Kosmos Energy (KOS) has to be one of the most under-rated oil companies listed in the UK, but I think that people that overlook it in favour of some of the more popular producers are wrong to do so. Despite its size - it has a market cap of over £840 million at the current mid share price of 206p - trading volumes in the UK are virtually zero most days, with most of the interest seeming to be in New York where it is dual listed. The spread in the UK doesn’t exactly help either and is currently 198p on the bid and 214p on the ask as I write this, so it definitely isn’t a share for trading but it still looks to have plenty of potential as an investment if you believe that oil prices will remain strong and that Kosmos is well positioned to benefit from that, as I do.
The company recently published an operational update – although even that appears not to have been added to some of the popular UK stock chat sites (it isn’t on the London South East site for instance) – which showed that production from its existing operations continued to be strong, although was a little below expectations. The update also pointed to some delays to first gas from its Greater Tortue project in Mauritania and Senegal, which now isn’t expected to come online until Q3 2023. Production for Q2 2021 was 52,000boepd and was slightly below expectations, due to facilities upgrades in Equatorial Guinea causing down time, as well as a lower entitlement due to the higher oil prices, and as a result net production averaged 9,400bopd for the period. Despite EG performing below expectations, infill drilling planned for this year should put things back on track and the company has maintained full year guidance at 53,000-57,000boepd. Its biggest producing fields in Ghana performed somewhat better though, with 22,000bopd net to Kosmos - with Jubilee producing 71,000bopd gross and 35,000bopd gross at TEN - and that should get even stronger as the year progresses, as a result of the recently producer and injector wells which should add gross production of 15,000 to 20,000bopd. In the past there have been reliability issues with the production facilities, as well as inconsistencies in water injection and gas offtake, but for now at least all of those seem to have been resolved and field is producing at close to optimum levels.
One of the things I really like about Kosmos is the diversification of the asset base, and whilst Africa accounts for the biggest percentage of its total production, its operations in the Gulf of Mexico account for getting on for 40% of the total, with 20,300boepd net during Q2. That also looks set to increase further as the Tornado-5 well (35% working interest) was recently completed successfully and is expected to add 8,000-10,000boepd when it comes online at some point during this quarter. So, in terms of current production, in general operations look strong and with the potential to increase output further, as well as having a decent spread of risk across a number of assets in case any operational issues are encountered. But the real upside will come from the Greater Tortue field, where Kosmos holds a 30% stake, and with BP being the operator and having 60% of it (Petrosen has the remaining 10%). The latest update mentions that the move to production is taking longer than expected and also with higher costs, but the last update at the end of Q1 showed that 58% of phase one had already been completed (the aim was for 80% by the end of this year), and any delays are likely to only be a few months to the original schedule anyway, so I see no reason why any investor would change their view based on this latest update. Once Greater Tortue comes online it is expected to produce 2.5MTPA during phase one, which by my calculations equates to around 29 million barrels per annum (based on BP’s stated conversion factor of 11.6 for tonnes to barrels), which is somewhere close to an average of 80,000boepd gross. This will make a big difference to the output of Kosmos once completed, and is largely already financed through to that stage by facilities that have already been put in place.
Debt has always been one of the concerns here as it has typically been high – at the end of 2020 it stood at around $2 billion, but higher oil prices are beginning to help reduce that, with $100 million taken off that during the last quarter. The company also successfully closed a $450 million 2028 senior notes issue, which was used to pay down some of the RBL and revolving credit facilities. Subsequently the RBL facility was also renegotiated in May, with it being reduced in size to $1.25 billion, but with the maturity extended by two years to March 2027. Total liquidity for the company is around $775 million currently. Revenue and free cash flow generation will continue to improve as a result of the current oil price levels as well as previous hedging significantly reducing – although the company has taken advantage of current prices to hedge some future production as well, which seems sensible. Last time I covered this company as a buy, back in December, it was trading at around 149p, and although its shares have had a decent rise since then, I still feel that it is relatively cheap and offers a great long term investment if you believe that oil and gas are set to remain strong for at least the next few years. So, for me, it remains a strong buy with plenty of upside potential – both in terms of the share price, but also production.
Filed under: Kosmos Energy, FCA, Asos, Immedia, Cloudbreak Discovery, Malcolm Stacey
RISK WARNING & DISCLAIMER - FiveFreeShareTips.com tips are provided by independent authors via a common carrier platform and do not represent the opinions of FiveFreeShareTips.com. FiveFreeShareTips.com does not accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at FiveFreeShareTips.com and via emails you receive from [email protected] are for your general information and use and are not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by the tipsters or FiveFreeShareTips.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Trading shares involves the risk of loss. The tipsters and FiveFreeShareTips.com shall not be liable for any losses or other damages incurred. The value of investments can go up or down and the past is not necessarily a guide of future performance.
Well actually it will be six. One every week day and one on Sunday, each landing with you at 11 AM sharp.
Unlike other services (which may always have a vested interest) we pride ourselves on our impartiality and cover all small caps including AIM. the Standard List, The Wider Main Market and NEX.
We cover small caps, penny shares, FTSE 350 stocks and blue chips. We look for red hot penny shares, Warren Buffett style value investments with yield and growth stocks. There is no technical analysis in our work just solid fundamental analysis from a team of experts with decades of stockmarket experience.
You will not agree with all we publish but if you are interested in small caps you cannot afford to ignore it either. Yo'll never be charged for the free share tips from Five Free Share Tips and given the star writers involved you know that they will move share prices.
There's no telephone number or postal address required and there is no charge, ever, for your Five Free Share Tips membership. Just free shares tips every day apart from Saturday And each day's share tip will not just be a few thoughts cobbled together but will be detailed analysis from experts.
Our experts do not just earn their living from writing. All own shares. If they own shares in a stock they cover they will declare it and will not sell until after advising a sell to our readers. And why not our tips are so good that why shouldn't our readers put their money where their mouth is?
Don't just take our word for it! Judge us on the calibre of our free share tips and join today to start receiving them from September 1 2017. If you don't like what you get delivered to your inbox unsubscribe and you will never hear from us again. So why not give it a go? Sign Up Now
We've put together a panel of top tipsters, including:
Tom Winnifrith, in his 27th year writing about shares, noted fraudbuster & dubbed "The maverick Tipster"
Chris Bailey, City whizz kid turned financial guru, rated as one of the top 50 commentators on shares on twitter, founder of Financial Orbit
Steve Moore, has worked with Tom Winnifrith for all bar 3 weeks of his working life - a noted commentator on value stocks
Malcolm Stacey, The Grandfather of Share Blogging, the founder of ShareCrazy & a best selling autthor of stockmarket books
Lucian Miers, the Bard of the Boleyn, one of the UK's best known short sellers
Gary Newman, writes about value investing on AIM, speciality is in share tips on oil and mining companies
Nigel Somerville, The Deputy Sheriff of AIM, an expert in forensic analysis a skill used to bust frauds but also to tip true value investments
The team from HotStockRockets, specialising in AIM and small cap shares which will fly on a three month view
Remember to book your place at the UK Investor Show 2018. The UK’s top investment show taking place on Saturday 21 April 2018 at the Queen Elizabeth II Conference Centre in Westminster, London. The show will feature a unique line-up of top speakers including Nigel Wray, tech queen Vin Murria, Dave Lenigas, Mark Slater, Tom Winnifrith, Adam Reynolds, Ed, Croft, Nick Leslau Luke Johnson and Dr Johnny Hon as well as 135 exhibiting small cap companies.
The hot share tips given here are of necessity, general. They cannot relate to the individual circumstances of investors. Anyone considering following the share tips contained here should seek independent advice from a Financial Conduct Authority authorised Stockbroker or Financial Adviser. We cannot be held liable if individuals suffer losses through following share tips contained on this site or emailed out as free share tips. The value of investments can go down as well as up. The past is not necessarily a guide to future performance. Investing in shares can lose you part or all of your capital although the potential returns are theoretically unlimited. The difference between the buy share price and the sell share price for smaller company shares (penny shares) can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Some of the shares recommended on this site will be smaller company shares. By their nature such investments can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares (or 'small caps'/'penny shares'). FiveFreeShareTips.com & its sister site ShareProphets.com defines a smaller company share as any stock traded on AIM or NEX or which has a market capitalisation of less than £300 million.