produced in water depths of 200 meters or less (the first 300,000 tons produced are exempt from
royalty) and 7% royalty on oil produced in water depths deeper than 200 meters (the first 500,000 tons
produced are exempt from royalty). These royalties are to be paid in-kind or, at the election of the
government of Morocco, in cash. A corporate tax rate of 30% is applied to profits at the license level
following a 10-year tax holiday post first production. The Tarhazoute Offshore block comprises
approximately 1.9 million acres (7,753 square kilometers). The exploration term of the Tarhazoute
Offshore Permits, beginning December 9, 2013, is eight years and includes an initial exploration period
of two years and six months followed by the first extension period of two years and six months and the
second extension period of three years. In the event of commercial success, we have the right to
develop and produce oil and/or gas for a period of 25 years from the grant of an exploitation
authorization from the government, which may be extended for an additional period of 10 years under
certain circumstances.
In October 2013, we entered into three farm-out agreements with BP covering our three blocks in
the Agadir Basin, offshore Morocco. Under the terms of the agreements, BP will acquire a
non-operating interest in each of the Essaouira Offshore, Foum Assaka Offshore and Tarhazoute
Offshore blocks. BP will fund Kosmos’ share of the cost of one exploration well in each of the three
blocks, subject to a maximum spend of $120.0 million per well, and pay its proportionate share of any
well costs above the maximum spend. In the event a second exploration well is drilled in any block, BP
will pay 150% of its share of costs subject to a maximum spend of $120.0 million per well. Upon close
of the transaction, BP shall also pay $36.3 million for their share of past costs and $8.9 million for their
portion of shared costs incurred from the effective date of the contract through December 31, 2013.
Completion of the transactions is subject to customary closing conditions, including Moroccan
Government approvals. After completing the transaction, our participating interests will be 30.0%,
29.925% and 30.0% in the Essaouira Offshore, Foum Assaka Offshore and Tarhazoute Offshore blocks,
respectively, and we will remain the operator.
Suriname Exploration Agreements
On December 13, 2011, we signed a petroleum contract covering Offshore Block 42 located
offshore 7W&