Equatorial Guinea takes steps to stem oil output decline

Bloomberg

Equatorial Guinea, OPEC’s newest member, is taking steps to stem the decline in its oil production following the acquisition by Kosmos Energy Ltd. and Trident Energy Management Ltd. of fields currently operated by Hess Corp.For two to three years there has been a trend of US companies operating in Africa, but not re-investing there, said the nation’s Minister of Mines, Industry and Energy Gabriel Obiang. The purchase of Hess’s 85 percent stake in the Ceiba and Okume offshore fields by the smaller companies could improve output in the short to medium term, he said.
“For Equatorial Guinea, for Nigeria, for any producers it’s the same story — we have been two years reducing costs, drilling very few wells,” Obiang said in an interview in Cape Town. “We clearly have to be realistic that we’re going to be affected by the reduction in our wells, in our operations.”
Equatorial Guinea joined the Organization of Petroleum Exporting Countries in May, making the group the largest it’s ever been. The nation’s oil production is capped at 128,000 barrels a day until the end of March as part of the group’s effort to eliminate a supply glut. In the longer term, it plans to increase output to 300,000 barrels a day and offered permits last year to bring in foreign investors for exploration. Winners of the licensing round included Exxon Mobil Corp. and Ophir Energy Plc.
Oil prices have finally stabilized, Obiang said. “The price that we’re having right now, we’re coming to the conclusion that we need to be realistic
and learn to live with that price.” The country is adjusting all its planning
according to that, he said.
Kosmos and Trident have created a joint venture that will buy an interest in three exploration licenses off Equatorial Guinea, on top of buying Hess’s stake in the producing fields, the companies said in a statement. Kosmos will focus primarily on exploration and Trident will mainly be in charge of production. Trident is backed by private-equity firm Warburg Pincus and founded by Jean-Michel Jacoulot, the former chief executive officer of privately-held French explorer Perenco.
The gross acquisition price is $650 million, while Kosmos will pay $240 million in cash to Hess when the deal closes at year-end due to adjustments related to cash flow since the transaction was first agreed on January 1.