- The producer-explorer is to keep its 30 per cent stake in a major gas project, after a failed sales attempt
- Results for the three months to September showed an adjusted net loss of $50m
Kosmos Energy (KOS) has set out a plan to fund its share of the massive Greater Tortue Ahmeyim (GTA) West African offshore gas project, rather than selling down its stake. The oil and gas company made the announcement alongside results for the three months to September, which included an adjusted loss of $50m (£38m), from a $17m profit in the third quarter of 2019.
Kosmos has struggled on low oil prices, although its sales price per barrel climbed to $41 in the period, up from $26 in the June quarter. However, production of 56,700 barrels of oil equivalent per day (boepd) was down from 60,100boepd in the previous quarter, because of rough weather in the Gulf of Mexico and Covid-19 constraints.
Of greater significance to longer-term shareholder value is the updated plan for GTA plan. Kosmos owns 30 per cent of the BP (BP.)-operated project, which it had initially hoped to reduce to 10 per cent in order to establish a “self-funded gas business”. This had first been expected by the end of 2019, but a new discovery in the licence area in October last year saw the sale pushed back. GTA has been in development during this time, and will be about halfway to production at the end of 2020.
Kosmos chief executive Andrew Inglis said now was "not the optimal time" to sell the GTA stake.
A new financing plan reduces Kosmos' expected spending on the major project, while the group has also committed to find $100m in new cash from a loan rearrangement. BP and Kosmos will now sell GTA’s under-construction floating production, storage and offloading (FPSO) vessel to a third party for the amount so far spent on the ship, $160m net to Kosmos. Removing future spending on the ship will save the company $160m as well. This is not the end of the job, however, as “further financing” will be required by mid-2021.
Kosmos shares, trading near the all-time low level of the March crash, were down 5 per cent on this update to 79p. Without the cash influx from two-thirds of the GTA stake, Kosmos has a real task on its hands to fund its position at the same time as earnings have crashed. Sell.
Last IC View: Sell, 119p, 3 Aug 2020
