Kosmos Energy Announces Second Quarter 2019 Results

DALLAS--()--Kosmos Energy Ltd. (“Kosmos”) (NYSE: KOS) announced today the financial and operating results for the second quarter of 2019. For the quarter, the Company generated net income of $17 million, or $0.04 per diluted share. When adjusted for certain items that impact the comparability of results, the Company generated adjusted net income(1) of $22 million or $0.05 per diluted share for the second quarter of 2019.

"Kosmos has continued to make good progress in the second quarter with record quarterly production and strong free cash flow,” said Andrew G. Inglis, chairman and chief executive officer. “At current oil prices we are forecasting to exceed the 2019 free cash flow we set out at our capital markets day. Kosmos has an active second half of the year with multiple catalysts across the portfolio including five exploration wells in Mauritania, Equatorial Guinea and the Gulf of Mexico, and the planned sell down of our position in Mauritania and Senegal which remains on track.”

It must be noted that beginning with the first quarter 2019, the results include the impact of proportionately consolidating the Equatorial Guinea results. Prior quarters exclude this impact and only include the minority interest gain or loss in the bottom line. In addition, the prior year quarter does not include the Gulf of Mexico acquisition, which did not close until the end of the third quarter of 2018.

SECOND QUARTER 2019 HIGHLIGHTS

  • Net cash provided by operating activities - $240 million; free cash flow1 (non-GAAP) - $136 million
  • Sales - 6.3 million barrels of oil equivalent (boe)
  • Revenues - $396 million
  • Realized oil and gas revenues, excluding the impact of hedging program - $63.18 per boe.
  • Production expense - $91 million, or $14.52 per boe
  • General and administrative expenses - $28 million, $19 million cash expense and $9 million non-cash equity based compensation expense
  • Depletion and depreciation expense - $151 million, or $24.16 per boe
  • Exploration expenses - $30 million
  • Capital expenditures - $101 million

At quarter end, the Company was in a net underlift position of approximately 1.0 million barrels of oil.

Second quarter results included a mark-to-market gain of $14 million related to the Company’s oil derivative contracts. As of the quarter end and including recently executed hedges, Kosmos has approximately 14.5 million barrels of oil hedged covering 2019 through 2020 including Brent, WTI, and LLS based hedges.

Kosmos exited the second quarter of 2019 with approximately $652 million of liquidity, total debt of $2.18 billion, and $1.99 billion of net debt.

OPERATIONAL UPDATE

Total net production was a record in the second quarter of 2019 averaging approximately 71,100 barrels of oil equivalent per day (boepd)(2).

Ghana

During the second quarter of 2019, net production from Ghana averaged approximately 31,700 barrels of oil per day (bopd). As forecast, Kosmos lifted three cargoes from Ghana during the second quarter.

At Jubilee, Kosmos and its partners are planning to accelerate the gas handling enhancement work program into the fourth quarter of 2019. These enhancements are designed to increase gas handling capacity to above 180 million standard cubic feet per day, thereby allowing oil production rates to increase in the fourth quarter of 2019 and into 2020.

At TEN, completion problems were experienced at the EN-14 well due to mechanical issues, resulting in the well not being completed and the potential deferral of two other TEN wells that were previously planned for 2019. These issues have reduced our full-year lifting expectations for the field; Kosmos now expects to lift four cargos from TEN, down from the previous expectation of five.

Equatorial Guinea

Production in Equatorial Guinea averaged approximately 13,000 bopd net in the second quarter of 2019. Kosmos lifted the forecast one cargo from Equatorial Guinea during the quarter. The electric submersible pump (ESP) program is ongoing and Kosmos expects to complete two more ESP conversions in the third quarter.

U.S. Gulf of Mexico

U.S. Gulf of Mexico production averaged approximately 26,400 boepd net (83% oil) during the second quarter, exceeding the high end of the guidance range. Strong second quarter production was driven primarily by increased production at Odd Job, taking advantage of spare capacity aboard Delta House, and the Tornado field coming back online after its planned drydock in the first quarter.

In June, Kosmos announced an oil discovery at Gladden Deep (Kosmos 20% working interest). Gladden Deep is a subsea tie back which is expected to be brought online through the existing Gladden pipeline to the Medusa spar in the fourth quarter of 2019. Based on preliminary analysis of drilling and wireline logging results, the recoverable resource is expected to be in line with the pre-drill estimate of 7 mmboe gross.

Kosmos was one of the most active participants in U.S. Gulf of Mexico Lease Sale 252 in March, and was subsequently awarded the nine deepwater blocks upon which it was previously deemed to be the high bidder.

Greater Tortue Ahmeyim Project

The Greater Tortue Ahmeyim project located offshore Mauritania and Senegal remains on track with progress being made across all Phase 1 project areas including subsea, FLNG vessel, HUB Terminal, and FPSO vessel. Pre-FEED work is ongoing for Phases 2 and 3 and these next phases are expected to expand capacity of this hub to almost 10 MTPA of LNG for export.

In July, Kosmos announced that the Greater Tortue Ahmeyim-1 well (GTA-1), drilled on the eastern anticline within the unit development area of Greater Tortue Ahmeyim, encountered approximately 30 meters of net gas pay in a high-quality Albian reservoir. Results from GTA-1 demonstrate that the gas resource at Greater Tortue Ahmeyim continues to grow and could lead to further offtake expansion of the project. The GTA-1 well was designed as a future producer and will be used to further optimize the development drilling plans for the BP-operated project.

The previously announced process to sell down Kosmos' interest in the broader Mauritania/Senegal region to 10 percent is ongoing and is targeting a transaction announcement by year end.

2019 Guidance

As a result of the completion issue at TEN, Kosmos now expects production for 2019 to be at the low end of the guidance range. All other 2019 guidance remains unchanged.

(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 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 second quarter 2019 financial and operating results today at 10:00 a.m. Central time (11:00 a.m. Eastern time). A live webcast of the event and slides 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 +1.877.407.3982. Callers outside the United States should dial +1.201.493.6780. 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 U.S. Gulf of Mexico, as well as a world-class gas development offshore Mauritania and Senegal. We also maintain a sustainable exploration program balanced between proven basin infrastructure-led exploration (Equatorial Guinea and U.S. Gulf of Mexico), emerging basins (Mauritania, Senegal and Suriname) and frontier basins (Cote d'Ivoire, Namibia and Sao Tome and Principe). 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 2018 Corporate Responsibility 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, Change in restricted cash, and certain other items that may affect the comparability of results. The Company defines net debt as the sum of notes outstanding issued at par and borrowings on the Facility and Corporate revolver less cash and cash equivalents and 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.

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, 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

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues and other income:

 

 

 

 

 

 

 

 

Oil and gas revenue

 

$

395,933

 

 

$

215,191

 

 

$

692,723

 

 

$

342,387

 

Other income, net

 

1

 

 

282

 

 

1

 

 

263

 

Total revenues and other income

 

395,934

 

 

215,473

 

 

692,724

 

 

342,650

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Oil and gas production

 

90,977

 

 

49,815

 

 

170,776

 

 

96,583

 

Facilities insurance modifications, net

 

2,278

 

 

1,029

 

 

(17,743

)

 

9,478

 

Exploration expenses

 

29,905

 

 

77,481

 

 

60,249

 

 

98,674

 

General and administrative

 

28,072

 

 

17,497

 

 

63,980

 

 

39,380

 

Depletion, depreciation and amortization

 

151,438

 

 

74,289

 

 

269,533

 

 

128,566

 

Interest and other financing costs, net

 

59,803

 

 

18,870

 

 

94,844

 

 

44,564

 

Derivatives, net

 

(14,185

)

 

140,272

 

 

62,900

 

 

178,750

 

Gain on equity method investments, net

 

 

 

(16,100

)

 

 

 

(34,796

)

Other expenses, net

 

(1,793

)

 

938

 

 

326

 

 

4,643

 

Total costs and expenses

 

346,495

 

 

364,091

 

 

704,865

 

 

565,842

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

49,439

 

 

(148,618

)

 

(12,141

)

 

(223,192

)

Income tax expense (benefit)

 

32,602

 

 

(45,345

)

 

23,928

 

 

(69,693

)

Net income (loss)

 

$

16,837

 

 

$

(103,273

)

 

$

(36,069

)

 

$

(153,499

)

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

(0.26

)

 

$

(0.09

)

 

$

(0.39

)

Diluted

 

$

0.04

 

 

$

(0.26

)

 

$

(0.09

)

 

$

(0.39

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used to compute net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

401,323

 

 

396,826

 

 

401,244

 

 

396,218

 

Diluted

 

408,230

 

 

396,826

 

 

401,244

 

 

396,218

 

 
 

Kosmos Energy Ltd.

Condensed Consolidated Balance Sheets

(In thousands, unaudited)

 

 

 

June 30,

 

December 31,

 

 

2019

 

2018

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

176,908

 

 

$

173,515

 

Receivables, net

 

160,944

 

 

140,006

 

Other current assets

 

161,862

 

 

196,179

 

Total current assets

 

499,714

 

 

509,700

 

 

 

 

 

 

Property and equipment, net

 

3,847,573

 

 

3,459,701

 

Other non-current assets

 

118,447

 

 

118,788

 

Total assets

 

$

4,465,734

 

 

$

4,088,189

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

157,373

 

 

$

176,540

 

Accrued liabilities

 

258,379

 

 

195,596

 

Other current liabilities

 

26,897

 

 

12,172

 

Total current liabilities

 

442,649

 

 

384,308

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Long-term debt, net

 

2,129,340

 

 

2,120,547

 

Deferred tax liabilities

 

697,792

 

 

477,179

 

Other non-current liabilities

 

311,742

 

 

164,677

 

Total long-term liabilities

 

3,138,874

 

 

2,762,403

 

 

 

 

 

 

Total stockholders’ equity

 

884,211

 

 

941,478

 

Total liabilities and stockholders’ equity

 

$

4,465,734

 

 

$

4,088,189

 

 
 

Kosmos Energy Ltd.

Condensed Consolidated Statements of Cash Flow

(In thousands, unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

Operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

16,837

 

 

$

(103,273

)

 

$

(36,069

)

 

$

(153,499

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depletion, depreciation and amortization

 

153,740

 

 

76,572

 

 

274,222

 

 

133,289

 

Deferred income taxes

 

(16,897

)

 

(57,179

)

 

(56,730

)

 

(81,876

)

Unsuccessful well costs

 

1,593

 

 

44,611

 

 

7,099

 

 

44,654

 

Change in fair value of derivatives

 

(8,121

)

 

138,824

 

 

65,686

 

 

177,790

 

Cash settlements on derivatives, net(1)

 

(17,468

)

 

(35,824

)

 

(21,044

)

 

(56,221

)

Equity-based compensation

 

9,491

 

 

9,068

 

 

17,932

 

 

17,085

 

Loss on extinguishment of debt

 

24,794

 

 

 

 

24,794

 

 

4,056

 

Distributions in excess of equity in earnings

 

 

 

 

 

 

 

5,234

 

Other

 

2,436

 

 

927

 

 

7,417

 

 

449

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Net changes in working capital

 

73,332

 

 

(56,277

)

 

(60,917

)

 

(90,528

)

Net cash provided by operating activities

 

239,737

 

 

17,449

 

 

222,390

 

 

433

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Oil and gas assets

 

(74,891

)

 

(57,938

)

 

(153,268

)

 

(92,650

)

Other property

 

(4,159

)

 

(1,058

)

 

(5,230

)

 

(2,815

)

Return of investment from KTIPI

 

 

 

38,900

 

 

 

 

79,970

 

Notes receivable from partners

 

(5,983

)

 

 

 

(5,983

)

 

 

Net cash used in investing activities

 

(85,033

)

 

(20,096

)

 

(164,481

)

 

(15,495

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Borrowings on long-term debt

 

 

 

 

 

175,000

 

 

 

Payments on long-term debt

 

(200,000

)

 

(100,000

)

 

(300,000

)

 

(100,000

)

Net proceeds from issuance of senior notes

 

641,875

 

 

 

 

641,875

 

 

 

Redemption of senior secured notes

 

(535,338

)

 

 

 

(535,338

)

 

 

Purchase of treasury stock

 

(3

)

 

(5,821

)

 

(1,983

)

 

(17,695

)

Dividends

 

(18,142

)

 

 

 

(36,289

)

 

 

Deferred financing costs

 

(821

)

 

(774

)

 

(1,981

)

 

(25,743

)

Net cash used in financing activities

 

(112,429

)

 

(106,595

)

 

(58,716

)

 

(143,438

)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

42,275

 

 

(109,242

)

 

(807

)

 

(158,500

)

Cash, cash equivalents and restricted cash at beginning of period

 

142,534

 

 

255,728

 

 

185,616

 

 

304,986

 

Cash, cash equivalents and restricted cash at end of period

 

$

184,809

 

 

$

146,486

 

 

$

184,809

 

 

$

146,486

 

____________________

(1)

Cash settlements on commodity hedges were $(11.4) million and $(37.5) million for the three months ended June 30, 2019 and 2018, respectively, and $(18.7) million and $(57.3) million for the six months ended June 30, 2019 and 2018, respectively.

 

 

 

Kosmos Energy Ltd.

Equity Method Investment

(In thousands, unaudited)

 

 

Three months ended

Six months ended

 

June 30, 2018

June 30, 2018

Revenues and other income:

 

 

Oil and gas revenue

$

138,395

 

$

384,749

 

Other income

(170

)

117

 

Total revenues and other income

138,225

 

384,866

 

 

 

 

Costs and expenses:

 

 

Oil and gas production

23,332

 

75,033

 

Depletion and depreciation

21,881

 

75,951

 

Other expenses, net

(73

)

(152

)

Total costs and expenses

45,140

 

150,832

 

 

 

 

Income before income taxes

93,085

 

234,034

 

Income tax expense

33,620

 

83,251

 

Net income

$

59,465

 

$

150,783

 

 

 

 

Kosmos' share of net income

$

29,733

 

$

75,392

 

Basis difference amortization(1)

13,633

 

40,596

 

Equity in earnings - KTIPI

$

16,100

 

$

34,796

 

____________________

(1)

The basis difference, which is associated with oil and gas properties and subject to amortization, has been allocated to the Ceiba Field and Okume Complex. We amortize the basis difference using the unit-of-production method.

 
 

Kosmos Energy Ltd.

EBITDAX

(In thousands, unaudited)

 

 

Three Months Ended

 

Three Months Ended

 

June 30, 2019

 

June 30, 2018

 

Kosmos

 

Kosmos

 

Equatorial
Guinea (Equity
Method)(1)

 

Total

Net income (loss)

$

16,837

 

 

$

(103,273

)

 

$

16,100

 

 

$

(87,173

)

Exploration expenses

29,905

 

 

77,481

 

 

 

 

77,481

 

Facilities insurance modifications, net

2,278

 

 

1,029

 

 

 

 

1,029

 

Depletion, depreciation and amortization

151,438

 

 

74,289

 

 

24,574

 

 

98,863

 

Equity-based compensation

9,491

 

 

9,068

 

 

 

 

9,068

 

Derivatives, net

(14,185

)

 

140,272

 

 

 

 

140,272

 

Cash settlements on commodity derivatives

(11,403

)

 

(37,521

)

 

 

 

(37,521

)

Inventory impairment and other

 

 

(24

)

 

 

 

(24

)

Disputed charges and related costs

 

 

626

 

 

 

 

626

 

Gain on equity method investment - KTIPI

 

 

(16,100

)

 

 

 

(16,100

)

Interest and other financing costs, net

59,803

 

 

18,870

 

 

 

 

18,870

 

Income tax expense (benefit)

32,602

 

 

(45,345

)

 

16,810

 

 

(28,535

)

EBITDAX

$

276,766

 

 

$

119,372

 

 

$

57,484

 

 

$

176,856

 

 

 

 

 

 

 

 

 

 

Six months ended

 

Six months ended

 

June 30, 2019

 

June 30, 2018

 

Kosmos

 

Kosmos

 

Equatorial
Guinea (Equity
Method)(2)

 

Total

Net income (loss)

$

(36,069

)

 

$

(153,499

)

 

$

34,796

 

 

$

(118,703

)

Exploration expenses

60,249

 

 

98,674

 

 

 

 

98,674

 

Facilities insurance modifications, net

(17,743

)

 

9,478

 

 

 

 

9,478

 

Depletion, depreciation and amortization

269,533

 

 

128,566

 

 

78,572

 

 

207,138

 

Equity-based compensation

17,932

 

 

17,085

 

 

 

 

17,085

 

Derivatives, net

62,900

 

 

178,750

 

 

 

 

178,750

 

Cash settlements on commodity derivatives

(18,692

)

 

(57,265

)

 

 

 

(57,265

)

Inventory impairment and other

187

 

 

(5

)

 

 

 

(5

)

Disputed charges and related costs

(14

)

 

2,961

 

 

 

 

2,961

 

Gain on sale of assets

 

 

 

 

 

 

 

Loss on equity method investment - KBSL

 

 

 

 

 

 

 

Gain on equity method investment - KTIPI

 

 

(34,796

)

 

 

 

(34,796

)

Interest and other financing costs, net

94,844

 

 

44,564

 

 

 

 

44,564

 

Income tax expense (benefit)

23,928

 

 

(69,693

)

 

41,626

 

 

(28,067

)

EBITDAX

$

457,055

 

 

$

164,820

 

 

$

154,994

 

 

$

319,814

 

 

 

Twelve Months Ended

 

 

June 30, 2019

 

 

Kosmos

 

Equatorial Guinea
(Equity Method)(2)

 

Total

 

Net income (loss)

$

23,439

 

 

$

38,085

 

 

$

61,524

 

 

Exploration expenses

263,067

 

 

352

 

 

263,419

 

 

Facilities insurance modifications, net

(20,266

)

 

 

 

(20,266

)

 

Depletion and depreciation

470,802

 

 

56,410

 

 

527,212

 

 

Equity-based compensation

36,077

 

 

 

 

36,077

 

 

Derivatives, net

(147,280

)

 

 

 

(147,280

)

 

Cash settlements on commodity derivatives

(98,480

)

 

 

 

(98,480

)

 

Inventory impairment and other

480

 

 

 

 

480

 

 

Disputed charges and related costs

(12,728

)

 

 

 

(12,728

)

 

Gain on sale of assets

(7,666

)

 

 

 

(7,666

)

 

Gain on equity method investment - KTIPI

(38,085

)

 

 

 

(38,085

)

 

Interest and other financing costs, net

151,456

 

 

 

 

151,456

 

 

Income tax expense

136,752

 

 

36,865

 

 

173,617

 

 

EBITDAX

$

757,568

 

 

$

131,712

 

 

$

889,280

 

 

____________________

(1)

For the three and six months ended June 30, 2018 we have presented separately our 50% share of the results from operations and amortization of our basis difference for the Equatorial Guinea investment as we accounted for such investment under the equity method during this period.

(2)

For the twelve months ended June 30, 2019, we have presented separately our 50% share of the results from operations and amortization of our basis difference for the Equatorial Guinea investment through December 31, 2018, as we accounted for such investment under the equity method through this date.

 

Kosmos Energy Ltd.

Adjusted Net Income

(In thousands, except per share amounts, unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

Net income (loss)

$

16,837

 

 

$

(103,273

)

 

$

(36,069

)

 

$

(153,499

)

 

 

 

 

 

 

 

 

Derivatives, net

(14,185

)

 

140,272

 

 

62,900

 

 

178,750

 

Cash settlements on commodity derivatives

(11,403

)

 

(37,521

)

 

(18,692

)

 

(57,265

)

Facilities insurance modifications, net

2,278

 

 

1,029

 

 

(17,743

)

 

9,478

 

Inventory impairment and other

 

 

(24

)

 

187

 

 

(5

)

Disputed charges and related costs

 

 

626

 

 

(14

)

 

2,961

 

Loss on extinguishment of debt

24,794

 

 

 

 

24,794

 

 

4,056

 

Total selected items before tax

1,484

 

 

104,382

 

 

51,432

 

 

137,975

 

 

 

 

 

 

 

 

 

Income tax expense on adjustments(1)

3,463

 

 

(35,963

)

 

(16,578

)

 

(42,527

)

Impact of U.S. tax law change

 

 

 

 

 

 

 

Adjusted net income (loss)

$

21,784

 

 

$

(34,854

)

 

$

(1,215

)

 

$

(58,051

)

 

 

 

 

 

 

 

 

Net income (loss) per diluted share

$

0.04

 

 

$

(0.26

)

 

$

(0.09

)

 

$

(0.39

)

 

 

 

 

 

 

 

 

Derivatives, net

(0.03

)

 

0.35

 

 

0.16

 

 

0.45

 

Cash settlements on commodity derivatives

(0.03

)

 

(0.09

)

 

(0.05

)

 

(0.14

)

Facilities insurance modifications, net

 

 

 

 

(0.04

)

 

0.02

 

Loss on extinguishment of debt

0.06

 

 

 

 

0.06

 

 

0.01

 

Total selected items before tax

 

 

0.26

 

 

0.13

 

 

0.34

 

 

 

 

 

 

 

 

 

Income tax expense on adjustments(1)

0.01

 

 

(0.09

)

 

(0.04

)

 

(0.10

)

Adjusted net income (loss) per diluted share

$

0.05

 

 

$

(0.09

)

 

$

0.00

 

 

$

(0.15

)

 

 

 

 

 

 

 

 

Weighted average number of diluted shares

408,230

 

 

396,826

 

 

401,244

 

 

396,218

 

____________________

(1)

Income tax expense is calculated at the statutory rate in which such item(s) reside. Statutory rates for the U.S. and Ghana are 21% and 35%, respectively.

 

Kosmos Energy Ltd.
Free Cash Flow
(In thousands, unaudited)

 

 

Three months
ended

 

Six months
ended

 

June 30, 2019

 

June 30, 2019

Reconciliation of net cash provided by operating activities to free cash flow:

 

 

 

Net cash provided by operating activities

$

239,737

 

 

$

222,390

 

Net cash used in investing activities

(85,033

)

 

(164,481

)

Other cash used in financing activities(1)

(19,287

)

 

(22,427

)

Change in restricted cash

209

 

 

4,200

 

Free cash flow (before dividends)

$

135,626

 

 

$

39,682

 

___________________

(1)

Amounts consist of costs related to the redemption of the senior secured notes, issuance of senior notes and other long-term debt and the purchase of treasury stock.

 

Operational Summary(1)

(In thousands, except barrel and per barrel data, unaudited)

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

Net Volume Sold

 

 

 

 

 

 

 

Oil (MMBbl)

 

 

 

 

 

 

 

Kosmos

5.851

 

 

2.895

 

 

10.541

 

 

4.829

 

Equity method investment - Equatorial Guinea

 

 

0.950

 

 

 

 

2.830

 

Total Oil (MMBbl)

5.851

 

 

3.845

 

 

10.541

 

 

7.659

 

Gas (MMcf)

1.663

 

 

 

 

3.464

 

 

 

NGL (MMBbl)

0.139

 

 

 

 

0.251

 

 

 

Total (MMBoe)

6.267

 

 

3.845

 

 

11.369

 

 

7.659

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

Oil sales:

 

 

 

 

 

 

 

Kosmos

$

389,286

 

 

$

215,191

 

 

$

680,150

 

 

$

342,387

 

Equity method investment - Equatorial Guinea

 

 

69,198

 

 

 

 

192,375

 

Total Oil sales

389,286

 

 

284,389

 

 

680,150

 

 

534,762

 

Gas sales

4,145

 

 

 

 

7,807

 

 

 

NGL sales

2,502

 

 

 

 

4,766

 

 

 

Total sales

395,933

 

 

284,389

 

 

692,723

 

 

534,762

 

Cash settlements on commodity derivatives

(11,403

)

 

(37,521

)

 

(18,692

)

 

(57,265

)

Realized revenue

$

384,530

 

 

$

246,868

 

 

$

674,031

 

 

$

477,497

 

 

 

 

 

 

 

 

 

Oil and Gas Production Costs

 

 

 

 

 

 

 

Kosmos

$

90,977

 

 

$

49,815

 

 

$

170,776

 

 

$

96,583

 

Equity method investment - Equatorial Guinea

 

 

11,666

 

 

 

 

37,516

 

Total oil and gas production costs

$

90,977

 

 

$

61,481

 

 

$

170,776

 

 

$

134,099

 

 

 

 

 

 

 

 

 

Oil sales per Bbl:

 

 

 

 

 

 

 

Kosmos

$

66.53

 

 

$

74.32

 

 

$

64.52

 

 

$

70.90

 

Equity method investment - Equatorial Guinea

 

 

72.84

 

 

 

 

67.98

 

Total Oil sales per Bbl

66.53

 

 

73.96

 

 

64.52

 

 

69.82

 

Gas sales per Mcf

2.49

 

 

 

 

2.25

 

 

 

NGL sales per Bbl

18.01

 

 

 

 

18.96

 

 

 

Total sales per Boe

63.18

 

 

73.96

 

 

60.93

 

 

69.82

 

Cash settlements on commodity derivatives per oil Bbl(2)

(1.95

)

 

(12.96

)

 

(1.77

)

 

(11.86

)

Realized revenue per Boe(3)

61.36

 

 

64.20

 

 

59.28

 

 

62.34

 

 

 

 

 

 

 

 

 

Oil and gas production costs per Boe:

 

 

 

 

 

 

 

Kosmos

$

14.52

 

 

$

17.21

 

 

$

15.02

 

 

$

20.01

 

Equity method investment - Equatorial Guinea

 

 

$

12.28

 

 

 

 

$

13.26

 

Total oil and gas production costs

14.52

 

 

15.99

 

 

15.02

 

 

17.51

 

____________________

(1)

For the three and six months June 30, 2018, we have presented separately our 50% share of the results from operations for the Equatorial Guinea investment, as we accounted for such investment under the equity method during this period.

(2)

Cash settlements on commodity derivatives are only related to Kosmos and are calculated on a per barrel basis using Kosmos' Net Oil Volumes Sold.

(3)

Realized revenue includes revenue from Kosmos, Equatorial Guinea (equity method investment), and Cash settlements on commodity derivatives; on a per Boe basis realized revenue is calculated using the total Net Volume Sold from both Kosmos and Equatorial Guinea (equity method investment).

 

 

Kosmos was underlifted by approximately 1,003 thousand barrels as of June 30, 2019.
 

Hedging Summary

As of June 30, 2019(1)

(Unaudited)

 

 

 

 

 

 

 

Weighted Average Price per Bbl

 

 

Index

 

MBbl

 

Floor(2)

 

Sold Put

 

Ceiling

2019:

 

 

 

 

 

 

 

 

 

 

Three-way collars

 

Dated Brent

 

5,256

 

 

$

53.33

 

 

$

43.81

 

 

$

73.57

 

Swaps

 

NYMEX WTI

 

730

 

 

52.01

 

 

 

 

 

Collars

 

Argus LLS

 

500

 

 

60.00

 

 

 

 

88.75

 

2020:

 

 

 

 

 

 

 

 

 

 

Three-way collars

 

Dated Brent

 

6,000

 

 

$

57.50

 

 

$

45.00

 

 

$

80.18

 

Put spread

 

Dated Brent

 

2,000

 

 

60.00

 

 

50.00

 

 

 

____________________

(1)

Please see the Company’s filed 10-Q for full disclosure on hedging material. Includes hedging position as of June 30, 2019 and hedges added since quarter-end.

(2)

“Floor” represents floor price for collars or swaps and strike price for purchased puts.

Note: Excludes 0.5 MMBbls of sold (short) calls with a strike price of $80.00 per Bbl in 2019, 8.0 MMBbls of sold (short) calls with a strike price of $85.00 per Bbl in 2020 and 1.0 MMBbls of sold (short) calls with a strike price of $75.00 per Bbl in 2021.

 

 

2019 Guidance

 

 

FY 2019

 

 

 

 

Production(1,2)

69,000 - 73,000 boe per day

 

 

 

 

Opex

$12.00 - $15.00 per boe

 

 

 

 

DD&A

$22.00 - $25.00 per boe

 

 

 

 

G&A(3)

$115 - $125 million

 

 

 

 

Exploration Expense

~$30 million average per quarter

 

 

 

 

Net Interest

$35 - $37 million per quarter

 

 

 

 

Tax

$3.00 - $5.00 per boe

 

 

 

 

Capex

$425 - $475 million in FY 2019

 ____________________
Note: Ghana/EG revenue calculated by number of cargos.

(1)

3Q 2019 - Ghana: 4 cargos / Equatorial Guinea 1 cargo. FY 2019 Ghana: 12 cargos / Equatorial Guinea 5.5 cargos. Average cargo sizes 950,000 barrels of oil.

(2)

GoM Production - 3Q 2019: 22,000-24,000 boe per day. FY 2019 22,000-24,000 boe per day. Oil/Gas/NGL split for 2019: U.S. Gulf of Mexico: 80%/12%/8%.

(3)

G&A - Approximately 70% cash.

 

 

Contacts

Investor Relations
Jamie Buckland
+44 (0) 203 954 2831
jbuckland@kosmosenergy.com

Rhys Williams
+1-214-445-9693
rwilliams@kosmosenergy.com

Media Relations
Thomas Golembeski
+1-214-445-9674
tgolembeski@kosmosenergy.com

Contacts

Investor Relations
Jamie Buckland
+44 (0) 203 954 2831
jbuckland@kosmosenergy.com

Rhys Williams
+1-214-445-9693
rwilliams@kosmosenergy.com

Media Relations
Thomas Golembeski
+1-214-445-9674
tgolembeski@kosmosenergy.com