Brian Maxted has made a career out of taking risks. Although he was born and raised in the United Kingdom, Maxted is an oilman; he’s been in the industry since the 1970s. He led discoveries for Triton Energy, but left in 2003 to help start Kosmos Energy. Maxted has spent the last twelve years refining his nontraditional approach to oil and gas exploration. He looks where others won’t to find resources they’ve overlooked—and it’s working. In Africa, where major players search in places like Nigeria and Kenya, Kosmos set its sights on Ghana. In 2007, the company struck oil and uncovered one of the largest discoveries in the last twenty years off the shore of Africa. Since production began, the place known as Jubilee Field has produced more than 100 million barrels of oil.
At the start, Kosmos was a private enterprise. Maxted and his partners raised $300 million from major players. At the end of 2010, Maxted became chief executive officer and helped take the company public the following year. In 2014, he stepped back into his original role as chief exploration officer. While he’s excited to be in charge of exploration again, Maxted stresses the importance of a capable and cohesive team. “Experience and expertise matter most,” he says. “We’re all in this together.” Maxted and his founding partners worked together at Triton. When they took over as a management team, Triton was worth $500 million. Three years later, they sold it for $3.2 billion. The same team started Kosmos to replicate the success, only instead of finding an existing company to fix—they’d build one from scratch.
“The easy oil has all been found. We’re looking for the difficult oil. We’ve built this company on what other people have failed to find.”
When oil prices sank to $10 a barrel in the 1990s, many hurting energy companies lacked cash flow. That’s when Maxted believes these other companies made a huge mistake. “They were focused only on cash flow and put all of their efforts toward existing fields to maximize production,” he says. “There was very little exploration, and what’s been done since has been largely low-risk activity in proven areas.”
That’s why Kosmos focuses instead on taking sensible risks to open up new petroleum systems in areas overlooked by the rest of the industry. “We identify areas we believe hold substantial potential and build our portfolio around that,” says Maxted, whose academic background is in geology.
Maxted and the team at Kosmos look for three things to find big oil that all need to “come together in a sweet spot.” First, they search for high-quality source rock that generates oil. Then they identify a large river that would deposit a reservoir where the oil can reside. Lastly, Maxted looks for a large trap or container. These criteria have led Kosmos to the Atlantic Margin from Africa to Ireland to Suriname. “The easy oil has all been found,” he says. “We’re looking for the difficult oil. We’ve built this company on what other people have failed to find.”
Kosmos’s exploration is driven by something Maxted calls the “rifleshot method.” Instead of using the shotgun approach and drilling as many holes as possible while hoping to hit something, proponents of the rifleshot method take time to aim. “Everyone is trying to find as much oil for as little money as possible. The amount of money it takes is driven by how much it costs and how regularly you find something,” Maxted says. If a company drills twenty $100 million wells, it costs $2 billion just to find a field. Those who can drill five wells but find bigger fields operate in a more efficient manner.
Small companies like Kosmos have to compete with the supermajors like Shell and Exxon that have more people, capital, and technology. The cost of entry can be high, especially in places with known oil fields. That’s why Kosmos operates in countries that don’t have existing oil and gas industries and therefore offer favorable terms to attract investment and provide returns that are commensurate with the higher risks. If Kosmos finds oil in Morocco, for example, the company can make up to four times what it could make in Angola. That leads Kosmos to low-cost, high-reward areas.
The industry standard success rate in these frontier areas is about one in twenty, but Maxted says Kosmos can improve its chances of success to one in five while drilling fewer holes. “We’re in what people perceive as high-risk places,” he says, “but risk is a perception. You manage that with understanding and experience.” Kosmos has built a team of talented industry veterans who use a principled approach in a narrow geographical region. The idea is for Kosmos to identify fertile land and be each region’s first mover.
Since the company went public in 2011, Maxted and his leadership team have spent three years building a new portfolio. After spending more than $100 million, they’ve matured their prospects and have procured a new drilling unit. For the next two to three years, Kosmos teams will drill on their very best prospects in search of oil. “We have a great chance to open up another massive petroleum system and bring another huge surprise to the industry like we did with Jubilee,” Maxted says.
As the drills break the earth, sensors will beam real-time information to satellites, which will send the data around the world. Maxted and his partners will be watching. The Kosmos portfolio totals around 24 million acres. Now, they just have to find out what lies beneath the surface.
