Why Kosmos Energy Stock Rallied Over 10% Today
Shares of offshore exploration and production company Kosmos Energy (NYSE: KOS) were up as much as 10.5% at 3 p.m. EDT on Oct. 15. That follows on notable gains from the day before. The strong two-day run is basically tied to the same set of facts. Here's why.
After the market closed on Oct. 13 Kosmos Energy announced that it had agreed to pay $550 million to Occidental Petroleum (NYSE: OXY) for an additional 18% interest in the Jubilee field and an additional 11% interest in the TEN fields in Ghana. The company will own 42% and 28% in the Jubilee and TEN fields, respectively, once the deal is completed.
Management believes the investment will have a payback period of three years or less at $65 per barrel of oil, with it generating an additional $1 billion in free cash flow by 2026. Management is confident that this will be a very attractive deal for Kosmos and its shareholders, noting that it already has a deep knowledge of the fields. That helps explains the price gain on Oct. 14.
Source Fool.com