In Shooting for the Stars, Kosmos’ Production Soars

Star projects in Kosmos Energy’s operational portfolio are shining bright.

The independent E&P known for its geologically-based approach to identifying petroleum systems and its low-carbon investment opportunities saw a 12% increase in net production to reach 66,000 boe/d.

The growth was driven by increased reserve recognition at Jubilee and the start-up of its brightest star, the Jubilee Southeast project. Kosmos is on track to hit its production growth target of 90,000 boe/d by the end of 2024, said Andrew Inglis, CEO of Kosmos, during the company’s Feb. 26 earnings call.

“2024 is a catalyst-rich year with Jubilee ramp up and Winterfell first oil both expected in the coming months.”

In addition to Jubilee Southeast, a number of other projects for Kosmos have either begun production or are on track to begin soon: the first wells in Phase 1 of the Winterfell project in the U.S. Gulf of Mexico (GoM) have been drilled, oil was discovered at the Tiberius ILX well in the GoM, Phase 1 of the Tortue development is 90% complete and Kosmos has assumed operatorship of Yakaar-Teranga in Senegal.

But even with fourth quarter 2023 seen as a success for Kosmos, it wasn’t without its hiccups.

“Production for the year was in line with the updated guidance we provided last quarter, with [fourth quarter] production at the lower end of the range due to the water injection issues that Jubilee flagged earlier,” Neal Shah, CFO of Kosmos said during the call. “Issues have now been resolved.”

As Kosmos continues to shoot for the stars, the company seems to be maintaining a solid trajectory with a net income of $22 million and adjusted net income of $149 million for the fourth quarter, in addition to its significant increase in production. Kosmos made $508 million in revenue for the fourth quarter, down from the $526 million in revenue generated in the previous quarter. Fortunately, production expenses were only $104 million, notably less than the $139 million in the third quarter.

Opex for the quarter was higher than anticipated, Shah said, due to higher workover costs for rig activity in Block G in Equatorial Guinea. Trident Energy, operator of the field, eventually terminated the rig contract for safety issues, which should result in lower opex in the future. Capex for the quarter was higher than expected at $281 million as inventory related to the Equatorial Guinea drilling program arrived earlier than expected.

Future guidance

Looking ahead, Kosmos has a plethora of projects coming online soon to take its production over the moon.

First oil at Winterfell is expected in the second quarter of 2024 in what Inglas called an “important milestone for our Gulf of Mexico business.”

And the start up of Tortue is expected to boost Kosmos’ production to more than 90,000 boe/d/

“With a targeted 50% increase in production by year end 2024, as measured against the first half of 2022, we expect our free cash flow to grow materially at mid cycle oil prices,” Inglis said. “As these projects deliver, capex is expected to fall sharply.”

Once both Tortue and Winterfell come online, Inglis expects annual capex in 2025 to return to a steadier number of approximately $550 million, as opposed to the $850 million in capex Kosmos reached in 2023. With growing production and falling capex, Kosmos will reach an “inflection point,” according to Inglis, with quarterly free cash flow expected to be in the $100 million to $150 million range.

Continuing with its 2024 guidance, full year guidance for the Ghanaian projects is around 116,500 bbl/d, with 100,000 bbl/d coming from Jubilee and the remaining production coming from the TEN Field in Ghana, which Kosmos has partnered in since its discovery in 2009.

In Equatorial Guinea, Kosmos expects production of approximately 8,000 bbl/d of oil, while in the GoM, production is expected to range from 15,500 boe/d to 17,000 boe/d. Inglis said final investment decision of the Tiberius development is expected in 2024, with the project having a development timeline of 18 months to 24 months.