“We have looked at the oil price sector with regard to hedging our production, such that we have protection against the low side and that is very much how we budget. This year, the company has hedged up to 75 per cent of its production,” the Vice- President and Country Manager of Kosmos Energy, Mr Ken Keag, told the GRAPHIC BUSINESS in Accra on April17.
The company’s hedging policy therefore means that up to three-fourth of its crude oil exports will not be affected by the slump in oil price, which dropped to as low as US$43 a barrel in February this year from about US$110 a barrel in June, last year.
“It gives us the confidence to make budget plans and to know that in the event of any major changes in oil price scenario, we have budgeted on a price that we can guarantee for the bulk of our production. So a large percentage is already established this year,” he explained.
Kosmos, which currently spends about 70 per cent of its capital expenditure on its projects in Ghana, is on course to closing its hedge book for the next couple of years, as oil prices also inch up gradually, with the May contracts for brent crude settling around US$64 a barrel.
Mitigating measures
But Kosmos says the company is sensitive to such currency and price fluctuations which spur it on to institute proactive risk-mitigating measures.
Two years ago, the company downsized the organisation to a workforce that could support its current and projected productions into the future. It completed the same exercise at its head office in the United States last year, thus already having the right size of workforce that would not be affected by the current currency fluctuations and oil price collapse.
“We could not have predicted the magnitude of the price decline, but by doing what we did in terms of our organisation, we haven’t had to make any changes to the size of our organisation,” Mr Keag pointed out.
“We’ve continued to look at our organisation to ensure it is the right size for the work for everything we do. Last year in our head office and in the previous year (two years ago) in Ghana, we looked at the size of our organisation and made some adjustments to ensure that we’re prepared for the future as much as we could,”he added.
Kosmos believes those two major decisions had anchored the company’s operations on solid grounds and would enable it to continue with every activity in the country without interruption.
“We are here (in Ghana) to stay and we are committed to its people. We have the financial strength to withstand the various variations that may occur at the market place. Kosmos is a company that is here for the long term,” he stressed.