Kosmos Energy Announces Second Quarter 2017 Results
“Kosmos is truly differentiating itself in 2017. In this
lower-for-longer price environment, we are generating significant free
cash flow and continuing to strengthen our balance sheet. This solid
financial position enables us to execute our planned work program with
the potential to drive significant growth,” said
Second quarter 2017 oil revenues were
Other income, net during the quarter was
Production expense for the second quarter was
Exploration expenses totaled
Depletion and depreciation expense for the quarter was
General and administrative expenses were
Second quarter results included a mark-to-market gain of
Total capital expenditures in the second quarter were
Kosmos exited the second quarter of 2017 with
Operational Update
During the second quarter of 2017, gross sales volumes from
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
The financial impact of lower Jubilee production as well as the
additional expenditures associated with the damage to the turret bearing
is being mitigated through a combination of the comprehensive Hull and
Machinery (H&M) insurance procured by the operator on behalf of the
partnership, and the corporate Loss of Production Income (LOPI)
insurance procured by Kosmos. LOPI coverage for this incident concluded
in May and all submitted claims have been approved with final cash
proceeds expected in early August. Since inception, Kosmos has claims
approved of
Work is progressing with the Government of
Production from TEN in the second quarter averaged approximately 45,000
bopd and is on track to achieve or exceed the operator’s 2017 guidance
of 50,000 bopd. During periods throughout the quarter, higher production
levels in excess of 50,000 bopd have been achieved and the partnership
is continuing to optimize field production levels. During performance
trials conducted in June the FPSO operated in excess of its design
capacity of 80,000 bopd with short term tests of up to 100,000 bopd
being achieved. Currently no new wells can be drilled until after the
In May, Kosmos announced a major gas discovery offshore
After completion of operations on the Yakaar-1 well, the Atwood Achiever mobilized to the Tortue-1 well to conduct a drill stem test (DST) on the Tortue discovery, which is expected to provide key information to support the Front End Engineering Design (FEED) in the second half of 2017, with Final Investment Decision (FID) in 2018 and first gas in 2021.
In June, Kosmos entered into a farm-in agreement to acquire a 15%
non-operated participating interest in Block C18 offshore
Corporate
In
During the quarter Kosmos and BP formed the
2017 Capital Program
Kosmos has reduced its net capex budget for 2017 to
(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 second quarter
2017 financial and operating results today at
About
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
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.
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Kosmos Energy Ltd.
Consolidated Statements of Operations (In thousands, except per share amounts, unaudited) |
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Three Months Ended |
Six Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Revenues and other income: | ||||||||||||||||||||
| Oil and gas revenue | $ | 136,363 | $ | 45,506 | $ | 239,795 | $ | 107,631 | ||||||||||||
| Other income, net | 10,161 | 170 | 58,695 | 178 | ||||||||||||||||
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Total revenues and other income |
146,524 | 45,676 | 298,490 | 107,809 | ||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||
| Oil and gas production | 21,604 | 32,681 | 41,490 | 62,073 | ||||||||||||||||
| Facilities insurance modifications, net | (2 | ) | — | 2,572 | — | |||||||||||||||
| Exploration expenses | 19,982 | 36,402 | 125,696 | 60,260 | ||||||||||||||||
| General and administrative | 14,739 | 19,838 | 30,526 | 37,758 | ||||||||||||||||
| Depletion and depreciation | 72,441 | 16,927 | 107,419 | 48,193 | ||||||||||||||||
| Interest and other financing costs, net | 19,465 | 8,878 | 36,251 | 19,202 | ||||||||||||||||
| Derivatives, net | (25,411 | ) | 54,988 | (63,268 | ) | 50,643 | ||||||||||||||
| Other expenses, net | 8,434 | (170 | ) | 9,196 | 14,563 | |||||||||||||||
| Total costs and expenses | 131,252 | 169,544 | 289,882 | 292,692 | ||||||||||||||||
| Income (loss) before income taxes | 15,272 | (123,868 | ) | 8,608 | (184,883 | ) | ||||||||||||||
| Income tax expense (benefit) | 23,739 | (15,544 | ) | 45,916 | (17,566 | ) | ||||||||||||||
| Net loss | $ | (8,467 | ) | $ | (108,324 | ) | $ | (37,308 | ) | $ | (167,317 | ) | ||||||||
| Net loss per share: | ||||||||||||||||||||
| Basic | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.10 | ) | $ | (0.43 | ) | ||||||||
| Diluted | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.10 | ) | $ | (0.43 | ) | ||||||||
| Weighted average number of shares used to compute net loss per share: | ||||||||||||||||||||
| Basic | 387,952 | 384,918 | 387,634 | 384,676 | ||||||||||||||||
| Diluted | 387,952 | 384,918 | 387,634 | 384,676 | ||||||||||||||||
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Kosmos Energy Ltd.
Condensed Consolidated Balance Sheets (In thousands, unaudited) |
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June 30, 2017 |
December 31, 2016 |
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| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 162,474 | $ | 194,057 | ||||
| Receivables, net | 185,822 | 143,337 | ||||||
| Other current assets | 165,179 | 137,793 | ||||||
| Total current assets | 513,475 | 475,187 | ||||||
| Property and equipment, net | 2,297,425 | 2,708,892 | ||||||
| Other non-current assets | 265,459 | 157,386 | ||||||
| Total assets | $ | 3,076,359 | $ | 3,341,465 | ||||
| Liabilities and shareholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 89,147 | $ | 220,627 | ||||
| Accrued liabilities | 190,261 | 129,706 | ||||||
| Other current liabilities | 2,932 | 19,692 | ||||||
| Total current liabilities | 282,340 | 370,025 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt, net | 1,127,503 | 1,321,874 | ||||||
| Deferred tax liabilities | 517,970 | 482,221 | ||||||
| Other non-current liabilities | 85,693 | 86,146 | ||||||
| Total long-term liabilities | 1,731,166 | 1,890,241 | ||||||
| Total shareholders’ equity | 1,062,853 | 1,081,199 | ||||||
| Total liabilities and shareholders’ equity | $ | 3,076,359 | $ | 3,341,465 | ||||
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Kosmos Energy Ltd.
Condensed Consolidated Statements of Cash Flow (In thousands, unaudited) |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Operating activities: | ||||||||||||||||||||
| Net loss | $ | (8,467 | ) | $ | (108,324 | ) | $ | (37,308 | ) | $ | (167,317 | ) | ||||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||||||||
| Depletion, depreciation and amortization | 74,992 | 19,478 | 112,521 | 53,295 | ||||||||||||||||
| Deferred income taxes | 18,884 | (17,978 | ) | 41,017 | (19,929 | ) | ||||||||||||||
| Unsuccessful well costs | 3,517 | 78 | 3,605 | 2,300 | ||||||||||||||||
| Change in fair value of derivatives | (20,767 | ) | 57,552 | (58,944 | ) | 55,175 | ||||||||||||||
| Cash settlements on derivatives, net(1) | 8,264 | 42,914 | 19,417 | 99,815 | ||||||||||||||||
| Equity-based compensation | 10,499 | 10,527 | 20,329 | 21,162 | ||||||||||||||||
| Loss on equity method investment | 6,426 | — | 6,426 | — | ||||||||||||||||
| Other | 1,893 | 100 | 2,514 | 15,069 | ||||||||||||||||
| Changes in assets and liabilities: | ||||||||||||||||||||
| Net changes in working capital | (82,373 | ) | (44,042 | ) | (127,091 | ) | (83,648 | ) | ||||||||||||
| Net cash provided by (used in) operating activities | 12,868 | (39,695 | ) | (17,514 | ) | (24,078 | ) | |||||||||||||
| Investing activities: | ||||||||||||||||||||
| Oil and gas assets | (10,995 | ) | (191,133 | ) | (42,805 | ) | (417,704 | ) | ||||||||||||
| Other property | (1,183 | ) | (554 | ) | (1,454 | ) | (601 | ) | ||||||||||||
| Proceeds from sale of assets | 18,149 | 196 | 222,068 | 196 | ||||||||||||||||
| Net cash provided by (used in) investing activities | 5,971 | (191,491 | ) | 177,809 | (418,109 | ) | ||||||||||||||
| Financing activities: | ||||||||||||||||||||
| Borrowings on long-term debt | — | 175,000 | — | 325,000 | ||||||||||||||||
| Payments on long-term debt | (50,000 | ) | — | (200,000 | ) | — | ||||||||||||||
| Purchase of treasury stock | (830 | ) | (724 | ) | (1,945 | ) | (1,798 | ) | ||||||||||||
| Net cash provided by (used in) financing activities | (50,830 | ) | 174,276 | (201,945 | ) | 323,202 | ||||||||||||||
| Net decrease in cash, cash equivalents and restricted cash | (31,991 | ) | (56,910 | ) | (41,650 | ) | (118,985 | ) | ||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 263,536 | 248,787 | 273,195 | 310,862 | ||||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 231,545 | $ | 191,877 | $ | 231,545 | $ | 191,877 | ||||||||||||
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_______________ |
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| (1) |
Cash settlements on commodity hedges were $12.9 million and $45.1 million for the three months ended June 30, 2017 and 2016, respectively, and $24.3 million and $101.8 million for the six months ended June 30, 2017 and 2016. |
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Kosmos Energy Ltd.
EBITDAX (In thousands, unaudited) |
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Twelve Months Ended June 30, |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | 2017 | |||||||||||||||||||||
| Net loss | $ | (8,467 | ) | $ | (108,324 | ) | $ | (37,308 | ) | $ | (167,317 | ) | $ | (153,771 | ) | ||||||||||
| Exploration expenses | 19,982 | 36,402 | 125,696 | 60,260 | 267,716 | ||||||||||||||||||||
| Facilities insurance modifications, net | (2 | ) | — | 2,572 | — | 17,533 | |||||||||||||||||||
| Depletion and depreciation | 72,441 | 16,927 | 107,419 | 48,193 | 199,630 | ||||||||||||||||||||
| Equity-based compensation | 10,499 | 10,527 | 20,329 | 21,162 | 39,251 | ||||||||||||||||||||
| Derivatives, net | (25,411 | ) | 54,988 | (63,268 | ) | 50,643 | (65,890 | ) | |||||||||||||||||
| Cash settlements on commodity derivatives | 12,928 | 45,136 | 24,348 | 101,766 | 110,532 | ||||||||||||||||||||
| Inventory impairment and other | 545 | 14,746 | 84 | 14,746 | (3,242 | ) | |||||||||||||||||||
| Disputed charges and related costs | 1,209 | — | 2,439 | — | 13,738 | ||||||||||||||||||||
| Loss on equity method investment | 6,426 | — | 6,426 | — | 6,426 | ||||||||||||||||||||
| Interest and other financing costs, net | 19,465 | 8,878 | 36,251 | 19,202 | 61,196 | ||||||||||||||||||||
| Income tax expense (benefit) | 23,739 | (15,544 | ) | 45,916 | (17,566 | ) | 52,698 | ||||||||||||||||||
| EBITDAX | $ | 133,354 | $ | 63,736 | $ | 270,904 | $ | 131,089 | $ | 545,817 | |||||||||||||||
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Adjusted Net Income (In thousands, except per share amounts, unaudited) |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Net loss | $ | (8,467 | ) | $ | (108,324 | ) | $ | (37,308 | ) | $ | (167,317 | ) | ||||||||
| Derivatives, net | (25,411 | ) | 54,988 | (63,268 | ) | 50,643 | ||||||||||||||
| Cash settlements on commodity derivatives | 12,928 | 45,136 | 24,348 | 101,766 | ||||||||||||||||
| Facilities insurance modifications, net | (2 | ) | — | 2,572 | — | |||||||||||||||
| Inventory impairment and other | 545 | (702 | ) | 84 | 14,044 | |||||||||||||||
| Disputed charges and related costs | 1,209 | — | 2,439 | — | ||||||||||||||||
| Loss on equity method investment | 6,426 | — | 6,426 | — | ||||||||||||||||
| Total selected items before tax | (4,305 | ) | 99,422 | (27,399 | ) | 166,453 | ||||||||||||||
| Income tax expense on adjustments(1) | 4,369 | (34,858 | ) | 13,622 | (57,447 | ) | ||||||||||||||
| Adjusted net loss | $ | (8,403 | ) | $ | (43,760 | ) | $ | (51,085 | ) | $ | (58,311 | ) | ||||||||
| Net loss per diluted share | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.10 | ) | $ | (0.43 | ) | ||||||||
| Derivatives, net | (0.06 | ) | 0.14 | (0.16 | ) | 0.13 | ||||||||||||||
| Cash settlements on commodity derivatives | 0.03 | 0.12 | 0.06 | 0.26 | ||||||||||||||||
| Facilities insurance modifications, net | — | — | — | — | ||||||||||||||||
| Inventory impairment and other | — | — | — | 0.04 | ||||||||||||||||
| Disputed charges and related costs | — | — | 0.01 | — | ||||||||||||||||
| Loss on equity method investment | 0.02 | — | 0.02 | — | ||||||||||||||||
| Total selected items before tax | (0.01 | ) | 0.26 | (0.07 | ) | 0.43 | ||||||||||||||
| Income tax expense on adjustments(1) | 0.01 | (0.09 | ) | 0.04 | (0.15 | ) | ||||||||||||||
| Income tax expense related to tax shortfall associated with IPO equity awards | — | — | — | — | ||||||||||||||||
| Adjusted net loss per diluted share | $ | (0.02 | ) | $ | (0.11 | ) | $ | (0.13 | ) | $ | (0.15 | ) | ||||||||
| Weighted average number of diluted shares | 387,952 | 384,918 | 387,634 | 384,676 | ||||||||||||||||
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| (1) | Income tax expense is calculated at the statutory rate in which such item(s) reside. Statutory rate for Ghana is 35%. | ||
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Oil Revenue Summary (In thousands, except barrel and per barrel data, unaudited) |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net Oil Volume Sold (MMBbls) | 2.915 | 0.948 | 4.891 | 2.844 | ||||||||||||
| Oil revenue | $ | 136,363 | $ | 45,506 | $ | 239,795 | $ | 107,631 | ||||||||
| Cash settlements on commodity derivatives | 12,928 | 45,136 | 24,348 | 101,766 | ||||||||||||
| Realized oil revenue | $ | 149,291 | $ | 90,642 | $ | 264,143 | $ | 209,397 | ||||||||
| Per Barrel: | ||||||||||||||||
| Oil revenue | $ | 46.78 | $ | 48.00 | $ | 49.03 | $ | 37.84 | ||||||||
| Cash settlements on commodity derivatives | 4.43 | 47.61 | 4.98 | 35.78 | ||||||||||||
| Realized oil revenue | $ | 51.21 | $ | 95.61 | $ | 54.01 | $ | 73.62 | ||||||||
| Underlifted by approximately 380 thousand barrels as of June 30, 2017. |
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Hedging Summary
As of June 30, 2017(1) (Unaudited) |
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| Volume | Floor(2) | Short Put | Ceiling | Long Call | |||||||||||||||
| (MMBbls) | |||||||||||||||||||
| 2017 : | |||||||||||||||||||
| Swaps with puts/calls | 1.006 | $ | 72.50 | $ | 55.00 | $ | — | $ | 90.00 | ||||||||||
| Swaps with puts | 1.006 | $ | 64.95 | $ | 50.00 | $ | — | $ | — | ||||||||||
| Three-way collars | 2.012 | $ | 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 | ||||||||||
| 2019 : | |||||||||||||||||||
| Three-way collars | 3.000 | $ | 50.00 | $ | 40.00 | $ | 61.67 | $ | — | ||||||||||
| (1) | Please see the Company’s filed 10-Q for full disclosure on hedging material. Includes hedging position as of June 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 1.0 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. | |||
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Source:
Kosmos Energy Ltd.
Investor Relations
Neal Shah,
+1-214-445-9628
nshah@kosmosenergy.com
or
Rhys
Williams, +1-214-445-9693
rwilliams@kosmosenergy.com
or
Media
Relations
Thomas Golembeski, +1-214-445-9674
tgolembeski@kosmosenergy.com