Kosmos Energy Announces First Quarter 2020 Results
FIRST QUARTER 2020 HIGHLIGHTS
- Net Production(2) - 66,300 barrels of oil equivalent per day (boepd) with sales of 43,700 boepd, resulting in a material net underlift position of approximately 1.7 million barrels of oil equivalent (boe)
-
Revenues -
$178 million
-
Realized oil and gas revenues, including the impact of hedging program -
$47.77 per boe
-
Production expense -
$62 million , or$15.50 per boe
-
General and administrative expenses -
$21 million ,$12 million cash expense and$9 million non-cash equity based compensation expense
-
Capital expenditure -
$84 million
In addition to the timing mismatch between production and the lifting of cargos, the first quarter was impacted by non-cash asset impairments and restructuring charges of
As of the quarter end and including recently executed hedges, Kosmos has approximately 20.2 million barrels of oil hedged covering 2020 and 2021 including Brent and LLS based hedges. The company’s oil hedge position was restructured in early April to provide further downside protection to lower oil prices through 2020.
Kosmos exited the first quarter of 2020 with approximately
Commenting on the company’s 1Q 2020 performance and the current COVID-19 situation, Chairman and Chief Executive Officer
Kosmos' operations performed well during the first quarter with production across our three hubs in line or at the top end of expectations. Our differentiated portfolio of low-cost, low decline conventional assets is well positioned to withstand the lower price environment we are in today.
In response to the volatile market conditions, we have taken decisive actions to protect the business in 2020 and position it for increased activity in 2021. These measures include materially reducing costs and restructuring our hedging portfolio. We completed our RBL re-determination in difficult market conditions in April and have no near-term debt maturities.
We look forward to building a self-funded gas business in
OPERATIONAL UPDATE
COVID-19 and Oil Price Response
The COVID-19 pandemic, its economic impact, and the recent oil price collapse are creating a challenging environment for the oil and gas sector. In these unprecedented times, Kosmos remains focused on safe and reliable operations by protecting the health of our employees, reducing the risk of the virus spreading in our operations, and minimizing the impact on our business.
Production
Total net production in the first quarter of 2020 averaged approximately 66,300 boepd(2), at the upper end of guidance.
Production in the
As a result of current market conditions, the operator of the Delta House host platform in the
Full year net production guidance in the
Production in
The Jubilee gas enhancement project was successfully completed in February with subsequent production rates of around 90,000 bopd being achieved. The operator is also increasing water injection capacity from two pumps, which is expected to provide the necessary pressure to support the reservoir while providing redundancy with a third pump available as needed. In addition, we have seen consistent gas offtake from the
On TEN, the field is currently producing over 50,000 bopd. The Ntomme-09 producer well has been drilled successfully and completion operations are now underway with the well scheduled to come online later this quarter.
Full year net production guidance in
Production in
Phase 1 of the Greater Tortue Ahmeyim project located offshore
As previously announced, on
The planned sell down process of our interests in
Cost Reductions
In response to current market volatility, Kosmos has identified capital reductions in the base business of around 40% from discretionary expenditure largely from exploration activities in the
Kosmos has taken steps with the operators of our producing assets to target a reduction in operating expenses of approximately
These capital, operating and G&A cost reductions lower the company’s costs for 2020 by approximately
Dividend
In March, the Board of Directors of the company made the decision to suspend the dividend, which will result in cash savings in 2020 of approximately
Impairments
Kosmos has booked asset impairments in the first quarter totaling
(1) A Non-GAAP measure, see attached reconciliation of non-GAAP measure
(2) Production means net entitlement volumes. In
Conference Call and Webcast Information
Kosmos will host a conference call and webcast to discuss first quarter 2020 financial and operating results today at
About
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
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 (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’
|
Consolidated Statements of Operations (In thousands, except per share amounts, unaudited) |
||||||||
|
|
|
Three Months Ended |
||||||
|
|
|
|
||||||
|
|
|
2020 |
|
2019 |
||||
|
Revenues and other income: |
|
|
|
|
||||
|
Oil and gas revenue |
|
$ |
177,780 |
|
|
$ |
296,790 |
|
|
Other income, net |
|
1 |
|
|
— |
|
||
|
Total revenues and other income |
|
177,781 |
|
|
296,790 |
|
||
|
|
|
|
|
|
||||
|
Costs and expenses: |
|
|
|
|
||||
|
Oil and gas production |
|
61,603 |
|
|
79,799 |
|
||
|
Facilities insurance modifications, net |
|
8,038 |
|
|
(20,021 |
) |
||
|
Exploration expenses |
|
44,605 |
|
|
30,344 |
|
||
|
General and administrative |
|
20,911 |
|
|
35,908 |
|
||
|
Depletion, depreciation and amortization |
|
93,302 |
|
|
118,095 |
|
||
|
Impairment of long-lived assets |
|
150,820 |
|
|
— |
|
||
|
Interest and other financing costs, net |
|
27,835 |
|
|
35,041 |
|
||
|
Derivatives, net |
|
(136,038 |
) |
|
77,085 |
|
||
|
Other expenses, net |
|
23,929 |
|
|
2,119 |
|
||
|
Total costs and expenses |
|
295,005 |
|
|
358,370 |
|
||
|
|
|
|
|
|
||||
|
Loss before income taxes |
|
(117,224 |
) |
|
(61,580 |
) |
||
|
Income tax expense (benefit) |
|
65,543 |
|
|
(8,674 |
) |
||
|
Net loss |
|
$ |
(182,767 |
) |
|
$ |
(52,906 |
) |
|
|
|
|
|
|
||||
|
Net loss per share: |
|
|
|
|
||||
|
Basic |
|
$ |
(0.45 |
) |
|
$ |
(0.13 |
) |
|
Diluted |
|
$ |
(0.45 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
Weighted average number of shares used to compute net loss per share: |
|
|
|
|
||||
|
Basic |
|
404,759 |
|
|
401,164 |
|
||
|
Diluted |
|
404,759 |
|
|
401,164 |
|
||
|
|
|
|
|
|
||||
|
Dividends declared per common share |
|
$ |
0.0452 |
|
|
$ |
0.0452 |
|
|
Condensed Consolidated Balance Sheets (In thousands, unaudited) |
|||||||
|
|
|
|
|
|
|||
|
|
|
2020 |
|
2019 |
|||
|
Assets |
|
|
|
|
|||
|
Current assets: |
|
|
|
|
|||
|
Cash and cash equivalents |
|
$ |
126,507 |
|
|
$ |
224,502 |
|
Receivables, net |
|
202,402 |
|
|
174,293 |
||
|
Other current assets |
|
285,606 |
|
|
167,762 |
||
|
Total current assets |
|
614,515 |
|
|
566,557 |
||
|
|
|
|
|
|
|||
|
Property and equipment, net |
|
3,442,937 |
|
|
3,642,332 |
||
|
Other non-current assets |
|
126,510 |
|
|
108,343 |
||
|
Total assets |
|
$ |
4,183,962 |
|
|
$ |
4,317,232 |
|
|
|
|
|
|
|||
|
Liabilities and stockholders’ equity |
|
|
|
|
|||
|
Current liabilities: |
|
|
|
|
|||
|
Accounts payable |
|
$ |
228,492 |
|
|
$ |
149,483 |
|
Accrued liabilities |
|
267,758 |
|
|
380,704 |
||
|
Other current liabilities |
|
19,587 |
|
|
8,914 |
||
|
Total current liabilities |
|
515,837 |
|
|
539,101 |
||
|
|
|
|
|
|
|||
|
Long-term liabilities: |
|
|
|
|
|||
|
Long-term debt, net |
|
2,059,929 |
|
|
2,008,063 |
||
|
Deferred tax liabilities |
|
692,618 |
|
|
653,221 |
||
|
Other non-current liabilities |
|
270,430 |
|
|
275,145 |
||
|
Total long-term liabilities |
|
3,022,977 |
|
|
2,936,429 |
||
|
|
|
|
|
|
|||
|
Total stockholders’ equity |
|
645,148 |
|
|
841,702 |
||
|
Total liabilities and stockholders’ equity |
|
$ |
4,183,962 |
|
|
$ |
4,317,232 |
|
Condensed Consolidated Statements of Cash Flow (In thousands, unaudited) |
||||||||
|
|
|
Three Months Ended |
||||||
|
|
|
|
||||||
|
|
|
2020 |
|
2019 |
||||
|
Operating activities: |
|
|
|
|
||||
|
Net loss |
|
$ |
(182,767 |
) |
|
$ |
(52,906 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
||||
|
Depletion, depreciation and amortization (including deferred financing costs) |
|
95,585 |
|
|
120,482 |
|
||
|
Deferred income taxes |
|
72,177 |
|
|
(39,833 |
) |
||
|
Unsuccessful well costs and leasehold impairments |
|
19,228 |
|
|
5,506 |
|
||
|
Impairment of long-lived assets |
|
150,820 |
|
|
— |
|
||
|
Change in fair value of derivatives |
|
(136,322 |
) |
|
73,807 |
|
||
|
Cash settlements on derivatives, net(1) |
|
9,016 |
|
|
(3,576 |
) |
||
|
Equity-based compensation |
|
9,346 |
|
|
8,441 |
|
||
|
Other |
|
3,974 |
|
|
4,981 |
|
||
|
Changes in assets and liabilities: |
|
|
|
|
||||
|
Net changes in working capital |
|
(58,020 |
) |
|
(134,249 |
) |
||
|
Net cash used in operating activities |
|
(16,963 |
) |
|
(17,347 |
) |
||
|
|
|
|
|
|
||||
|
Investing activities |
|
|
|
|
||||
|
Oil and gas assets |
|
(83,716 |
) |
|
(78,377 |
) |
||
|
Other property |
|
(1,537 |
) |
|
(1,071 |
) |
||
|
Proceeds on sale of assets |
|
1,713 |
|
|
— |
|
||
|
Notes receivable from partners |
|
(23,983 |
) |
|
— |
|
||
|
Net cash used in investing activities |
|
(107,523 |
) |
|
(79,448 |
) |
||
|
|
|
|
|
|
||||
|
Financing activities: |
|
|
|
|
||||
|
Borrowings on long-term debt |
|
50,000 |
|
|
175,000 |
|
||
|
Payments on long-term debt |
|
— |
|
|
(100,000 |
) |
||
|
Purchase of treasury stock / tax withholdings |
|
(4,947 |
) |
|
(1,980 |
) |
||
|
Dividends |
|
(19,156 |
) |
|
(18,147 |
) |
||
|
Deferred financing costs |
|
— |
|
|
(1,160 |
) |
||
|
Net cash provided by financing activities |
|
25,897 |
|
|
53,713 |
|
||
|
|
|
|
|
|
||||
|
Net decrease in cash, cash equivalents and restricted cash |
|
(98,589 |
) |
|
(43,082 |
) |
||
|
Cash, cash equivalents and restricted cash at beginning of period |
|
229,346 |
|
|
185,616 |
|
||
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
130,757 |
|
|
$ |
142,534 |
|
| ____________________ | |
|
(1) |
Cash settlements on commodity hedges were |
|
EBITDAX (In thousands, unaudited) |
|||||||||||
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
Twelve Months
|
||||||||
|
|
|
|
|
|
|
||||||
|
Net loss |
$ |
(182,767 |
) |
|
$ |
(52,906 |
) |
|
$ |
(185,638 |
) |
|
Exploration expenses |
44,605 |
|
|
30,344 |
|
|
195,216 |
|
|||
|
Facilities insurance modifications, net |
8,038 |
|
|
(20,021 |
) |
|
3,805 |
|
|||
|
Depletion, depreciation and amortization |
93,302 |
|
|
118,095 |
|
|
539,068 |
|
|||
|
Impairment of long-lived assets |
150,820 |
|
|
— |
|
|
150,820 |
|
|||
|
Equity-based compensation |
9,346 |
|
|
8,441 |
|
|
33,275 |
|
|||
|
Derivatives, net |
(136,038 |
) |
|
77,085 |
|
|
(141,238 |
) |
|||
|
Cash settlements on commodity derivatives |
12,018 |
|
|
(7,289 |
) |
|
(17,034 |
) |
|||
|
Restructuring and other |
18,023 |
|
|
187 |
|
|
45,186 |
|
|||
|
Other, net |
3,091 |
|
|
(14 |
) |
|
7,254 |
|
|||
|
Gain on sale of assets |
— |
|
|
— |
|
|
(10,528 |
) |
|||
|
Interest and other financing costs, net |
27,835 |
|
|
35,041 |
|
|
147,868 |
|
|||
|
Income tax expense (benefit) |
65,543 |
|
|
(8,674 |
) |
|
155,111 |
|
|||
|
EBITDAX |
$ |
113,816 |
|
|
$ |
180,289 |
|
|
$ |
923,165 |
|
|
Adjusted Net Income (In thousands, except per share amounts, unaudited) |
|||||||
|
|
Three Months Ended |
||||||
|
|
|
||||||
|
|
2020 |
|
2019 |
||||
|
Net loss |
$ |
(182,767 |
) |
|
$ |
(52,906 |
) |
|
|
|
|
|
||||
|
Derivatives, net |
(136,038 |
) |
|
77,085 |
|
||
|
Cash settlements on commodity derivatives |
12,018 |
|
|
(7,289 |
) |
||
|
Facilities insurance modifications, net |
8,038 |
|
|
(20,021 |
) |
||
|
Impairment of long-lived assets |
150,820 |
|
|
— |
|
||
|
Restructuring and other |
18,023 |
|
|
187 |
|
||
|
Other, net |
3,091 |
|
|
(14 |
) |
||
|
Total selected items before tax |
55,952 |
|
|
49,948 |
|
||
|
|
|
|
|
||||
|
Income tax expense (benefit) on adjustments(1) |
34,464 |
|
|
(20,041 |
) |
||
|
Impact of valuation adjustments and |
26,001 |
|
|
— |
|
||
|
Adjusted net loss |
$ |
(66,350 |
) |
|
$ |
(22,999 |
) |
|
|
|
|
|
||||
|
Net loss per diluted share |
$ |
(0.45 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
||||
|
Derivatives, net |
(0.34 |
) |
|
0.19 |
|
||
|
Cash settlements on commodity derivatives |
0.03 |
|
|
(0.02 |
) |
||
|
Facilities insurance modifications, net |
0.02 |
|
|
(0.05 |
) |
||
|
Impairment of long-lived assets |
0.37 |
|
|
— |
|
||
|
Restructuring and other |
0.04 |
|
|
— |
|
||
|
Other, net |
0.01 |
|
|
— |
|
||
|
Total selected items before tax |
0.13 |
|
|
0.12 |
|
||
|
|
|
|
|
||||
|
Income tax expense (benefit) on adjustments(1) |
0.09 |
|
|
(0.05 |
) |
||
|
Impact of valuation adjustments and |
0.07 |
|
|
— |
|
||
|
Adjusted net loss per diluted share |
$ |
(0.16 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
||||
|
Weighted average number of diluted shares |
404,759 |
|
|
401,164 |
|
||
| ____________________ | |
|
(1) |
Income tax expense is calculated at the statutory rate in which such item(s) reside. Statutory rates for the |
|
Free Cash Flow (In thousands, unaudited) |
|||||||
|
|
Three Months Ended |
||||||
|
|
|
||||||
|
|
2020 |
|
2019 |
||||
|
Reconciliation of net cash provided by operating activities to free cash flow: |
|
|
|
||||
|
Net cash used in operating activities |
$ |
(16,963 |
) |
|
$ |
(17,347 |
) |
|
Net cash used in investing activities |
(107,523 |
) |
|
(79,448 |
) |
||
|
Other cash used in financing activities(1) |
(4,947 |
) |
|
(3,140 |
) |
||
|
Change in restricted cash |
594 |
|
|
3,990 |
|
||
|
Free cash flow (before dividends) |
$ |
(128,839 |
) |
|
$ |
(95,945 |
) |
| ____________________ | |
|
(1) |
Amounts consist of costs related to deferred financing costs and the purchase of treasury stock. |
|
Operational Summary (In thousands, except barrel and per barrel data, unaudited) |
|||||||
|
|
Three Months Ended |
||||||
|
|
|
||||||
|
|
2020 |
|
2019 |
||||
|
Net Volume Sold |
|
|
|
||||
|
Oil (MMBbl) |
3.450 |
|
|
4.690 |
|
||
|
Gas (MMcf) |
1.982 |
|
|
1.801 |
|
||
|
NGL (MMBbl) |
0.193 |
|
|
0.113 |
|
||
|
Total (MMBoe) |
3.973 |
|
|
5.103 |
|
||
|
Total (Boepd) |
43,659 |
|
|
56,077 |
|
||
|
|
|
|
|
||||
|
Revenue |
|
|
|
||||
|
Oil sales |
$ |
171,916 |
|
|
$ |
290,864 |
|
|
Gas sales |
3,719 |
|
|
3,662 |
|
||
|
NGL sales |
2,145 |
|
|
2,264 |
|
||
|
Total sales |
177,780 |
|
|
296,790 |
|
||
|
Cash settlements on commodity derivatives |
12,018 |
|
|
(7,289 |
) |
||
|
Realized revenue |
$ |
189,798 |
|
|
$ |
289,501 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
|
Oil and Gas Production Costs |
$ |
61,603 |
|
|
$ |
79,799 |
|
|
|
|
|
|
||||
|
Sales per Bbl/Mcf/Boe |
|
|
|
||||
|
Oil sales per Bbl |
$ |
49.83 |
|
|
$ |
62.02 |
|
|
Gas sales per Mcf |
1.88 |
|
|
2.03 |
|
||
|
NGL sales per Bbl |
11.11 |
|
|
20.13 |
|
||
|
Total sales per Boe |
44.74 |
|
|
58.16 |
|
||
|
Cash settlements on commodity derivatives per oil Bbl(1) |
3.48 |
|
|
(1.55 |
) |
||
|
Realized revenue per Boe(2) |
47.77 |
|
|
56.73 |
|
||
|
|
|
|
|
||||
|
Oil and gas production costs per Boe |
$ |
15.50 |
|
|
$ |
15.64 |
|
| ____________________ | |
|
(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. |
|
(2) |
Realized revenue includes revenue from Kosmos, |
|
|
|
|
Kosmos was underlifted by approximately 1,737 thousand barrels as of |
|
|
Hedging Summary
As of (Unaudited) |
|||||||||||||||||
|
|
|
|
|
|
|
Weighted Average Price per Bbl |
|||||||||||
|
|
|
Index |
|
MBbl |
|
Floor(2) |
|
Sold Put |
|
Ceiling |
|||||||
|
2020: |
|
|
|
|
|
|
|
|
|
|
|||||||
|
Restructured trades remaining |
|
Dated Brent |
|
1,167 |
|
|
$ |
58.65 |
|
|
$ |
49.82 |
|
|
$ |
80.18 |
|
|
Swaps with sold puts |
|
Dated Brent |
|
2,000 |
|
|
35.00 |
|
|
25.00 |
|
|
— |
|
|||
|
Swaps |
|
Dated Brent |
|
7,033 |
|
|
42.67 |
|
|
— |
|
|
— |
|
|||
|
Swaps |
|
Argus LLS |
|
4,000 |
|
|
29.98 |
|
|
— |
|
|
— |
|
|||
|
2021: |
|
|
|
|
|
|
|
|
|
|
|||||||
|
Swaps with sold puts |
|
Dated Brent |
|
6,000 |
|
|
$ |
53.52 |
|
|
$ |
41.77 |
|
|
$ |
— |
|
| ___________________ | |
|
(1) |
Please see the Company’s filed 10-K for full disclosure on hedging material. Includes hedging position as of |
|
(2) |
“Floor” represents floor price for collars or swaps and strike price for purchased puts. |
|
Note: Excludes 7.0 MMBbls of sold (short) calls with a strike price of |
|
2020 Guidance |
|||
|
|
Previous FY 2020 Guidance |
|
Updated FY 2020 Guidance |
|
|
|
|
|
|
Production(1) |
62,000 - 70,000 boe per day |
|
62,000 - 70,000 boe per day |
|
|
|
|
|
|
Opex |
|
|
|
|
|
|
|
|
|
DD&A |
|
|
|
|
|
|
|
|
|
G&A(2) |
|
|
|
|
|
|
|
|
|
Exploration Expense(3) |
|
|
|
|
|
|
|
|
|
Net Interest |
|
|
|
|
|
|
|
|
|
Tax |
|
|
|
|
|
|
|
|
|
Base Business Capex |
|
|
|
| ____________________ | |
|
Note: |
|
|
(1) |
2Q 2020 cargos forecast - |
|
(2) |
G&A - Approximately 60% cash. |
|
(3) |
Excludes dry hole expense of approximately |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200510005030/en/
Investor Relations
+44 (0) 203 954 2831
jbuckland@kosmosenergy.com
Media Relations
+1-214-445-9674
tgolembeski@kosmosenergy.com
Source: