Kosmos Energy Outperforms Q4 Expectations Amid Production Challenges

Kosmos Energy Ltd KOS reported a fourth-quarter fiscal 2023 revenue decline of 10% year-over-year to $507.81 million, beating the consensus of $477.73 million.

Net production came in at around 66,000 barrels of oil equivalent per day (boepd), an increase of 12% YoY, with sales of about 73,000 boepd in the quarter.

The company stated that quarterly production was affected by decreased water injection at Jubilee, which has now been resolved. With new wells at Jubilee and the launch of Winterfell and Tortue LNG projects, production is set to increase throughout the year.

The company exited the quarter in a net overlift position of approximately 0.2 million barrels. Realized pricing declined to $75.03 per boe (including derivative cash settlements) from $75.62 per boe.

Pro Forma EBITDAX increased to $389.02 million from $332.17 million a year ago. Adjusted EPS was $0.31, surpassing the consensus of $0.24.

Net capital expenditure for the quarter stood at $281 million, higher than expected primarily due to the accelerated timing of long-lead equipment purchases for the Equatorial Guinea infill and ILX drilling program.

Operating cash flow for the fiscal 2023 totaled $765.17 million compared to $1.13 billion a year ago. As of December 31, cash and cash equivalents stood at $95.34 million, and total long-term debt of around $2.4 billion. 

Kosmos had 1P reserves of ~280 million barrels of oil equivalent (boe) at the end of 2023, representing a 1P reserves-to-production ratio of around 12 years and a reserve replacement ratio of 104%, primarily as a result of increased reserve recognition at Jubilee. 

2024 Outlook: KOS expects the production of 71,000 – 77,000 boe per day and capital expenditure of $700 million – $750 million.

For Q1, the company expects capital expenditure of $275 million – $325 million and production of ~ 65,000 – 68,000 boe per day.

Price Action: KOS shares traded lower by 3.1% at $5.78 on the last check Monday.