London oil investors, of course, know all about Tullow - many may still remember the Dublin headquartered group’s original success story.
Jubilee, the project which Tullow and Kosmos both have in common, was the breakout success for the LSE incumbent.
The project was the exploration project (discovered by Kosmos) that became the ‘company making’ production base for Tullow. But, that’s by-the-by.
Now, some ten years or so later, both companies are now focussed on their respective pipeline of follow-on projects.
The drop-off in crude prices over recent years have not been particularly kind to anyone in the exploration and production segment of the oil market.
Whereas the oil majors (or supermajors if you prefer) have had to choke off capital spending to protect cashflows for dividends, growing E&Ps have been squeezed by the need to maintain capital investment into the next projects - to which they’ve already pledged to their production growth profiles - while at the same time they’ve had to appease lenders that funded those ambitions.
Tullow earlier this year navigated such a balancing act, with a US$750mln rights issue taking some pressure off a balance sheet that still carries some US$3.8bn of debt.
So, one may ask again what might be the motivation for Kosmos to list in London.
Tullow’s share price of around 168p in London values the company at £2.3bn, meanwhile, in New York Kosmos has a market capitalisation of US$2.5bn.
In its statement on Wednesday, Kosmos boasted that it had some US$1.2bn of liquidity and at the end of March it had just less than US$1bn of debt.
In late 2016, the group’s coffers were boosted by a farm-out deal with BP, for assets in Senegal and Mauritania, delivering just over US$160mln in upfront cash and some US$750mln of commitments for future development costs.
Tullow’s share of Jubilee amounts to the equivalent of around 30,000 bopd net (it is producing the equivalent of about 84,000 bopd gross), while its overall West Africa business now yields around 80,000 bopd to Tullow.
Last week, Tullow reported a US$300mln gross profit, though after impairments - mainly against properties and equipment – the oil firm chalked up a US$300mln post-tax loss for the first half.
Notably, the company also highlighted a turnaround in cash flows. It brought in US$205mln in the first six months of 2017, after a US$697mln outflow in the same period of last year.
Tullow also recently hived off a substantial portion of its pending capital budget in Uganda, through a farm-out deal with French major Total (the deal was worth US$900mln), and after a series of big discoveries in Kenya it is now advancing towards a final investment decision for developments that could address potential resources of around 750mln barrels.
Kosmos, meanwhile, is advancing some very large gas projects alongside BP in Senegal and Mauritania, where some 40 trillion cubic feet is estimate to date.
Tullow’s shares are up around 12% over the past month, supported by the interim results, and in last week’s results statement new chief executive Paul McDade said: “Despite continued challenging market conditions, Tullow performed well in the first half of 2017 delivering strong revenues and organic free cash flow.”
Plainly, there’s still appetite in London for Tullow’s investment proposition, so, it would be pretty safe to assume Kosmos will also find favour here in London too.
The next question for investors, perhaps, is whether (if investors only had to choose one) which of the two they should own?