Kosmos Energy Ltd. (“Kosmos”) (NYSE:KOS) (LSE: KOS) announced
today financial and operating results for the third quarter of
2017. For the third quarter of 2017, the Company generated
a net loss of $63.4 million,
or $0.16 per diluted share as compared to net loss
of $59.8 million or $0.15 per diluted share in the same period last
year. When adjusted for certain items that impact the
comparability of results, the Company generated an adjusted
net loss(1) of $36.9 million or $0.09 per diluted share for
the third quarter of 2017.
“Over the first nine months of 2017, our strong free cash flow
has allowed us to reduce debt and to grow the value of our company
through both organic and inorganic opportunities,” said Andrew G.
Inglis, chairman and chief executive officer. “We have ramped up
production at the TEN fields, progressed the Tortue project
offshore Mauritania and Senegal with our partner BP, and acquired a
strategic exploration and production position in Equatorial Guinea
which is immediately accretive. Our exploration portfolio remains
strong with four world-class prospects to be tested in Mauritania,
Senegal, and Suriname over the next 12 months.”
Third quarter 2017 oil revenues were $151.2 million versus $46.6
million in the same quarter of 2016, on sales of 2.9 million
barrels of oil in 2017 as compared to 0.9 million barrels in 2016.
Third quarter 2017 oil revenues exclude $12.1 million of derivative
settlements. Realized oil revenues, including the impact of the
Company’s hedging program, were $55.57 per barrel of oil sold in
the third quarter of 2017. At the end of the quarter, the Company
was in a net underlift position of approximately 0.4 million
barrels of oil.
Production expense for the third quarter was $39 million, or
$13.33 per barrel, versus $14 million, or $14.33 per barrel, in the
third quarter of 2016. The increase in total production expense was
attributable to lifting two more cargoes than in the year ago
quarter.
Exploration expenses totaled $37 million for the third quarter,
compared to $66 million in the same period of 2016 primarily the
result of lower geologic and geophysical costs. While Kosmos was
carried for the Hippocampe-1 exploration well by BP, $21 million of
expenses related to the drilling rig that are not eligible for
reimbursement were expensed during the quarter.
Depletion and depreciation expense for the quarter was $73
million, or $25.01 per barrel. This was an increase from $18.84 per
barrel in the third quarter of 2016, primarily a result of
production from the TEN fields coming online, which has a higher
depletion rate.
General and administrative expenses were $20 million during the
third quarter, slightly less than the same period in 2016. This
amount includes approximately $10 million in cash expense and $10
million in non-cash equity based compensation expense.
Third quarter results included a mark-to-market loss of $27
million related to the Company’s oil derivative contracts. At
September 30, 2017, the Company’s hedging position had a total
commodity net asset value of $1.6 million. As of quarter end,
Kosmos had approximately 14 million barrels of oil hedged from 2017
to 2019.
Total capital expenditures in the third quarter were $61
million. In the first nine months of 2017 Kosmos spent
approximately $217 million which was offset by the initial proceeds
from the BP transaction of $222 million resulting in a credit to
the capital budget of $5 million.
Kosmos exited the third quarter of 2017 with approximately $1.3
billion of liquidity and $890 million of net debt, including a
year-to-date voluntary repayment of $250 million on our
reserves-based lending facility in 2017.
Operational Update
Ghana
During the third quarter of 2017, gross sales volumes from Ghana
averaged approximately 160,000 barrels of oil per day (bopd),
including volumes from the Jubilee and TEN fields which averaged
approximately 100,000 bopd and 60,000 bopd, respectively.
The Jubilee FPSO turret remediation project has continued to
make good progress during the year. Following the spread mooring of
the FPSO at its current heading in late February, optimization of
the offtake procedures has allowed the Jubilee field to regularly
produce in excess of 100,000 bopd. The Jubilee partners and the
Government of Ghana have now agreed on the need to stabilize the
turret bearing and rotate the FPSO. The operator estimates
stabilization will require two shutdowns in early 2018, resulting
in approximately four weeks of downtime. Planning for the rotation
of the vessel to its optimal heading is ongoing, with work expected
to begin around year-end 2018.
In mid-October, the partnership received approval for the
Greater Jubilee Full Field Development Plan (GJFFDP) from the
Government of Ghana. The approval of the GJFFDP establishes a price
for gas sales and allows for drilling to resume in 2018, which is
expected to increase production, extend the field production
profile, and allow the Company to book additional proved
reserves.
Production from TEN in the third quarter averaged approximately
60,000 bopd. In September, the Special Chamber of
the International Tribunal of the Law of the Sea (ITLOS)
issued its final decision in the maritime boundary dispute between
the Governments of Ghana and Côte d'Ivoire. The maritime
boundary delimited by the Special Chamber’s decision had no impact
on the TEN field’s production or reserves or otherwise on the
company’s interests in Ghana. The partnership expects to
resume TEN development drilling in early 2018 to ramp up production
with additional wells to the FPSO capacity of 80,000 barrels of oil
per day.
Mauritania and Senegal
In August, Kosmos completed the drill stem test (DST) of the
Tortue-1 well, demonstrating that the Tortue field is a world-class
resource and confirming key development parameters including well
deliverability, reservoir connectivity, and fluid composition. The
Tortue-1 well flowed at a sustained, equipment-constrained rate of
approximately 60 million cubic feet per day (MMcf/d) during the
main, extended flow period, with minimal pressure drawdown,
providing confidence in well designs that are each capable of
producing approximately 200 MMcf/d.
In September, Kosmos closed a farm-in agreement to acquire a 15%
non-operated participating interest in Block C18 offshore
Mauritania.
In early November the ENSCO DS-12 drilling rig completed
plugging and abandonment operations at the Hippocampe-1 location
offshore Mauritania and has mobilized to the Lamantin-1 exploration
well location to commence drilling operations.
Sao Tome
In August 2017, Kosmos completed the acquisition of an
approximately 16,000 square kilometer proprietary 3D seismic
survey. This survey is the largest ever conducted in the Company's
history, and potentially the largest proprietary 3D seismic survey
conducted offshore West Africa.
(1) A Non-GAAP measure, see attached
reconciliation of adjusted net income.
Conference Call and Webcast Information
Kosmos will host a conference call and webcast to discuss third
quarter 2017 financial and operating results today at 10:00 a.m.
Central time (11:00 a.m. Eastern time). A live webcast of the event
can be accessed on the Investors page of Kosmos’ website at
investors.kosmosenergy.com. 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 leading independent oil and gas exploration and
production company focused on frontier and emerging areas along the
Atlantic Margins. Our assets include existing production and
development projects offshore Ghana, large discoveries and
significant further hydrocarbon exploration potential offshore
Mauritania and Senegal, as well as exploration licenses with
significant hydrocarbon potential offshore Suriname, Sao Tome and
Principe, Morocco and Western Sahara. 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 2016 Corporate
Responsibility Report. For additional information, visit
www.kosmosenergy.com.
Non-GAAP Financial Measures
EBITDAX, Adjusted net income (loss) and Adjusted net income
(loss) per share 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) depletion and depreciation, (ii) exploration
expenses, (iii) interest and other financing costs, net,
(iv) unrealized (gain) loss on commodity derivatives,
(v) income tax expense, (vi) equity-based compensation,
(vii) (gain) loss on sale of oil and gas properties,
(viii) restructuring charges and (ix) similar other material
items, which management believes affect the comparability of
operating results. The Company defines adjusted net income (loss)
as net income (loss) after adjusting for the impact of certain
non-cash and non-recurring items, including non-cash changes in the
fair value of derivative instruments, cash settlements on commodity
derivatives, gain on sale of assets, and other similar non-cash and
non-recurring charges, and then the non-cash and related tax
impacts in the same period.
We believe that EBITDAX, Adjusted net income (loss), and
Adjusted net income (loss) per share 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. Because
EBITDAX, Adjusted net income (loss), and Adjusted net income (loss)
per share excludes some, but not all, items that affect net income,
these measures 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017
2016 Revenues and other income: Oil and gas revenue $
151,240 $ 46,628 $ 391,035 $ 154,259 Other income, net 2
20,001 58,697 20,179 Total revenues and other
income 151,242 66,629 449,732 174,438
Costs and
expenses: Oil and gas production 39,187 13,574 80,677 75,647
Facilities insurance modifications, net (3,906 ) 5,946 (1,334 )
5,946 Exploration expenses 36,983 66,238 162,679 126,498 General
and administrative 20,029 21,914 50,555 59,672 Depletion and
depreciation 73,490 17,838 180,909 66,031 Interest and other
financing costs, net 18,478 11,066 54,729 30,268 Derivatives, net
26,864 (16,891 ) (36,404 ) 33,752 Other expenses, net 5,037
(795 ) 14,233 13,768 Total costs and expenses 216,162
118,890 506,044 411,582 Loss
before income taxes (64,920 ) (52,261 ) (56,312 ) (237,144 ) Income
tax expense (benefit) (1,515 ) 7,502 44,401 (10,064 )
Net loss $ (63,405 ) $ (59,763 ) $ (100,713 ) $ (227,080 )
Net loss per share: Basic $ (0.16 ) $ (0.15 ) $ (0.26 ) $
(0.59 ) Diluted $ (0.16 ) $ (0.15 ) $ (0.26 ) $ (0.59 )
Weighted average number of shares used to compute net loss
per share: Basic 389,058 386,026 388,114
385,130 Diluted 389,058 386,026 388,114
385,130
Kosmos Energy Ltd.
Condensed Consolidated Balance
Sheets
(In thousands, unaudited)
September 30,2017
December 31,2016
Assets Current assets: Cash and cash equivalents $ 164,162 $
194,057 Receivables, net 149,301 143,337 Other current assets
155,686 137,793 Total current assets 469,149 475,187
Property and equipment, net 2,258,401 2,708,892 Other non-current
assets 242,898 157,386
Total assets $ 2,970,448
$ 3,341,465
Liabilities and shareholders’
equity Current liabilities: Accounts payable $ 100,302 $
220,627 Accrued liabilities 173,804 129,706 Other current
liabilities 9,016 19,692 Total current liabilities 283,122
370,025 Long-term liabilities: Long-term debt, net 1,080,352
1,321,874 Deferred tax liabilities 511,891 482,221 Other
non-current liabilities 85,840 86,146 Total long-term
liabilities 1,678,083 1,890,241 Total shareholders’ equity
1,009,243 1,081,199
Total liabilities and shareholders’
equity $ 2,970,448 $ 3,341,465
Kosmos Energy Ltd.
Condensed Consolidated Statements of
Cash Flow
(In thousands, unaudited)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017
2016 Operating activities: Net
loss $ (63,405 ) $ (59,763 ) $ (100,713 ) $ (227,080 ) Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities: Depletion, depreciation and amortization 76,042 20,389
188,563 73,684 Deferred income taxes (8,197 ) 3,108 32,820 (16,821
) Unsuccessful well costs 20,910 309 24,515 2,609 Change in fair
value of derivatives 33,020 (17,996 ) (25,924 ) 37,179 Cash
settlements on derivatives, net(1) 5,858 44,707 25,275 144,522
Equity-based compensation 9,616 9,229 29,945 30,391 Loss on equity
method investment 4,804 — 11,230 — Other 898 (1,711 ) 3,412 13,358
Changes in assets and liabilities: Net changes in working capital
32,380 (39,817 ) (94,711 ) (123,465 ) Net cash provided by
(used in) operating activities 111,926 (41,545 ) 94,412 (65,623 )
Investing activities: Oil and gas assets (57,907 )
(88,552 ) (100,712 ) (506,256 ) Other property (185 ) (402 ) (1,639
) (1,003 ) Proceeds from sale of assets — 14 222,068
210 Net cash provided by (used in) investing
activities (58,092 ) (88,940 ) 119,717 (507,049 )
Financing activities: Borrowings on long-term debt — 125,000
— 450,000 Payments on long-term debt (50,000 ) — (250,000 ) —
Purchase of treasury stock (171 ) (132 ) (2,116 ) (1,930 ) Net cash
provided by (used in) financing activities (50,171 ) 124,868
(252,116 ) 448,070 Net increase (decrease) in cash,
cash equivalents and restricted cash 3,663 (5,617 ) (37,987 )
(124,602 ) Cash, cash equivalents and restricted cash at beginning
of period 231,545 191,877 273,195 310,862
Cash, cash equivalents and restricted cash at end of period
$ 235,208 $ 186,260 $ 235,208 $ 186,260
___________________________________
(1)
Cash settlements on commodity hedges were
$12.1 million and $44.7 million for the three months ended
September 30, 2017 and 2016, respectively, and $36.4 million
and $146.5 million for the nine months ended September 30,
2017 and 2016.
Kosmos Energy Ltd.
EBITDAX
(In thousands, unaudited)
Twelve
MonthsEndedSeptember 30,
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017 2016 2017 Net
loss $ (63,405 ) $ (59,763 ) $ (100,713 ) $ (227,080 ) $ (157,413 )
Exploration expenses 36,983 66,238 162,679 126,498 238,461
Facilities insurance modifications, net (3,906 ) 5,946 (1,334 )
5,946 7,681 Depletion and depreciation 73,490 17,838 180,909 66,031
255,282 Equity-based compensation 9,616 9,229 29,945 30,391 39,638
Derivatives, net 26,864 (16,891 ) (36,404 ) 33,752 (22,135 ) Cash
settlements on commodity derivatives 12,078 44,748 36,426 146,514
77,862 Inventory impairment and other (501 ) (3,047 ) (417 ) 10,997
(696 ) Disputed charges and related costs 821 1,826 3,260 1,826
12,733 Loss on equity method investment 4,804 — 11,230 — 11,230
Interest and other financing costs, net 18,478 11,066 54,729 30,268
68,608 Income tax expense (benefit) (1,515 ) 7,502 44,401
(10,064 ) 43,681 EBITDAX $ 113,807 $ 84,692
$ 384,711 $ 215,079 $ 574,932
Adjusted Net Income
(In thousands, except per share
amounts, unaudited)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017
2016 Net loss $ (63,405 ) $ (59,763 ) $ (100,713 ) $
(227,080 ) Derivatives, net 26,864 (16,891 ) (36,404 )
33,752 Cash settlements on commodity derivatives 12,078 44,748
36,426 146,514 Facilities insurance modifications, net (3,906 )
5,946 (1,334 ) 5,946 Inventory impairment and other (501 ) (3,047 )
(417 ) 10,997 Disputed charges and related costs 821 1,826 3,260
1,826 Loss on equity method investment 4,804 — 11,230
— Total selected items before tax 40,160
32,582 12,761 199,035 Income tax
expense on adjustments(1) (13,630 ) (9,323 ) (8 ) (66,769 )
Adjusted net loss $ (36,875 ) $ (36,504 ) $ (87,960 ) $ (94,814 )
Net loss per diluted share $ (0.16 ) $ (0.15 ) $ (0.26 ) $
(0.59 ) Derivatives, net 0.07 (0.04 ) (0.09 ) 0.09 Cash
settlements on commodity derivatives 0.04 0.11 0.09 0.38 Facilities
insurance modifications, net (0.01 ) 0.01 — 0.02 Inventory
impairment and other — — — 0.03 Disputed charges and related costs
— — 0.01 — Loss on equity method investment 0.01 —
0.02 — Total selected items before tax 0.11
0.08 0.03 0.52 Income tax expense on
adjustments(1) (0.04 ) (0.02 ) 0.00 (0.18 ) Adjusted net
loss per diluted share $ (0.09 ) $ (0.09 ) $ (0.23 ) $ (0.25 )
Weighted average number of diluted shares 389,058 386,026
388,114 385,130
___________________________________
(1) Income tax expense is calculated at the statutory
rate in which such item(s) reside. Statutory rate for Ghana is 35%.
Oil Revenue Summary
(In thousands, except barrel and per
barrel data, unaudited)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017
2016 Net Oil Volume Sold (MMBbls) 2.939 0.947 7.830
3.791 Oil revenue $ 151,240 $ 46,628 $ 391,035 $ 154,259
Cash settlements on commodity derivatives 12,078 44,748
36,426 146,514 Realized oil revenue $ 163,318
$ 91,376 $ 427,461 $ 300,773 Per Barrel: Oil
revenue $ 51.46 $ 49.24 $ 49.94 $ 40.69 Cash settlements on
commodity derivatives 4.11 47.25 4.65 38.65
Realized oil revenue $ 55.57 $ 96.49 $ 54.59 $
79.34
Underlifted by approximately 425 thousand barrels as of
September 30, 2017.
Hedging Summary
As of September 30,
2017(1)
(Unaudited)
Volume Floor(2)
ShortPut
Ceiling
LongCall
(MMBbls)
2017 : Swaps with puts/calls 0.503 $ 72.50 $ 55.00
$ — $ 90.00 Swaps with puts 0.503 $ 64.95 $ 50.00 $ — $ — Three-way
collars 1.006 $ 45.00 $ 30.00 $ 60.00 $ —
2018 :
Three-way collars 2.913 $ 56.57 $ 41.57 $ 65.90 $ — Four-way
collars 3.000 $ 50.00 $ 40.00 $ 61.33 $ 70.00 Swaps 1.000 $ 57.25
Swaps with puts 4.000 $ 56.14 $ 42.50
2019 :
Three-way collars 4.500 $ 50.00 $ 40.00 $ 62.78 $ —
___________________________________
(1) Please see the Company’s filed 10-Q for full
disclosure on hedging material. Includes hedging position as of
September 30, 2017 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 $85.00/Bbl in 2017, 2.0 MMBbls of sold (short) calls with
a strike price of $65.00/Bbl in 2018, and 0.9 MMBbls of sold
(short) calls with a strike price of $80.00/Bbl in 2019.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171105005084/en/
Kosmos Energy Ltd.Investor RelationsNeal Shah,
+1-214-445-9628nshah@kosmosenergy.comorRhys Williams,
+1-214-445-9693rwilliams@kosmosenergy.comorMedia
RelationsThomas Golembeski,
+1-214-445-9674tgolembeski@kosmosenergy.com
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