EX-99.1 2 kos_ex99x1.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

kos_logo.jpg
NEWS RELEASE
 

KOSMOS ENERGY ANNOUNCES THIRD QUARTER 2017 RESULTS

DALLAS--(BUSINESS WIRE)—November 6, 2017-- Kosmos Energy Ltd. (“Kosmos”) (NYSE: KOS) announced today financial and operating results for the third quarter of 2017. For the third quarter of 2017, the Company generated a net loss of $63.4 million, or $0.16 per diluted share as compared to net loss of $59.8 million or $0.15 per diluted share in the same period last year. When adjusted for certain items that impact the comparability of results, the Company generated an adjusted net loss(1) of $36.9 million or $0.09 per diluted share for the third quarter of 2017.

“Over the first nine months of 2017, our strong free cash flow has allowed us to reduce debt and to grow the value of our company through both organic and inorganic opportunities,” said Andrew G. Inglis, chairman and chief executive officer. “We have ramped up production at the TEN fields, progressed the Tortue project offshore Mauritania and Senegal with our partner BP, and acquired a strategic exploration and production position in Equatorial Guinea which is immediately accretive. Our exploration portfolio remains strong with four world-class prospects to be tested in Mauritania, Senegal, and Suriname over the next 12 months.”

Third quarter 2017 oil revenues were $151.2 million versus $46.6 million in the same quarter of 2016, on sales of 2.9 million barrels of oil in 2017 as compared to 0.9 million barrels in 2016. Third quarter 2017 oil revenues exclude $12.1 million of derivative settlements. Realized oil revenues, including the impact of the Company’s hedging program, were $55.57 per barrel of oil sold in the third quarter of 2017. At the end of the quarter, the Company was in a net underlift position of approximately 0.4 million barrels of oil.

Production expense for the third quarter was $39 million, or $13.33 per barrel, versus $14 million, or $14.33 per barrel, in the third quarter of 2016. The increase in total production expense was attributable to lifting two more cargoes than in the year ago quarter.

Exploration expenses totaled $37 million for the third quarter, compared to $66 million in the same period of 2016 primarily the result of lower geologic and geophysical costs. While Kosmos was carried for the Hippocampe-1 exploration well by BP, $21 million of expenses related to the drilling rig that are not eligible for reimbursement were expensed during the quarter.

Depletion and depreciation expense for the quarter was $73 million, or $25.01 per barrel. This was an increase from $18.84 per barrel in the third quarter of 2016, primarily a result of production from the TEN fields coming online, which has a higher depletion rate.

General and administrative expenses were $20 million during the third quarter, slightly less than the same period in 2016. This amount includes approximately $10 million in cash expense and $10 million in non-cash equity based compensation expense.



Third quarter results included a mark-to-market loss of $27 million related to the Company’s oil derivative contracts. At September 30, 2017, the Company’s hedging position had a total commodity net asset value of $1.6 million. As of quarter end, Kosmos had approximately 14 million barrels of oil hedged from 2017 to 2019.

Total capital expenditures in the third quarter were $61 million. In the first nine months of 2017 Kosmos spent approximately $217 million which was offset by the initial proceeds from the BP transaction of $222 million resulting in a credit to the capital budget of $5 million.

Kosmos exited the third quarter of 2017 with approximately $1.3 billion of liquidity and $890 million of net debt, including a year-to-date voluntary repayment of $250 million on our reserves-based lending facility in 2017.

Operational Update

Ghana

During the third quarter of 2017, gross sales volumes from Ghana averaged approximately 160,000 barrels of oil per day (bopd), including volumes from the Jubilee and TEN fields which averaged approximately 100,000 bopd and 60,000 bopd, respectively.

The Jubilee FPSO turret remediation project has continued to make good progress during the year. Following the spread mooring of the FPSO at its current heading in late February, optimization of the offtake procedures has allowed the Jubilee field to regularly produce in excess of 100,000 bopd. The Jubilee partners and the Government of Ghana have now agreed on the need to stabilize the turret bearing and rotate the FPSO. The operator estimates stabilization will require two shutdowns in early 2018, resulting in approximately four weeks of downtime. Planning for the rotation of the vessel to its optimal heading is ongoing, with work expected to begin around year-end 2018.

In mid-October, the partnership received approval for the Greater Jubilee Full Field Development Plan (GJFFDP) from the Government of Ghana. The approval of the GJFFDP establishes a price for gas sales and allows for drilling to resume in 2018, which is expected to increase production, extend the field production profile, and allow the Company to book additional proved reserves.
 
Production from TEN in the third quarter averaged approximately 60,000 bopd. In September, the Special Chamber of the International Tribunal of the Law of the Sea (ITLOS) issued its final decision in the maritime boundary dispute between the Governments of Ghana and Côte d'Ivoire. The maritime boundary delimited by the Special Chamber’s decision had no impact on the TEN field’s production or reserves or otherwise on the company’s interests in Ghana. The partnership expects to resume TEN development drilling in early 2018 to ramp up production with additional wells to the FPSO capacity of 80,000 barrels of oil per day.

Mauritania and Senegal

In August, Kosmos completed the drill stem test (DST) of the Tortue-1 well, demonstrating that the Tortue field is a world-class resource and confirming key development parameters including well deliverability, reservoir connectivity, and fluid composition. The Tortue-1 well flowed at a sustained, equipment-constrained rate of approximately 60 million cubic feet per day (MMcf/d) during the main, extended flow period, with minimal pressure drawdown, providing confidence in well designs that are each capable of producing approximately 200 MMcf/d. 

In September, Kosmos closed a farm-in agreement to acquire a 15% non-operated participating interest in Block C18 offshore Mauritania.




In early November the ENSCO DS-12 drilling rig completed plugging and abandonment operations at the Hippocampe-1 location offshore Mauritania and has mobilized to the Lamantin-1 exploration well location to commence drilling operations.

Sao Tome

In August 2017, Kosmos completed the acquisition of an approximately 16,000 square kilometer proprietary 3D seismic survey. This survey is the largest ever conducted in the Company's history, and potentially the largest proprietary 3D seismic survey conducted offshore West Africa.

(1)
A Non-GAAP measure, see attached reconciliation of adjusted net income.

Conference Call and Webcast Information

Kosmos will host a conference call and webcast to discuss third quarter 2017 financial and operating results today at 10:00 a.m. Central time (11:00 a.m. Eastern time). A live webcast of the event can be accessed on the Investors page of Kosmos’ website at investors.kosmosenergy.com. 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 leading independent oil and gas exploration and production company focused on frontier and emerging areas along the Atlantic Margins. Our assets include existing production and development projects offshore Ghana, large discoveries and significant further hydrocarbon exploration potential offshore Mauritania and Senegal, as well as exploration licenses with significant hydrocarbon potential offshore Suriname, Sao Tome and Principe, Morocco and Western Sahara. 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 2016 Corporate Responsibility Report. For additional information, visit www.kosmosenergy.com.

Non-GAAP Financial Measures

EBITDAX, Adjusted net income (loss) and Adjusted net income (loss) per share 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) depletion and depreciation, (ii) exploration expenses, (iii) interest and other financing costs, net, (iv) unrealized (gain) loss on commodity derivatives, (v) income tax expense, (vi) equity-based compensation, (vii) (gain) loss on sale of oil and gas properties, (viii) restructuring charges and (ix) similar other material items, which management believes affect the comparability of operating results. The Company defines adjusted net income (loss) as net income (loss) after adjusting for the impact of certain non-cash and non-recurring items, including non-cash changes in the fair value of derivative instruments, cash settlements on commodity derivatives, gain on sale of assets, and other similar non-cash and non-recurring charges, and then the non-cash and related tax impacts in the same period.

We believe that EBITDAX, Adjusted net income (loss), and Adjusted net income (loss) per share 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. Because EBITDAX, Adjusted net income (loss), and Adjusted net income (loss) per share excludes some, but not all, items that affect net income, these measures 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
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
Revenues and other income:
 
 
 
 
 
 
 
 
Oil and gas revenue
 
$
151,240

 
$
46,628

 
$
391,035

 
$
154,259

Other income, net
 
2

 
20,001

 
58,697

 
20,179

Total revenues and other income
 
151,242

 
66,629

 
449,732

 
174,438

 
 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
 
Oil and gas production
 
39,187

 
13,574

 
80,677

 
75,647

Facilities insurance modifications, net
 
(3,906
)
 
5,946

 
(1,334
)
 
5,946

Exploration expenses
 
36,983

 
66,238

 
162,679

 
126,498

General and administrative
 
20,029

 
21,914

 
50,555

 
59,672

Depletion and depreciation
 
73,490

 
17,838

 
180,909

 
66,031

Interest and other financing costs, net
 
18,478

 
11,066

 
54,729

 
30,268

Derivatives, net
 
26,864

 
(16,891
)
 
(36,404
)
 
33,752

Other expenses, net
 
5,037

 
(795
)
 
14,233

 
13,768

Total costs and expenses
 
216,162

 
118,890

 
506,044

 
411,582

 
 
 
 
 
 
 
 
 
Loss before income taxes
 
(64,920
)
 
(52,261
)
 
(56,312
)
 
(237,144
)
Income tax expense (benefit)
 
(1,515
)
 
7,502

 
44,401

 
(10,064
)
Net loss
 
$
(63,405
)
 
$
(59,763
)
 
$
(100,713
)
 
$
(227,080
)
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.16
)
 
$
(0.15
)
 
$
(0.26
)
 
$
(0.59
)
Diluted
 
$
(0.16
)
 
$
(0.15
)
 
$
(0.26
)
 
$
(0.59
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of shares used to compute net loss per share:
 
 
 
 
 
 
 
 
Basic
 
389,058

 
386,026

 
388,114

 
385,130

Diluted
 
389,058

 
386,026

 
388,114

 
385,130




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

 
 
September 30,
 
December 31,
 
 
2017
 
2016
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
164,162

 
$
194,057

Receivables, net
 
149,301

 
143,337

Other current assets
 
155,686

 
137,793

Total current assets
 
469,149

 
475,187

 
 
 
 
 
Property and equipment, net
 
2,258,401

 
2,708,892

Other non-current assets
 
242,898

 
157,386

Total assets
 
$
2,970,448

 
$
3,341,465

 
 
 
 
 
Liabilities and shareholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
100,302

 
$
220,627

Accrued liabilities
 
173,804

 
129,706

Other current liabilities
 
9,016

 
19,692

Total current liabilities
 
283,122

 
370,025

 
 
 
 
 
Long-term liabilities:
 
 
 
 
Long-term debt, net
 
1,080,352

 
1,321,874

Deferred tax liabilities
 
511,891

 
482,221

Other non-current liabilities
 
85,840

 
86,146

Total long-term liabilities
 
1,678,083

 
1,890,241

 
 
 
 
 
Total shareholders’ equity
 
1,009,243

 
1,081,199

Total liabilities and shareholders’ equity
 
$
2,970,448

 
$
3,341,465



Kosmos Energy Ltd.
Condensed Consolidated Statements of Cash Flow
(In thousands, unaudited)

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
Operating activities:
 
 
 
 
 
 
 
 
Net loss
 
$
(63,405
)
 
$
(59,763
)
 
$
(100,713
)
 
$
(227,080
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
 
Depletion, depreciation and amortization
 
76,042

 
20,389

 
188,563

 
73,684

Deferred income taxes
 
(8,197
)
 
3,108

 
32,820

 
(16,821
)
Unsuccessful well costs
 
20,910

 
309

 
24,515

 
2,609

Change in fair value of derivatives
 
33,020

 
(17,996
)
 
(25,924
)
 
37,179

Cash settlements on derivatives, net(1)
 
5,858

 
44,707

 
25,275

 
144,522

Equity-based compensation
 
9,616

 
9,229

 
29,945

 
30,391

Loss on equity method investment
 
4,804

 
—

 
11,230

 
—

Other
 
898

 
(1,711
)
 
3,412

 
13,358

Changes in assets and liabilities:
 
 
 
 
 
 
 
 
Net changes in working capital
 
32,380

 
(39,817
)
 
(94,711
)
 
(123,465
)
Net cash provided by (used in) operating activities
 
111,926

 
(41,545
)
 
94,412

 
(65,623
)
 
 
 
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
 
 
Oil and gas assets
 
(57,907
)
 
(88,552
)
 
(100,712
)
 
(506,256
)
Other property
 
(185
)
 
(402
)
 
(1,639
)
 
(1,003
)
Proceeds from sale of assets
 
—

 
14

 
222,068

 
210

Net cash provided by (used in) investing activities
 
(58,092
)
 
(88,940
)
 
119,717

 
(507,049
)
 
 
 
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
 
 
 
Borrowings on long-term debt
 
—

 
125,000

 
—

 
450,000

Payments on long-term debt
 
(50,000
)
 
—

 
(250,000
)
 
—

Purchase of treasury stock
 
(171
)
 
(132
)
 
(2,116
)
 
(1,930
)
Net cash provided by (used in) financing activities
 
(50,171
)
 
124,868

 
(252,116
)
 
448,070

 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
 
3,663

 
(5,617
)
 
(37,987
)
 
(124,602
)
Cash, cash equivalents and restricted cash at beginning of period
 
231,545

 
191,877

 
273,195

 
310,862

Cash, cash equivalents and restricted cash at end of period
 
$
235,208

 
$
186,260

 
$
235,208

 
$
186,260

 
(1)
Cash settlements on commodity hedges were $12.1 million and $44.7 million for the three months ended September 30, 2017 and 2016, respectively, and $36.4 million and $146.5 million for the nine months ended September 30, 2017 and 2016.


Kosmos Energy Ltd.
EBITDAX
(In thousands, unaudited)

 
 
 
 
 
 
 
 
 
Twelve Months
 
Three Months Ended
 
Nine Months Ended
 
Ended
 
September 30,
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
 
2017
Net loss
$
(63,405
)
 
$
(59,763
)
 
$
(100,713
)
 
$
(227,080
)
 
$
(157,413
)
Exploration expenses
36,983

 
66,238

 
162,679

 
126,498

 
238,461

Facilities insurance modifications, net
(3,906
)
 
5,946

 
(1,334
)
 
5,946

 
7,681

Depletion and depreciation
73,490

 
17,838

 
180,909

 
66,031

 
255,282

Equity-based compensation
9,616

 
9,229

 
29,945

 
30,391

 
39,638

Derivatives, net
26,864

 
(16,891
)
 
(36,404
)
 
33,752

 
(22,135
)
Cash settlements on commodity derivatives
12,078

 
44,748

 
36,426

 
146,514

 
77,862

Inventory impairment and other
(501
)
 
(3,047
)
 
(417
)
 
10,997

 
(696
)
Disputed charges and related costs
821

 
1,826

 
3,260

 
1,826

 
12,733

Loss on equity method investment
4,804

 
—

 
11,230

 
—

 
11,230

Interest and other financing costs, net
18,478

 
11,066

 
54,729

 
30,268

 
68,608

Income tax expense (benefit)
(1,515
)
 
7,502

 
44,401

 
(10,064
)
 
43,681

EBITDAX
$
113,807

 
$
84,692

 
$
384,711

 
$
215,079

 
$
574,932




Adjusted Net Income
(In thousands, except per share amounts, unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net loss
$
(63,405
)
 
$
(59,763
)
 
$
(100,713
)
 
$
(227,080
)
 
 
 
 
 
 
 
 
Derivatives, net
26,864

 
(16,891
)
 
(36,404
)
 
33,752

Cash settlements on commodity derivatives
12,078

 
44,748

 
36,426

 
146,514

Facilities insurance modifications, net
(3,906
)
 
5,946

 
(1,334
)
 
5,946

Inventory impairment and other
(501
)
 
(3,047
)
 
(417
)
 
10,997

Disputed charges and related costs
821

 
1,826

 
3,260

 
1,826

Loss on equity method investment
4,804

 
—

 
11,230

 
—

Total selected items before tax
40,160

 
32,582

 
12,761

 
199,035

 
 
 
 
 
 
 
 
Income tax expense on adjustments(1)
(13,630
)
 
(9,323
)
 
(8
)
 
(66,769
)
Adjusted net loss
$
(36,875
)
 
$
(36,504
)
 
$
(87,960
)
 
$
(94,814
)
 
 
 
 
 
 
 
 
Net loss per diluted share
$
(0.16
)
 
$
(0.15
)
 
$
(0.26
)
 
$
(0.59
)
 
 
 
 
 
 
 
 
Derivatives, net
0.07

 
(0.04
)
 
(0.09
)
 
0.09

Cash settlements on commodity derivatives
0.04

 
0.11

 
0.09

 
0.38

Facilities insurance modifications, net
(0.01
)
 
0.01

 
—

 
0.02

Inventory impairment and other
—

 
—

 
—

 
0.03

Disputed charges and related costs
—

 
—

 
0.01

 
—

Loss on equity method investment
0.01

 
—

 
0.02

 
—

Total selected items before tax
0.11

 
0.08

 
0.03

 
0.52

 
 
 
 
 
 
 
 
Income tax expense on adjustments(1)
(0.04
)
 
(0.02
)
 
0.00

 
(0.18
)
Adjusted net loss per diluted share
$
(0.09
)
 
$
(0.09
)
 
$
(0.23
)
 
$
(0.25
)
 
 
 
 
 
 
 
 
Weighted average number of diluted shares
389,058

 
386,026

 
388,114

 
385,130

 
(1)
Income tax expense is calculated at the statutory rate in which such item(s) reside. Statutory rate for Ghana is 35%.



Oil Revenue Summary
(In thousands, except barrel and per barrel data, unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net Oil Volume Sold (MMBbls)
2.939
 
0.947
 
7.830
 
3.791
 
 
 
 
 
 
 
 
Oil revenue
$
151,240

 
$
46,628

 
$
391,035

 
$
154,259

Cash settlements on commodity derivatives
12,078

 
44,748

 
36,426

 
146,514

Realized oil revenue
$
163,318

 
$
91,376

 
$
427,461

 
$
300,773

 
 
 
 
 
 
 
 
Per Barrel:
 
 
 
 
 
 
 
Oil revenue
$
51.46

 
$
49.24

 
$
49.94

 
$
40.69

Cash settlements on commodity derivatives
4.11

 
47.25

 
4.65

 
38.65

Realized oil revenue
$
55.57

 
$
96.49

 
$
54.59

 
$
79.34


Underlifted by approximately 425 thousand barrels as of September 30, 2017.

Hedging Summary
As of September 30, 2017(1) 
(Unaudited)

 
 
Volume
 
Floor(2)
 
Short Put
 
Ceiling
 
Long Call
 
 
(MMBbls)
 
 
 
 
 
 
 
 
2017 :
 
 
 
 
 
 
 
 
 
 
Swaps with puts/calls
 
0.503

 
$
72.50

 
$
55.00

 
$
—

 
$
90.00

Swaps with puts
 
0.503

 
$
64.95

 
$
50.00

 
$
—

 
$
—

Three-way collars
 
1.006

 
$
45.00

 
$
30.00

 
$
60.00

 
$
—

 
 
 
 
 
 
 
 
 
 
 
2018 :
 
 
 
 
 
 
 
 
 
 
Three-way collars
 
2.913

 
$
56.57

 
$
41.57

 
$
65.90

 
$
—

Four-way collars
 
3.000

 
$
50.00

 
$
40.00

 
$
61.33

 
$
70.00

Swaps
 
1.000

 
$
57.25

 
 
 
 
 
 
Swaps with puts
 
4.000

 
$
56.14

 
$
42.50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 :
 
 
 
 
 
 
 
 
 
 
Three-way collars
 
4.500

 
$
50.00

 
$
40.00

 
$
62.78

 
$
—

 
(1)
Please see the Company’s filed 10-Q for full disclosure on hedging material. Includes hedging position as of September 30, 2017 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 $85.00/Bbl in 2017, 2.0 MMBbls of sold (short) calls with a strike price of $65.00/Bbl in 2018, and 0.9 MMBbls of sold (short) calls with a strike price of $80.00/Bbl in 2019.



Source: Kosmos Energy Ltd.


Investor Relations
Neal Shah
+1-214-445-9628
nshah@kosmosenergy.com


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rwilliams@kosmosenergy.com


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+1-214-445-9674
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