Kosmos Energy Ltd. announced its financial and operating results for the third quarter of 2021. For the quarter, the Company generated a net loss of $29 million, or $0.07 per diluted share. When adjusted for certain items that impact the comparability of results, the Company generated an adjusted net loss(1) of $43 million, or $0.11 per diluted share for the third quarter of 2021.
Commenting on the Company’s third quarter 2021 performance and subsequent events, Chairman and Chief Executive Officer Andrew G. Inglis said: “With the recently executed transactions, Kosmos has significantly enhanced the outlook for the Company. The Oxy Ghana transaction accelerates our strategic delivery with increased near-term production and cash flow driving down leverage. The cash flow from the acquired assets also supports our portfolio transition to LNG at a time of increasing global gas demand.
"Operationally, Kosmos delivered in line with expectations for the quarter, taking account of the impact of Hurricane Ida in the Gulf of Mexico. At Tortue, the project continued to make good progress, and we now have a clear funding path to first gas following the successful completion of the FPSO sale and leaseback announced in the third quarter. This transaction materially reduces our outstanding capital to first gas with the remainder expected to be funded through organic free cash flow.
"Looking forward, growing production and increased exposure to current oil prices as 2021 hedges roll off give us visibility to materially higher EBITDAX and cash flow in 2022, with leverage expected to continue to fall. Over the next year, we also expect to substantially de-risk the delivery of Tortue Phase 1 while advancing Phase 2 to maximize the value of our significant gas resources in Mauritania and Senegal. With the right portfolio for the future and a strengthened balance sheet, we are excited about the outlook for Kosmos.”
THIRD QUARTER 2021 HIGHLIGHTS
- Completed Greater Tortue Ahmeyim (GTA) floating production, storage and offloading vessel (FPSO) transaction, reducing GTA project capital expenditure to first gas
- Net Production(2): 49,300 barrels of oil equivalent per day (boepd) with sales of 32,700 boepd, resulting in a material net underlift position of approximately 1.5 million barrels of oil (excluding impact of Ghana acquisition)
- Revenues: $199 million, or $66.10 per boe (excluding the impact of derivative cash settlements)
- Production expense: $50 million, or $16.72 per boe
- General and administrative expenses: $22 million, $14 million cash expense and $8 million non-cash
- Capital expenditures:
$72 million Base Business
$14 million Mauritania and Senegal
- Post quarter end, announced and completed the acquisition of additional interests in Ghana from Occidental Petroleum ("Oxy") for approximately $550 million
In August 2021, Kosmos successfully completed the GTA FPSO transaction, a major step in the funding path for the project. The transaction significantly reduces the outstanding capital expenditures net to Kosmos with any remaining cash calls for the project in 2021 covered by the proceeds. The remaining benefits of the transaction reduce project cash calls in 2022.
The base business net capital expenditure for the third quarter of 2021 was approximately $72 million, in-line with Company guidance. Net capital expenditure related to Mauritania and Senegal in the third quarter was $14 million.
Kosmos exited the third quarter of 2021 with $2.3 billion of net debt(1) and available liquidity of approximately $0.6 billion. The increase in net debt in the quarter was primarily driven by the low sales volumes in the quarter, in line with previous guidance, as well as a working capital outflow largely due to the material underlift position and cash calls relating to the GTA project prior to the conclusion of the FPSO transaction.
Post quarter end, Kosmos announced the acquisition of additional interests in the Jubilee and TEN fields in Ghana from Oxy for approximately $550 million. Consideration due to Oxy at completion was approximately $460 million after taking into account closing adjustments.
To fund the transaction, Kosmos successfully announced and closed an equity offering of approximately $140 million and a $400 million senior notes offering.
Total net production(2) in the third quarter of 2021 averaged approximately 49,300 boepd. Pro forma net production including the additional interest acquired in Ghana would have been approximately 65,800 boepd.
Production in Ghana averaged approximately 22,700 barrels of oil per day (bopd) net in the third quarter of 2021. As forecast, Kosmos lifted one cargo from Ghana during the third quarter.
At Jubilee, production averaged approximately 77,800 bopd gross during the quarter. At TEN, production averaged approximately 30,400 bopd gross for the third quarter.
The first Jubilee producer well (J-56P) came online early in the third quarter, adding around 10,000 bopd gross with Jubilee currently producing above 80,000 bopd. The Jubilee injector well (J-55W) came online around the end of the third quarter and is already supporting increased production levels. The second Jubilee producer well is expected to be drilled in the fourth quarter, with gross Jubilee production expected to rise to over 85,000 bopd gross once this well is online around the end of the year.
At TEN, a gas injector well came online early in the fourth quarter and is expected to add pressure support to the Ntomme field going forwards.
High reliability of the Ghana production facilities continues, with uptime of the Jubilee and TEN FPSOs averaging around 98% to the end of the third quarter. Consistently high levels of water injection (>200,000 barrels/day) and gas offtake from the Government of Ghana (>110 mmscf/day) over the same period are helping to optimize reservoir performance at Jubilee.
U.S. Gulf of Mexico
Production in the U.S. Gulf of Mexico averaged approximately 17,000 boepd net (81% oil) during the third quarter, including the previously announced impact of Hurricane Ida, which shut in production across the Gulf of Mexico for several weeks. The net impact for the quarter was around 4,000 boepd. Gulf of Mexico production was restored to around pre-hurricane levels in September.
In September, Kosmos and its partners started drilling an appraisal well on the Winterfell discovery. The appraisal well will evaluate the adjacent fault block to the northwest of the original discovery, which has the same seismic signature as Winterfell, with an exploration tail into a deeper horizon. The Winterfell discovery is located within tie back distance to several existing and planned host facilities.
Production in Equatorial Guinea averaged approximately 29,900 bopd gross and 9,600 bopd net in the third quarter of 2021. As forecast, Kosmos lifted 0.5 cargos from Equatorial Guinea during the quarter.
The first of three planned infill wells in the Okume Complex was completed in August 2021 with hookup currently in progress. In the third quarter of 2021, the operator commenced drilling an additional well, which is expected to be online in the fourth quarter of 2021. The third planned well is now expected to be deferred, as the rig is being utilized to plug and abandon an existing well in Equatorial Guinea and is required to mobilize for its next contract before it can complete the drilling of the last well.
Mauritania & Senegal
The Greater Tortue Ahmeyim liquified natural gas (LNG) project has made steady progress year-to-date with the following milestones achieved in the third quarter and post quarter-end.
FLNG: Mechanical completion activities have commenced with instrument loop checks
FPSO: Topsides integration and hull and living quarters mechanical completion activities have commenced
Breakwater: Commenced fabrication of the 20th caisson (of 21) with 12 installed
Subsea: Nouakchott and Dakar marine supply bases established
The Company is currently working to re-finance the National Oil Company loans.