Kosmos Energy Ltd. (“Kosmos” or the “Company”) (NYSE/LSE: KOS)
announced today its financial and operating results for the first
quarter of 2023. For the quarter, the Company generated a net
income of $83 million, or $0.17 per diluted share. When adjusted
for certain items that impact the comparability of results, the
Company generated an adjusted net income(1) of $78 million, or
$0.16 per diluted share for the first quarter of 2023.
FIRST QUARTER 2023 HIGHLIGHTS
- Net Production(2): ~58,800 barrels of oil equivalent per day
(boepd), with sales of ~61,100 boepd
- Revenues: $394 million, or $71.67 per boe (excluding the impact
of derivative cash settlements)
- Production expense: $84 million, or $15.26 per boe
- Capital expenditures: $206 million
- On Phase 2 of the Greater Tortue Ahmeyim LNG project, partners
confirmed a gravity-based structure development concept
Commenting on the Company’s first quarter 2023 performance,
Chairman and Chief Executive Officer Andrew G. Inglis said: “Kosmos
delivered solid performance in the first quarter and moved the
company closer to the expected mid-year free cash flow inflection
point. We have three development projects underway that aim to
increase production by around 50% from current levels.
“New oil production from Jubilee is expected online shortly,
with capital expenditure starting to fall through the rest of the
year. We have also made good progress in the quarter on Phase 1 of
the Tortue project and drilling at Winterfell is planned to begin
next quarter.
“Kosmos has a busy year of catalysts ahead, having already
delivered key milestones in the first quarter. We remain focused on
execution and realizing the full potential of our distinctive
assets.”
FINANCIAL UPDATE
Net capital expenditures for the first quarter of 2023 was $206
million, in line with guidance.
Realized pricing for the quarter of $70.91 per boe, including
derivative cash settlements, was lower compared to the fourth
quarter due to lower commodity prices during the period, and was
partially offset by a reduction in operating expenses to $15.26 per
boe.
Kosmos exited the first quarter of 2023 with approximately $2.3
billion of total long-term debt and approximately $2.1 billion of
net debt(1) and available liquidity of approximately $1.0 billion.
The Company generated net cash provided by operating activities of
approximately $204 million and free cash flow(1) of approximately
$(20) million in the first quarter.
At the end of the quarter, the company completed its semi-annual
re-determination of the RBL facility. As expected, the borrowing
base decreased by ~$100 million, effective April 1, due to the
reduction in loan life.
OPERATIONAL UPDATE
Production
Total net production(2) in the first quarter of 2023 averaged
approximately 58,800 boepd, in line with company guidance. The
Company exited the quarter in a net overlift position.
Ghana
Production in Ghana averaged approximately 33,600 boepd net in
the first quarter of 2023. Kosmos lifted three cargos from Ghana
during the quarter, in line with guidance.
At Jubilee, production averaged approximately 72,200 bopd gross
during the quarter. Lower production during the quarter, compared
to the previous quarter, was largely due to reduced water injection
to manage reservoir pressure during Jubilee Southeast drilling.
Normal water injection at Jubilee resumed late February.
Drilling on the Jubilee field continues to make good progress
with five wells across the Jubilee main reservoir and Jubilee
Southeast development expected online from the end of the second
quarter through to the end of the third quarter (four producer
wells and one injector well). Production at the Jubilee field is
expected to rise through to year-end as these new wells come
online. The partnership expects new wells to increase gross
production at Jubilee by over 50% from the first quarter to more
than 110,000 bopd by the end of 2023.
At TEN, production averaged approximately 20,300 bopd gross for
the first quarter.
Two cargos are expected in Ghana in the second quarter of 2023,
which would lead to an underlift position at the end of the second
quarter, ahead of an anticipated increase in cargo liftings during
the second half of the year as Jubilee production ramps up.
U.S. Gulf of Mexico
Production in the U.S. Gulf of Mexico averaged approximately
15,900 boepd net (~82% oil) during the first quarter, in line with
guidance.
The workover plan for the Kodiak ST3 well has progressed and a
vessel has been contracted. Work is expected to begin in the fourth
quarter.
The Odd Job subsea pump project, intended to sustain long-term
production from the field, is 45% complete and is on track to be in
service by mid-year 2024.
The Winterfell development project continues to progress.
Drilling is expected to start in the third quarter of 2023, with
first oil targeted around the end of the first quarter of 2024.
Host facility and export agreements are expected to be executed
around mid-year 2023.
The Tiberius infrastructure-led exploration (ILX) well, a
four-way structural trap targeting a pre-drill gross resource of
~135 million barrels of oil, is scheduled to spud in the third
quarter.
Equatorial Guinea
Production in Equatorial Guinea averaged approximately 27,200
bopd gross and 9,300 bopd net in the first quarter of 2023. Kosmos
lifted 1 cargo from Equatorial Guinea during the quarter, in line
with guidance.
The infill drilling campaign is scheduled to commence in the
fourth quarter of 2023 with the first of three infill wells
expected to be online around the end of the year.
The Akeng Deep ILX opportunity, a well targeting a pre-drill
gross resource of ~180 million barrels of oil in the deeper Albian
trend, is expected to spud next year following the completion of
the infill drilling campaign.
Mauritania & Senegal
Phase 1 of the Greater Tortue Ahmeyim liquified natural gas
(LNG) project continues to make good progress. First gas is
targeted at the end of 2023 with continued progress across the four
major work streams:
- Hub Terminal: Construction work is complete, and activity is
focused on progressing the final commissioning for handover to
operations around the end of the second quarter of 2023.
- Subsea: Laying of the deepwater section of the pipeline from
the field to the FPSO is currently underway. This will be followed
by the installation of the infield flowlines and subsea structures.
Timely execution of this subsea work scope is the critical path to
first gas by the end of the year.
- FPSO: Arrival on location offshore Mauritania/Senegal is
expected around the end of the second quarter of 2023 when the
hookup and commissioning work will commence.
- FLNG: Construction and mechanical completion activities are
finishing and commissioning work is underway. Sailaway is targeted
for mid-year 2023.
Further progress has also been made across the company's other
future gas developments:
- Tortue Phase 2: In late February, the company announced that
the partnership had selected a gravity-based structure development
concept, a key step to advancing the project into pre-FEED.
- BirAllah: Kosmos is working with the partnership and Government
of Mauritania on project optimization and concept selection.
- Yakaar-Teranga: The partnership is continuing to progress the
first phase domestic gas scheme with the Government of Senegal,
with the potential for LNG export in future phases.
(1) A Non-GAAP measure, see attached reconciliation of non-GAAP
measure. (2) Production means net entitlement volumes. In Ghana and
Equatorial Guinea, this means those volumes net to Kosmos' working
interest or participating interest and net of royalty or production
sharing contract effect. In the U.S. Gulf of Mexico, this means
those volumes net to Kosmos' working interest and net of
royalty.
Conference Call and Webcast Information
Kosmos will host a conference call and webcast to discuss first
quarter 2023 financial and operating results today, May 9, 2023, at
10:00 a.m. Central time (11:00 a.m. Eastern time). The live webcast
of the event can be accessed on the Investors page of Kosmos’
website at http://investors.kosmosenergy.com/investor-events. The
dial-in telephone number for the call is +1-877-407-0784. Callers
in the United Kingdom should call 0800 756 3429. Callers outside
the United States should dial +1-201-689-8560. A replay of the
webcast will be available on the Investors page of Kosmos’ website
for approximately 90 days following the event.
About Kosmos Energy
Kosmos is a full-cycle deepwater independent oil and gas
exploration and production company focused along the Atlantic
Margins. Our key assets include production offshore Ghana,
Equatorial Guinea and the U.S. Gulf of Mexico, as well as a
world-class gas development offshore Mauritania and Senegal. We
also maintain a sustainable proven basin exploration program in
Equatorial Guinea, Ghana and the U.S. Gulf of Mexico. Kosmos is
listed on the New York Stock Exchange and London Stock Exchange and
is traded under the ticker symbol KOS. As an ethical and
transparent company, Kosmos is committed to doing things the right
way. The Company’s Business Principles articulate our commitment to
transparency, ethics, human rights, safety and the environment.
Read more about this commitment in the Kosmos Sustainability
Report. For additional information, visit www.kosmosenergy.com.
Non-GAAP Financial Measures
EBITDAX, Adjusted net income (loss), Adjusted net income (loss)
per share, free cash flow, and net debt are supplemental non-GAAP
financial measures used by management and external users of the
Company's consolidated financial statements, such as industry
analysts, investors, lenders and rating agencies. The Company
defines EBITDAX as Net income (loss) plus (i) exploration expense,
(ii) depletion, depreciation and amortization expense, (iii) equity
based compensation expense, (iv) unrealized (gain) loss on
commodity derivatives (realized losses are deducted and realized
gains are added back), (v) (gain) loss on sale of oil and gas
properties, (vi) interest (income) expense, (vii) income taxes,
(viii) loss on extinguishment of debt, (ix) doubtful accounts
expense and (x) similar other material items which management
believes affect the comparability of operating results. The Company
defines Adjusted net income (loss) as Net income (loss) adjusted
for certain items that impact the comparability of results. The
Company defines free cash flow as net cash provided by operating
activities less Oil and gas assets, Other property, and certain
other items that may affect the comparability of results and
excludes non-recurring activity such as acquisitions, divestitures
and National Oil Company ("NOC") financing. NOC financing refers to
the amounts funded by Kosmos under the Carry Advance Agreements
that the Company has in place with the national oil companies of
each of Mauritania and Senegal related to the financing of the
respective national oil companies’ share of certain development
costs at Greater Tortue Ahmeyim. The Company defines net debt as
total long-term debt less cash and cash equivalents and total
restricted cash.
We believe that EBITDAX, Adjusted net income (loss), Adjusted
net income (loss) per share, free cash flow, Net debt and other
similar measures are useful to investors because they are
frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in the oil and
gas sector and will provide investors with a useful tool for
assessing the comparability between periods, among securities
analysts, as well as company by company. EBITDAX, Adjusted net
income (loss), Adjusted net income (loss) per share, free cash
flow, and net debt as presented by us may not be comparable to
similarly titled measures of other companies.
This release also contains certain forward-looking non-GAAP
financial measures, including free cash flow. Due to the
forward-looking nature of the aforementioned non-GAAP financial
measures, management cannot reliably or reasonably predict certain
of the necessary components of the most directly comparable
forward-looking GAAP measures, such as future impairments and
future changes in working capital. Accordingly, we are unable to
present a quantitative reconciliation of such forward-looking
non-GAAP financial measures to their most directly comparable
forward-looking GAAP financial measures. Amounts excluded from
these non-GAAP measures in future periods could be significant.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that Kosmos
expects, believes or anticipates will or may occur in the future
are forward-looking statements. Kosmos’ estimates and
forward-looking statements are mainly based on its current
expectations and estimates of future events and trends, which
affect or may affect its businesses and operations. Although Kosmos
believes that these estimates and forward-looking statements are
based upon reasonable assumptions, they are subject to several
risks and uncertainties and are made in light of information
currently available to Kosmos. When used in this press release, the
words “anticipate,” “believe,” “intend,” “expect,” “plan,” “will”
or other similar words are intended to identify forward-looking
statements. Such statements are subject to a number of assumptions,
risks and uncertainties, many of which are beyond the control of
Kosmos (including, but not limited to, the impact of the COVID-19
pandemic), which may cause actual results to differ materially from
those implied or expressed by the forward-looking statements.
Further information on such assumptions, risks and uncertainties is
available in Kosmos’ Securities and Exchange Commission (“SEC”)
filings. Kosmos undertakes no obligation and does not intend to
update or correct these forward-looking statements to reflect
events or circumstances occurring after the date of this press
release, except as required by applicable law. You are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date of this press release. All
forward-looking statements are qualified in their entirety by this
cautionary statement.
Kosmos Energy Ltd.
Consolidated Statements of
Operations
(In thousands, except per
share amounts, unaudited)
Three Months Ended
March 31,
2023
2022
Revenues and other income:
Oil and gas revenue
$
394,240
$
659,015
Other income, net
(373
)
52
Total revenues and other income
393,867
659,067
Costs and expenses:
Oil and gas production
83,936
124,703
Facilities insurance modifications,
net
—
7,136
Exploration expenses
12,000
11,876
General and administrative
29,167
25,793
Depletion, depreciation and
amortization
109,374
158,969
Interest and other financing costs,
net
24,568
33,139
Derivatives, net
(6,840
)
282,172
Other expenses, net
2,030
2,426
Total costs and expenses
254,235
646,214
Income before income taxes
139,632
12,853
Income tax expense
56,323
11,453
Net income
$
83,309
$
1,400
Net income per share:
Basic
$
0.18
$
0.00
Diluted
$
0.17
$
0.00
Weighted average number of shares used to
compute net income per share:
Basic
458,318
454,102
Diluted
479,326
469,164
Kosmos Energy Ltd.
Condensed Consolidated Balance
Sheets
(In thousands,
unaudited)
March 31,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
128,427
$
183,405
Receivables, net
110,005
119,735
Other current assets
204,886
165,581
Total current assets
443,318
468,721
Property and equipment, net
3,966,178
3,842,647
Other non-current assets
288,649
268,620
Total assets
$
4,698,145
$
4,579,988
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
273,195
$
212,275
Accrued liabilities
319,801
325,206
Current maturities of long-term debt
30,000
30,000
Other current liabilities
1,517
6,773
Total current liabilities
624,513
574,254
Long-term liabilities:
Long-term debt, net
2,191,054
2,195,911
Deferred tax liabilities
460,414
468,445
Other non-current liabilities
552,724
553,530
Total long-term liabilities
3,204,192
3,217,886
Total stockholders’ equity
869,440
787,848
Total liabilities and stockholders’
equity
$
4,698,145
$
4,579,988
Kosmos Energy Ltd.
Condensed Consolidated
Statements of Cash Flow
(In thousands,
unaudited)
Three Months Ended
March 31,
2023
2022
Operating activities:
Net income
$
83,309
$
1,400
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depletion, depreciation and amortization
(including deferred financing costs)
111,925
161,639
Deferred income taxes
(8,032
)
(85,792
)
Unsuccessful well costs and leasehold
impairments
1,304
2,401
Change in fair value of derivatives
(2,338
)
290,806
Cash settlements on derivatives,
net(1)
(11,357
)
(93,050
)
Equity-based compensation
10,093
8,392
Loss on extinguishment of debt
—
192
Other
(2,273
)
(2,288
)
Changes in assets and liabilities:
Net changes in working capital
21,222
45,928
Net cash provided by operating
activities
203,853
329,628
Investing activities
Oil and gas assets
(223,685
)
(108,834
)
Proceeds on sale of assets
—
118,222
Notes receivable from partners
(15,671
)
—
Net cash provided by (used in) investing
activities
(239,356
)
9,388
Financing activities:
Payments on long-term debt
(7,500
)
(107,500
)
Tax withholdings on restricted stock
units
(11,810
)
(2,753
)
Dividends
(165
)
(642
)
Deferred financing costs
—
(5,738
)
Net cash used in financing activities
(19,475
)
(116,633
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(54,978
)
222,383
Cash, cash equivalents and restricted cash
at beginning of period
186,821
174,896
Cash, cash equivalents and restricted cash
at end of period
$
131,843
$
397,279
____________________
(1)
Cash settlements on commodity hedges were $(4.2) million and
$(83.6) million for the three months ended March 31, 2023 and 2022,
respectively.
Kosmos Energy Ltd.
EBITDAX
(In thousands,
unaudited)
Three Months Ended
Twelve Months Ended
March 31, 2023
March 31, 2022
March 31, 2023
Net income
$
83,309
$
1,400
$
308,460
Exploration expenses
12,000
11,876
134,354
Facilities insurance modifications,
net
—
7,136
(893
)
Depletion, depreciation and
amortization
109,374
158,969
448,661
Impairment of long-lived assets
—
—
449,969
Equity-based compensation
10,093
8,392
36,247
Derivatives, net
(6,840
)
282,172
(28,120
)
Cash settlements on commodity
derivatives
(4,182
)
(83,563
)
(248,491
)
Other expenses, net(2)
2,030
2,426
(9,451
)
Gain on sale of assets
—
—
(50,471
)
Interest and other financing costs,
net
24,568
33,139
109,689
Income tax expense
56,323
11,453
155,386
EBITDAX
$
286,675
$
433,400
$
1,305,340
Sold Ghana & acquired Kodiak interests
EBITDAX Adj(1)
—
(22,208
)
2,969
Pro Forma EBITDAX
$
286,675
$
411,192
$
1,308,309
____________________
(1)
Adjustment to present Pro Forma EBITDAX
for the impact of the revenues less direct operating expenses from
the sold Ghana interest associated with the Ghana pre-emption and
the acquired Kodiak interest, for the respective period. The
results are presented on the accrual basis of accounting, however
as the acquired properties were not accounted for or operated as a
separate segment, division, or entity, complete financial
statements under U.S. generally accepted accounting principles are
not available or practicable to produce. The results are not
intended to be a complete presentation of the results of operations
of the acquired properties and may not be representative of future
operations as they do not include general and administrative
expenses; interest expense; depreciation, depletion, and
amortization; provision for income taxes; and certain other
revenues and expenses not directly associated with revenues from
the sale of crude oil and natural gas.
(2)
Commencing in the first quarter of 2023,
the Company combined the lines for "Restructuring and other" and
"Other, net" in its presentation of EBITDAX into a single line
titled "Other expenses, net."
The following table presents our net debt as of March 31, 2023
and December 31, 2022:
March 31,
December 31,
2023
2022
Total long-term debt
$
2,262,500
$
2,270,000
Cash and cash equivalents
128,427
183,405
Total restricted cash
3,416
3,416
Net debt
$
2,130,657
$
2,083,179
Kosmos Energy Ltd.
Adjusted Net Income
(Loss)
(In thousands, except per
share amounts, unaudited)
Three Months Ended
March 31,
2023
2022
Net income
$
83,309
$
1,400
Derivatives, net
(6,840
)
282,172
Cash settlements on commodity
derivatives
(4,182
)
(83,563
)
Facilities insurance modifications,
net
—
7,136
Other, net(2)
1,899
2,331
Loss on extinguishment of debt
—
192
Total selected items before tax
(9,123
)
208,268
Income tax (expense) benefit on
adjustments(1)
3,508
(63,980
)
Impact of valuation adjustments and U.S.
tax law changes
—
(3,295
)
Adjusted net income
$
77,694
142,393
Net income per diluted share
$
0.17
$
0.00
Derivatives, net
(0.01
)
0.60
Cash settlements on commodity
derivatives
(0.01
)
(0.18
)
Facilities insurance modifications,
net
—
0.02
Other, net(2)
—
—
Loss on extinguishment of debt
—
—
Total selected items before tax
(0.02
)
0.44
Income tax (expense) benefit on
adjustments(1)
0.01
(0.13
)
Impact of valuation adjustments and U.S.
tax law changes
—
(0.01
)
Adjusted net income per diluted share
$
0.16
$
0.30
Weighted average number of diluted
shares
479,326
469,164
____________________
(1)
Income tax expense is calculated at the
statutory rate in which such item(s) reside. Statutory rates for
the U.S. and Ghana/Equatorial Guinea are 21% and 35%,
respectively.
(2)
Commencing in the first quarter of 2023,
the Company combined the lines for "Restructuring and other" and
"Other, net" in its presentation of Adjusted net income into a
single line titled "Other, net."
Kosmos Energy Ltd.
Free Cash Flow
(In thousands,
unaudited)
Three Months Ended
March 31,
2023
2022
Reconciliation of free cash
flow:
Net cash provided by operating
activities
$
203,853
$
329,628
Net cash used for oil and gas assets -
base business
(97,174
)
(85,925
)
Base business free cash flow
106,679
243,703
Net cash used for oil and gas assets -
Mauritania/Senegal
(126,511
)
(22,909
)
Free cash flow
$
(19,832
)
$
220,794
Kosmos Energy Ltd.
Operational Summary
(In thousands, except barrel
and per barrel data, unaudited)
Three Months Ended
March 31,
2023
2022
Net Volume Sold
Oil (MMBbl)
4.945
6.231
Gas (MMcf)
2.761
1.004
NGL (MMBbl)
0.096
0.117
Total (MMBoe)
5.501
6.515
Total (Boepd)
61.124
72.393
Revenue
Oil sales
$
388,099
$
650,008
Gas sales
3,866
4,936
NGL sales
2,275
4,071
Total oil and gas revenue
394,240
659,015
Cash settlements on commodity
derivatives
(4,182
)
(83,563
)
Realized revenue
$
390,058
$
575,452
Oil and Gas Production Costs
$
83,936
$
124,703
Sales per Bbl/Mcf/Boe
Average oil sales price per Bbl
$
78.48
$
104.32
Average gas sales price per Mcf
1.40
4.92
Average NGL sales price per Bbl
23.70
34.79
Average total sales price per Boe
71.67
101.15
Cash settlements on commodity derivatives
per oil Bbl(1)
(0.85
)
(13.41
)
Realized revenue per Boe
70.91
88.32
Oil and gas production costs per
Boe
$
15.26
$
19.14
____________________
(1)
Cash settlements on commodity derivatives are only related to
Kosmos and are calculated on a per barrel basis using Kosmos' Net
Oil Volumes Sold.
Kosmos was overlifted by approximately (217.0) thousand barrels
as of March 31, 2023.
Kosmos Energy Ltd.
Hedging Summary
As of March 31,
2023(1)
(Unaudited)
Weighted Average Price per
Bbl
Index
MBbl
Floor(2)
Sold Put
Ceiling
2023:
Three-way collars
Dated Brent
4,500
$
71.67
$
49.17
$
107.58
Two-way collars
Dated Brent
3,750
72.00
—
113.33
2024:
Three-way collars
Dated Brent
2,000
70.00
45.00
97.50
____________________
(1)
Please see the Company’s filed 10-K for
full disclosure on hedging material. Includes hedging position as
of March 31, 2023 and hedges put in place through the end of April
2023.
(2)
“Floor” represents floor price for collars
and strike price for purchased puts.
2023 Guidance
2Q 2023
FY 2023 Guidance
Production(1,2)
57,000 - 61,000 boe per day
65,000 - 69,000 boe per day
Opex(3)
$14.50 - $16.50 per boe
$13.50 - $15.50 per boe
DD&A
$20.00 - $22.00 per boe
$19.00 - $21.00 per boe
G&A(~60% cash)
$28 - $30 million
~$110 - $120 million
Exploration Expense(4)
~$10 million
~$40 million
Net Interest Expense(5)
~$25 million / quarter
Tax
$5.50 - $7.50 per boe
$10.00 - $12.00 per boe
Capital Expenditure(6)
$200 - $225 million
$700 - $750 million
____________________
Note: Ghana / Equatorial Guinea revenue
calculated by number of cargos.
(1)
2Q 2023 cargo forecast – Ghana: 2 cargos /
Equatorial Guinea 0.5 cargo. FY 2023 Ghana: 15 cargos / Equatorial
Guinea 3.5 cargos. Average cargo sizes 950,000 barrels of oil.
(2)
U.S. Gulf of Mexico Production: 2Q 2023
forecast 15,500-16,500 boe per day. FY2023: 14,000-15,000 boe per
day. Oil/Gas/NGL split for 2022: ~81%/~11%/~8%.
(3)
Mauritania & Senegal cash Opex of $15
million in 2023 (fully allocated to lifting in 2024)
(4)
Excludes leasehold impairments and dry
hole costs
(5)
Includes impact of capitalized interest
through year-end 2023 of ~$30 million/quarter
(6)
Excludes acquisitions/sales of oil &
gas assets
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230508005756/en/
Investor Relations Jamie Buckland +44 (0) 203 954 2831
jbuckland@kosmosenergy.com
Media Relations Thomas Golembeski +1-214-445-9674
tgolembeski@kosmosenergy.com
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