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Report: Blackstone, Warburg to strike it rich

The reported $4bn sale of Kosmos Energy to ExxonMobil comes as institutional investors show increasing appetite for natural resources.

Global private equity firms The Blackstone Group and Warburg Pincus have reportedly agree to sell Kosmos Energy – their jointly owned energy exploration business – to energy giant ExxonMobil for $4 billion.

The two buyout groups initially invested $300 million in the venture in March 2004, subsequently investing a further $500 million in 2008. The sale to ExxonMobil will net the firms four times their original investment, according to media reports.

Based in Dallas, Texas, Kosmos focuses on oil exploration and production in the emerging and frontier basins offshore West Africa. It is led by former Triton Energy chief executive officer James Musselman. The Kosmos team has extensive experience in West Africa and was responsible for the discovery and development of the Ceiba Field in Equatorial Guinea.

By acquiring Kosmos, ExxonMobil would be buying a stake of almost 31 percent in the Jubilee oil field off the coast of Ghana, according to UK newspaper the Financial Times. When Jubilee was discovered in 2007 it became the first commercial discovery in Ghana and that year’s second largest discovery worldwide.

Institutional investors are showing increasing appetite for private equity-style exposure to natural resources assets, particularly in emerging markets.

Barclays Natural Resources Investments, the principle investment division of investment bank Barclays Capital, recently began inviting clients – specifically sovereign wealth funds and ultra high net worth individuals – to participate in its principle investments for the first time.

The move comes at the same time when the team, which features the former oil and gas head of private equity firm Actis, Meb Sormani, is in advanced discussions with the government of South Korea to launch and manage a $400 million investment fund: its first foray into fund management.

Other private equity firms active in the West African offshore exploration sector include Goldman Sachs Capital Partners, Calgary-based private equity firm KERN Partners and Riverstone Holdings. Via their joint venture exploration company Cobalt International Energy, these three firms in April signed an agreement to open up interests offshore Angola.