Management View
- Andrew Inglis, Chairman & CEO, reiterated that Kosmos’ key priorities remain unchanged, focusing on growing production, reducing costs, and strengthening the balance sheet. “We’ve made important progress across all 3 of these areas this quarter.” (Chairman & CEO Andrew Inglis)
- At Jubilee, a new producer well came online in July, delivering around 10,000 barrels of oil per day. Drilling efficiencies have allowed an increase in the 2026 drilling campaign from 4 to 5 wells without exceeding the original budget.
- GTA production ramped up, with the partnership lifting 13.5 gross LNG cargos by the end of October and the first condensate cargo, introducing a new revenue stream. The company targets reaching the FLNG nameplate capacity of 2.7 million tonnes per annum by year-end.
- Gulf of America production remained strong, with continued progress on Tiberius and Gettysburg developments. Equatorial Guinea is set for increased production as repaired subsea pumps are installed, with normalized output expected in the first half of 2026.
- CapEx is forecasted to be below $350 million for the year, a reduction of about $500 million year-on-year. Overhead savings of $25 million are expected by year-end, with full benefits in 2026 and beyond. Operating costs are declining across all businesses, with significant OpEx reduction targeted at GTA as production increases.
- The company secured a $250 million term loan from Shell, used to repay outstanding 2026 bond maturities, and completed the RBL semi-annual redetermination, passing the 2027 bonds maturity test. “Operating costs were down almost 40% quarter-on-quarter with improvements across all our business units.” (Senior VP, Chief Commercial Officer & CFO Neal Shah)
Outlook
- Management expects production to continue growing, with current levels in the low 70,000s barrels of oil equivalent per day and more increases anticipated as GTA approaches nameplate and the second Jubilee producer well comes online by year-end.
- CapEx for the full year is expected to be below $350 million. Shah stated, “we are firmly on track to close out the year with full year CapEx below our $350 million forecast.”
- The company is targeting further unit cost improvements at GTA, aiming for a “unit cost to fall by over 50% next year.”
- Jubilee production is anticipated to exit 2025 at around 70,000 barrels per day, with a path to sustain production in the 80,000s as new wells come online and decline rates are managed.
Financial Results
- Production increased sequentially due to the new Jubilee well and GTA ramp-up. Current production is in the low 70,000s barrels of oil equivalent per day.
- Operating costs declined nearly 40% quarter-on-quarter, reflecting focus on cost reduction and lower lifting costs.
- CapEx for Q3 was $67 million, with year-to-date CapEx just under $240 million.
- The company used the first tranche of the Shell facility to repay $150 million of 2026 unsecured notes and plans to use the remainder for additional debt repayment in early 2026.
- Kosmos has 2.5 million barrels of 2025 oil production hedged at $62 per barrel floor and $77 ceiling, and 8.5 million barrels hedged for 2026 at a $66 floor and $73 ceiling.
Q&A
- Matthew Smith, BofA Securities, asked about the financial implications of the TEN FPSO sale and repurchase agreement. Shah responded, “no additional payments in terms of what we’re paying for the lease until a sort of closeout payment in 2027…it would be done on very attractive terms.”
- Bob Brackett, Bernstein, inquired about GTA OpEx reduction, estimating a move towards $30 per barrel. Shah explained current costs and projections: “we’re at $70 million in 2Q, $60 million in 3Q, and we’re expecting at the midpoint of guidance about $50 million per quarter net to Kosmos in 4Q.”
- Neil Mehta, Goldman Sachs, focused on the balance sheet and liquidity risk. Shah emphasized, “we continue to be proactive in terms of getting in front of the refinancing issues…we’re doing all the things we said we would.”
- Charles Meade, Johnson Rice, probed cargo timing and condensate revenue. Shah clarified the timing impact and revenue allocation: “there will be, again, a nice source of additional income for the partnership.”
Sentiment Analysis
- Analysts expressed cautious optimism, pressing for more detail on cost reductions, balance sheet strategies, and production sustainability. Tone was probing but constructive, with repeated focus on liquidity, OpEx, and drilling execution.
- Management’s tone was confident and disciplined in both prepared remarks and Q&A, highlighting cost management, production growth, and proactive debt actions. Quotes like “we remain confident that we have a unique, world-class portfolio of assets” reflected continued optimism.
- Compared to last quarter, management maintained a similar tone of measured confidence with more detail on cost achievements and balance sheet actions, while analysts continued to scrutinize execution and risk.
Quarter-over-Quarter Comparison
- Guidance for CapEx remains below $350 million, with a further absolute reduction from last quarter’s forecast.
- Production growth was emphasized more strongly, with current levels in the low 70,000s barrels of oil equivalent per day compared to approaching record highs last quarter.
- Analysts’ focus shifted from concerns over Jubilee decline rates and GTA ramp-up to more granular questions about cost structure and future production sustainability.
- Management provided more operational detail and proactive commentary on balance sheet strategies, compared to prior quarter’s focus on general progress and strategic objectives.
Risks and Concerns
- Operational risks at Winterfell were highlighted, with management noting recent well abandonment due to completion challenges and emphasizing a “keep it simple” approach for future operations.
- Analysts raised concerns about the company’s ability to maintain compliance with leverage covenants and manage upcoming debt maturities.
- Management is pursuing multiple strategies for liquidity, including secured debt options and non-core asset divestments, to address maturities and strengthen the balance sheet.
- There is continued sensitivity to commodity price volatility and its impact on free cash flow generation.
Final Takeaway
Kosmos Energy’s management emphasized a disciplined approach to production growth, cost reduction, and balance sheet resilience, with production nearing record highs, CapEx firmly under control, and operating costs falling across key assets. The company outlined concrete steps to address near-term debt maturities, optimize asset performance, and sustain growth through 2026, reinforcing confidence in the ability to deliver long-term value for shareholders.