SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|(Mark One)|| |
|QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934|
For the quarterly period ended June 30, 2022
|TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934|
For the transition period from to
Commission file number: 001-35167
Kosmos Energy Ltd.
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction of|| ||(I.R.S. Employer|
|incorporation or organization)|| ||Identification No.)|
|8176 Park Lane|
|(Address of principal executive offices)||(Zip Code)|
|Title of each class||Trading Symbol||Name of each exchange on which registered:|
|Common Stock $0.01 par value||KOS||New York Stock Exchange|
|London Stock Exchange|
Registrant’s telephone number, including area code: +1 214 445 9600
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|Large accelerated filer ||☒|| ||Accelerated filer ||☐|
| || || |
|Non-accelerated filer ||☐|| ||Smaller reporting company ||☐|
|(Do not check if a smaller reporting company)|| || |
| || ||Emerging growth company ||☐|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|Class||Outstanding at August 4, 2022|
|Common Shares, $0.01 par value|| ||455,841,255|
TABLE OF CONTENTS
Unless otherwise stated in this report, references to “Kosmos,” “we,” “us” or “the company” refer to Kosmos Energy Ltd. and its wholly owned subsidiaries. We have provided definitions for some of the industry terms used in this report in the “Glossary and Selected Abbreviations” beginning on page 3.
KOSMOS ENERGY LTD.
GLOSSARY AND SELECTED ABBREVIATIONS
The following are abbreviations and definitions of certain terms that may be used in this report. Unless listed below, all defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings.
|“2D seismic data”||Two‑dimensional seismic data, serving as interpretive data that allows a view of a vertical cross‑section beneath a prospective area.|
|“3D seismic data”||Three‑dimensional seismic data, serving as geophysical data that depicts the subsurface strata in three dimensions. 3D seismic data typically provides a more detailed and accurate interpretation of the subsurface strata than 2D seismic data.|
|“ANP-STP”||Agencia Nacional Do Petroleo De Sao Tome E Principe.|
|“API”||A specific gravity scale, expressed in degrees, that denotes the relative density of various petroleum liquids. The scale increases inversely with density. Thus, lighter petroleum liquids will have a higher API than heavier ones.|
|“Asset Coverage Ratio”||The “Asset Coverage Ratio” as defined in the GoM Term Loan means, as of each March 31, June 30, September 30 and December 31 of each Fiscal Year, commencing December 31, 2020, the ratio of (a) Total PDP PV-10 (as defined in the GoM Term Loan) as of such date to (b) outstanding principal amount of Loans (as defined in the GoM Term Loan) as of such date.|
|“ASC”||Financial Accounting Standards Board Accounting Standards Codification.|
|“ASU”||Financial Accounting Standards Board Accounting Standards Update.|
|“Barrel” or “Bbl”||A standard measure of volume for petroleum corresponding to approximately 42 gallons at 60 degrees Fahrenheit.|
|“BBbl”||Billion barrels of oil.|
|“BBoe”||Billion barrels of oil equivalent.|
|“Bcf”||Billion cubic feet.|
|“Boe”||Barrels of oil equivalent. Volumes of natural gas converted to barrels of oil using a conversion factor of 6,000 cubic feet of natural gas to one barrel of oil.|
|“BOEM”||Bureau of Ocean Energy Management.|
|“Boepd”||Barrels of oil equivalent per day.|
|“Bopd”||Barrels of oil per day.|
|“BP”||BP p.l.c. and related subsidiaries.|
|“Bwpd”||Barrels of water per day.|
|“Corporate Revolver”||Prior to March 31, 2022, this term refers to the Revolving Credit Facility Agreement dated November 23, 2012 (as amended or as amended and restated from time to time), and on or after March 31, 2022, this term refers to the new Revolving Credit Facility Agreement dated March 31, 2022.|
|“COVID-19”||Coronavirus disease 2019.|
|“Debt cover ratio”||The “debt cover ratio” is broadly defined, for each applicable calculation date, as the ratio of (x) total long‑term debt less cash and cash equivalents and restricted cash, to (y) the aggregate EBITDAX (see below) of the Company for the previous twelve months.|
|“Developed acreage”||The number of acres that are allocated or assignable to productive wells or wells capable of production.|
|“Development”||The phase in which an oil or natural gas field is brought into production by drilling development wells and installing appropriate production systems.|
|“DST”||Drill stem test.|
|“Dry hole” or “Unsuccessful well”||A well that has not encountered a hydrocarbon bearing reservoir expected to produce in commercial quantities.|
|“EBITDAX”||Net income (loss) plus (i) exploration expense, (ii) depletion, depreciation and amortization expense, (iii) equity‑based compensation expense, (iv) unrealized (gain) loss on commodity derivatives (realized losses are deducted and realized gains are added back), (v) (gain) loss on sale of oil and gas properties, (vi) interest (income) expense, (vii) income taxes, (viii) loss on extinguishment of debt, (ix) doubtful accounts expense and (x) similar other material items which management believes affect the comparability of operating results. |
|“ESG”||Environmental, social, and governance.|
|“ESP”||Electric submersible pump.|
|“E&P”||Exploration and production.|
|“Facility”||Facility agreement dated March 28, 2011 (as amended or as amended and restated from time to time).|
|“FASB”||Financial Accounting Standards Board.|
|“Farm‑in”||An agreement whereby a party acquires a portion of the participating interest in a block from the owner of such interest, usually in return for cash and/or for taking on a portion of future costs or other performance by the assignee as a condition of the assignment.|
|“Farm‑out”||An agreement whereby the owner of the participating interest agrees to assign a portion of its participating interest in a block to another party for cash and/or for the assignee taking on a portion of future costs and/or other work as a condition of the assignment.|
|“FEED”||Front End Engineering Design.|
|“Field life cover ratio”|
The “field life cover ratio” is broadly defined, for each applicable forecast period, as the ratio of (x) the forecasted net present value of net cash flow through depletion plus the net present value of the forecast of certain capital expenditures incurred in relation to the Ghana and Equatorial Guinea assets, to (y) the aggregate loan amounts outstanding under the Facility.
|“FLNG”||Floating liquefied natural gas.|
|“FPS”||Floating production system.|
|“FPSO”||Floating production, storage and offloading vessel.|
|“GAAP”||Generally Accepted Accounting Principles in the United States of America.|
|“GEPetrol”||Guinea Equatorial De Petroleos.|
|“GJFFDP”||Greater Jubilee Full Field Development Plan.|
|“GNPC”||Ghana National Petroleum Corporation.|
|“GoM Term Loan”||Senior Secured Term Loan Credit Agreement dated September 30, 2020.|
|“Greater Tortue Ahmeyim”||Ahmeyim and Guembeul discoveries.|
|“GTA UUOA”||Unitization and Unit Operating Agreement covering the Greater Tortue Ahmeyim Unit.|
|“HLS”||Heavy Louisiana Sweet.|
|“Jubilee UUOA”||Unitization and Unit Operating Agreement covering the Jubilee Unit.|
|“Interest cover ratio”||The “interest cover ratio” is broadly defined, for each applicable calculation date, as the ratio of (x) the aggregate EBITDAX (see above) of the Company for the previous twelve months, to (y) interest expense less interest income for the Company for the previous twelve months.|
|“LNG”||Liquefied natural gas.|
|“Loan life cover ratio”||The “loan life cover ratio” is broadly defined, for each applicable forecast period, as the ratio of (x) net present value of forecasted net cash flow through the final maturity date of the Facility plus the net present value of forecasted capital expenditures incurred in relation to the Ghana and Equatorial Guinea assets, to (y) the aggregate loan amounts outstanding under the Facility.|
|“LSE”||London Stock Exchange.|
|“LTIP”||Long Term Incentive Plan.|
|“MBbl”||Thousand barrels of oil.|
|“MBoe”||Thousand barrels of oil equivalent.|
|“Mcf”||Thousand cubic feet of natural gas.|
|“Mcfpd”||Thousand cubic feet per day of natural gas.|
|“MMBbl”||Million barrels of oil.|
|“MMBoe”||Million barrels of oil equivalent.|
|“MMBtu”||Million British thermal units. |
|“MMcf”||Million cubic feet of natural gas.|
|“MMcfd”||Million cubic feet per day of natural gas.|
|“MMTPA”||Million metric tonnes per annum.|
|“Natural gas liquid” or “NGL”||Components of natural gas that are separated from the gas state in the form of liquids. These include propane, butane, and ethane, among others.|
|“NYSE”||New York Stock Exchange.|
|“Petroleum contract”||A contract in which the owner of hydrocarbons gives an E&P company temporary and limited rights, including an exclusive option to explore for, develop, and produce hydrocarbons from the lease area.|
|“Petroleum system”||A petroleum system consists of organic material that has been buried at a sufficient depth to allow adequate temperature and pressure to expel hydrocarbons and cause the movement of oil and natural gas from the area in which it was formed to a reservoir rock where it can accumulate.|
|“Plan of development” or “PoD”||A written document outlining the steps to be undertaken to develop a field.|
|“Productive well”||An exploratory or development well found to be capable of producing either oil or natural gas in sufficient quantities to justify completion as an oil or natural gas well.|
|“Prospect(s)”||A potential trap that may contain hydrocarbons and is supported by the necessary amount and quality of geologic and geophysical data to indicate a probability of oil and/or natural gas accumulation ready to be drilled. The five required elements (generation, migration, reservoir, seal and trap) must be present for a prospect to work and if any of these fail neither oil nor natural gas may be present, at least not in commercial volumes.|
|“Proved reserves”||Estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be economically recoverable in future years from known reservoirs under existing economic and operating conditions, as well as additional reserves expected to be obtained through confirmed improved recovery techniques, as defined in SEC Regulation S‑X 4‑10(a)(2).|
|“Proved developed reserves”||Those proved reserves that can be expected to be recovered through existing wells and facilities and by existing operating methods.|
|“Proved undeveloped reserves”||Those proved reserves that are expected to be recovered from future wells and facilities, including future improved recovery projects which are anticipated with a high degree of certainty in reservoirs which have previously shown favorable response to improved recovery projects.|
|“RSC”||Ryder Scott Company, L.P.|
|“SEC”||Securities and Exchange Commission.|
|“7.125% Senior Notes”||7.125% Senior Notes due 2026.|
|“7.750% Senior Notes”||7.750% Senior Notes due 2027.|
|“7.500% Senior Notes”||7.500% Senior Notes due 2028.|
|“Shelf margin”||The path created by the change in direction of the shoreline in reaction to the filling of a sedimentary basin.|
|“Shell”||Royal Dutch Shell and related subsidiaries.|
|“Stratigraphy”||The study of the composition, relative ages and distribution of layers of sedimentary rock.|
|“Stratigraphic trap”||A stratigraphic trap is formed from a change in the character of the rock rather than faulting or folding of the rock and oil is held in place by changes in the porosity and permeability of overlying rocks.|
|“Structural trap”||A topographic feature in the earth’s subsurface that forms a high point in the rock strata. This facilitates the accumulation of oil and gas in the strata.|
|“Structural‑stratigraphic trap”||A structural‑stratigraphic trap is a combination trap with structural and stratigraphic features.|
|“Submarine fan”||A fan‑shaped deposit of sediments occurring in a deep water setting where sediments have been transported via mass flow, gravity induced, processes from the shallow to deep water. These systems commonly develop at the bottom of sedimentary basins or at the end of large rivers.|
|“TAG GSA”||TEN Associated Gas - Gas Sales Agreement.|
|“TEN”||Tweneboa, Enyenra and Ntomme.|
|“Three‑way fault trap”||A structural trap where at least one of the components of closure is formed by offset of rock layers across a fault.|
“Tortue Phase 1 SPA”
|Greater Tortue Ahmeyim Agreement for a Long Term Sale and Purchase of LNG.|
|“Trafigura”||Trafigura Group PTD, Ltd. and related subsidiaries including Trafigura Trading LLC.|
|“Trap”||A configuration of rocks suitable for containing hydrocarbons and sealed by a relatively impermeable formation through which hydrocarbons will not migrate.|
|“Undeveloped acreage”||Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of natural gas and oil regardless of whether such acreage contains discovered resources.|
|“WCTP”||West Cape Three Points.|
KOSMOS ENERGY LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| ||June 30,|
| ||(Unaudited)|| |
|Assets|| || |
|Current assets:|| || |
|Cash and cash equivalents ||$||223,327 ||$||131,620 |
|Restricted cash ||27 ||42,971 |
|Joint interest billings, net ||38,788 ||36,908 |
|Oil sales ||230,717 ||134,004 |
|Other ||20,952 ||6,614 |
|Inventories ||154,484 ||165,247 |
|Prepaid expenses and other ||21,988 ||18,899 |
|Derivatives||— ||5,689 |
|Total current assets ||690,283 ||541,952 |
|Property and equipment:|| || |
|Oil and gas properties, net ||4,025,752 ||4,177,323 |
|Other property, net ||6,575 ||6,664 |
|Property and equipment, net ||4,032,327 ||4,183,987 |
|Other assets:|| || |
|Restricted cash ||305 ||305 |
|Long-term receivables||180,180 ||191,150 |
Deferred financing costs, net of accumulated amortization of $12,103 and $19,912 at June 30, 2022 and December 31, 2021, respectively
|5,800 ||1,090 |
|Derivatives||1,988 ||1,026 |
|Other||20,307 ||21,141 |
|Total assets ||$||4,931,190 ||$||4,940,651 |
|Liabilities and stockholders’ equity|| || |
|Current liabilities:|| || |
|Accounts payable ||$||286,730 ||$||184,403 |
|Accrued liabilities ||352,055 ||250,670 |
|Current maturities of long-term debt||30,000 ||30,000 |
|Derivatives ||197,172 ||65,879 |
|Total current liabilities ||865,957 ||530,952 |
|Long-term liabilities:|| || |
|Long-term debt, net ||2,280,625 ||2,590,495 |
|Derivatives ||14,758 ||6,298 |
|Asset retirement obligations ||270,176 ||322,237 |
|Deferred tax liabilities||582,973 ||711,038 |
|Other long-term liabilities ||254,335 ||250,394 |
|Total long-term liabilities ||3,402,867 ||3,880,462 |
|Stockholders’ equity:|| || |
Preference shares, $0.01 par value; 200,000,000 authorized shares; zero issued at June 30, 2022 and December 31, 2021
|— ||— |
Common stock, $0.01 par value; 2,000,000,000 authorized shares; 500,016,474 and 496,152,331 issued at June 30, 2022 and December 31, 2021, respectively
|5,000 ||4,962 |
|Additional paid-in capital ||2,488,192 ||2,473,674 |
|Accumulated deficit ||(1,593,819)||(1,712,392)|
Treasury stock, at cost, 44,263,269 shares at June 30, 2022 and December 31, 2021, respectively
|Total stockholders’ equity ||662,366 ||529,237 |
|Total liabilities and stockholders’ equity ||$||4,931,190 ||$||4,940,651 |
See accompanying notes.
KOSMOS ENERGY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| ||Three Months Ended||Six Months Ended|
| ||June 30,||June 30,|
|Revenues and other income:|| || || || |
|Oil and gas revenue ||$||620,368 ||$||384,045 ||$||1,279,383 ||$||560,519 |
|Gain on sale of assets ||471 ||— ||471 ||26 |
|Other income, net ||43 ||74 ||95 ||144 |
|Total revenues and other income ||620,882 ||384,119 ||1,279,949 ||560,689 |
|Costs and expenses:|| || || || |
|Oil and gas production ||90,189 ||115,803 ||214,892 ||161,555 |
|Facilities insurance modifications, net||(384)||1,270 ||6,752 ||1,941 |
|Exploration expenses ||89,565 ||9,289 ||101,441 ||17,470 |
|General and administrative ||24,624 ||21,728 ||50,417 ||44,169 |
|Depletion, depreciation and amortization||121,679 ||151,161 ||280,648 ||227,702 |
|Interest and other financing costs, net||29,382 ||39,326 ||62,521 ||63,854 |
|Derivatives, net ||75,204 ||111,921 ||357,376 ||214,382 |
|Other expenses, net ||(3,528)||(2,659)||(1,102)||809 |
|Total costs and expenses ||426,731 ||447,839 ||1,072,945 ||731,882 |
|Income (loss) before income taxes||194,151 ||(63,720)||207,004 ||(171,193)|
|Income tax expense (benefit)||76,978 ||(6,533)||88,431 ||(23,238)|
|Net income (loss)||$||117,173 ||$||(57,187)||$||118,573 ||$||(147,955)|
|Net income (loss) per share:|| || || || |
|Basic ||$||0.26 ||$||(0.14)||$||0.26 ||$||(0.36)|
|Diluted ||$||0.25 ||$||(0.14)||$||0.25 ||$||(0.36)|
Weighted average number of shares used to compute net income (loss) per share:
| || || || |
|Basic ||455,512 ||408,131 ||454,811 ||409,828 |
|Diluted ||475,645 ||408,131 ||473,471 ||409,828 |
See accompanying notes.
KOSMOS ENERGY LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| || || ||Additional|| || || |
| ||Common Shares||Paid-in||Accumulated||Treasury|| |
| ||Shares||Amount ||Capital||Deficit||Stock||Total|
|Balance as of December 31, 2021||496,152 ||$||4,962 ||$||2,473,674 ||$||(1,712,392)||$||(237,007)||$||529,237 |
|Dividends||— ||— ||12 ||— ||— ||12 |
|Equity-based compensation ||— ||— ||8,425 ||— ||— ||8,425 |
|Restricted stock units ||3,377 ||33 ||(33)||— ||— ||— |
|Tax withholdings on restricted stock units||— ||— ||(2,753)||— ||— ||(2,753)|
|Net income||— ||— ||— ||1,400 ||— ||1,400 |
|Balance as of March 31, 2022||499,529 ||4,995 ||2,479,325 ||(1,710,992)||(237,007)||536,321 |
|Dividends ||— ||— ||(14)||— ||— ||(14)|
|Equity-based compensation ||— ||— ||8,886 ||— ||— ||8,886 |
|Restricted stock units ||487 ||5 ||(5)||— ||— ||— |
|Tax withholdings on restricted stock units||— ||— ||— ||— ||— ||— |
|Net income||— ||— ||— ||117,173 ||— ||117,173 |
|Balance as of June 30, 2022||500,016 ||$||5,000 ||$||2,488,192 ||$||(1,593,819)||$||(237,007)||$||662,366 |
|Balance as of December 31, 2020||449,718 ||$||4,497 ||$||2,307,220 ||$||(1,634,556)||$||(237,007)||$||440,154 |
|Dividends||— ||— ||90 ||— ||— ||90 |
|Equity-based compensation ||— ||— ||8,327 ||— ||— ||8,327 |
|Restricted stock units ||2,408 ||24 ||(24)||— ||— ||— |
|Tax withholdings on restricted stock units||— ||— ||(1,018)||— ||— ||(1,018)|
|Net loss||— ||— ||— ||(90,768)||— ||(90,768)|
|Balance as of March 31, 2021||452,126 ||$||4,521 ||$||2,314,595 ||$||(1,725,324)||$||(237,007)||$||356,785 |
|Dividends||— ||— ||29 ||— ||— ||29 |
|Equity-based compensation ||— ||— ||7,634 ||— ||— ||7,634 |
|Restricted stock awards and units ||540 ||6 ||(6)||— ||— ||— |
|Tax withholdings on restricted stock units||(19)||(19)|
|Net loss||— ||— ||— ||(57,187)||— ||(57,187)|
|Balance as of June 30, 2021||452,666 ||$||4,527 ||$||2,322,233 ||$||(1,782,511)||$||(237,007)||$||307,242 |
See accompanying notes.
KOSMOS ENERGY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| ||Six Months Ended June 30,|
|Operating activities|| || |
|Net income (loss)||$||118,573 ||$||(147,955)|
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:|
|Depletion, depreciation and amortization (including deferred financing costs)||285,909 ||232,893 |
|Deferred income taxes ||(83,432)||(69,485)|
|Unsuccessful well costs and leasehold impairments||73,662 ||4,865 |
|Change in fair value of derivatives ||367,374 ||223,159 |
Cash settlements on derivatives, net (including $(212.9) million and $(87.4) million on commodity hedges during 2022 and 2021)
|Equity-based compensation ||17,129 ||15,889 |
|Gain on sale of assets ||(471)||(26)|
|Loss on extinguishment of debt ||192 ||15,223 |
|Changes in assets and liabilities:|
|Increase in receivables||(103,589)||(13,365)|
|Increase in inventories||(9,398)||(6,552)|
|(Increase) decrease in prepaid expenses and other||(4,261)||1,467 |
|Increase in accounts payable||78,179 ||51,158 |
|Increase in accrued liabilities||95,679 ||32,265 |
|Net cash provided by operating activities||608,186 ||242,255 |
|Investing activities|| || |
|Oil and gas assets ||(320,787)||(290,539)|
|Acquisition of oil and gas properties||(21,205)||— |
|Proceeds on sale of assets ||118,693 ||1,932 |
|Notes receivable from partners||(11,428)||(36,181)|
|Net cash used in investing activities||(234,727)||(324,788)|
|Financing activities|| || |
|Borrowings under long-term debt ||— ||100,000 |
|Payments on long-term debt ||(315,000)||(400,000)|
|Net proceeds from issuance of senior notes||— ||444,375 |
|Tax withholdings on restricted stock units||(2,753)||(1,037)|
|Deferred financing costs ||(6,288)||(17,062)|
|Net cash provided by (used in) financing activities||(324,696)||125,832 |
|Net increase in cash, cash equivalents and restricted cash||48,763 ||43,299 |
|Cash, cash equivalents and restricted cash at beginning of period ||174,896 ||149,764 |
|Cash, cash equivalents and restricted cash at end of period ||$||223,659 ||$||193,063 |
|Supplemental cash flow information|| || |
|Cash paid for:|| || |
|Interest, net of capitalized interest ||$||46,262 ||$||44,540 |
|Income taxes, net of refund received ||$||137,099 ||$||22,056 |
See accompanying notes.
KOSMOS ENERGY LTD.
Notes to Consolidated Financial Statements
Kosmos Energy Ltd. changed our jurisdiction of incorporation from Bermuda to the State of Delaware in December 2018 as a holding company for Kosmos Energy Delaware Holdings, LLC, a Delaware limited liability company. As a holding company, Kosmos Energy Ltd.’s management operations are conducted through a wholly-owned subsidiary, Kosmos Energy, LLC. The terms “Kosmos,” the “Company,” “we,” “us,” “our,” “ours,” and similar terms refer to Kosmos Energy Ltd. and its wholly-owned subsidiaries, unless the context indicates otherwise.
Kosmos is a full-cycle deepwater independent oil and gas exploration and production company focused along the Atlantic Margins. Our key assets include production offshore Ghana, Equatorial Guinea and the U.S. Gulf of Mexico, as well as a world-class gas development offshore Mauritania and Senegal. We also maintain a sustainable proven basin exploration program in Equatorial Guinea, Ghana and the U.S. Gulf of Mexico. Kosmos is listed on the NYSE and LSE and is traded under the ticker symbol KOS.
Kosmos is engaged in a single line of business, which is the exploration, development, and production of oil and natural gas. Substantially all of our long-lived assets and all of our product sales are related to operations in four geographic areas: Ghana, Equatorial Guinea, Mauritania/Senegal and the U.S. Gulf of Mexico.
2. Accounting Policies
The interim consolidated financial statements included in this report are unaudited and, in the opinion of management, include all adjustments of a normal recurring nature necessary for a fair presentation of the results for the interim periods. The results of the interim periods shown in this report are not necessarily indicative of the final results to be expected for the full year. The interim consolidated financial statements were prepared in accordance with the requirements of the SEC for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by GAAP have been condensed or omitted from these interim consolidated financial statements. These interim consolidated financial statements and the accompanying notes should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2021, included in our annual report on Form 10-K.
Certain prior period amounts have been reclassified to conform with the current presentation. Such reclassifications had no significant impact on our reported net income (loss), current assets, total assets, current liabilities, total liabilities, stockholders’ equity or cash flows.
Cash, Cash Equivalents and Restricted Cash
| ||June 30,|
| ||(In thousands)|
|Cash and cash equivalents ||$||223,327 ||$||131,620 |
|Restricted cash - current||27 ||42,971 |
|Restricted cash - long-term||305 ||305 |
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows
|$||223,659 ||$||174,896 |
Cash and cash equivalents include demand deposits and funds invested in highly liquid instruments with original maturities of three months or less at the date of purchase. When our net leverage ratio exceeds 2.50x, we are required under the Facility to maintain a restricted cash balance that is sufficient to meet the payment of interest and fees for the next six-month period on the 7.125% Senior Notes, the 7.750% Senior Notes and the 7.500% Senior Notes plus the Corporate Revolver or the
Facility, whichever is greater. As of March 31, 2022 our net leverage ratio was below 2.50x, therefore in May 2022, we released $59.1 million from restricted cash upon submission of the net leverage test as of March 31, 2022. As of June 30, 2022 our net leverage ratio remained below 2.50x.
Inventories consisted of $143.3 million and $149.5 million of materials and supplies and $11.2 million and $15.7 million of hydrocarbons as of June 30, 2022 and December 31, 2021, respectively. The Company’s materials and supplies inventory primarily consists of casing and wellheads and is stated at the lower of cost, using the weighted average cost method, or net realizable value.
Hydrocarbon inventory is carried at the lower of cost, using the weighted average cost method, or net realizable value. Hydrocarbon inventory costs include expenditures and other charges incurred in bringing the inventory to its existing condition. Selling expenses and general and administrative expenses are reported as period costs and excluded from inventory costs.
Our oil and gas revenues are recognized when hydrocarbons have been sold to a purchaser at a fixed or determinable price, title has transferred and collection is probable. Certain revenues are based on provisional price contracts which contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from oil sales at the spot price on the date of sale. The embedded derivative, which is not designated as a hedge, is marked to market through oil and gas revenue each period until the final settlement occurs, which generally is limited to the month after the sale.
Oil and gas revenue is composed of the following:
|Three Months Ended June 30,||Six Months Ended June 30,|
| ||(In thousands)|
|Revenues from contract with customer - Equatorial Guinea||$||113,608 ||$||84,699 ||$||222,353 ||$||111,131 |
|Revenues from contract with customer - Ghana||325,078 ||196,536 ||742,185 ||255,886 |
|Revenues from contract with customers - U.S. Gulf of Mexico||183,046 ||107,890 ||324,843 ||202,279 |
|Provisional oil sales contracts||(1,364)||(5,080)||(9,998)||(8,777)|
|Oil and gas revenue||$||620,368 ||$||384,045 ||$||1,279,383 ||$||560,519 |
Concentration of Credit Risk
Our revenue can be materially affected by current economic conditions and the price of oil and natural gas. However, based on the current demand for crude oil and natural gas and the fact that alternative purchasers are available, we believe that the loss of our marketing agents and/or any of the purchasers identified by our marketing agents would not have a long‑term material adverse effect on our financial position or results of operations. The continued economic disruption and volatility in the global and industry-wide markets resulting from the COVID-19 pandemic, Russia’s invasion of Ukraine, a potential global recession, and other varying macroeconomic conditions could materially impact the Company’s business in future periods. Any potential disruption will depend on the duration and intensity of these events, which are highly uncertain and cannot be predicted at this time.
3. Acquisitions and Divestitures
Following the closing of the acquisition of Anadarko WCTP Company (“Anadarko WCTP”) in the fourth quarter of 2021, Kosmos’ interest in the Jubilee Unit Area and the TEN fields offshore Ghana were 42.1% and 28.1%, respectively. Under the DT Block Joint Operating Agreement, certain joint venture partners have pre-emption rights in the Jubilee Unit Area and the TEN fields. In November 2021, we received notice from Tullow Oil plc (“Tullow”) and PetroSA that they intend to exercise their pre-emption rights in relation to Kosmos’ acquisition of Anadarko WCTP. After execution of definitive transaction documentation and receipt of governmental approvals, Kosmos concluded the pre-emption transaction with Tullow in March 2022. Following the completion of the pre-emption by Tullow, Kosmos’ interest in the Jubilee Unit Area decreased from 42.1% to 38.6% and Kosmos’ interest in the TEN fields decreased from 28.1% to 20.4%. Tullow paid Kosmos $118.2 million in cash
consideration after post closing adjustments for the pre-emption. During the first quarter of 2022, our oil and gas properties, net balance was reduced by $175.5 million, which includes the cash proceeds and net liabilities transferred to the purchaser as a result of concluding the Tullow pre-emption transaction. The difference in the net book value of the proved property, net liabilities transferred and adjusted purchase price qualified for treatment as a recovery of cost and normal retirement under ASC 932, which resulted in no gain or loss being recognized.
For PetroSA, the pre-emption process is ongoing and remains subject to execution of definitive agreements and required government approvals. Following completion of the pre-emption for PetroSA, Kosmos' ultimate interests in the Jubilee Unit Area and TEN fields would be reduced to 38.3% and 19.8%, respectively.
In March 2022, Kosmos completed the acquisition of an additional 5.5% interest in the Winterfell area in Green Canyon Blocks 943, 944, 987 and 988, offshore U.S. Gulf of Mexico, and an additional 1.5% interest in Green Canyon blocks 899 and 900 for $9.6 million.
In June 2022, Kosmos completed the acquisition of an additional 5.9% interest in the Kodiak oil field from Marubeni by exercising our preferential right to purchase, which increased our working interest from 29.1% to 35.0%. As consideration for the acquisition, Kosmos paid approximately $21.2 million in cash with additional deferred payments of $7.8 million for a total purchase price of approximately $29.0 million The purchase price was based on an initial purchase price of $38.3 million reduced by certain purchase adjustments totaling approximately $9.3 million. The purchase price allocation was based on the estimated fair value of identifiable assets acquired and liabilities assumed primarily comprised of $27.1 million of oil and gas properties, net.
In May 2022, Kosmos and its joint venture partners agreed with the Ministry of Mines and Hydrocarbons of Equatorial Guinea to extend the Block G petroleum contract term harmonizing the expiration of the Ceiba Field and Okume Complex production licenses (from 2029 and 2034 respectively) to 2040. As part of the extension, during the second quarter of 2022, Kosmos paid a signature bonus and agreed to undertake a work program including the drilling of three development wells on Block G in either the Ceiba Field or Okume Complex and the drilling of one exploration well in Block S offshore Equatorial Guinea.
In June 2022, at the conclusion of the second exploration period, Block C12 offshore Mauritania was relinquished.
4. Joint Interest Billings and Long-term Receivables
Joint Interest Billings
The Company’s joint interest billings consist of receivables from partners with interests in common oil and gas properties operated by the Company for shared costs. Joint interest billings are classified on the face of the consolidated balance sheets as current and long-term receivables based on when collection is expected to occur.
In Ghana, the foreign contractor group funded GNPC’s 5% share of the TEN development costs. The foreign contractor group is being reimbursed for such costs plus interest out of a portion of GNPC’s TEN production revenues. As of June 30, 2022 and December 31, 2021, the current portions of the joint interest billing receivables due from GNPC for the TEN fields development costs were $7.9 million and $7.9 million, respectively, and the long-term portions were $19.3 million and $20.9 million, respectively.
In February 2019, Kosmos and BP signed Carry Advance Agreements with the national oil companies of Mauritania and Senegal obligating us to finance a portion of the respective national oil company’s share of certain development costs incurred through first gas production for Greater Tortue Ahmeyim Phase 1, currently targeted in the third quarter of 2023. Kosmos’ share for the two agreements combined is currently estimated at approximately $240.0 million, which is to be repaid with interest through the national oil companies’ share of future revenues. As of June 30, 2022 and December 31, 2021, the balance due from the national oil companies was $160.9 million and $145.2 million, respectively, which is classified as Long-term receivables on our consolidated balance sheets. Interest income on the long-term notes receivable was $2.3 million and $1.9 million for the three months ended June 30, 2022 and 2021, respectively, and $4.3 million and $3.6 million for the six months ended June 30, 2022 and 2021, respectively.
Other Long-term Receivables
In August 2021, BP, as the operator of the Greater Tortue project (“BP Operator”), with the consent of the Greater Tortue Unit participants and the respective States, agreed to sell the Greater Tortue FPSO (which is currently under construction by Technip Energies in China) to an affiliate of BP (“BP Buyer”). The Greater Tortue FPSO will be leased back to BP Operator under a long-term lease agreement, for exclusive use in the Greater Tortue project. BP Operator will continue to manage and supervise the construction contract with Technip Energies. Delivery of the Greater Tortue FPSO to BP Buyer will occur after construction is complete and the Greater Tortue FPSO has been commissioned, with the lease to BP Operator becoming effective on the same date, currently targeted to be in the third quarter of 2023.
As a result of the above transactions entered into by BP Operator, Kosmos recognized a Long-term receivable of $200.2 million from BP Operator for our share of the consideration paid from BP Buyer to and held by BP Operator as well as a $200.2 million FPSO Contract Liability in Other long-term liabilities related to the deferred sale of the Tortue FPSO. As of June 30, 2022, this Long-term receivable has been non-cash settled against obligations payable to BP Operator, which included $132.4 million and $67.8 million of non-cash capital expenditures during the fourth quarter of 2021 and the first quarter of 2022, respectively. These non-cash impacts are excluded from the statement of cash flows.
5. Property and Equipment
Property and equipment is stated at cost and consisted of the following:
| ||June 30,|
| ||(In thousands)|
|Oil and gas properties:|| || |
|Proved properties ||$||6,872,341 ||$||6,725,453 |
|Unproved properties ||405,711 ||451,454 |
|Total oil and gas properties ||7,278,052 ||7,176,907 |
|Accumulated depletion ||(3,252,300)||(2,999,584)|
|Oil and gas properties, net ||4,025,752 ||4,177,323 |
|Other property ||60,359 ||58,598 |
|Accumulated depreciation ||(53,784)||(51,934)|
|Other property, net ||6,575 ||6,664 |
|Property and equipment, net ||$||4,032,327 ||$||4,183,987 |
We recorded depletion expense of $114.7 million and $145.1 million for the three months ended June 30, 2022 and 2021, respectively, and $266.4 million and $215.8 million for the six months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022 our oil and gas properties, net balance was reduced by $175.5 million as a result of concluding the Tullow pre-emption transaction in March 2022, $64.2 million as a result of the write-off of previously capitalized costs related to the BirAllah and Orca discoveries incurred under the C8 license to exploration expense, offset by additions of $36.9 million related to the acquisition of an additional working interest in the Kodiak oil field and the extension of the Block G licenses in Equatorial Guinea in the second quarter of 2022. See Note 3 — Acquisitions and Divestitures and Note 6 — Suspended Well Costs.
6. Suspended Well Costs
The following table reflects the Company’s capitalized exploratory well costs on drilled wells as of and during the six months ended June 30, 2022.
| ||June 30,|
| ||(In thousands)|
|Beginning balance ||$||218,180 |
|Additions to capitalized exploratory well costs pending the determination of proved reserves ||16,849 |
|Reclassification due to determination of proved reserves ||— |
|Capitalized exploratory well costs charged to expense ||(63,176)|
|Ending balance ||$||171,853 |
The following table provides an aging of capitalized exploratory well costs based on the date drilling was completed and the number of projects for which exploratory well costs have been capitalized for more than one year since the completion of drilling:
| ||June 30,|
| ||(In thousands, except project counts)|
|Exploratory well costs capitalized for a period of one year or less||$||— ||$||20,903 |
|Exploratory well costs capitalized for a period of one to three years||62,406 ||30,389 |
|Exploratory well costs capitalized for a period of four to six years||109,447 ||166,888 |
|Ending balance||$||171,853 ||$||218,180 |
Number of projects that have exploratory well costs that have been capitalized for a period greater than one year
|3 ||3 |
As of June 30, 2022, the projects with exploratory well costs capitalized for more than one year since the completion of drilling are related to the Yakaar and Teranga discoveries in the Cayar Offshore Profond block offshore Senegal, the Asam discovery in Block S offshore Equatorial Guinea, and the Winterfell discovery in Green Canyon Block 944 in the U.S. Gulf of Mexico.
BirAllah and Orca Discoveries — In November 2015, we completed the Marsouin-1 exploration well in the northern part of Block C8 offshore Mauritania, which encountered hydrocarbon pay. During the fourth quarter of 2019, we completed the nearby Orca-1 exploration well which encountered hydrocarbon pay. The BirAllah and Orca discoveries are being analyzed as a joint development. During the second quarter of 2022, the partnership continued progressing appraisal studies, maturing concept design. In June 2022, the exploration period of Block C8 offshore Mauritania expired. As a result, during the second quarter of 2022 we wrote off all of the capitalized costs, or $64.2 million, related to the BirAllah and Orca discoveries incurred under the C8 license to exploration expense. The partnership and the government of Mauritania are currently in the process of finalizing a new Production Sharing Contract (“PSC”) covering these discoveries.
Yakaar and Teranga Discoveries — In May 2016, we completed the Teranga-1 exploration well in the Cayar Offshore Profond block offshore Senegal, which encountered hydrocarbon pay. In June 2017, we completed the Yakaar-1 exploration well in the Cayar Offshore Profond block offshore Senegal, which encountered hydrocarbon pay. In November 2017, an integrated Yakaar-Teranga appraisal plan was submitted to the government of Senegal. In September 2019, we completed the Yakaar-2 appraisal well which encountered hydrocarbon pay. The Yakaar-2 well was drilled approximately nine kilometers from the Yakaar-1 exploration well. In July 2021, the current phase of the Cayar Block exploration license was extended up to an additional three years to 2024. The Yakaar and Teranga discoveries are being analyzed as a joint development. During the second quarter of 2022, we continued progressing appraisal studies and maturing concept design. Following additional evaluation, a decision regarding commerciality is expected to be made.
Asam Discovery — In October 2019, we completed the S-5 exploration well offshore Equatorial Guinea, which encountered hydrocarbon pay. In July 2020, an appraisal plan was approved by the government of Equatorial Guinea. The well is located within tieback range of the Ceiba FPSO and work is currently ongoing to integrate all available data into models to
establish the scale of the discovered resource. The active phase of the Block S exploration license is currently set to expire in December 2022. During the second quarter of 2022, engineering continued to progress concepts around required subsea infrastructure necessary for a subsea tieback. Once the appraisal plan involving this work is complete, a decision regarding commerciality will be made.
Winterfell Discovery — In January 2021, we drilled the Winterfell-1 exploration well located in Green Canyon Block 944 in the U.S. Gulf of Mexico, which encountered hydrocarbon pay. In January 2022, we drilled the Winterfell-2 appraisal well which encountered hydrocarbon pay. The field development plan has been submitted to partners for approval.
| ||June 30,|
| ||(In thousands)|
|Outstanding debt principal balances:|| || |
|Facility ||$||700,000 ||$||1,000,000 |
7.125% Senior Notes
|650,000 ||650,000 |
7.750% Senior Notes
|400,000 ||400,000 |
7.500% Senior Notes
|450,000 ||450,000 |
|GoM Term Loan||160,000 ||175,000 |
|Total ||2,360,000 ||2,675,000 |
|Unamortized deferred financing costs and discounts||(49,375)||(54,505)|
|Total debt, net||2,310,625 ||2,620,495 |
|Less: Current maturities of long-term debt||(30,000)||(30,000)|
|Long-term debt, net||$||2,280,625 ||$||2,590,495 |
The Facility supports our oil and gas exploration, appraisal and development programs and corporate activities. As of June 30, 2022, borrowings under the Facility totaled $700.0 million and the undrawn availability under the facility was $550.0 million. During the six months ended June 30, 2022, the Company made principal repayments totaling $300.0 million on the Facility including $100.0 million with the proceeds from the Tullow pre-emption transaction. See Note 3 — Acquisitions and Divestitures. Final maturity of the Facility is in March 2027. As part of the last amendment to the Facility in May 2021, the Company incurred $15.2 million for loss on extinguishment of debt during the second quarter of 2021. In April 2022, during the Spring 2022 redetermination, the Company’s lending syndicate approved a borrowing base capacity in excess of the facility size of $1.25 billion. The borrowing base amount is based on the sum of the net present values of net cash flows and relevant capital expenditures reduced by certain percentages as well as value attributable to certain assets’ reserves and/or resources in the Company’s production assets in Ghana (excluding the additional interests in Jubilee and TEN acquired in the acquisition of Anadarko WCTP in October 2021) and Equatorial Guinea.
When our net leverage ratio exceeds 2.50x, we are required under the Facility to maintain a restricted cash balance that is sufficient to meet the payment of interest and fees for the next six-month period on the 7.125% Senior Notes, the 7.750% Senior Notes and the 7.500% Senior Notes plus the Corporate Revolver or the Facility, whichever is greater. As of March 31, 2022 our net leverage ratio was below 2.50x, and therefore, we released $59.1 million from restricted cash in May 2022 upon submission of the net leverage test as of March 31, 2022. As of June 30, 2022 our net leverage ratio remained below 2.50x.
We were in compliance with the financial covenants contained in the Facility as of March 31, 2022 (the most recent assessment date). The Facility, as amended, contains customary cross default provisions.
On March 31, 2022, we refinanced the Corporate Revolver by replacing it with a new revolving credit facility agreement resulting in the following changes to the terms:
•The total size of the Corporate Revolver is reduced from $400 million to $250 million.
•The maturity date is extended from May 2022 to December 31, 2024.
•Borrowings under the Corporate Revolver now bear interest at a rate equal to the secured overnight financing rate administered by the Federal Reserve Bank of New York plus a credit adjustment spread plus a 7.0% margin plus mandatory costs, if applicable.
•Addition of a negative pledge covenant over the participating interests held by the Company’s wholly-owned subsidiary, Kosmos Energy Ghana Investments, in the WCTP and DT blocks offshore Ghana.
•As the Corporate Revolver is intended to continue to largely remain undrawn, the Company is required to use the proceeds from any capital markets and loan transactions to first repay any drawn outstanding balance under the Corporate Revolver and the Company is subject to a cash sweep of at least 50% of the Company’s Excess Cash (as defined in the Corporate Revolver) to pay outstanding balances as of March 31 or September 30 in any calendar year.
The Company capitalized $6.1 million of deferred financing costs associated with entering into the new revolving credit facility, which will be amortized over the term of the new revolving credit facility. As of June 30, 2022, there were no outstanding borrowings under the Corporate Revolver and the undrawn availability was $250.0 million The Corporate Revolver is available for general corporate purposes and for oil and gas exploration, appraisal and development programs.
We were in compliance with the financial covenants contained in the Corporate Revolver as of March 31, 2022 (the most recent assessment date). The Corporate Revolver contains customary cross default provisions.
7.125% Senior Notes due 2026
In April 2019, the Company issued $650.0 million of 7.125% Senior Notes and received net proceeds of approximately $640.0 million after deducting commissions and other expenses. We used the net proceeds to redeem all of the previously issued 7.875% Senior Secured Notes due 2021, repay a portion of the outstanding indebtedness under the Corporate Revolver and pay fees and expenses related to the redemption, repayment and the issuance of the 7.125% Senior Notes.
The 7.125% Senior Notes mature on April 4, 2026. Interest is payable in arrears each April 4 and October 4, commencing on October 4, 2019. The 7.125% Senior Notes are senior, unsecured obligations of Kosmos Energy Ltd. and rank equal in right of payment with all of its existing and future senior indebtedness (including all borrowings under the Corporate Revolver, 7.750% Senior Notes and the 7.500% Senior Notes) and rank effectively junior in right of payment to all of its existing and future secured indebtedness (including all borrowings under the Facility) and all borrowings under the GoM Term Loan. The 7.125% Senior Notes are guaranteed on a senior, unsecured basis by certain subsidiaries owning the Company's U.S. Gulf of Mexico assets and the interests acquired in the Anadarko WCTP acquisition, and on a subordinated, unsecured basis by certain subsidiaries that borrow under, or guarantee, the Facility and that guarantee the Corporate Revolver, the 7.750% Senior Notes and the 7.500% Senior Notes. The 7.125% Senior Notes contain customary cross default provisions.
7.750% Senior Notes due 2027
In October 2021, the Company issued $400.0 million of 7.750% Senior Notes and received net proceeds of approximately $395.0 million after deducting fees. We used the net proceeds, together with cash on hand, to refinance the $400.0 million Bridge Notes (which were issued during in the fourth quarter of 2021 in connection with the completion of the acquisition of Anadarko WCTP) and to pay expenses related to the issuance of the 7.750% Senior Notes.
The 7.750% Senior Notes mature on May 1, 2027. Interest is payable in arrears each May 1 and November 1, commencing on May 1, 2022. The 7.750% Senior Notes are senior, unsecured obligations of Kosmos Energy Ltd. and rank equal in right of payment with all of its existing and future senior indebtedness (including all borrowings under the Corporate Revolver, the 7.125% Senior Notes and the 7.500% Senior Notes) and rank effectively junior in right of payment to all of its existing and future secured indebtedness (including all borrowings under the Facility) and all borrowings under the GoM Term Loan. The 7.750% Senior Notes are guaranteed on a senior, unsecured basis by certain subsidiaries owning the Company's U.S. Gulf of Mexico assets and the interests acquired in the Anadarko WCTP acquisition, and on a subordinated, unsecured basis by
certain subsidiaries that borrow under, or guarantee, the Facility and that guarantee the Corporate Revolver, the 7.125% Senior Notes and the 7.500% Senior Notes. The 7.750% Senior Notes contain customary cross default provisions.
7.500% Senior Notes due 2028
In March 2021, the Company issued $450.0 million of 7.500% Senior Notes and received net proceeds of approximately $444.4 million after deducting fees. We used the net proceeds to repay outstanding indebtedness under the Corporate Revolver and the Facility, to pay expenses related to the issuance of the 7.500% Senior Notes and for general corporate purposes.
The 7.500% Senior Notes mature on March 1, 2028. Interest is payable in arrears each March 1 and September 1, commencing on September 1, 2021. The 7.500% Senior Notes are senior, unsecured obligations of Kosmos Energy Ltd. and rank equal in right of payment with all of its existing and future senior indebtedness (including all borrowings under the Corporate Revolver, the 7.125% Senior Notes and the 7.750% Senior Notes) and rank effectively junior in right of payment to all of its existing and future secured indebtedness (including all borrowings under the Facility) and all borrowings under the GoM Term Loan. The 7.500% Senior Notes are guaranteed on a senior, unsecured basis by certain subsidiaries owning the Company's U.S. Gulf of Mexico assets and the interests in the Anadarko WCTP acquisition, and on a subordinated, unsecured basis by certain subsidiaries that borrow under, or guarantee, the Facility and that guarantee the Corporate Revolver, and the 7.125% Senior Notes and the 7.750% Senior Notes. The 7.500% Senior Notes contain customary cross default provisions.
GoM Term Loan
In September 2020, the Company entered into a five-year $200.0 million senior secured term-loan credit agreement secured against the Company's U.S. Gulf of Mexico assets with net proceeds received of $197.7 million after deducting fees and other expenses. The GoM Term Loan also includes an accordion feature providing for incremental commitments of up to $100.0 million subject to certain conditions. The GoM Term Loan bears interest at an effective rate of approximately 6% per annum and matures in 2025, with quarterly principal repayments having started since the fourth quarter of 2021. As of June 30, 2022, $30.0 million of the total $160.0 million outstanding under the GoM Term Loan have been classified within Current maturities of long-term debt on our consolidated balance sheet. We were in compliance with the covenants, representations and warranties contained in the GoM Term Loan as of March 31, 2022 (the most recent assessment date). The GoM Term Loan contains customary cross default provisions as well as maturity acceleration provisions if certain Permitted Guaranteed Facilities are not refinanced prior to scheduled maturity.
Principal Debt Repayments
At June 30, 2022, the estimated repayments of debt during the five fiscal year periods and thereafter are as follows:
| ||Payments Due by Year|
| ||(In thousands)|
|Principal debt repayments(1)||$||2,360,000 ||$||15,000 ||$||30,000 ||$||30,000 ||$||254,011 ||$||1,002,418 ||$||1,028,571 |
(1)Includes the scheduled maturities for outstanding principal debt balances. The scheduled maturities of debt related to the Facility as of June 30, 2022 are based on our level of borrowings and our estimated future available borrowing base commitment levels in future periods. Any increases or decreases in the level of borrowings or increases or decreases in the available borrowing base would impact the scheduled maturities of debt during the next five years and thereafter.
(2)Represents payments for the period July 1, 2022 through December 31, 2022.
Interest and other financing costs, net
Interest and other financing costs, net incurred during the periods is comprised of the following:
| ||Three Months Ended June 30,||Six Months Ended June 30,|
| ||(In thousands)|
|Interest expense||$||43,016 ||$||35,740 ||$||86,178 ||$||67,175 |
|Amortization—deferred financing costs||2,591 ||2,620 ||5,261 ||5,191 |
|Loss on extinguishment of debt ||— ||15,223 ||192 ||15,223 |
|Capitalized interest ||(19,187)||(11,063)||(35,326)||(19,704)|
|Deferred interest ||10 ||70 ||(1,440)||(124)|
|Interest income ||(3,344)||(4,247)||(4,884)||(6,072)|
|Other, net||6,296 ||983 ||12,540 ||2,165 |
|Interest and other financing costs, net ||$||29,382 ||$||39,326 ||$||62,521 ||$||63,854 |
8. Derivative Financial Instruments
We use financial derivative contracts to manage exposures to commodity price and interest rate fluctuations. We do not hold or issue derivative financial instruments for trading purposes.
We manage market and counterparty credit risk in accordance with our policies and guidelines. In accordance with these policies and guidelines, our management determines the appropriate timing and extent of derivative transactions. We have included an estimate of non-performance risk in the fair value measurement of our derivative contracts as required by ASC 820 — Fair Value Measurement.
Oil Derivative Contracts
The following table sets forth the volumes in barrels underlying the Company’s outstanding oil derivative contracts and the weighted average prices per Bbl for those contracts as of June 30, 2022. Volumes and weighted average prices are net of any offsetting derivative contracts entered into.
| || || ||Weighted Average Price per Bbl|
| || || ||Net Deferred|| || || |
| || || ||Premium|| || |