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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
August 5, 2019

KOSMOS ENERGY LTD.
(Exact Name of Registrant as Specified in its Charter)

 
 
 
 
 
Delaware
 
001-35167
 
98-0686001
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
 
 
8176 Park Lane
Dallas, Texas
 
75231
(Address of Principal Executive Offices)
 
(Zip Code)
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered:
Common Stock $0.01 par value
 
KOS
 
New York Stock Exchange
 
 
 
 
London Stock Exchange

Registrant’s telephone number, including area code: +1 214 445 9600

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 



Item 2.02    Results of Operations and Financial Condition.

On August 5, 2019, Kosmos Energy Ltd. (the “Company”) issued a news release announcing results for the fiscal quarter ended June 30, 2019. A copy of the news release issued by the Company is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Form 8-K and Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section.

Item 7.01 Regulation FD Disclosure.

On August 5, 2019, the Company issued a news release announcing results for the fiscal quarter ended June 30, 2019. A copy of the news release issued by the Company is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Form 8-K and Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section.

Item 9.01 Financial Statements and Exhibits.

 
 
 
(d)
Exhibits.
The following exhibit is furnished as part of this current report on Form 8-K:
 
 
 
 
99.1




2



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: August 5, 2019
 
 
KOSMOS ENERGY LTD.
 
 
 
 
 
 
 
 
 
By:
/s/ Thomas P. Chambers
 
 
 
Thomas P. Chambers
 
 
 
Senior Vice President and Chief Financial Officer



3



INDEX TO EXHIBITS

Exhibit No.
 
Description
99.1
 
 
 
 
 
 
 



4
Exhibit
Exhibit 99.1

https://cdn.kscope.io/4eeb738d8b324e549533331afcc9a467-kos_logoa06.jpg
NEWS RELEASE
 

KOSMOS ENERGY ANNOUNCES SECOND QUARTER 2019 RESULTS

DALLAS--(BUSINESS WIRE)—August 5, 2019-- Kosmos Energy Ltd. (“Kosmos”) (NYSE: KOS) announced today the financial and operating results for the second quarter of 2019. For the quarter, the Company generated net income of $17 million, or $0.04 per diluted share. When adjusted for certain items that impact the comparability of results, the Company generated adjusted net income(1) of $22 million or $0.05 per diluted share for the second quarter of 2019.

"Kosmos has continued to make good progress in the second quarter with record quarterly production and strong free cash flow,” said Andrew G. Inglis, chairman and chief executive officer. “At current oil prices we are forecasting to exceed the 2019 free cash flow we set out at our capital markets day. Kosmos has an active second half of the year with multiple catalysts across the portfolio including five exploration wells in Mauritania, Equatorial Guinea and the Gulf of Mexico, and the planned sell down of our position in Mauritania and Senegal which remains on track.”

It must be noted that beginning with the first quarter 2019, the results include the impact of proportionately consolidating the Equatorial Guinea results. Prior quarters exclude this impact and only include the minority interest gain or loss in the bottom line. In addition, the prior year quarter does not include the Gulf of Mexico acquisition, which did not close until the end of the third quarter of 2018.

SECOND QUARTER 2019 HIGHLIGHTS

•
Net cash provided by operating activities - $240 million; free cash flow1 (non-GAAP) - $136 million

•
Sales - 6.3 million barrels of oil equivalent (boe)

•
Revenues - $396 million

•
Realized oil and gas revenues, excluding the impact of hedging program - $63.18 per boe.

•
Production expense - $91 million, or $14.52 per boe

•
General and administrative expenses - $28 million, $19 million cash expense and $9 million non-cash equity based compensation expense

•
Depletion and depreciation expense - $151 million, or $24.16 per boe

•
Exploration expenses - $30 million

•
Capital expenditures - $101 million



At quarter end, the Company was in a net underlift position of approximately 1.0 million barrels of oil.

Second quarter results included a mark-to-market gain of $14 million related to the Company’s oil derivative contracts. As of the quarter end and including recently executed hedges, Kosmos has approximately 14.5 million barrels of oil hedged covering 2019 through 2020 including Brent, WTI, and LLS based hedges.

Kosmos exited the second quarter of 2019 with approximately $652 million of liquidity, total debt of $2.18 billion, and $1.99 billion of net debt.

OPERATIONAL UPDATE

Total net production was a record in the second quarter of 2019 averaging approximately 71,100 barrels of oil equivalent per day (boepd)(2).

Ghana

During the second quarter of 2019, net production from Ghana averaged approximately 31,700 barrels of oil per day (bopd). As forecast, Kosmos lifted three cargoes from Ghana during the second quarter.

At Jubilee, Kosmos and its partners are planning to accelerate the gas handling enhancement work program into the fourth quarter of 2019. These enhancements are designed to increase gas handling capacity to above 180 million standard cubic feet per day, thereby allowing oil production rates to increase in the fourth quarter of 2019 and into 2020.

At TEN, completion problems were experienced at the EN-14 well due to mechanical issues, resulting in the well not being completed and the potential deferral of two other TEN wells that were previously planned for 2019. These issues have reduced our full-year lifting expectations for the field; Kosmos now expects to lift four cargos from TEN, down from the previous expectation of five.

Equatorial Guinea

Production in Equatorial Guinea averaged approximately 13,000 bopd net in the second quarter of 2019. Kosmos lifted the forecast one cargo from Equatorial Guinea during the quarter. The electric submersible pump (ESP) program is ongoing and Kosmos expects to complete two more ESP conversions in the third quarter.

U.S. Gulf of Mexico

U.S. Gulf of Mexico production averaged approximately 26,400 boepd net (83% oil) during the second quarter, exceeding the high end of the guidance range. Strong second quarter production was driven primarily by increased production at Odd Job, taking advantage of spare capacity aboard Delta House, and the Tornado field coming back online after its planned drydock in the first quarter.

In June, Kosmos announced an oil discovery at Gladden Deep (Kosmos 20% working interest). Gladden Deep is a subsea tie back which is expected to be brought online through the existing Gladden pipeline to the Medusa spar in the fourth quarter of 2019. Based on preliminary analysis of drilling and wireline logging results, the recoverable resource is expected to be in line with the pre-drill estimate of 7 mmboe gross.

Kosmos was one of the most active participants in U.S. Gulf of Mexico Lease Sale 252 in March, and was subsequently awarded the nine deepwater blocks upon which it was previously deemed to be the high bidder.



Greater Tortue Ahmeyim Project

The Greater Tortue Ahmeyim project located offshore Mauritania and Senegal remains on track with progress being made across all Phase 1 project areas including subsea, FLNG vessel, HUB Terminal, and FPSO vessel. Pre-FEED work is ongoing for Phases 2 and 3 and these next phases are expected to expand capacity of this hub to almost 10 MTPA of LNG for export.

In July, Kosmos announced that the Greater Tortue Ahmeyim-1 well (GTA-1), drilled on the eastern anticline within the unit development area of Greater Tortue Ahmeyim, encountered approximately 30 meters of net gas pay in a high-quality Albian reservoir. Results from GTA-1 demonstrate that the gas resource at Greater Tortue Ahmeyim continues to grow and could lead to further offtake expansion of the project. The GTA-1 well was designed as a future producer and will be used to further optimize the development drilling plans for the BP-operated project.

The previously announced process to sell down Kosmos' interest in the broader Mauritania/Senegal region to 10 percent is ongoing and is targeting a transaction announcement by year end.

2019 Guidance

As a result of the completion issue at TEN, Kosmos now expects production for 2019 to be at the low end of the guidance range. All other 2019 guidance remains unchanged.

(1) A Non-GAAP measure, see attached reconciliation of 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 Gulf of Mexico, this means those volumes net to Kosmos' working interest and net of royalty.

Conference Call and Webcast Information

Kosmos will host a conference call and webcast to discuss second quarter 2019 financial and operating results today at 10:00 a.m. Central time (11:00 a.m. Eastern time). A live webcast of the event and slides can be accessed on the Investors page of Kosmos’ website at http://investors.kosmosenergy.com/investor-events. The dial-in telephone number for the call is +1.877.407.3982. Callers outside the United States should dial +1.201.493.6780. A replay of the webcast will be available on the Investors page of Kosmos’ website for approximately 90 days following the event.

About Kosmos Energy

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 Ghana, Equatorial Guinea and U.S. Gulf of Mexico, as well as a world-class gas development offshore Mauritania and Senegal. We also maintain a sustainable exploration program balanced between proven basin infrastructure-led exploration (Equatorial Guinea and U.S. Gulf of Mexico), emerging basins (Mauritania, Senegal and Suriname) and frontier basins (Cote d'Ivoire, Namibia and Sao Tome and Principe). Kosmos is listed on the New York Stock Exchange and London Stock Exchange and is traded under the ticker symbol KOS. As an ethical and transparent company, Kosmos is committed to doing things the right way. The Company’s Business Principles articulate our commitment to transparency, ethics, human rights, safety and the environment. Read more about this commitment in the Kosmos 2018 Corporate Responsibility Report. For additional information, visit www.kosmosenergy.com.



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, 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.

###





Kosmos Energy Ltd.
Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)

 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues and other income:
 
 
 
 
 
 
 
 
Oil and gas revenue
 
$
395,933

 
$
215,191


$
692,723


$
342,387

Other income, net
 
1

 
282

 
1

 
263

Total revenues and other income
 
395,934

 
215,473

 
692,724

 
342,650

 
 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
 
Oil and gas production
 
90,977


49,815


170,776


96,583

Facilities insurance modifications, net
 
2,278

 
1,029

 
(17,743
)
 
9,478

Exploration expenses
 
29,905

 
77,481

 
60,249

 
98,674

General and administrative
 
28,072

 
17,497

 
63,980

 
39,380

Depletion, depreciation and amortization
 
151,438

 
74,289

 
269,533

 
128,566

Interest and other financing costs, net
 
59,803

 
18,870

 
94,844

 
44,564

Derivatives, net
 
(14,185
)
 
140,272

 
62,900

 
178,750

Gain on equity method investments, net
 
—

 
(16,100
)
 
—

 
(34,796
)
Other expenses, net
 
(1,793
)
 
938

 
326

 
4,643

Total costs and expenses
 
346,495

 
364,091

 
704,865

 
565,842

 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
49,439

 
(148,618
)
 
(12,141
)
 
(223,192
)
Income tax expense (benefit)
 
32,602

 
(45,345
)
 
23,928

 
(69,693
)
Net income (loss)
 
$
16,837

 
$
(103,273
)
 
$
(36,069
)
 
$
(153,499
)
 
 
 
 
 
 
 
 
 
Net income (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.04

 
$
(0.26
)
 
$
(0.09
)
 
$
(0.39
)
Diluted
 
$
0.04

 
$
(0.26
)
 
$
(0.09
)
 
$
(0.39
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of shares used to compute net income (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
401,323

 
396,826

 
401,244

 
396,218

Diluted
 
408,230

 
396,826

 
401,244

 
396,218




Kosmos Energy Ltd.
Condensed Consolidated Balance Sheets
(In thousands, unaudited)

 
 
June 30,
 
December 31,
 
 
2019
 
2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
176,908

 
$
173,515

Receivables, net
 
160,944

 
140,006

Other current assets
 
161,862

 
196,179

Total current assets
 
499,714

 
509,700

 
 
 
 
 
Property and equipment, net
 
3,847,573

 
3,459,701

Other non-current assets
 
118,447

 
118,788

Total assets
 
$
4,465,734

 
$
4,088,189

 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
157,373

 
$
176,540

Accrued liabilities
 
258,379

 
195,596

Other current liabilities
 
26,897

 
12,172

Total current liabilities
 
442,649

 
384,308

 
 
 
 
 
Long-term liabilities:
 
 
 
 
Long-term debt, net
 
2,129,340

 
2,120,547

Deferred tax liabilities
 
697,792

 
477,179

Other non-current liabilities
 
311,742

 
164,677

Total long-term liabilities
 
3,138,874

 
2,762,403

 
 
 
 
 
Total stockholders’ equity
 
884,211

 
941,478

Total liabilities and stockholders’ equity
 
$
4,465,734

 
$
4,088,189



Kosmos Energy Ltd.
Condensed Consolidated Statements of Cash Flow
(In thousands, unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2019
 
2018
 
2019
 
2018
Operating activities:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
16,837

 
$
(103,273
)
 
$
(36,069
)
 
$
(153,499
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
 
Depletion, depreciation and amortization
 
153,740

 
76,572

 
274,222

 
133,289

Deferred income taxes
 
(16,897
)
 
(57,179
)
 
(56,730
)
 
(81,876
)
Unsuccessful well costs
 
1,593

 
44,611

 
7,099

 
44,654

Change in fair value of derivatives
 
(8,121
)
 
138,824

 
65,686

 
177,790

Cash settlements on derivatives, net(1)
 
(17,468
)
 
(35,824
)
 
(21,044
)
 
(56,221
)
Equity-based compensation
 
9,491

 
9,068

 
17,932

 
17,085

Loss on extinguishment of debt
 
24,794

 
—

 
24,794

 
4,056

Distributions in excess of equity in earnings
 
—

 
—

 
—

 
5,234

Other
 
2,436

 
927

 
7,417

 
449

Changes in assets and liabilities:
 
 
 
 
 
 
 
 
Net changes in working capital
 
73,332

 
(56,277
)
 
(60,917
)
 
(90,528
)
Net cash provided by operating activities
 
239,737

 
17,449

 
222,390

 
433

 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
Oil and gas assets
 
(74,891
)
 
(57,938
)
 
(153,268
)
 
(92,650
)
Other property
 
(4,159
)
 
(1,058
)
 
(5,230
)
 
(2,815
)
Return of investment from KTIPI
 
—

 
38,900

 
—

 
79,970

Notes receivable from partners
 
(5,983
)
 
—

 
(5,983
)
 
—

Net cash used in investing activities
 
(85,033
)

(20,096
)
 
(164,481
)
 
(15,495
)
 
 
 
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
 
 
 
Borrowings on long-term debt
 
—

 
—

 
175,000

 
—

Payments on long-term debt
 
(200,000
)
 
(100,000
)
 
(300,000
)
 
(100,000
)
Net proceeds from issuance of senior notes
 
641,875

 
—

 
641,875

 
—

Redemption of senior secured notes
 
(535,338
)
 
—

 
(535,338
)
 
—

Purchase of treasury stock
 
(3
)
 
(5,821
)
 
(1,983
)
 
(17,695
)
Dividends
 
(18,142
)
 
—

 
(36,289
)
 
—

Deferred financing costs
 
(821
)
 
(774
)
 
(1,981
)
 
(25,743
)
Net cash used in financing activities
 
(112,429
)
 
(106,595
)
 
(58,716
)
 
(143,438
)
 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
 
42,275

 
(109,242
)
 
(807
)
 
(158,500
)
Cash, cash equivalents and restricted cash at beginning of period
 
142,534

 
255,728

 
185,616

 
304,986

Cash, cash equivalents and restricted cash at end of period
 
$
184,809

 
$
146,486

 
$
184,809

 
$
146,486

 
(1)
Cash settlements on commodity hedges were $(11.4) million and $(37.5) million for the three months ended June 30, 2019 and 2018, respectively, and $(18.7) million and $(57.3) million for the six months ended June 30, 2019 and 2018, respectively.


Kosmos Energy Ltd.
Equity Method Investment
(In thousands, unaudited)
 
Three months ended
Six months ended
 
June 30, 2018
June 30, 2018
Revenues and other income:
 
 
Oil and gas revenue
$
138,395

$
384,749

Other income
(170
)
117

Total revenues and other income
138,225

384,866

 
 
 
Costs and expenses:
 
 
Oil and gas production
23,332

75,033

Depletion and depreciation
21,881

75,951

Other expenses, net
(73
)
(152
)
Total costs and expenses
45,140

150,832

 
 
 
Income before income taxes
93,085

234,034

Income tax expense
33,620

83,251

Net income
$
59,465

$
150,783

 
 
 
Kosmos' share of net income
$
29,733

$
75,392

Basis difference amortization(1)
13,633

40,596

Equity in earnings - KTIPI
$
16,100

$
34,796

 
(1)
The basis difference, which is associated with oil and gas properties and subject to amortization, has been allocated to the Ceiba Field and Okume Complex. We amortize the basis difference using the unit-of-production method.



Kosmos Energy Ltd.
EBITDAX
(In thousands, unaudited)

Three Months Ended
 
Three Months Ended
 
June 30, 2019
 
June 30, 2018
 
Kosmos
 
Kosmos
 
Equatorial Guinea (Equity Method)(1)
 
Total
Net income (loss)
$
16,837


$
(103,273
)
 
$
16,100

 
$
(87,173
)
Exploration expenses
29,905


77,481

 
—

 
77,481

Facilities insurance modifications, net
2,278


1,029

 
—

 
1,029

Depletion, depreciation and amortization
151,438


74,289

 
24,574

 
98,863

Equity-based compensation
9,491


9,068

 
—

 
9,068

Derivatives, net
(14,185
)

140,272

 
—

 
140,272

Cash settlements on commodity derivatives
(11,403
)

(37,521
)
 
—

 
(37,521
)
Inventory impairment and other
—


(24
)
 
—

 
(24
)
Disputed charges and related costs
—


626

 
—

 
626

Gain on equity method investment - KTIPI
—

 
(16,100
)
 
—

 
(16,100
)
Interest and other financing costs, net
59,803


18,870

 
—

 
18,870

Income tax expense (benefit)
32,602


(45,345
)
 
16,810

 
(28,535
)
EBITDAX
$
276,766


$
119,372

 
$
57,484

 
$
176,856


 
 
 
 
 
 
 
 
 
Six months ended
 
Six months ended
 
June 30, 2019
 
June 30, 2018
 
Kosmos
 
Kosmos
 
Equatorial Guinea (Equity Method)(2)
 
Total
Net income (loss)
$
(36,069
)
 
$
(153,499
)
 
$
34,796

 
$
(118,703
)
Exploration expenses
60,249

 
98,674

 
—

 
98,674

Facilities insurance modifications, net
(17,743
)
 
9,478

 
—

 
9,478

Depletion, depreciation and amortization
269,533

 
128,566

 
78,572

 
207,138

Equity-based compensation
17,932

 
17,085

 
—

 
17,085

Derivatives, net
62,900

 
178,750

 
—

 
178,750

Cash settlements on commodity derivatives
(18,692
)
 
(57,265
)
 
—

 
(57,265
)
Inventory impairment and other
187

 
(5
)
 
—

 
(5
)
Disputed charges and related costs
(14
)
 
2,961

 
—

 
2,961

Gain on sale of assets
—

 
—

 
—

 
—

Loss on equity method investment - KBSL
—

 
—

 
—

 
—

Gain on equity method investment - KTIPI
—

 
(34,796
)
 
—

 
(34,796
)
Interest and other financing costs, net
94,844

 
44,564

 
—

 
44,564

Income tax expense (benefit)
23,928

 
(69,693
)
 
41,626

 
(28,067
)
EBITDAX
$
457,055

 
$
164,820

 
$
154,994

 
$
319,814



 
Twelve Months Ended
 
 
June 30, 2019
 
 
Kosmos
 
Equatorial Guinea (Equity Method)(2)
 
Total
 
Net income (loss)
$
23,439

 
$
38,085

 
$
61,524

 
Exploration expenses
263,067

 
352

 
263,419

 
Facilities insurance modifications, net
(20,266
)
 
—

 
(20,266
)
 
Depletion and depreciation
470,802

 
56,410

 
527,212

 
Equity-based compensation
36,077

 
—

 
36,077

 
Derivatives, net
(147,280
)
 
—

 
(147,280
)
 
Cash settlements on commodity derivatives
(98,480
)
 
—

 
(98,480
)
 
Inventory impairment and other
480

 
—

 
480

 
Disputed charges and related costs
(12,728
)
 
—

 
(12,728
)
 
Gain on sale of assets
(7,666
)
 
—

 
(7,666
)
 
Gain on equity method investment - KTIPI
(38,085
)
 
—

 
(38,085
)
 
Interest and other financing costs, net
151,456

 
—

 
151,456

 
Income tax expense
136,752

 
36,865

 
173,617

 
EBITDAX
$
757,568

 
$
131,712

 
$
889,280

 
 
(1)
For the three and six months ended June 30, 2018 we have presented separately our 50% share of the results from operations and amortization of our basis difference for the Equatorial Guinea investment as we accounted for such investment under the equity method during this period.
(2)
For the twelve months ended June 30, 2019, we have presented separately our 50% share of the results from operations and amortization of our basis difference for the Equatorial Guinea investment through December 31, 2018, as we accounted for such investment under the equity method through this date.


Kosmos Energy Ltd.
Adjusted Net Income
(In thousands, except per share amounts, unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Net income (loss)
$
16,837

 
$
(103,273
)
 
$
(36,069
)
 
$
(153,499
)
 
 
 
 
 
 
 
 
Derivatives, net
(14,185
)
 
140,272

 
62,900

 
178,750

Cash settlements on commodity derivatives
(11,403
)
 
(37,521
)
 
(18,692
)
 
(57,265
)
Facilities insurance modifications, net
2,278

 
1,029

 
(17,743
)
 
9,478

Inventory impairment and other
—

 
(24
)
 
187

 
(5
)
Disputed charges and related costs
—

 
626

 
(14
)
 
2,961

Loss on extinguishment of debt
24,794

 
—

 
24,794

 
4,056

Total selected items before tax
1,484

 
104,382

 
51,432

 
137,975

 
 
 
 
 
 
 
 
Income tax expense on adjustments(1)
3,463

 
(35,963
)
 
(16,578
)
 
(42,527
)
Impact of U.S. tax law change
—

 
—

 
—

 
—

Adjusted net income (loss)
$
21,784

 
$
(34,854
)
 
$
(1,215
)
 
$
(58,051
)
 
 
 
 
 
 
 
 
Net income (loss) per diluted share
$
0.04

 
$
(0.26
)
 
$
(0.09
)
 
$
(0.39
)
 
 
 
 
 
 
 
 
Derivatives, net
(0.03
)
 
0.35

 
0.16

 
0.45

Cash settlements on commodity derivatives
(0.03
)
 
(0.09
)
 
(0.05
)
 
(0.14
)
Facilities insurance modifications, net
—

 
—

 
(0.04
)
 
0.02

Loss on extinguishment of debt
0.06

 
—

 
0.06

 
0.01

Total selected items before tax
—

 
0.26

 
0.13

 
0.34

 
 
 
 
 
 
 
 
Income tax expense on adjustments(1)
0.01

 
(0.09
)
 
(0.04
)
 
(0.10
)
Adjusted net income (loss) per diluted share
$
0.05

 
$
(0.09
)
 
$
0.00

 
$
(0.15
)
 
 
 
 
 
 
 
 
Weighted average number of diluted shares
408,230

 
396,826

 
401,244

 
396,218

 
(1)
Income tax expense is calculated at the statutory rate in which such item(s) reside. Statutory rates for the U.S. and Ghana are 21% and 35%, respectively.









Kosmos Energy Ltd.
Free Cash Flow
(In thousands, unaudited)


 
Three months ended
 
Six months ended
 
June 30, 2019
 
June 30, 2019
Reconciliation of net cash provided by operating activities to free cash flow:
 
 
 
Net cash provided by operating activities
$
239,737

 
$
222,390

Net cash used in investing activities
(85,033
)
 
(164,481
)
Other cash used in financing activities(1)
(19,287
)
 
(22,427
)
Change in restricted cash
209

 
4,200

Free cash flow (before dividends)
$
135,626

 
$
39,682


 
(1)
Amounts consist of costs related to the redemption of the senior secured notes, issuance of senior notes and other long-term debt and the purchase of treasury stock.







Operational Summary(1) 
(In thousands, except barrel and per barrel data, unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Net Volume Sold
 
 
 
 
 
 
 
Oil (MMBbl)
 
 
 
 
 
 
 
Kosmos
5.851

 
2.895

 
10.541

 
4.829

Equity method investment - Equatorial Guinea
—

 
0.950

 
—

 
2.830

Total Oil (MMBbl)
5.851

 
3.845

 
10.541

 
7.659

Gas (MMcf)
1.663

 
—

 
3.464

 
—

NGL (MMBbl)
0.139

 
—

 
0.251

 
—

Total (MMBoe)
6.267

 
3.845

 
11.369

 
7.659

 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Oil sales:
 
 
 
 
 
 
 
Kosmos
$
389,286

 
$
215,191

 
$
680,150

 
$
342,387

Equity method investment - Equatorial Guinea
—

 
69,198

 
—

 
192,375

Total Oil sales
389,286

 
284,389

 
680,150

 
534,762

Gas sales
4,145

 
—

 
7,807

 
—

NGL sales
2,502

 
—

 
4,766

 
—

Total sales
395,933

 
284,389

 
692,723

 
534,762

Cash settlements on commodity derivatives
(11,403
)
 
(37,521
)
 
(18,692
)
 
(57,265
)
Realized revenue
$
384,530

 
$
246,868

 
$
674,031

 
$
477,497

 
 
 
 
 
 
 
 
Oil and Gas Production Costs
 
 
 
 
 
 
 
Kosmos
$
90,977

 
$
49,815

 
$
170,776

 
$
96,583

Equity method investment - Equatorial Guinea
—

 
11,666

 
—

 
37,516

Total oil and gas production costs
$
90,977

 
$
61,481

 
$
170,776

 
$
134,099

 
 
 
 
 
 
 
 
Oil sales per Bbl:
 
 
 
 
 
 
 
Kosmos
$
66.53

 
$
74.32

 
$
64.52

 
$
70.90

Equity method investment - Equatorial Guinea
—

 
72.84

 
—

 
67.98

Total Oil sales per Bbl
66.53

 
73.96

 
64.52

 
69.82

Gas sales per Mcf
2.49

 
—

 
2.25

 
—

NGL sales per Bbl
18.01

 
—

 
18.96

 
—

Total sales per Boe
63.18

 
73.96

 
60.93

 
69.82

Cash settlements on commodity derivatives per oil Bbl(2)
(1.95
)
 
(12.96
)
 
(1.77
)
 
(11.86
)
Realized revenue per Boe(3)
61.36

 
64.20

 
59.28

 
62.34

 
 
 
 
 
 
 
 
Oil and gas production costs per Boe:
 
 
 
 
 
 
 
Kosmos
$
14.52

 
$
17.21

 
$
15.02

 
$
20.01

Equity method investment - Equatorial Guinea
—

 
$
12.28

 
—

 
$
13.26

Total oil and gas production costs
14.52

 
15.99

 
15.02

 
17.51

 
(1)
For the three and six months June 30, 2018, we have presented separately our 50% share of the results from operations for the Equatorial Guinea investment, as we accounted for such investment under the equity method during this period.
(2)
Cash settlements on commodity derivatives are only related to Kosmos and are calculated on a per barrel basis using Kosmos' Net Oil Volumes Sold.
(3)
Realized revenue includes revenue from Kosmos, Equatorial Guinea (equity method investment), and Cash settlements on commodity derivatives; on a per Boe basis realized revenue is calculated using the total Net Volume Sold from both Kosmos and Equatorial Guinea (equity method investment).

Kosmos was underlifted by approximately 1,003 thousand barrels as of June 30, 2019.




Hedging Summary
As of June 30, 2019(1) 
(Unaudited)

 
 
 
 
 
 
Weighted Average Price per Bbl
 
 
Index
 
MBbl
 
Floor(2)
 
Sold Put
 
Ceiling
2019:
 
 
 
 

 
 

 
 

 
 

Three-way collars
 
Dated Brent
 
5,256

 
$
53.33

 
$
43.81

 
$
73.57

Swaps
 
NYMEX WTI
 
730

 
52.01

 
—

 
—

Collars
 
Argus LLS
 
500

 
60.00

 
—

 
88.75

2020:
 
 
 
 
 
 
 
 
 
 
Three-way collars
 
Dated Brent
 
6,000

 
$
57.50

 
$
45.00

 
$
80.18

Put spread
 
Dated Brent
 
2,000

 
60.00

 
50.00

 
—

 
(1)
Please see the Company’s filed 10-Q for full disclosure on hedging material. Includes hedging position as of June 30, 2019 and hedges added since quarter-end.
(2)
“Floor” represents floor price for collars or swaps and strike price for purchased puts.

Note: Excludes 0.5 MMBbls of sold (short) calls with a strike price of $80.00 per Bbl in 2019, 8.0 MMBbls of sold (short) calls with a strike price of $85.00 per Bbl in 2020 and 1.0 MMBbls of sold (short) calls with a strike price of $75.00 per Bbl in 2021.


2019 Guidance
 
FY 2019
 
 
 
 
Production(1,2)
69,000 - 73,000 boe per day
 
 
 
 
Opex
$12.00 - $15.00 per boe
 
 
 
 
DD&A
$22.00 - $25.00 per boe
 
 
 
 
G&A(3)
$115 - $125 million
 
 
 
 
Exploration Expense
~$30 million average per quarter
 
 
 
 
Net Interest
$35 - $37 million per quarter
 
 
 
 
Tax
$3.00 - $5.00 per boe
 
 
 
 
Capex
$425 - $475 million in FY 2019
 

Note: Ghana/EG revenue calculated by number of cargos.
(1)
3Q 2019 - Ghana: 4 cargos / Equatorial Guinea 1 cargo. FY 2019 Ghana: 12 cargos / Equatorial Guinea 5.5 cargos. Average cargo sizes 950,000 barrels of oil.
(2)
GoM Production - 3Q 2019: 22,000-24,000 boe per day. FY 2019 22,000-24,000 boe per day. Oil/Gas/NGL split for 2019: U.S. Gulf of Mexico: 80%/12%/8%.
(3)
G&A - Approximately 70% cash.





Source: Kosmos Energy Ltd.


Investor Relations
Jamie Buckland
+44 (0) 203 954 2831
jbuckland@kosmosenergy.com

    
Rhys Williams
+1-214-445-9693
rwilliams@kosmosenergy.com


Media Relations
Thomas Golembeski
+1-214-445-9674
tgolembeski@kosmosenergy.com