KEYFACT Energy
Kosmos Energy Ltd. announced today the financial and operating results for the fourth quarter of 2019. For the quarter, the Company generated a net loss of $36 million, or $0.09 per diluted share. When adjusted for certain items that impact the comparability of results, the Company generated an adjusted net loss(1) of $37 million or $0.09 per diluted share for the fourth quarter of 2019.
FOURTH QUARTER 2019 HIGHLIGHTS
- Net cash provided by operating activities - $228 million; free cash flow (non-GAAP) - $139 million
- Sales - 7.5 million barrels of oil equivalent (boe)
- Revenues - $450 million
- Realized oil and gas revenues, excluding the impact of hedging program - $59.76 per boe
- Production expense - $136 million, or $18.12 per boe
- General and administrative expenses - $21 million, $16 million cash expense and $5 million non-cash equity based compensation expense
- Capital expenditure - $122 million
At quarter end, the Company was in a net overlift position of approximately 0.3 million barrels of oil.
Fourth quarter results included a mark-to-market loss of $36 million related to the Company's oil derivative contracts. As of the quarter end and including recently executed hedges, Kosmos has approximately 18.0 million barrels of Brent oil hedged covering 2020 and 2021.
Kosmos exited the fourth quarter of 2019 with approximately $825 million of liquidity, total debt of $2.05 billion, and $1.82 billion of net debt.
Commenting on the company's 2019 performance, Chairman and Chief Executive Officer Andrew G. Inglis said:
"2019 was a strong year for Kosmos with the business generating approximately $250 million of free cash flow, the third successive year of material organic cash generation. Our free cash flow enabled us to reduce our leverage and initiate the payment of our dividend, in line with our strategy of protecting the balance sheet and delivering shareholder returns.
It was also one of the most active years in the company's history with over 1.7 million man hours operating five wells. Importantly, this activity was executed with zero lost time or recordable incidents, a best-in-class safety performance. Our exploration and appraisal program delivered five successes from seven wells drilled and we continue to make excellent progress with our developments in Mauritania and Senegal with Tortue Phase 1 around 25 percent complete at year-end.
Kosmos is integrating climate risk into its business strategy and we see the energy transition as a major opportunity for progressive companies like Kosmos to play an important role. Today, we will present our climate policy as part of our wider environmental, social and governance responsibilities, with a commitment to both transparency and emissions reduction. With a diverse portfolio of advantaged oil and gas assets, Kosmos is well-positioned to deliver shareholder value while advancing the societies in which we work."
OPERATIONAL UPDATE
Total net production in the fourth quarter of 2019 averaged approximately 65,200 barrels of oil equivalent per day (boepd)(1).
U.S.Gulf of Mexico
U.S.Gulf of Mexico production averaged approximately 26,000 boepd net (82% oil) during the fourth quarter. Record fourth quarter production was driven by strong performance at Odd Job and initial production from new wells from the Odd Job, Gladden, and Nearly Headless Nick fields. During the fourth quarter, Kosmos recorded approximately $75 million of exploration expense related to the Resolution-1 and Oldfield-1 unsuccessful wells.
Ghana
During the fourth quarter of 2019, net production from Ghana averaged approximately 27,800 barrels of oil per day (bopd). As forecast, Kosmos lifted four cargos from Ghana during the fourth quarter. The Jubilee gas enhancement work program that was rescheduled from the fourth quarter of 2019 into the first quarter of 2020, was completed in early February with production rates of around 90,000 bopd now being achieved.
Equatorial Guinea
Production in Equatorial Guinea averaged approximately 11,400 bopd net in the fourth quarter of 2019 and Kosmos lifted one and a half cargos from Equatorial Guinea during the quarter.
In late October, the S-5 well encountered approximately 39 meters of net oil pay in good-quality Santonian reservoir. The well is located within tieback range of the Ceiba FPSO and work is currently ongoing to establish the scale of the discovered resource and evaluate the optimal development solution. The well was drilled in approximately 800 meters of water to a total measured depth of around 4,400 meters.
Mauritania & Senegal
The Greater Tortue Ahmeyim project located offshore Mauritania and Senegal remains on track with Phase 1 approximately 25 percent complete. Pre-FEED work is ongoing for Phases 2 and 3 and these phases are expected to expand capacity to almost 10 MTPA of LNG export capacity.
On February 11, 2020, Kosmos and its partners signed a Sale and Purchase Agreement (SPA) with BP Gas Marketing Limited for 2.45 million tonnes per annum of liquified natural gas from Phase 1 of the project for an initial term of up to 20 years. Signing the SPA has allowed Kosmos to book approximately 100 mmboe of proven reserves associated with the project.
In October, Kosmos announced that the Orca-1 exploration well made a major gas discovery offshore Mauritania in the BirAllah area. Orca was the largest deepwater hydrocarbon discovery in 2019 and the results continue the 100 percent success rate from nine wells targeting the inboard gas trend in Mauritania/Senegal.
2020 Capital Expenditure Budget
Kosmos expects to spend approximately $325 to $375 million in 2020, excluding Mauritania and Senegal, with spending focused on maintaining existing production and growth through infrastructure led exploration. In Mauritania and Senegal, total 2020 capital expenditure for Kosmos' approximately 30 percent working interest is expected to be around $250 million and is expected to be funded from proceeds from the previously announced and ongoing farm-down process.
(1) 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.