KOS

Kosmos Energy Ltd. Q1 2026 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026. Kosmos Energy Ltd. is a deepwater exploration and production company with operations in Ghana, Equatorial Guinea, Mauritania/Senegal, and the Gulf of America. The company reported a net loss for the quarter, driven primarily by significant unrealized losses on commodity derivatives, despite increased production volumes and revenue.

Key Financial Metrics

Note: Net Debt excludes the $80.1 million TEN FPSO finance lease liability for this calculation, though it is included in the debt cover ratio.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased by $80.6 million (27.8%) year-over-year, driven by higher production volumes at the Jubilee field (Ghana) and the Greater Tortue Ahmeyim (GTA) project (Mauritania/Senegal), which operated at 5% above nameplate capacity.
• Derivative Losses: The company recorded a net loss of $252.0 million on derivatives in Q1 2026, compared to $6.7 million in Q1 2025. This was due to changes in the forward oil price curve impacting mark-to-market valuations.
• Production Costs: Total oil and gas production costs decreased by $36.7 million to $130.6 million, resulting in a lower average cost per Boe ($19.66 vs. $37.64), primarily due to reduced workover expenses and routine operating costs.
• Debt Restructuring: The company fully redeemed the remaining $100 million of 7.125% Senior Notes due 2026 and repurchased $249.8 million of 7.750% Senior Notes using proceeds from new debt issuances.

Guidance, Outlook, and Risks

• Capital Program: Kosmos estimates a 2026 capital budget of approximately $350 million, allocated to maintenance in Ghana and the Gulf of America ($275M), development programs ($60M), and facilities integrity in Equatorial Guinea ($15M).
• Divestiture: The company entered an agreement to sell its 40.4% interest in the Ceiba Field and Okume Complex (Equatorial Guinea) for $180 million upfront plus up to $39.5 million in contingent consideration. Assets are classified as "held for sale."
• Liquidity and Covenants: The company raised $350 million via Nordic bonds and $206.4 million via a common stock offering. The Facility borrowing base was set at $1.25 billion (reducing to $1.2 billion post-divestiture). The debt cover ratio exceeded the 2.50x threshold, triggering a requirement to fund a restricted cash balance of approximately $47.0 million, though the company is seeking a waiver extension.
• Operational Updates:
  • Ghana: Jubilee license extended to 2040; two new producer wells brought online.
  • Gulf of America: Final investment decision made on the Tiberius project (first oil targeted H2 2028).
  • Mauritania/Senegal: GTA production averaged 69,800 Boepd gross.
• Risks: Key risks include commodity price volatility, the timing of the Equatorial Guinea divestiture closing, and compliance with financial covenants under the Facility and GoA Term Loan.

Investor Verification Checklist

• Derivative Exposure: Verify the impact of the $171.2 million net liability position on derivatives and the sensitivity of future earnings to oil price changes (10% price increase decreases pre-tax earnings by ~$77.8 million).
• Divestiture Closing: Monitor the status of the Ceiba/Okume Complex sale to Panoro Energy, as closing is expected mid-2026 but remains subject to regulatory approval.
• Covenant Compliance: Confirm the status of the waiver for the restricted cash funding requirement under the Facility, as failure to secure it may impact liquidity in Q2 2026.
• Debt Maturities: Review the repayment schedule, noting significant principal maturities in 2027 ($281M) and 2028 ($846M), and the refinancing strategy for the 7.750% notes maturing in 2027.
• Production Volumes: Validate the sustainability of GTA production levels above nameplate capacity and the timeline for Tiberius first oil.