10
|
INVENTORY ACCOUNTING
|
3.1
|
CAPITAL COSTS
|
3.1.1
|
TANGIBLE CAPITAL COSTS
|
(a)
|
for Development Wells: the costs of material and equipment employed in the culmination process (equipment for the well bottom, fixed production pipes, production packagers, valves, wellhead equipment, subsoil machinery for elevation, pumping rods, surface pumps,
|
(b)
|
for all purchase of goods and equipment: the real cost of the asset (excluding transport), the construction cost of platforms outside of the Contract Area, the cost of power generation equipment and the cost of facilities on land;
|
(c)
|
for the purchase of movable goods: automotive machinery (vehicles, tractors, tugs, tools, lighters, etc.), construction machinery and equipment (office furniture and equipment, among others);
|
(d)
|
for construction purposes: the cost of construction of houses and residential facilities, offices, warehouses, workshops, energy plants, storage facilities and access roads for development activities, the cost of quays and anchors, the treatment plant and machinery, the secondary recovery system, the gas plants and steam systems; and
|
(e)
|
drilling and production facilities and platforms.
|
3.1.2
|
INTANGIBLE CAPITAL COSTS
|
(a)
|
the costs of aeromagnetic, airborne gravimetry, topographical, geological, geophysical and geochemical studies, costs of interpretation and reinterpretation of technical data, labour required for exploration and similar costs:
|
(b)
|
drilling costs of Exploration Wells and Evaluation Wells: costs of services provided to drill Development and Evaluation wells, chemical products, leasing costs (of helicopters, lighters, boats, tugs etc.), transport, warehousing facilities, accommodation, technical services for mud control, Well geology, controlled directional drilling of Wells, diving service, mud control, Well geology tests, hardening and related costs;
|
(c)
|
drilling costs of Development Wells such as mobilisation and demobilisation of platforms and drilling equipment, drilling contracts and hire of platforms and drilling equipment, labour for platform facilities and infrastructure, fuel, water, drivers, drill bits, drilling tubes, hire of equipment, production test equipment, Christmas tree for production and mud tests and components, chemical products, hire costs (of helicopters, lighters, boats, tugs, etc.), transport, warehousing facilities, accommodation, technical services for mud control, Well location geology, directional drilling of Wells, diving service, production and evaluation test, culmination and supervision;
|
(d)
|
the acquisition or purchase costs of goods and services such as transport costs, operating costs, verification of equipment, costs of on site installation, maintenance costs and fuel costs;
|
(e)
|
general services (electrical registers, vertical seismic profile [VSP], mud control, sample collection, Well geology tests, hardening, production test, supervision and similar costs), delineation services, all leasing of heavy engineering machinery and other expenses incurred abroad;
|
(f)
|
materials, reconstruction of access roads and other types of roads and other intangible goods for construction, public services and construction support; and
|
(g)
|
other Exploration Costs, auxiliary or temporary installations with a working life of less than one (1) Year.
|
3.2
|
DEPRECIATION OF TANGIBLE CAPITAL COSTS
|
3.3
|
NON-CAPITAL COSTS
|
3.3.1
|
COSTS DEDUCTIBLE BY THE CONTRACTOR
|
(a)
|
general and administrative expenses (staff salaries, insurance payments, labour, office technical services and other similar services, material services, public relations, expenses abroad related to Oil Operations in Equatorial Guinea determined in accordance with Article 2.5 of the Accounting Procedure);
|
(b)
|
labour, materials and services used indirectly in Development Drill operations, viability studies for the production of Crude Oil or Natural Gas fields, secondary recovery operations, warehousing, handling, transport and delivery operations, Natural Gas Well operations, transport and delivery of Natural Gas, services for treatment of Natural Gas, environmental protection measures and all other maintenance activities indirectly related to the Oil Operations.
|
3.3.2
|
COSTS NOT DEDUCTIBLE BY THE CONTRACTOR
|
(a)
|
Bonus paid by Contractor for agreement of Contract;
|
(b)
|
Discovery bonuses paid by the Contractor;
|
(c)
|
Production bonuses paid by the Contractor;
|
(d)
|
surface leases paid to the State;
|
(e)
|
any unapproved excess cost that exceeds the limits established by Article 4.4 of the Contract;
|
(f)
|
interest on loans, in accordance with Article 2.7 of this Accounting Procedure;
|
(g)
|
any payment made to the State for breach of the minimum obligations of Exploration work in accordance with the provisions of Article 3 of the Contract;
|
(h)
|
any fine or penalty imposed for infringement of any laws or regulations, including the laws and regulations of Equatorial Guinea;
|
(i)
|
any amounts that exceed the limits established in relation to the depreciation of tangible assets;
|
(j)
|
any donation to the State or other similar expenses unless otherwise agreed;
|
(k)
|
the costs of auditing and State inspection incurred due to failure to keep original documents at the office of the Contractor in Equatorial Guinea;
|
(l)
|
any penalty imposed on the Contractor in accordance with the Law of Hydrocarbons or otherwise;
|
(m)
|
costs related to transfers made by the Contractor to any of its Affiliates or other Persons.
|
4.1
|
PRACTICAL DETERMINATION OF TAXABLE INCOME
|
(1)
|
Gross annual income (including gifts)
|
(2)
|
Gifts
|
(3)
|
State Share of net Hydrocarbons
|
(4)
|
National Company share of Hydrocarbons based on interest owed or with payment obligations in the Contract under Article 8
|
(5)
|
Deductible intangible capital costs
|
(6)
|
Depreciation of tangible capital costs
|
(7)
|
Non-capital deductible costs
|
(8)
|
Losses authorised and certified by the Ministry corresponding to previous Calendar Years.
|
4.2
|
PRINCIPLE OF TAX TREATMENT OF DEFICIT IN A FINANCIAL YEAR
|
5.1
|
RECORDS
|
5.2
|
INVENTORIES AFTER INITIAL PRODUCTION
|
5.3
|
INVENTORIES IN SUBSEQUENT OPERATIONS
|
6.1
|
FINANCIAL STATEMENTS AND TAX REPORTS TO BE SUPPLIED BY THE CONTRACTOR
|
(a)
|
details of depreciation;
|
(b)
|
details of fixed assets;
|
(c)
|
statistics and details of Production and export;
|
(d)
|
all tax reports specified in the Contract; and
|
(e)
|
detailed information on deductible expenses to estimate the tax obligations in accordance with the Tax Law.
|
6.2
|
PRODUCTION STATEMENT
|
(a)
|
the amount of Crude Oil produced and conserved;
|
(b)
|
the quality characteristics of the Crude Oil produced and conserved;
|
(c)
|
the amount of Natural Gas produced and conserved;
|
(d)
|
the quality characteristics of this Natural Gas produced and conserved;
|
(e)
|
the amounts of Crude Oil and Natural Gas used to perform drilling and Production Operations;
|
(f)
|
the amounts of Crude Oil and Natural Gas unavoidably lost;
|
(g)
|
the amounts of Natural Gas burned off and flared;
|
(h)
|
the amounts of Hydrocarbons in existence at the start of the calendar month in question;
|
(i)
|
the amounts of Hydrocarbons in existence at the end of the calendar month in question;
|
(j)
|
the amounts of Natural Gas reinjected into Hydrocarbon deposits; and
|
(k)
|
the amounts of Hydrocarbons delivered and sold.
|
6.3
|
STATEMENT OF THE PRODUCTION VALUE AND THE PRICE
|
(a)
|
the amounts, prices and income received by the Contractor as a consequence of sales of Hydrocarbons to third parties during the Quarter in question;
|
(a)
|
the amounts, prices and income received by the Contractor as a consequence of sales of Hydrocarbons, other than sales to third parties, during the Quarter in question;
|
(c)
|
the value of the stocks of Hydrocarbons at the end of the Quarter preceding the Quarter in question;
|
(c)
|
the value of all stocks of Hydrocarbons at the end of the Quarter in question; and
|
(e)
|
the information available to the Contractor regarding the prices of competitive Crude Oil in so far as is necessary for the purposes of Article 10 of the Contract.
|
6.4
|
STATEMENT OF COSTS OF OIL OPERATIONS
|
6.4.1
|
Quarterly Statement
|
6.4.2
|
Annual Statement
|
(a)
|
the Costs of Oil Operations which have not yet been recovered and are carried over from the previous Calendar year, if they exist;
|
(b)
|
the Costs of Oil Operations of the Calendar Year in question;
|
(c)
|
the quantity and value of the Production of Hydrocarbons that the Contractor has designated as Oil for Recovery of Costs in accordance with the provisions of Article 7.2 of the Contract for the Calendar Year in question; and
|
(d)
|
the Costs of Oil Operations which have not yet been recovered at the end of the Calendar Year in question.
|
6.5
|
STATEMENT OF PRODUCTION SHARE
|
(a)
|
the value of all sales of Hydrocarbons made by the Contractor from the Date on which the Contract came into Force until the end of the previous Calendar Year;
|
(a)
|
the value of all sales of Hydrocarbons made by the Contractor during the Calendar Year in question;
|
(c)
|
the total of points (a) and (b) at the end of the Calendar Year in question;
|
(d)
|
the accumulated Costs of Oil Operations from the Date on which the Contract came into Force until the end of the previous Calendar Year;
|
(e)
|
the Costs of Oil Operations of the Calendar Year in question;
|
(f)
|
the total of points (d) and (e) at the end of the Calendar Year in question;
|
(g)
|
the amount and value of the Contractor's share in the Hydrocarbons; and
|
(h)
|
the amount of the State's share in the Hydrocarbons and their value if they have been sold by the Contractor.
|
6.6
|
FINAL STATEMENT AT THE END OF THE YEAR
|
6.7
|
STATEMENT OF ANNUAL BUDGET
|
(a)
|
3.1.1
|
(b)
|
3.1.2
|
(c)
|
3.1.4
|
(a)
|
the clause(s) allegedly breached,
|
(b)
|
that the Contractor has failed to make timely payment or perform in a timely manner all or some of its obligations under the Contract,
|
(c)
|
a description of the obligations breached and the amount that the Contractor must pay as a consequence of said breach, and
|
(d)
|
that the Contractor has not paid to the State the amount claimed, that the State has notified the Contractor in writing of the lack of payment or breach and was informed of the intention of the State to enforce this Guarantee Agreement.
|
(a)
|
it is delivered in person, (i) on the day on which it is delivered, unless this is not a Banking Day or (ii) if it is delivered after the closing time of a Banking Day, the notification will be considered to have been received on the next Banking Day, and
|
(b)
|
it is delivered by fax, on the date of sending, as shown by the 'fax sent' confirmation generated by the fax machine of the sender, unless the date of sending and confirmation is not a Banking Day or the time of confirmation is after the closing time for that day, in which case the notification will be considered to have been received on the next Banking Day.
|
(GUARANTOR)
|
|||
|
|
||
By
|
|
||
|
[name]
[position]
|
||
|
|
||
|
|
||
|
|
||
[full name of Beneficiary]
|
|||
|
|
||
By
|
|
||
|
[name]
[position]
|
(a)
|
3.1.1
|
(b)
|
3.1.2
|
(a)
|
the clause(s) allegedly breached,
|
(b)
|
that the Contractor has failed to make timely payment or perform in a timely manner all or some of its obligations under the Contract,
|
(c)
|
a description of the obligations breached and the amount that the Contractor must pay as a consequence of said breach, and
|
(d)
|
that the Contractor has not paid to the State the amount claimed, that the State has notified the Contractor in writing of the lack of payment or breach and was informed of the intention of the State to enforce this Guarantee Agreement.
|
(a)
|
it is delivered in person, (i) on the day on which it is delivered, unless this is not a Banking Day or (ii) if it is delivered after the closing time of a Banking Day, the notification will be considered to have been received on the next Banking Day, and
|
(b)
|
it is delivered by fax, on the date of sending, as shown by the 'fax sent' confirmation generated by the fax machine of the sender, unless the date of sending and confirmation is not a Banking Day or the time of confirmation is after the closing time for that day, in which case the notification will be considered to have been received on the next Banking Day.
|
[GUARANTOR]
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By
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[name]
[position]
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[
full name of Beneficiary
]
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By
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[name]
[position]
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(1)
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Ophir Equatorial Guinea (EG-24) Limited
, a company existing under the laws of the British Virgin Islands under commercial registry number 1958060 whose registered office is at Jayla Place, Wickhams Cay 1, Road Town, Tortola, VG1110, British Virgin Islands (hereinafter referred to as “
Assignor
”)
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(2)
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Kosmos Energy Equatorial Guinea
, a company existing under the laws of the Cayman Islands whose registered office is at c/o Circumference (Cayman), 4th Floor, Century Yard, Cricket Square, Elgin Avenue, George Town, Grand Cayman, KY1 1209, Cayman Islands (hereinafter referred to as “
Assignee
”)
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A.
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The Republic of Equatorial Guinea (represented by the Ministry of Mines and Hydrocarbons), Guinea Ecuatorial de Petroleos (“GEPetrol”) and Assignor have entered into a Production Sharing Contract for the exploration, development and production of hydrocarbons in block EG-24 (“PSC”)
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B.
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Assignor is the current owner of an undivided eighty percent (80%) Participating Interest (one hundred percent (100%) paying interest in the PSC.
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C.
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Assignor wishes to assign and transfer to Assignee a forty percent (40%) Participating Interest (fifty percent (50%) paying interest) in the PSC in accordance with the terms and conditions set out in this Agreement and Assignee wishes to acquire such forty percent (40%) Participating Interest (fifty percent (50%) paying interest) in the PSC.
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D.
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Pursuant to the Farmout Agreement the Assignor agreed to assign
to the Assignee the Assigned Interest.
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2.1
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Updating of Documents and Legislation
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2.2
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Parties’ Successors
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3.1
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For the consideration referred to in Clause 3.2 of this Deed, the Assignor hereby assigns and transfers as legal and beneficial owner, the Assigned Interest to the Assignee, and the Assignee agrees to such assignment and transfer on and from the Assignment Date.
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3.2
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The Parties agree that the consideration payable under the Farmout Agreement and the assumption of obligations and liabilities by the Assignee pursuant to the Farmout Agreement is good and sufficient consideration for the transfer of the Assigned Interest to the Assignee by the Assignor.
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3.3
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This Deed shall be binding upon and inure to the benefit of the Parties hereto, their successors and lawful assigns,
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4.1
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The Assignee covenants with the Assignor on and from the Assignment Date to observe and be bound by the terms and conditions of the PSC as existing and as amended from time to time in respect of the Assigned Interest.
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4.2
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The Assignee indemnifies the Assignor against all liabilities and obligations arising with respect to the Assigned Interest accruing on and after the Assignment Date.
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5.1
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Subject to clauses 5.2 and 5.3 of this Deed, the Assignee releases and discharges the Assignor from its obligations in respect of the Assigned Interest on and from the Assignment Date.
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5.2
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Subject to clause 5.3 of this Deed as between the Assignor and the Assignee, Assignor remains liable to the Assignee for, and must observe and perform, all the Assignor's obligations arising in respect of the Assigned Interest before the Assignment Date.
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5.3
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This Deed does not affect the Assignor or the Assignee’s rights and obligations to each other under the Farmout Agreement, which, as between Assignor and Assignee, shall prevail over this Deed in the event of a conflict.
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Ophir:
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40
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%
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Kosmos:
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40
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%
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GEPetrol:
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20
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%
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100
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%
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(B)
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must be left at or delivered by courier to the address of the addressee or sent by pre‑paid recorded delivery (airmail if posted to or from a place outside the United Kingdom) to the address of the addressee or sent by facsimile to the facsimile number of the addressee in each case which is specified in this Clause in relation to the Party to whom the notice is addressed, and marked for the attention of the person so specified, or to such other address or facsimile number in the United Kingdom and/or marked for the attention of such other person as the relevant Party may from time to time specify by notice given in accordance with this Clause.
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Name:
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Ophir Equatorial Guinea (EG-24) Limited
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Address:
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123 Victoria Street, London, SW1E 6DE
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Attention:
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General Counsel
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Fax:
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+44207 811 2421
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Name:
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Kosmos Energy Equatorial Guinea
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Address:
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c/o Circumference (Cayman), P.O. Box 32322, 4th Floor, Century Yard, Cricket Square, Elgin Avenue, George Town, Grand Cayman, KY1-1209, Cayman Islands
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Attention:
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General Counsel
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Fax:
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+1 214 445 9705
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SIGNED AS A DEED and DELIVERED on behalf of
Ophir Equatorial Guinea (EG-24) Limited
by:
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/s/ Oliver Quinn
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Oliver Quinn
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in the presence of:
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Signature of Witness
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/s/ Andrew Freear
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Name
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Andrew Freear
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Address
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52 Bridle Road Maidenhead, UK
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Occupation
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Asset Manager
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SIGNED AS A DEED and DELIVERED on behalf of
Kosmos Energy Equatorial Guinea
by:
in the presence of: |
/s/ Alissa Lee Eason
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Alissa Lee Eason
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in the presence of:
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Signature of Witness
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/s/ Andrew Freear
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Name
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Andrew Freear
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Address
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52 Bridle Road Maidenhead, UK
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Occupation
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Asset Manager
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1.
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I have reviewed this quarterly report on Form 10-Q of Kosmos Energy Ltd.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 6, 2018
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/s/ ANDREW G. INGLIS
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Andrew G. Inglis
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Chairman of the Board of Directors and Chief Executive Officer
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(Principal Executive Officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of Kosmos Energy Ltd.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 6, 2018
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/s/ THOMAS P. CHAMBERS
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Thomas P. Chambers
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Senior Vice President and Chief Financial Officer
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(Principal Financial Officer)
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 6, 2018
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/s/ ANDREW G. INGLIS
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Andrew G. Inglis
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Chairman of the Board of Directors and Chief Executive Officer
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(Principal Executive Officer)
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 6, 2018
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/s/ THOMAS P. CHAMBERS
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Thomas P. Chambers
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Senior Vice President and Chief Financial Officer
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(Principal Financial Officer)
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