Kosmos (KOS) Q2 Revenue Falls 13%

Kosmos Energy (KOS -2.56%), a deepwater oil and gas exploration and production company active in Africa and the Gulf of America, released its second quarter 2025 results on August 4, 2025. The most significant headlines were an adjusted net loss per share of $(0.19) and GAAP revenue of $393 million. Both metrics (non-GAAP EPS and GAAP revenue) came in below analyst estimates, with adjusted (non-GAAP) net loss per share of $(0.19) missing the expected $(0.07) by $0.12 and GAAP revenue trailing the $403.51 million consensus. The quarter reflected ongoing pressure from project start-up delays and operational challenges. The company signaled cautious optimism for the rest of FY2025 as ramp-ups at major assets progress.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Brief Overview of Kosmos Energy's Business

Kosmos Energy is focused on deepwater oil and natural gas exploration and production, targeting under-explored regions in Africa and the Gulf of America. It operates key projects such as Jubilee in Ghana and Greater Tortue Ahmeyim (GTA), a liquefied natural gas (LNG) project in Mauritania and Senegal.

Recent years have seen the company concentrate on ramping up large-scale projects, improving production efficiency, managing geopolitical complexities, and delivering cost discipline. Success for Kosmos relies heavily on turning discoveries into producing, cash-generating assets, managing operating expenses, and maintaining sound financial risk management given the capital-intensive nature of its sector.

Quarter Highlights: Operations and Financials

The latest period marked a transition phase for Kosmos Energy as it advanced critical projects but faced setbacks in meeting market expectations, with adjusted EPS (non-GAAP) of -$0.19 falling short of the analyst estimate of -$0.07 and GAAP revenue of $393 million missing the consensus estimate of $403.51 million. The company generated an adjusted net loss of $93 million, or $(0.19) per share, compared to adjusted net income of $80.5 million, or $0.17 per share, in Q2 2024. GAAP revenue slipped to $393 million, GAAP revenue missed consensus by $10.5 million. and down 12.9 % year over year. This drop reflects lower than guided production and higher per-barrel costs, with higher operating expenses putting margins under further strain.

Total production averaged approximately 63,500 barrels of oil equivalent per day (boe/d), below guidance, primarily due to start‑up delays at GTA and weak output from Jubilee. Operating expenses climbed to $36.49 per boe, up from $25.31 per boe in Q2 2024, a rise driven by mix changes and GTA start-up requirements.

The company’s main production centers performed unevenly. In Mauritania and Senegal, GTA reached a major milestone as the floating LNG vessel moved into commercial operations and the first LNG cargos were delivered. Net production from GTA was 7,100 boe/d. Ghana delivered net production of 29,100 boe/d, but output at the flagship Jubilee oil field was impacted by a scheduled FPSO maintenance shutdown and well underperformance. An infill well at Jubilee delivered positive results and management plans additional drilling to improve output.

Production in the Gulf of America hit the upper end of guidance at 19,600 boe/d, with drilling expected to boost volumes further in the near term. Equatorial Guinea lagged, with net production at 7,700 boe/d due to mechanical issues that are expected to be fixed later in the year. Across its portfolio, the company also closed out special funding obligations for the national oil company (NOC) in Mauritania and Senegal, which should improve cash flow in the future.

Free cash flow (non-GAAP) improved to $44.6 million, up from a negative $14.5 million in Q2 2024. Capital expenditure for the quarter was $86 million, and full-year capital expenditure guidance has been reduced from $400 million to $350 million for FY2025. The company made progress on its cost control initiatives, targeting an additional $25 million in overhead reductions by the end of 2025.

Net debt finished the quarter at $2.85 billion, up 4.9% compared to December 31, 2024, as the company funded project expenses and absorbed negative net income. Liquidity stood at $400 million at quarter end. Kosmos amended terms on its Reserve-Based Lending facility to help manage the impact of delayed GTA ramp-up and agreed to indicative terms for a new $250 million loan secured by Gulf of America assets, with closing anticipated by the end of the third quarter of 2025, subject to certain conditions.

The company continues to maintain a rolling hedging program to mitigate oil price volatility. For 2025, 5 million barrels are hedged between $62 and $77 per barrel, For calendar year 2026, 7 million barrels are hedged between $66 and $75 per barrel. Management highlighted that its risk management and hedging strategies are intended to protect cash flows while still allowing some upside in the event of favorable market moves, as evidenced by Kosmos' rolling hedging program, which included hedges with both floor and ceiling prices to provide downside protection while retaining partial exposure to higher oil prices.

Kosmos Energy’s Products and Assets

The company’s main asset families are:

LNG production, driven by the Greater Tortue Ahmeyim (GTA) project in Mauritania and Senegal, which transforms offshore gas into liquefied natural gas for export and domestic use.

Oil production from deepwater fields like Jubilee and TEN in Ghana, and from mature and newly drilled fields in the Gulf of America and Equatorial Guinea.

Each product line plays a crucial role in the company’s revenue mix and future growth. GTA, in particular, is viewed as transformative, offering scale and stable cash flow through the use of floating LNG technology.

Outlook and What to Watch

Looking ahead, Kosmos Energy’s management is guiding for net production in the 65,000–70,000 boe/d range for FY2025, with operating expenses for the core business expected at $22.00–$24.00 per barrel, excluding GTA start-up costs, for FY2025. Capital spending is now forecast at $350 million for FY2025, a reduction from previous plans, reflecting both capital discipline and some delayed project expenditures. The plan involves ramping up GTA to its nameplate capacity, further expanding production at Jubilee with new wells, and bringing additional Gulf of America wells online.

Management emphasized the importance of delivering on operational milestones at GTA and Jubilee, further controlling costs, reducing debt, and enhancing liquidity. Investors should monitor the speed and reliability of GTA’s ramp-up, mechanical resolution in Equatorial Guinea, and the results of additional drilling in Ghana and the Gulf of America. These areas remain critical for meeting the company’s updated targets and stabilizing its financial position.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.