Kosmos Energy Ltd. announced the financial and operating results for the second quarter of 2020. For the quarter, the Company generated a net loss of $199 million, or $0.49 per diluted share. When adjusted for certain items that impact the comparability of results, the Company generated an adjusted net loss(1) of $95 million or $0.23 per diluted share for the second quarter of 2020.
SECOND QUARTER 2020 HIGHLIGHTS
- Net Production(2) - 60,100 barrels of oil equivalent per day (boepd) with sales of 67,100 boepd
- Revenues - $127 million
- Realized oil and gas revenues, including the impact of hedging program - $25.82 per boe
- Production expense - $89 million, or $14.53 per boe
- General and administrative expenses - $18 million, $10 million cash expense and $8 million non-cash equity-based compensation expense
- Capital expenditure - $66 million
- At quarter end, the Company was in a net underlift position of approximately 1.1 million barrels of oil.
Commenting on the company’s 2Q 2020 performance, Chairman and Chief Executive Officer Andrew G. Inglis said: “Kosmos delivered strong operational performance in the second quarter, despite a challenging backdrop for our industry. Production was in line with guidance and we are on track to deliver the cost reductions we set out earlier in the year.
“We have added an additional source of liquidity with the prepayment agreement, and total liquidity stood at over $600 million at the end of the second quarter. At current oil prices, the company has reached a free cash flow inflection point and we expect to generate positive free cash flow through the second half of the year and into 2021.
“Looking forward, we continue to make good progress in Mauritania & Senegal despite the COVID-19 mitigations, with Phase 1 of the Tortue project now around 40% complete, a 7% increase in the quarter, which supports the sell down process. We continue to mature our exploration portfolio focusing on high return, fast payback opportunities with several proven basin, infrastructure-led exploration targets and a self-funded basin-opening exploration program expected in 2021.”
In June 2020, the Company entered into a Production Prepayment Agreement with Trafigura Trading LLC (“Trafigura”) for up to $200 million of crude oil sales related primarily to a portion of Kosmos' 2022 and 2023 U.S. Gulf of Mexico production. The Company received $50 million from Trafigura under the Production Prepayment Agreement in June, and the Company may elect for Trafigura to advance two additional tranches of crude oil for up to $150 million, subject to finalizing additional commitments for $50 million.
Kosmos exited the second quarter of 2020 with approximately $614 million of liquidity(3) and $2.0 billion of net debt. Net debt increased by $66 million in the second quarter, largely driven by a build in working capital.
Despite the recent stabilizing of oil prices, the COVID-19 pandemic and its economic impact continue to create a challenging environment for the oil and gas sector. Kosmos’ response remains focused on safe and reliable operations by protecting the health of our employees and contractors, reducing the risk of the virus spreading in our operations, and minimizing the impact on our business. We are also working closely with the local communities in the countries we operate in around the world to fight the virus.
Total net production in the second quarter of 2020 averaged approximately 60,100 boepd(2), as expected, due to the previously announced shut-in of some U.S. Gulf of Mexico production during May (~6,000 boepd second quarter impact). Approximately 60% of total production during the quarter was sold during the month of April, which experienced particularly low oil prices and therefore had an impact on the Company's realized oil prices for the second quarter.
Production in Ghana continued to be unaffected by COVID-19, despite the previously disclosed offshore cases, and averaged approximately 28,700 barrels of oil per day (bopd) net in the second quarter of 2020, at the top end of guidance. As forecasted, Kosmos lifted three cargos from Ghana during the second quarter.
Jubilee continues to perform well with high reliability. Gross production rates averaged approximately 90,000 bopd during the quarter with consistent water injection and gas offtake since the work to enhance gas handling capacity was completed during the first quarter.
TEN production averaged approximately 50,000 bopd gross for the second quarter. The Ntomme-09 producer well is expected to come online shortly, which is expected to increase production rates.
Full year net production guidance in Ghana of 27,000-29,000 bopd and ten cargos is unchanged.
U.S. Gulf of Mexico
Production in the U.S. Gulf of Mexico averaged approximately 20,200 boepd net (80% oil) during the second quarter, including the impact of approximately 6,000 boepd shut-in during the quarter.
As a result of market conditions in the second quarter, the operator of the Delta House platform in the U.S. Gulf of Mexico shut-in the facility during the month of May 2020 and accelerated planned maintenance. The shut-ins were primarily limited to May 2020 and all shut-in fields were brought back online by early June 2020, allowing Kosmos to exit the second quarter at a rate of approximately 29,000 boepd net.
Full year net production guidance in the U.S. Gulf of Mexico remains at the low end of the of 24,000-28,000 boepd range.
Production in Equatorial Guinea continued to be unaffected by COVID-19 and averaged approximately 34,000 bopd gross and 11,200 bopd net in the second quarter of 2020. Kosmos lifted 1.5 cargos from Equatorial Guinea during the quarter, which includes half a cargo pushed from late-March into early April, as disclosed previously. Full year net production guidance of 11,000-13,000 bopd and cargo guidance of 4.5 cargos is unchanged.
Mauritania & Senegal
Phase 1 of the Greater Tortue Ahmeyim project continued to advance in the quarter despite COVID-19 mitigation measures in Mauritania and Senegal. The project is now approximately 40% complete. While the breakwater installation was disrupted as a result of COVID-19, other areas of development continue to progress well. The BP development carry is expected to cover all cash requirements through 2020. The planned sell down process of our interests in Mauritania and Senegal remains ongoing.