Kosmos Energy Announces Second Quarter 2023 Results
Kosmos Energy Ltd. (“Kosmos” or the “Company”) (NYSE/LSE: KOS) announced today its financial and operating results for the second quarter of 2023. For the quarter, the Company generated a net income of $23 million, or $0.05 per diluted share. When adjusted for certain items that impact the comparability of results, the Company generated an adjusted net income(1) of $27 million, or $0.06 per diluted share for the second quarter of 2023.
SECOND QUARTER 2023 HIGHLIGHTS
Net Production(2): ~58,000 barrels of oil equivalent per day (boepd), with sales of ~45,200 boepd
Revenues: $273 million, or $66.38 per boe (excluding the impact of derivative cash settlements)
Production expense: $64 million, or $15.45 per boe
Capital expenditures: $170 million
Post-quarter end, start-up of the Jubilee South East development with the field now producing ~100,000 barrels of oil per day gross
Commenting on the Company’s second quarter 2023 performance, Chairman and Chief Executive Officer Andrew G. Inglis said: “Kosmos continued to deliver on its strategy with the commencement of production from the Jubilee South East development in July. The start up of the first of three key development projects for Kosmos is an important step to realizing the free cash flow inflection point we expect as production rises and capital spending starts to fall. With the additional production from Jubilee year-to-date, we are currently around half way to achieving our 50% production growth target from 2022 levels.
“Further production growth is expected later in the year as additional Jubilee wells come online. Our other key projects, Greater Tortue Ahmeyim Phase 1 in Mauritania and Senegal, and Winterfell in the U.S. Gulf of Mexico continue to progress with first gas at Tortue expected in the first quarter of 2024 and first oil at Winterfell expected around the end of the first quarter of 2024. We are approaching an exciting time for the business as we begin to benefit from the delivery of our multi-year investment program.”
Net capital expenditure for the second quarter of 2023 was $170 million, below guidance primarily due to lower accruals related to the delay in the subsea workscope on Tortue Phase 1.
Realized pricing for the quarter of $65.40 per boe, including derivative cash settlements, was lower compared to the first quarter due to lower commodity prices during the period.
Kosmos exited the second quarter of 2023 with approximately $2.4 billion of total long-term debt and approximately $2.3 billion of net debt(1) and available liquidity of approximately $0.7 billion. The Company generated net cash provided by operating activities of approximately $18 million and free cash flow(1) of approximately $(175) million in the second quarter, in line with expectations, largely as a result of the underlift position at the end of the second quarter.
Total net production(2) in the second quarter of 2023 averaged approximately 58,000 boepd, in line with company guidance, with current production around 25% higher post the startup of Jubilee South East. The Company exited the quarter in a net material underlift position of approximately 1 million barrels, which is expected to reverse in the second half of the year.
Production in Ghana averaged approximately 33,700 boepd net in the second quarter of 2023. Kosmos lifted two cargos from Ghana during the quarter, in line with guidance.
At Jubilee, production averaged approximately 72,700 bopd gross during the quarter, in line with the previous quarter.
Post the end of the second quarter, the Jubilee South East (JSE) development commenced production with two wells coming online, approximately a month behind schedule. The two new JSE wells took gross Jubilee production to around 100,000 bopd. An additional Jubilee producer well and two water injector wells are expected online later in the year, which should further enhance production levels towards the facility limit.
At TEN, production averaged approximately 19,700 bopd gross for the second quarter, in line with expectations.
A draft amended plan of development for a high-graded activity set at TEN and a combined gas sales agreement for Jubilee and TEN are currently being progressed with the Government of Ghana for approval. To allow the Government of Ghana time to secure the necessary approvals, an interim gas sales agreement for Jubilee associated gas has been signed through September 2023 at a price of $2.90/mmbtu.
U.S. Gulf of Mexico
Production in the U.S. Gulf of Mexico averaged approximately 15,900 boepd net (~81% oil) during the second quarter, in line with guidance.
The Winterfell project continues to make good progress with drilling of the first phase of the development wells expected to start in the third quarter. Partners are targeting first oil around the end of the first quarter of 2024.
Tiberius, an infrastructure-led exploration (ILX) well, targeting a four-way structural trap with a pre-drill gross resource estimate of ~135 million barrels of oil, commenced drilling early in the third quarter with initial results expected late in the quarter.
Production from the Kodiak ST-3 well has improved over the quarter and, as a result, the timing for the well workover is being optimized to include a third producing zone and is now expected to complete mid-2024.
The Odd Job subsea pump project, intended to sustain long-term production from the field, continues to progress and remains on track to be in service by mid-2024.
Production in Equatorial Guinea averaged approximately 24,000 bopd gross and 8,400 bopd net in the second quarter of 2023. Kosmos lifted 0.5 cargos from Equatorial Guinea during the quarter, in line with guidance. In July, the partnership lifted the 500th cargo from the FPSO, a major milestone for the fields.
The infill drilling campaign is scheduled to commence in the fourth quarter of 2023 following a two well workover program utilizing the drilling rig. The first of three infill wells is expected to be online around the end of the first quarter 2024.
The Akeng Deep ILX opportunity, a well targeting an estimated pre-drill gross resource of ~180 million barrels of oil in the deeper Albian trend, is expected to spud next year following the completion of the infill drilling campaign.
Mauritania & Senegal
As communicated with the Company’s first quarter 2023 results, critical path to first gas on Phase 1 of the Greater Tortue project is through the completion of the subsea work scope. As a result of a delay in these activities, first gas for the project is now targeted in the first quarter of 2024, with the delivery of the other work scopes being optimized for the updated project schedule. The following milestones were achieved during the period:
FLNG: Construction and mechanical completion activities are finishing and pre-commissioning work is underway. Sailaway is targeted around the end of the third quarter of 2023 with the vessel expected to arrive on location around the end of 2023 when hookup work is expected to commence.
FPSO: In January 2023, the FPSO vessel departed China making a planned stopover in Singapore to install the fair leads. Arrival on location offshore Mauritania/Senegal is expected in the fourth quarter of 2023 to align with the revised schedule for the subsea work scope.
Hub Terminal: Construction work is complete, and activity is focused on progressing handover to operations in the third quarter of 2023.
Subsea: Due to a delay in the subsea workstream, the operator has put in place a plan to finish installation of the infield flowlines and subsea structures in the first quarter of 2024.
Drilling: Successfully drilled and completed all four wells with expected production capacity significantly higher than what is required for first gas.
Source: Kosmos Energy