Shares of independent oil and gas producer Kosmos Energy (NYSE:KOS) are down 14.2% as of 12:30 p.m. EST today. Kosmos itself didn't issue any press releases, but the news from one of its major partners, Tullow Oil (OTC:TUWOY), is spearheading its drop.
Today was bad news for Tullow. The UK-based oil and gas producer announced it was suspending its dividend, both its chief executive officer and chief operating officer were leaving, and that it expects production for 2020 to come in at 70,000 to 80,000 barrels per day (bpd) compared to 87,000 bpd this year. Furthermore, it expects 2021-2023 production to be around 70,000 bpd.
This matters to Kosmos because it partners with Tullow on two of Kosmos' largest-producing projects, its field in Equatorial Guinea and the Jubilee field off the coast of Ghana where Tullow is the operator of the project. What's worse is that most of Tullow's issues stem from poor performance from its Ghana assets.
Even if this has a minor impact, the fact that one of Kosmos' major partners looks to be in trouble could affect the company's cash-generating assets. That is important because Kosmos has a suite of offshore development projects it needs to fund over the next few years.
The one silver lining for Kosmos is that Tullow is not a partner on any of Kosmos' development or exploration projects. It has mostly partnered with integrated oil and gas companies with deep pockets and long histories of being adept offshore operators. So as these projects are brought to fruition, Kosmos will be less tied to Tullow's issues.
For the time being, though, this could have a modest impact on the company. The scope of that impact is unknown, but it is enough of a variable that it's probably best to sit on the sidelines to see what Kosmos' management has to say about it.