Kosmos Energy(KOS) - 2023 Q4 - Annual Results

Financial and Operating Highlights Kosmos Energy reported a Q4 2023 net income of $22 million ($0.04/share) and an adjusted net income of $149 million ($0.31/share), driven by a 12% year-over-year increase in Q4 production and significant progress on key development projects expected to boost future production and cash flow Q4 and Full Year 2023 Key Metrics | Metric | Q4 2023 | Full Year 2023 | | :--- | :--- | :--- | | Net Income | $22 million | $214 million | | Adjusted Net Income | $149 million | $380 million | | Diluted EPS | $0.04 | $0.44 | | Adjusted Diluted EPS | $0.31 | $0.79 | | Net Production | ~66,000 boepd | - | | Revenues | $508 million | $1.7 billion | | Capital Expenditures | $281 million | - | - The company is advancing key development projects, including the start-up of Jubilee Southeast, with upcoming production from Winterfell (Gulf of Mexico) and first gas at Greater Tortue Ahmeyim, aiming to deliver around 50% production growth from H2 2022 levels[3] - Portfolio strength was enhanced by a significant oil discovery at Tiberius in the Gulf of Mexico and by assuming operatorship and a larger working interest at the Yakaar-Teranga gas project in Senegal[5] - As of year-end 2023, 1P reserves were ~280 million boe, representing a 104% replacement rate ratio, primarily due to increased reserves at Jubilee[4][9] Financial Review The company ended Q4 2023 with $2.3 billion in net debt and $0.7 billion in available liquidity, reporting a full-year 2023 net income of $213.5 million, a decrease from 2022, mainly due to lower oil and gas revenues, with projected 2024 capital expenditures of $700-$750 million Financial Position and Capital Expenditures At the end of Q4 2023, Kosmos had total long-term debt of $2.4 billion, net debt of $2.3 billion, and available liquidity of $0.7 billion, with Q4 net capital expenditure at $281 million, and projected 2024 net capital expenditures between $700-$750 million focused on key development projects Debt and Liquidity (End of Q4 2023) | Metric | Amount | | :--- | :--- | | Total Long-Term Debt | ~$2.4 billion | | Net Debt | ~$2.3 billion | | Available Liquidity | ~$0.7 billion | Capital Expenditures | Period | Amount | | :--- | :--- | | Q4 2023 (Actual) | $281 million | | FY 2024 (Guidance) | $700 - $750 million | - The company is seeking to recover up to $160.0 million (net share) in damages from the original subsea contractor for the Tortue Phase 1 project due to the contractor's failure to perform its contractual obligations[8] Consolidated Financial Statements The consolidated financial statements show a full-year 2023 revenue of $1.70 billion, down from $2.25 billion in 2022, with net income for 2023 at $213.5 million, and total assets increasing to $4.94 billion from $4.58 billion at year-end 2022, while net cash provided by operating activities decreased to $765.2 million Consolidated Statement of Operations (Full Year, Millions USD) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Oil and gas revenue | $1,701.6 | $2,245.4 | | Total revenues | $1,701.5 | $2,299.8 | | Net income | $213.5 | $226.6 | | Diluted EPS | $0.44 | $0.48 | Consolidated Balance Sheet (Year-End, Millions USD) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $422.7 | $468.7 | | Total assets | $4,938.1 | $4,579.9 | | Total current liabilities | $554.8 | $574.3 | | Long-term debt, net | $2,390.9 | $2,195.9 | | Total stockholders' equity | $1,032.3 | $787.8 | Consolidated Statement of Cash Flow (Full Year, Millions USD) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $765.2 | $1,130.5 | | Net cash used in investing activities | $(994.9) | $(703.9) | | Net cash provided by (used in) financing activities | $141.6 | $(414.7) | Non-GAAP Financial Measures and Reconciliations For the full year 2023, EBITDAX was $1.24 billion, and adjusted net income was $380 million ($0.79 per diluted share), compared to 2022 figures of $1.45 billion and $475 million ($1.00 per diluted share), respectively, with free cash flow for 2023 being negative $167.4 million, a significant decrease from 2022 due to higher capital expenditures EBITDAX Reconciliation (Full Year, Millions USD) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net income (loss) | $213.5 | $226.6 | | EBITDAX | $1,238.2 | $1,452.1 | Adjusted Net Income Reconciliation (Full Year, Millions USD) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Adjusted net income | $379.9 | $475.2 | | Adjusted net income per diluted share | $0.79 | $1.00 | Free Cash Flow Reconciliation (Full Year, Millions USD) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $765.2 | $1,130.5 | | Free cash flow | $(167.4) | $343.2 | Reserves Update As of year-end 2023, Kosmos reported 1P (proved) reserves of approximately 280 million barrels of oil equivalent (boe), achieving a 104% reserve replacement ratio, mainly due to increased reserves at the Jubilee field, with 2P (proved and probable) reserves at approximately 520 million boe, not yet including recent discoveries Year-End 2023 Reserves | Metric | Value | | :--- | :--- | | 1P Reserves | ~280 million boe | | 1P Reserve Replacement Ratio | 104% | | 1P Reserves-to-Production Ratio | ~12 years | | 2P Reserves | ~520 million boe | | 2P Reserves-to-Production Ratio | >20 years | - The 104% 1P reserve replacement was primarily driven by increased reserve recognition at the Jubilee field, which more than offset downward revisions at the TEN field[9][16] - Year-end 2P reserves do not yet include any recognition for the Tiberius (U.S. Gulf of Mexico) and Yakaar-Teranga (Senegal) discoveries[9] Operational Review Total net production for Q4 2023 averaged approximately 66,000 boepd, a 12% year-over-year increase, as the company advances key projects in Ghana, the U.S. Gulf of Mexico, and Mauritania & Senegal, despite an impairment charge on the TEN asset and a temporary halt in Equatorial Guinea drilling Overall Production Q4 2023 net production averaged approximately 66,000 boepd, up ~12% YoY, with production expected to increase throughout 2024 driven by new wells at Jubilee and the startup of the Winterfell and Tortue LNG projects Q4 2023 Production | Metric | Value | | :--- | :--- | | Net Production | ~66,000 boepd | | YoY Growth | ~12% | - Production is expected to rise through 2024, driven by additional wells at Jubilee and the startup of the Winterfell and Tortue LNG projects[10] Ghana Ghana production averaged 43,300 boepd net in Q4 2023, with Jubilee achieving record water injection levels post-quarter, while a full impairment charge of $222.3 million was recorded for the TEN asset due to a reduced development work scope Ghana Q4 2023 Production | Asset | Production (Gross) | | :--- | :--- | | Total Net to Kosmos | ~43,300 boepd | | Jubilee | ~92,400 bopd | | TEN | ~18,500 bopd | - At Jubilee, water injection is currently at record levels of approximately 285,000 bwpd, compared to ~150,000 bwpd in Q4, providing necessary pressure support for elevated production levels[13] - A $222.3 million impairment charge was recorded for the TEN Fields, resulting in a full impairment of the remaining book value and reducing its carrying value to zero[16] U.S. Gulf of Mexico Production in the U.S. Gulf of Mexico averaged 13,900 boepd net in Q4, with the Winterfell development progressing towards first production in early Q2 2024, and a significant discovery at the Tiberius ILX well targeting a phased tie-back development later in 2024 - The Winterfell development is progressing, with first production expected early in the second quarter of 2024[17] - The Tiberius ILX well discovered approximately 250 feet of net oil pay, and a sanction decision for a phased tie-back development is targeted for later in 2024[18][19] - The Odd Job subsea pump project, designed to sustain long-term production, was ~90% complete and is on track to be in service by mid-2024[20] Equatorial Guinea Production averaged 8,700 boepd net in Q4, but the 2023 drilling campaign was halted in early February 2024 due to the operator terminating the rig contract for safety issues, leading to uncertainty in 2024 production guidance as the partnership seeks an alternative rig Equatorial Guinea Q4 2023 Production | Metric | Production | | :--- | :--- | | Gross | ~24,800 bopd | | Net to Kosmos | ~8,700 bopd | - The 2023 drilling campaign was suspended in early February 2024 after the operator terminated the rig contract due to safety issues, and the partnership is seeking a replacement rig to resume work[22] Mauritania & Senegal The Greater Tortue Ahmeyim project is progressing toward first gas in Q3 2024 and first LNG in Q4 2024, with the FPSO arrival being the critical path, while Kosmos assumed operatorship and a 90% working interest in the Yakaar-Teranga gas project, planning to farm down its interest to around 33% in H2 2024 - The Greater Tortue Ahmeyim project expects first gas in Q3 2024 and first LNG in Q4 2024, with the arrival of the FPSO, expected in early Q2, as the critical path item[23][26] - Kosmos assumed operatorship and increased its 90% working interest in the Yakaar-Teranga project, with plans to farm down its interest to ~33% in the second half of 2024 while retaining operatorship[24] Greater Tortue Ahmeyim Project Status | Component | Status | | :--- | :--- | | Drilling | All 4 wells completed | | Hub Terminal | Construction complete | | Subsea | Completion expected end of Q2 2024 | | FLNG | Arrived on location, hookup underway | | FPSO | Expected on site early Q2 2024 for hookup | 2024 Outlook For fiscal year 2024, Kosmos guides for production between 71,000 - 77,000 boepd and capital expenditures of $700 - $750 million, having hedged 10 million barrels of its 2024 oil production using various collar structures to manage price volatility 2024 Guidance The company forecasts full-year 2024 production to be between 71,000 and 77,000 boepd, with capital expenditures guided at $700-$750 million, and operating expenses expected to be approximately $15-$17 per boe, excluding costs for the Greater Tortue Ahmeyim project 2024 Full Year Guidance | Metric | FY 2024 Guidance | | :--- | :--- | | Production | 71,000 - 77,000 boe per day | | Opex | ~$15 - $17 per boe | | G&A | $100 - $120 million | | Capital Expenditure | $700 - $750 million | Hedging Summary As of December 31, 2023, Kosmos has hedged 10 million barrels of its 2024 oil production, utilizing a portfolio of three-way and two-way collars on Dated Brent crude with floors ranging from $65 to $70 per barrel and ceilings from $85 to $100 per barrel 2024 Oil Hedging Summary (Dated Brent) | Instrument | Volume (MBbl) | Floor | Ceiling | | :--- | :--- | :--- | :--- | | Three-way collars | 6,000 | $70.00 | $90.00 - $96.25 | | Two-way collars | 4,000 | $65.00 - $70.00 | $85.00 - $100.00 | Appendix This section contains standard disclosures, including definitions of non-GAAP measures like EBITDAX and free cash flow used for performance assessment, along with a forward-looking statements disclaimer and general information about the company's operations and commitment to transparency and sustainability About Kosmos Energy Kosmos Energy is a full-cycle deepwater independent oil and gas exploration and production company focused along the Atlantic Margins, with key assets including production facilities offshore Ghana, Equatorial Guinea, and the U.S. Gulf of Mexico, and a major gas development offshore Mauritania and Senegal - Kosmos is a full-cycle deepwater independent E&P company focused on the Atlantic Margins[28] - Key assets include production in Ghana, Equatorial Guinea, U.S. Gulf of Mexico, and a world-class gas development in Mauritania and Senegal[28] Non-GAAP Financial Measures Definition The company defines and utilizes supplemental non-GAAP financial measures, including EBITDAX, Adjusted net income (loss), free cash flow, and net debt, which are employed by management and external users to evaluate performance and assess comparability within the oil and gas sector - The company defines and uses non-GAAP measures such as EBITDAX, Adjusted net income (loss), free cash flow, and net debt[29] - These measures are considered useful for investors and analysts in the evaluation of companies in the oil and gas sector and for assessing comparability between periods[30] Forward-Looking Statements This press release contains forward-looking statements based on current expectations, estimates, and trends, which are subject to various risks and uncertainties beyond the company's control that may cause actual results to differ materially, with no obligation to update these statements except as required by law - The press release includes forward-looking statements that are subject to numerous assumptions, risks, and uncertainties, many of which are beyond the company's control[32]