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Kosmos Energy Ltd. (KOS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was operationally stronger (production +3% q/q to ~65.5k boepd; GTA ramp-up and Jubilee well added ~10k bopd), but financially soft: revenue $311.2M, adjusted EPS -$0.15, GAAP EPS -$0.26 due largely to Winterfell-4 write-off and higher exploration expense .
  • Versus consensus, Kosmos missed on revenue ($311.2M vs $354.1M*) and EPS (-$0.15 vs -$0.134*), marking the third straight quarter of top- and bottom-line shortfalls; cost control improved (production expense down ~39% q/q, cost/boe down to $26.78) and EBITDAX remained positive . Values retrieved from S&P Global.*
  • Guidance trimmed: FY production to ~65k boepd (from 65–70k), G&A lowered to ~$75M, CapEx cut to < $350M, net interest expense raised to ~$220M; Q4 production guided at 66–72k boepd as GTA targets nameplate and second Jubilee producer comes online .
  • Balance sheet actions: $250M Shell term loan (first $150M used post quarter to partially redeem 2026 notes), RBL redetermination completed with borrowing base > $1.35B facility; hedges expanded to 8.5MM bbls in 2026 (floor ~$66) to stabilize near-term cash flows .
  • Potential stock catalysts: sustained GTA nameplate volumes, Jubilee well delivery cadence, TEN FPSO purchase to lower OpEx, and secured debt options against GTA to address 2027 maturities .

What Went Well and What Went Wrong

What Went Well

  • GTA ramped materially: 6.8 gross LNG cargos in Q3; 13.5 cargos through October and first condensate cargo lifted, with path to nameplate by year-end and unit costs targeted to fall >50% in 2026 .
  • Jubilee execution: first producer of 2025/26 campaign averaged ~10k bopd gross; rig spud second producer in mid-October with more wells scheduled into 2026; OBN seismic to enhance future well placement .
  • Costs trending down: production expense fell to $148M (ex-GTA $19.51/boe), CapEx $67M below guidance; overhead reductions on-track for $25M by year-end .

“Through rising production and this focus on costs, we expect unit costs to fall by over 50% next year.” — Andrew Inglis, CEO .

What Went Wrong

  • Gulf of America setback: Winterfell-4 abandoned due to casing collapse, triggering ~$51.1M write-off; 2026 activity refocused on restoring Winterfell-3 fault block .
  • Higher exploration and interest costs pressured earnings: exploration expenses rose to $54.9M; interest and financing costs $57.9M in Q3 .
  • Free cash flow negative in Q3 (-$98.9M) on working capital draw tied to GTA Phase 1 completion; operating cash flow -$27.6M, liquidity ~$540M at quarter-end .

Financial Results

Core metrics vs prior quarters

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$290.4 $393.5 $311.2
Diluted EPS (GAAP, $)-$0.23 -$0.18 -$0.26
Adjusted EPS (Non-GAAP, $)-$0.22 -$0.19 -$0.15
EBITDAX ($USD Millions)$103.6 $149.5 $153.6
Net Production (boepd)~60,500 ~63,500 ~65,500
Realized revenue per Boe ($)$64.87 $60.64 $55.97
Production costs per Boe ($)$37.64 $36.49 $26.78

Actual vs S&P Global consensus and surprise

MetricQ1 2025Q2 2025Q3 2025
Revenue Actual ($USD Millions)$290.4 $393.5 $311.2
Revenue Consensus Mean ($USD Millions)*$319.2*$398.3*$354.1*
Revenue Surprise ($USD Millions)*-$28.8*-$4.8*-$42.9*
Primary EPS Actual ($)*-$0.22*-$0.19*-$0.15*
Primary EPS Consensus Mean ($)*-$0.0775*-$0.088*-$0.134*
EPS Surprise ($)*-$0.1425*-$0.102*-$0.016*

Values retrieved from S&P Global.*

Segment and operational breakdown (Q3 2025)

AreaNet Production (boepd)Liftings/CargoesNotes
Mauritania & Senegal (GTA)~11,400 6.8 gross LNG cargos lifted; first gross condensate cargo post quarter Startup maintenance on 3 FLNG trains; targeting nameplate in Q4
Ghana (Jubilee/TEN)~31,300 2 cargos lifted Jubilee gross oil ~62,500 bopd; second producer spud mid-Oct
Gulf of America~16,600 (~84% oil) N/AWinterfell-4 write-off; ODD JOB/Kodiak strong; Tiberius PHA executed
Equatorial Guinea~6,200 net; 17,700 gross bopd 0.7 cargo lifted Subsea pump failures; repairs underway through Q4/Q1’26
Underlift positionN/AUnderlift ~0.6 mmboe at 9/30/25 —

KPIs

KPIQ1 2025Q2 2025Q3 2025
Net Volume Sold (MMBoe)4.445 6.663 5.515
Sales Price per Boe ($)65.27 58.93 56.39
Realized Revenue per Boe ($)64.87 60.64 55.97
Avg Oil Price per Bbl ($)73.90 66.10 67.30
Underlift (mmboe)~1.2 ~0.3 ~0.6
CapEx ($USD Millions)$86 $86 $67
Operating Cash Flow ($USD Millions)-$0.9 $127.2 -$27.6
Free Cash Flow ($USD Millions)-$91.1 $44.6 -$98.9

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2025)Current Guidance (Q3 2025)Change
Production (Company)FY 202565,000–70,000 boepd ~65,000 boepd Lowered
Production (Company)Q4 2025N/A66,000–72,000 boepd New detail
Opex (ex-GTA)FY 2025$22–$24/boe ~$22/boe Lowered
DD&AFY 2025$22–$24/boe $22–$24/boe Maintained
G&A (~66% cash)FY 2025$80–$100M ~$75M Lowered
Exploration ExpenseFY 2025$25–$45M $25–$45M Maintained
Net Interest ExpenseFY 2025~ $200M ~$220M Raised
TaxFY 2025$4–$6/boe $4–$6/boe Maintained
Capital ExpenditureFY 2025~$350M < $350M Lowered
GTA OpEx (net)FY 2025~$225–$245M ~$225–$245M; $45–$55M in Q4 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3)Trend
GTA ramp-up and costsCOD achieved; 3.5 cargos in Q2; targeting 2.7 mtpa in Q4; focus on FPSO refinancing and lower-cost ops 6.8 cargos in Q3; 13.5 through Oct; first condensate cargo; expect >50% unit cost reduction in 2026 Improving volumes; accelerating cost initiatives
Jubilee drilling programJ-72 online ~10k bopd; 2026 program planned; NAZ/OBN seismic processing to inform infill Second producer spud mid-Oct; 5 more wells in 2026 incl. water injector; exit 2025 ~70k bopd Jubilee; OBN underway Execution progressing; enhanced subsurface imaging
Gulf of America (Winterfell)W-4 expected online Q3; W-3 remediation unsuccessful; GOM production ~19.6k boepd W-4 abandoned; ~$51.1M write-off; refocus on W-3 block in 2026 Operational reset; near-term production restoration
Balance sheet and liquidityRBL redetermination; indicative terms for $250M secured loan $250M Shell term loan executed; $150M applied to 2026 notes; planning secured options vs 2027 bonds; passed liquidity test De-risking maturities; improving optionality
Hedging~5MM bbls 2025 hedged; starting 2026 hedges 2.5MM bbls 2025 floor ~$62; 8.5MM bbls 2026 floor ~$66; >50% H1 2026 hedged Increased downside protection
TEN/OpEx optimizationTEN production ~15.9k gross; planning pump replacements TEN FPSO purchase agreement being finalized; ~60% of cost is lease; target lower OpEx Structural cost actions underway

Management Commentary

  • “We set out this year with three clear priorities: Increase production, reduce costs and enhance the resilience of the balance sheet… we have continued to make good progress against each of these priorities.” — Andrew Inglis, CEO .
  • “Operating costs were down almost 40% quarter on quarter… CapEx of $67 million came in lower than guidance… full-year CapEx below our $350 million forecast.” — Neal Shah, CFO .
  • “We now have 8.5 million barrels of oil hedged next year, with a floor of $66 and a ceiling of $73 per barrel.” — Neal Shah, CFO .
  • “We expect unit costs to fall by over 50% next year [at GTA]… we continue to advance Phase 1+ targeting online in 2029.” — Andrew Inglis, CEO .
  • “We plan to focus next year's activity on restoring production from the Winterfell #3-#4 block… lessons learned: keep it simple, rigorous planning and execution.” — Andrew Inglis, CEO .

Q&A Highlights

  • TEN FPSO purchase: Structure aims for no additional payments until a discounted buyout in 2027; lease is >60% of TEN OpEx; expected to materially lower OpEx post purchase .
  • GTA OpEx trajectory: Quarterly OpEx net to Kosmos trending ~$70M (Q2) → ~$60M (Q3) → ~$50M (Q4 midpoint); targeting ~$6/MMBtu break-even and lower in 2026 .
  • Winterfell lessons: Operational issues (screen pack-off, casing collapse) vs reservoir; 2026 plan refocused on a simple recompletion to restore production .
  • Condensate cargo treatment: First cargo lifted by partnership; Kosmos receives pro-rata cash flow in Q4; future liftings to alternate among partners/NOCs .
  • Covenants/liquidity tests: Waiver to 4.0x for September test; year-end test 4.25x using Dec 31 financials; mitigation options in-flight; liquidity test for 2027s passed .

Estimates Context

  • Q3 2025: Revenue $311.2M vs $354.1M consensus (miss), EPS -$0.15 vs -$0.134 consensus (miss). Prior quarters also missed on both metrics (Q2: -$4.8M revenue, -$0.102 EPS; Q1: -$28.8M revenue, -$0.1425 EPS). Values retrieved from S&P Global.*
  • Estimate revisions likely to reflect lower FY production (65k boepd), higher net interest ($220M), and lower FY CapEx (<$350M), with improving unit costs and growing volumes into 2026 as GTA reaches nameplate and Jubilee adds wells .

Key Takeaways for Investors

  • Production trajectory is upward: GTA approaching nameplate and Jubilee well cadence should lift volumes sequentially through 2026, supporting EBITDAX and cash generation .
  • Cost base is improving: OpEx per boe fell to $26.78; management targets >50% GTA unit cost reduction in 2026; TEN FPSO purchase should structurally reduce OpEx .
  • Near-term FCF remains sensitive to cargo timing and oil prices; hedging (floors ~$62 in 2025, ~$66 in 2026) provides downside protection while CapEx and overhead cuts improve resilience .
  • Balance sheet de-risking: $250M Shell loan addresses 2026 notes; secured options vs GTA contemplated for 2027s; RBL base remains > facility size .
  • Watch for delivery milestones: GTA nameplate attainment, Jubilee second producer online by year-end, pump repairs in EG, and TEN FPSO transaction signing — each could catalyze sentiment .
  • Risk flags: Operational execution in GOM (Winterfell remediation) and covenant headroom into the year-end test; management indicated active mitigations .
  • Medium-term thesis: With Phase 1+ low-capex expansion (domestic gas) and potential Gimi debottlenecking (10–20% LNG increment), Kosmos can expand throughput with limited capital, improving unit economics by 2029 .