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
| 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
| 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
| 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.
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Three months
| Six months
| ||||||
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. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190804005060/en/
Contacts:
Jamie Buckland
+44 (0) 203 954 2831
jbuckland@kosmosenergy.com
