One-glance verdict
Undervalued
$10.61 our estimate vs market $2.68
Wall Street consensus: $3.00 (-71.7% lower than our fair-value estimate)
75% below our estimate, below the bear case
Fundamentals snapshot
Kosmos Energy Ltd.
KOS · NYQ · Energy · Oil & Gas E&P
Current price
$2.68
52-week range
$0.84 - $3.34
Market cap
$1.60B
Balance sheet
Distressed
-1.10x Concerning
Net debt $2.65B. Interest coverage shows how many times profit covers the interest bill.
What stands out
2 Rewards
3 Risks
2 rewards · 3 risks
- Reward Revenue grew 22.9% last year.
- Reward Free cash flow was positive in 1/10 years.
- Risk Return on equity was -63.0% last year — the company lost money on shareholders' equity.
- Risk Net debt grew 45.0% over 3 years.
What this company does
Kosmos Energy Ltd.
Kosmos Energy is a company that finds and produces oil and natural gas from deep underwater in places like Ghana and Senegal. The money they make mainly comes from selling the oil and gas they extract, which is important because it shows how much of the value from the resources they are able to keep after covering their costs to find and produce them. Their focus on deepwater exploration means they are dealing with complex and potentially costly projects to get these energy resources out of the ground.
How the company got here
Kosmos Energy was founded in 2003 by a group of partners who believed that major oil and gas fields were still waiting to be discovered, challenging the conventional wisdom of the time. Their contrarian approach led them to West Africa, specifically offshore Ghana, where they made one of the world's largest oil discoveries in 2007 – the Jubilee Field. This discovery marked the beginning of Kosmos's operations in Ghana, with oil production commencing in 2010 and generating the company's first revenues in 2011. Since then, Kosmos has expanded its reach, engaging in deepwater exploration and production across several offshore locations in Africa and the Gulf of Mexico. The company has since reincorporated in Delaware, USA, after initially being incorporated in Bermuda.
What it actually does
Kosmos Energy is a company that explores for, develops, and produces oil and natural gas. Think of them as prospectors searching for valuable underground resources and then bringing them to the surface to be sold. They focus on deepwater locations, which means they operate in the ocean depths, often far from shore. These operations involve complex technology to extract oil and gas, which are then used to create fuels and other products we rely on every day.
Ghana
The Ghana segment is a significant contributor to Kosmos Energy's revenue, primarily driven by production from the Jubilee and TEN fields. These fields are located offshore Ghana and represent some of the company's earliest and most substantial discoveries. The Jubilee Field, discovered in 2007, was a landmark find for Kosmos and a major oil discovery globally that year. Production from these fields involves extracting crude oil and natural gas, which are then processed and sold, forming a core part of Kosmos's business.
Equatorial Guinea
Kosmos Energy holds interests in oil and gas production projects offshore Equatorial Guinea. These operations contribute to the company's overall production portfolio, diversifying its geographic footprint. The company engages in the exploration, development, and production of these resources, aiming to extract and monetize oil and natural gas reserves in the region.
Mauritania/Senegal
In Mauritania and Senegal, Kosmos Energy is involved in a major offshore natural gas development project known as Greater Tortue Ahmeyim (GTA). This project is focused on developing significant natural gas discoveries made by the company. Kosmos partners with other companies, like BP, in these ventures, where BP often takes the lead in development and production. The gas extracted from these fields is intended for both global export and domestic use in Mauritania and Senegal, positioning it as a key energy resource for the region.
Gulf of America
Kosmos Energy also operates in the Gulf of Mexico, referred to here as the 'Gulf of America,' where it has several key oil and gas fields. These fields include names like Odd Job, Tornado, and Kodiak. The company focuses on exploration and production in this region, leveraging existing infrastructure to potentially reduce costs and carbon intensity for new discoveries. This segment adds to the company's diversified production base.
What management is betting on now
Kosmos Energy's current strategy is focused on increasing production by approximately 15% year-on-year, reducing operating costs by 20%, and lowering net debt by at least 10% in 2026. They are prioritizing operational delivery to meet energy demand while managing investments prudently and maintaining strict cost discipline. The company is also emphasizing infrastructure-led exploration in proven basins, which allows for quicker development of new discoveries at a lower cost and with a reduced environmental impact. Additionally, Kosmos is actively managing its debt structure and increasing its oil hedging activities to mitigate risks associated with fluctuating energy prices.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
Revenue
$607.25M
Net income
$184.78M
Diluted EPS
0.31
Operating cash flow
$175.01M
Free cash flow
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Sources
Revenue
$370.73M
Net income
$-225.57M
Diluted EPS
-0.45
Operating cash flow
$106.56M
Free cash flow
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Sources
Revenue
$294.62M
Net income
$-377.14M
Diluted EPS
-0.80
Operating cash flow
$35.30M
Free cash flow
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Sources
Revenue
$310.96M
Net income
$-124.30M
Diluted EPS
-0.26
Operating cash flow
$-27.57M
Free cash flow
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Sources
Revenue
$392.63M
Net income
$-87.74M
Diluted EPS
-0.18
Operating cash flow
$127.17M
Free cash flow
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Sources
Revenue
$290.13M
Net income
$-110.61M
Diluted EPS
-0.23
Operating cash flow
$-888.00K
Free cash flow
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Sources
Revenue
$397.56M
Net income
$-6.58M
Diluted EPS
0.00
Operating cash flow
$175.75M
Free cash flow
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Sources
Revenue
$407.79M
Net income
$44.97M
Diluted EPS
0.09
Operating cash flow
$6.28M
Free cash flow
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Sources
Is it cheap or expensive?
Fair value $10.61 vs current price $2.68
Wall Street consensus is the average analyst price target: $3.00 (-71.7% lower than our fair-value estimate).
Our most-likely fair value is $10.61 a share — about 296.0% above today's price of $2.68, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Distressed
Net debt $2.7B. Interest coverage -1.1x.
Net debt
$2.65B
Interest coverage
-1.10x
Kosmos Energy Ltd.'s profit covers its interest bill about 0.0 times over. which is weaker than most peers shown here.
Distressed
Worse cushion
Baseline
Better cushion
KOS
BASELINE
Kosmos Energy Ltd.
Total debt $2.76B Interest coverage -1.10x This is the baseline the peer rows are being compared against.
Total debt $3.88B Interest coverage 9.89x This peer still has a real interest-payment cushion, while KOS does not.
Total debt $1.50B Interest coverage 2.35x This peer still has a real interest-payment cushion, while KOS does not.
Total debt $12.61B Interest coverage 18.56x This peer still has a real interest-payment cushion, while KOS does not.
Total debt $4.32B Interest coverage 5.69x This peer still has a real interest-payment cushion, while KOS does not.
Total debt $2.26B Interest coverage 4.44x This peer still has a real interest-payment cushion, while KOS does not.
What you should know
The case for and against KOS
2 Rewards
3 Risks
Rewards
-
Revenue grew 22.9% last year.
-
Free cash flow was positive in 1/10 years.
Risks
-
Return on equity was -63.0% last year — the company lost money on shareholders' equity.
-
Net debt grew 45.0% over 3 years.
-
Insider ownership is only 2.3% (peer median: 5.7%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
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Forward P/E
8.32x
P/B
2.26x
P/S
1.01x
EV/EBITDA
6.82x
PEG ratio
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Profitability
How much profit each dollar creates
Gross margin
61.6%
Operating margin
53.8%
Net margin
-34.2%
ROE
-63.0%
ROA
-2.9%
Health
Liquidity and balance-sheet strength
Debt / equity
3.91x
Current ratio
0.59x
Quick ratio
0.33x
Total debt
$2.76B
Total cash
$102.14M
Growth
How the business has been compounding
Revenue TTM
$1.58B
Revenue 5Y CAGR
-0.8%
EPS TTM
-1.12
EPS 5Y CAGR
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Cash flow
How much cash the business throws off
Operating CF TTM
$289.30M
Free CF TTM
$-180.40M
FCF margin
-11.4%
Dividend
Shareholder payout
Yield
0.0%
Payout ratio
0.0%
Last ex-div date
2020-03-04