Kosmos Energy(KOS) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Glossary and Select Abbreviations This section defines technical, industry-specific, and company-specific terms and abbreviations used throughout the report - The report includes a comprehensive glossary defining key oil and gas industry terminology, financial metrics like EBITDAX, and project-specific abbreviations to aid in understanding the document's content[12][13][14] Financial Statements This section presents Kosmos Energy Ltd.'s unaudited interim consolidated financial statements for Q2 and H1 2023, including balance sheets, statements of operations, equity, cash flows, and notes Consolidated Balance Sheets Total assets increased to $4.81 billion by June 30, 2023, driven by oil and gas properties, with total liabilities rising to $3.90 billion and stockholders' equity to $903.9 million Consolidated Balance Sheet Highlights (as of June 30, 2023 vs. Dec 31, 2022) | Balance Sheet Item | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 85,729 | 183,405 | | Oil and gas properties, net | 4,073,399 | 3,837,437 | | Total assets | 4,807,619 | 4,579,988 | | Long-term debt, net | 2,358,689 | 2,195,911 | | Total liabilities | 3,903,715 | 3,792,140 | | Total stockholders' equity | 903,904 | 787,848 | Consolidated Statements of Operations Q2 2023 net income decreased to $23.3 million from $117.2 million in Q2 2022 due to lower revenue, while H1 2023 net income was $106.7 million Q2 & H1 2023 vs 2022 Performance | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Oil and gas revenue ($ thousands) | 273,255 | 620,368 | 667,495 | 1,279,383 | | Net income ($ thousands) | 23,345 | 117,173 | 106,654 | 118,573 | | Diluted EPS ($) | 0.05 | 0.25 | 0.22 | 0.25 | Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $903.9 million by June 30, 2023, primarily due to $106.7 million in net income - Stockholders' equity grew to $903.9 million by June 30, 2023, up from $787.8 million at year-end 2022, mainly due to the net income earned during the first half of the year[23] Consolidated Statements of Cash Flows H1 2023 net cash from operations decreased to $222.0 million, with increased investing activities and a net cash decrease of $97.7 million Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity ($ thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | 221,963 | 608,186 | | Net cash used in investing activities | (450,162) | (234,727) | | Net cash provided by (used in) financing activities | 130,523 | (324,696) | | Net (decrease) increase in cash | (97,676) | 48,763 | Notes to Consolidated Financial Statements Notes detail accounting policies, debt facilities totaling $2.41 billion, derivative instruments, and segmented financial results across key operating regions Total Long-Term Debt Principal (as of June 30, 2023) | Debt Instrument | Principal Balance ($ thousands) | | :--- | :--- | | Facility | 775,000 | | 7.125% Senior Notes | 650,000 | | 7.750% Senior Notes | 400,000 | | 7.500% Senior Notes | 450,000 | | GoM Term Loan | 137,500 | | Total | 2,412,500 | - As of June 30, 2023, the company had outstanding oil derivative contracts (collars) covering 9.5 MMBbl for the remainder of 2023 and 2024 to hedge against price volatility[71] Segment Oil & Gas Revenue (Six Months Ended June 30, 2023) | Geographic Segment | Revenue ($ thousands) | | :--- | :--- | | Ghana | 380,100 | | Equatorial Guinea | 104,629 | | U.S. Gulf of Mexico | 182,766 | | Mauritania/Senegal | — | | Total | 667,495 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2023 revenue decline, operational updates including Jubilee South East and Greater Tortue Ahmeyim (first gas Q1 2024), a $700-$750 million capital budget, and $705 million in liquidity - The Greater Tortue Ahmeyim Phase 1 project's first gas is now targeted for the first quarter of 2024 due to delays in the subsea work scope[122] - The Jubilee South East project in Ghana successfully started up in July 2023 with two producer wells online, and three additional wells are expected in H2 2023[114] - The company estimates a capital expenditure budget of approximately $700-$750 million for 2023, allocated to maintenance, development projects (Jubilee South East, Greater Tortue, Winterfell), and infrastructure-led exploration[152][153] Sales Volumes and Average Prices | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Sales (MBoe) | 4,116 | 5,677 | 9,618 | 12,191 | | Average Sales Price ($/Boe) | 66.38 | 109.28 | 69.40 | 104.94 | - Q2 2023 oil and gas revenue decreased by $347.1 million compared to Q2 2022, primarily due to the timing of international oil liftings, lower average oil prices, and natural field decline[130] Liquidity Position (as of June 30, 2023) | Liquidity Source | Amount ($ thousands) | | :--- | :--- | | Availability under the Facility | 370,083 | | Availability under the Corporate Revolver | 250,000 | | Cash and cash equivalents | 85,729 | | Total Available Liquidity | 705,812 | Quantitative and Qualitative Disclosures about Market Risk This section details market risk exposure from commodity price and interest rate fluctuations, with derivative contracts used to mitigate price volatility and significant floating-rate debt - As of June 30, 2023, a hypothetical 10% increase in commodity futures prices would decrease future pre-tax earnings by approximately $27.5 million, while a 10% decrease would increase earnings by $36.1 million, reflecting the impact on the company's hedge portfolio[186] - The company is exposed to interest rate risk on $912.5 million of variable-rate debt. A 10% increase in the floating market rate would result in an estimated additional $4.8 million in annual interest expense[187] Outstanding Oil Derivative Contracts (as of June 30, 2023) | Term | Type | Volume (MBbl) | Floor Price ($/Bbl) | Ceiling Price ($/Bbl) | | :--- | :--- | :--- | :--- | :--- | | Jul - Dec 2023 | Three-way collars | 3,000 | 71.67 | 107.58 | | Jul - Dec 2023 | Two-way collars | 2,500 | 72.00 | 112.00 | | Jan - Dec 2024 | Three-way collars | 2,000 | 70.00 | 97.50 | | Jan - Jun 2024 | Two-way collars | 2,000 | 65.00 | 85.00 | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[188] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[189] PART II. OTHER INFORMATION Legal Proceedings There have been no material changes to legal proceedings since the last annual report on Form 10-K - There have been no material changes to legal proceedings since the last annual report[190] Risk Factors There have been no material changes to the company's risk factors since the 2022 Annual Report on Form 10-K - There have been no material changes to the company's risk factors since the 2022 Form 10-K[191] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[192] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[193] Mine Safety Disclosures This item is not applicable to the company - Not applicable[194] Other Information No material changes required to be disclosed under this item that were not previously reported in the annual report - There have been no material changes required to be reported under this Item that have not previously been disclosed[195]