Kosmos Energy announced today its financial and operating results for the third quarter of 2023. For the quarter, the Company generated a net income of $85 million, or $0.18 per diluted share. When adjusted for certain items that impact the comparability of results, the Company generated an adjusted net income(1) of $126 million, or $0.26 per diluted share for the third quarter of 2023.

THIRD QUARTER 2023 HIGHLIGHTS

• Net Production(2): ~68,200 barrels of oil equivalent per day (boepd), with sales of ~73,100 boepd
• Start up of the Jubilee South East development offshore Ghana
• Post quarter-end, Tiberius infrastructure-led exploration (ILX) oil discovery offshore U.S. Gulf of Mexico
• Post quarter-end, assumption of operatorship and a greater working interest at Yakaar-Teranga offshore Senegal, subject to customary government approvals
• Repayment of Gulf of Mexico Term Loan, reducing our cost of capital and simplifying our capital structure
• Revenues: $526 million, or $78.24 per boe (excluding the impact of derivative cash settlements)
• Production expense: $139 million, or $20.63 per boe
• Capital expenditures: $193 million

Commenting on the Company's third quarter 2023 performance, Chairman and Chief Executive Officer Andrew G. Inglis said: 
"Kosmos continues to create value for its stakeholders through the consistent delivery of its strategy to grow production, advance its advantaged oil and LNG projects, and add resource through infrastructure-led exploration.

"Production in the quarter increased by around 17% versus the second quarter following the successful startup of the Jubilee South East development, with three producers brought online taking gross field production up to around 100,000 barrels of oil per day, with continued growth expected.

"In addition, Kosmos advanced its two key development projects at Winterfell and Tortue Phase 1. When online, these projects together with Jubilee South East are expected to increase production by around 50% from the second half of 2022, generating the cash flow inflection we have been working towards. 

"Looking to options for future growth, Kosmos recently announced the Tiberius oil discovery in the U.S. Gulf of Mexico, as well as the assumption of operatorship of the Yakaar-Teranga gas fields offshore Senegal. These low cost, lower carbon oil and gas projects are expected to provide the next phase of growth for the company beyond 2024. We plan to balance the pace and working interest of these future projects to ensure we can manage our growth and generate material free cash flow."

FINANCIAL UPDATE

Kosmos exited the third 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 $0.6 billion. The Company generated net cash provided by operating activities of approximately $249 million and free cash flow(1) of approximately $54 million in the third quarter, in line with expectations.

During the quarter, Kosmos repaid the Gulf of Mexico term loan, simplifying the company's capital structure. The Company also successfully completed the semi-annual redetermination of the reserve-based lending facility and deferred the first amortization period, which results in no scheduled debt maturities until 2025 and beyond.

Net capital expenditure for the third quarter of 2023 was $193 million, in line with guidance.

OPERATIONAL UPDATE

Production
Total net production(2) in the third quarter of 2023 averaged approximately 68,200 boepd, a ~17% increase from the second quarter, in line with guidance. The Company exited the quarter in a net underlift position of approximately 0.5 million barrels, which is expected to partially reverse in the fourth quarter.

Ghana

Production in Ghana averaged approximately 43,600 boepd net in the third quarter of 2023. Kosmos lifted four cargos from Ghana during the quarter, in line with guidance.

At Jubilee, production averaged approximately 95,900 bopd gross during the quarter, ~32% higher compared to the previous quarter.

Three producer wells were brought online during the third quarter, taking gross field production up to around 100,000 bopd.

Post quarter-end, two water injection wells, which were delayed due to operational issues, were brought online. This delay coupled with higher than anticipated downtime of the water injection pumps within the quarter, resulted in a slower ramp-up in Jubilee production. This is expected to result in one Jubilee cargo lifting originally planned for Kosmos in the fourth quarter of 2023, being deferred into early 2024.

At TEN, production averaged approximately 15,100 bopd gross for the third quarter, in line with expectations, and lower quarter-on-quarter largely due to a planned two week shutdown.

The partnership has submitted a draft amended plan of development for a high-graded activity set at TEN and a combined gas sales agreement for Jubilee and TEN to the Government of Ghana for approval. An interim gas sales agreement for Jubilee associated gas has been extended through November 2023 at a price of $2.90/mmbtu while discussions are ongoing on a longer-term agreement.

U.S. Gulf of Mexico

Production in the U.S. Gulf of Mexico averaged approximately 15,700 boepd net (~82% oil) during the third quarter, above guidance due to lower storm activity than anticipated during the period.

The Winterfell development continues to make good progress. Drilling of the wells commenced in August and the first well has now been successfully completed. Partners are targeting first oil around the end of the first quarter of 2024.

As announced in October, the Tiberius ILX well in Keathley Canyon, block 964 encountered approximately 250 feet (~75 meters) of net oil pay in the primary Wilcox target. The Tiberius well is located in approximately 7,500 feet (2,300 meters) of water and was drilled to a total vertical depth of approximately 25,800 feet (7,800 meters).

Kosmos is undertaking rock and fluid analysis to confirm the production potential of the reservoir, with results expected around year-end. Kosmos is also working with partners on subsea development options. The discovery is located approximately 6 miles southeast of the Occidental-operated Lucius SPAR production facility, enabling a short tie-back in the event of a development.

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. The Odd Job field saw some unplanned downtime in October and is expected back online in November.

At Kodiak, workover plans have been developed for remediation and are now expected to commence around the middle of 2024 given the better than forecast performance of the well this year.

Equatorial Guinea

Production in Equatorial Guinea averaged approximately 25,400 bopd gross and 8,900 bopd net in the third quarter of 2023. Kosmos lifted one cargo from Equatorial Guinea during the quarter, in line with guidance.

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, with all three wells expected online by the second quarter of 2024.

Deep, an ILX opportunity 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 workover and infill drilling campaign.

Mauritania & Senegal

On Greater Tortue Ahmeyim, the following milestones have been achieved:

• Drilling: Earlier in the year, the operator, successfully drilled and completed all four wells with expected production capacity significantly higher than what is required for first gas.
• Hub Terminal: Construction work is complete, and handover to operations was completed in August 2023.
• Subsea: Significant progress has been made on the revised plan to complete installation of the infield flowlines and subsea structures due to the previously announced delay in the subsea workstream. Work on the revised plan is expected to commence later this quarter with new contractors.
• FLNG: Construction and mechanical completion activities are finishing and pre-commissioning work is underway. The vessel is expected to sail away later this quarter arriving on location early next year when hookup work is expected to commence.
• FPSO: Currently en route to Mauritania/Senegal and is now expected to arrive on location in the first quarter of 2024.

The critical path to first gas on Phase 1 of the Greater Tortue Ahmeyim project is now through the arrival, hookup and commissioning of the FPSO. The delivery of first gas in the first quarter of 2024, as signaled by BP (the operator) in its third quarter results last week, depends on the execution of this workstream, which has the potential to slip into the second quarter of 2024.

On Yakaar-Teranga, Kosmos announced today that it had assumed operatorship and increased its interest in the field to 90% (from 30%), subject to customary government approvals. Kosmos is working closely with Senegal's national oil company (PETROSEN) and the Government of Senegal on an innovative development concept that prioritizes cost-competitive gas to the rapidly growing domestic market, combined with an offshore liquefied natural gas facility targeting exports into international LNG markets. The project supports the country's 'Plan Sénégal Emergent' objective of providing affordable, abundant, and cleaner energy.

(1) A 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 U.S. Gulf of Mexico, this means those volumes net to Kosmos' working interest and net of royalty.

KeyFacts Energy: Kosmos Energy US country profile

If you would like a complimentary 7-day trial to our Energy Country Review resource, free access to our daily news alert service, details of marketing opportunities or if you would like to contribute to KeyFacts Energy, click here. We can provide access, sign you up, send full details or set up a quick online meeting to review our services in more detail.