Kosmos Swings to Profit as Pricing Lifts Revenue
Free cash flow rose to about $89 million as stronger commodity prices outweighed lower production.
Kosmos Energy (KOS), the oil and gas producer, swung to second-quarter net income of $185 million, or $0.31 a diluted share, from a first-quarter loss of $226 million, or $0.45 a share.
The reversal reflected a sharp pricing lift even as production retreated from a record. Revenue rose about 64% sequentially to $607 million, while average sales revenue increased to $86.68 per barrel of oil equivalent from $55.81. Net production declined about 5% to 71,400 barrels of oil equivalent a day, though it remained 12% above the year-earlier quarter.
Adjusted income was $68 million, or $0.11 a diluted share, compared with an adjusted loss of $36 million, or $0.07 a share, in the first quarter. Average oil pricing rose to $108.57 a barrel from $66.10 a year earlier, but commodity hedges reduced revenue by $105.4 million. Realized revenue after hedging increased to $71.64 per barrel of oil equivalent from $60.64.
The Greater Tortue Ahmeyim ramp-up shifted the sales mix toward gas. Total volumes increased 5% from a year earlier as gas volumes rose 72%, offsetting a 15% decline in oil volumes. GTA supplied nine gross LNG cargoes during the quarter, bringing first-half liftings to 18.5, and Kosmos reiterated its full-year forecast of 32 to 36 cargoes.
Higher activity carried additional costs. Production expense increased to $179 million, or $25.61 per barrel of oil equivalent, from $131 million in the first quarter, although the total remained about 25% below the year-earlier period. Cash provided by operations rose to about $175 million from $107 million sequentially, while free cash flow increased from $14 million. Capital spending climbed to $105 million, and the company maintained its full-year budget of about $350 million.
Kosmos completed the sale of its Equatorial Guinea production assets for about $127 million in final cash consideration and used the proceeds to repay reserve-based lending borrowings. Following the sale, the company introduced adjusted 2026 production guidance of 69,000 to 74,000 barrels of oil equivalent a day and operating-expense guidance of $19 to $21 per barrel of oil equivalent. Net debt fell 14% from year-end to $2.563 billion, keeping Kosmos on course toward its target of reducing debt by roughly 20% during 2026.
GTA production eased below its floating-LNG facility's nameplate capacity as warmer seasonal temperatures reduced output, while Kosmos expected new wells to lift Jubilee production above 90,000 barrels a day. Winterfell-5 was temporarily abandoned in July after production-casing problems, adding a new operational setback.
After the quarter, Kosmos completed a Tiberius farm-down that reduced its interest to 33.34%. The company expects the consideration from Navitas to cover its project spending through 2026 and into mid-2027, extending the debt-reduction push into its development portfolio.