Executive Summary / Key Takeaways

• Strategic Pivot to Free Cash Flow: Kosmos Energy is undergoing a significant transformation, shifting from a capital-intensive growth phase to prioritizing robust free cash flow generation, primarily aimed at debt reduction and strengthening its balance sheet.
• Operational Milestones Driving Production: The Greater Tortue Ahmeyim (GTA) LNG project achieved Commercial Operations Date (COD) in June 2025, with production ramping towards nameplate capacity. Concurrently, renewed drilling in Ghana's Jubilee field and ongoing developments in the Gulf of America are set to drive substantial production growth through 2026.
• Rigorous Cost Discipline: The company has sharply reduced its 2025 capital expenditure guidance to $350 million, down over 50% from prior years, and is targeting $25 million in annual overhead savings, underpinning a projected business breakeven of $50-$55 per barrel.
• Enhanced Financial Resilience: Proactive debt management, including a new $250 million term loan to address 2026 maturities and an active hedging program, is fortifying the balance sheet, with a target to reduce leverage below 1.5 times by late 2026.
• Technological Edge and Long-Life Assets: Kosmos leverages advanced seismic imaging (4D and OBN) and AI-enhanced reservoir management to maximize recovery from its diversified, long-life asset base, which boasts a 2P reserve life exceeding 20 years, providing significant organic running room.

Unlocking Deepwater Potential: Kosmos's Strategic Evolution

Kosmos Energy Ltd. stands as a leading deepwater exploration and production company, strategically positioned to meet the world's growing demand for energy. Founded in 2003, Kosmos has built a diversified portfolio of world-scale oil and gas assets across Ghana, Equatorial Guinea, Mauritania, Senegal, and the Gulf of America. This portfolio is characterized by its longevity, boasting a 2P reserve life of over 20 years, extending to approximately 30 years when including 2C resources. The company's oil assets benefit from inherently low operating costs and high cash margins, while its gas assets are poised for significant revenue growth and expanding margins, aligning with the increasing role of gas and LNG in the global energy mix.

The company's journey has been marked by pivotal exploration successes, notably the 2015 Tortue discovery, which unveiled a massive 25 TCF gas field. This led to a strategic partnership with BP (BP), where Kosmos farmed out the Greater Tortue Ahmeyim (GTA) project, securing substantial funding for its development. This historical context of significant discoveries and strategic partnerships has shaped Kosmos's current trajectory, which is now firmly focused on maximizing cash generation, implementing rigorous cost controls, and fortifying its financial resilience. This strategic pivot is critical as the company transitions from a period of heavy capital investment to realizing the benefits of its developed assets.

Technological Moats: Precision in the Deepwater Frontier

A cornerstone of Kosmos's strategy and a key competitive differentiator lies in its advanced technological capabilities, particularly in seismic imaging and reservoir management. The company is at the forefront of applying cutting-edge techniques to enhance resource recovery from its mid-life fields and derisk new developments.

For instance, in Ghana's Jubilee field, Kosmos initiated a new 4D seismic survey in early 2025, the first in nearly eight years. This modern 4D data, processed with state-of-the-art algorithms, is generating a significantly improved image of the subsurface, providing enhanced understanding of fluid movements and identifying new undrilled lobes and unswept oil. This translates directly into better-targeted infill drilling campaigns and optimized reservoir management strategies, aiming to increase the field's recovery factor from its substantial 2.4 billion barrels of oil in place. Furthermore, Kosmos plans to acquire Ocean Bottom Node (OBN) data over Jubilee later in 2025. OBN data is expected to further enhance the velocity model, uplifting the 4D processing and providing even greater clarity for deeper potential, thereby maximizing recovery. The company is also integrating AI-enhanced data interpretation and reservoir modeling to leverage these advanced seismic insights, ensuring that future wells are derisked and optimally placed.

Similarly, in the Gulf of America, the Tiberius project's lower-cost development plan will be supported by new OBN seismic data acquired in 2025. This technological investment is not merely about data acquisition; it's about translating superior subsurface understanding into tangible operational and financial benefits. These technological advancements contribute directly to Kosmos's competitive moat by enabling more efficient and effective capital deployment, reducing drilling risk, and ultimately enhancing the economic returns and longevity of its asset base. This focus on technological leadership ensures that Kosmos can extract maximum value from its existing resources and strategically advance new opportunities.

Strategic Transformation and Operational Momentum

Kosmos's strategic pivot is visibly manifesting through significant operational achievements and a disciplined approach to project execution. The Greater Tortue Ahmeyim (GTA) LNG project in Mauritania and Senegal reached a critical juncture in June 2025, achieving Commercial Operations Date (COD) for the Gimi FLNG vessel. This milestone signals the successful ramp-up of LNG production to the annual contracted volume of 2.45 million tonnes per annum (MTPA). First gas from the subsea system to the FPSO was achieved on December 31, 2024, followed by first LNG production in February 2025, and the successful export of the first gross LNG cargo in April 2025. The project is now targeting the FLNG's nameplate capacity of 2.7 MTPA by the fourth quarter of 2025, with the subsurface performing well and the first condensate cargo expected in late Q3 2025.

In Ghana, a Memorandum of Understanding (MOU) was signed in June 2025 with the Government to extend the Jubilee and TEN field licenses to 2040. This extension is a "win-win" for all stakeholders, enabling long-term investment planning. The '25/'26 drilling program at Jubilee commenced with the first producer well (J-72) coming online in July 2025, delivering an initial gross production of approximately 10,000 barrels of oil per day. A second producer is slated for year-end 2025, with four or more wells planned for 2026. This consistent drilling, coupled with improved water injection (voidage replacement exceeding 100%) and enhanced power generation reliability on the FPSO, is crucial for reestablishing Jubilee's production potential, aiming for around 70,000 bopd by year-end 2025 and building towards 90,000 bopd.

The Gulf of America assets also demonstrate strong performance, with Q2 2025 net production at approximately 19,600 boepd, driven by Kodiak and Odd Job. Despite the temporary plug and abandonment of Winterfell-3 due to sand production, Winterfell-4 is expected online in late Q3 2025, contributing around 1,000 boepd net to Kosmos. The Tiberius project, a 50-50 partnership with Oxy (OXY), is advancing towards a Final Investment Decision (FID) in 2026, supported by new OBN seismic.

Financial Performance and Balance Sheet Resilience

Kosmos's financial performance in the first half of 2025 reflects the ongoing transition and market dynamics. Oil and gas revenue for the six months ended June 30, 2025, decreased to $682.77 million from $870.00 million in the prior year, primarily due to lower average realized oil and gas prices and reduced sales volumes from Jubilee. However, Q2 2025 revenue saw an increase in Equatorial Guinea, rising to $64.59 million from $38.41 million in Q2 2024, and in the Gulf of America, increasing to $103.10 million from $76.10 million. Mauritania-Senegal contributed a new revenue stream of $20.24 million in Q2 2025 as GTA ramped up.
Operating costs saw a notable increase, with oil and gas production costs rising to $410.43 million for the six months ended June 30, 2025, from $244.35 million in the prior year. This was largely driven by the operating costs associated with the ramp-up of LNG production at the GTA project, including initial commissioning expenses. Conversely, exploration expenses decreased by $11.56 million for the six-month period, reflecting the company's focus on cost management across its portfolio. The company reported a net loss of $87.74 million for Q2 2025 and $198.35 million for H1 2025, impacted by these factors and increased depletion, depreciation, and amortization due to higher sales volumes and depletion rates.

To bolster its financial resilience, Kosmos has undertaken proactive measures. The company has reduced its full-year 2025 capital expenditure guidance to approximately $350 million, a significant reduction from prior years, by slowing down longer-term investments like Tiberius. This $350 million CapEx level is deemed sustainable into 2026 while still supporting company growth. Operating expenses at GTA are expected to fall in the second half of 2025 as commissioning costs subside, further aided by the planned refinancing of the GTA FPSO lease. Kosmos is also on track to deliver $25 million in annual overhead savings by year-end 2025.

Liquidity management remains a top priority. The company has agreed to indicative terms for a senior secured term loan of up to $250 million, backed by its Gulf of America assets, to repay its outstanding 2026 unsecured notes. An active hedging program provides downside protection, with 5 million barrels of 2025 oil production hedged at a $62 floor and $77 ceiling, and 7 million barrels of 2026 production hedged at a $66 floor and $75 ceiling. Furthermore, in July 2025, Kosmos secured an amendment to its RBL facility's debt cover ratio covenant, making it less restrictive for upcoming assessment dates to accommodate the GTA ramp-up. These actions underscore a clear commitment to debt reduction and achieving a leverage target of below 1.5 times by late 2026.

Competitive Landscape and Strategic Positioning

Kosmos Energy operates in the highly competitive deepwater exploration and production sector, distinguishing itself through a diversified, long-life asset portfolio and a strategic focus on capital efficiency and technological innovation. Unlike many peers facing declining inventory, Kosmos's 2P reserve life of over 20 years provides a significant competitive advantage, ensuring sustained production and cash flow for decades.

The company's deepwater expertise and asset locations offer unique advantages. The GTA project, for instance, establishes a new Atlantic basin LNG hub ideally located for European markets, benefiting from short sailing distances and low transportation costs. The gas itself is noted for minimal CO2 or H2S content, offering environmental and operational benefits. This strategic positioning in a growing LNG market segment differentiates Kosmos from companies with less diversified or more onshore-focused portfolios.

Technologically, Kosmos's aggressive adoption of 4D seismic, OBN data, and AI-enhanced reservoir modeling in fields like Jubilee positions it favorably against competitors who may rely on older data or less sophisticated recovery techniques. This technological edge allows for more precise well targeting, higher recovery factors, and optimized field management, directly impacting profitability and extending asset life. While direct financial comparisons with all competitors are challenging to ascertain, Kosmos's internal focus on reducing its business breakeven to $50-$55 per barrel and its commitment to a sustainable free cash flow yield demonstrate a clear strategy to outperform peers through operational efficiency and disciplined capital allocation. The company's ability to control the pace and spend on its operated growth projects, such as Tiberius, further enhances its strategic flexibility in a volatile commodity market.

Outlook and Value Creation

The outlook for Kosmos Energy is one of sustained production growth, rigorous cost management, and a clear pathway to enhanced financial strength. Production is expected to continue rising quarter-over-quarter into 2026, driven by the full ramp-up of GTA, the ongoing drilling campaign at Jubilee, and the anticipated online status of Winterfell-4 and replacement pumps at Ceiba. The reduced 2025 capital expenditure of $350 million is projected to be sustainable into 2026, supporting growth while prioritizing free cash flow.

Management's target of a $50-$55 per barrel Brent breakeven for the business, coupled with $25 million in annual overhead savings, underscores a commitment to efficiency. This disciplined approach is expected to generate significant free cash flow, which will be primarily directed towards debt paydown. The company anticipates achieving its leverage target of below 1.5 times by the second half of 2026, at which point discussions around shareholder returns will reopen. Future growth opportunities, including the low-cost GTA Phase 1 plus expansion and the Tiberius development, are being advanced at a managed pace, ensuring they contribute to long-term value without compromising near-term financial objectives.

Conclusion

Kosmos Energy is at a pivotal inflection point, successfully executing a strategic shift towards becoming a robust free cash flow generator. The recent achievement of COD at the GTA LNG project, coupled with a revitalized drilling program in Ghana and strong performance in the Gulf of America, underpins a compelling narrative of rising production. This operational momentum is amplified by a relentless focus on cost discipline, evidenced by a significantly reduced capital expenditure budget and targeted overhead savings, all contributing to a lower corporate breakeven.

The company's commitment to strengthening its balance sheet through proactive debt management and an active hedging program provides a solid foundation for navigating market volatility. With a diversified, long-life asset base further enhanced by cutting-edge seismic technology and AI-driven reservoir management, Kosmos possesses a differentiated competitive advantage. As the company progresses towards its leverage reduction targets, the stage is set for sustained value creation, transforming operational success into tangible financial returns for investors.