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(Alliance News) - Kosmos Energy Ltd on Monday said its first-quarter loss almost doubled, and it said it will curtail production at its US Gulf of Mexico sites due to the crash in oil prices.
A barrel of Brent oil was priced just above USD30 on Monday, more than halved from USD66 at the start of 2020. Prices have crashed due to lower demand resulting from the Covid-19 pandemic and a short-lived oil production war between Saudi Arabia and Russia.
For the three months to March 31, Kosmos recorded a pretax loss of USD117.2 million compared with a pretax loss of USD61.6 million a year ago. Total revenue and other income fell 40% to USD177.8 million from USD296.8 million.
The widened loss was attributed to the "timing mismatch" between production and the lifting of cargoes and impairment charges totalling USD150.8 million, largely related to the Kodiak and Tornado fields in the Gulf of Mexico.
Net production for the quarter amounted to 66,300 barrels of oil equivalent per day, with sales of 43,700 barrels, resulting in a material net underlift position of 1.7 million barrels of oil equivalent
Kosmos's production in the US Gulf of Mexico was unaffected by Covid-19 and averaged approximately 28,300 barrels of oil equivalent per day during the first quarter. However, it expects a 7,000 barrel per day reduction in the second quarter due to production shut-ins.
Annual net production guidance for the company's US Gulf of Mexico operations is expected to be at the lower end of the of 24,000 barrels of oil equivalent per day to 28,000 barrels range, assuming the shut-ins last through May.
Chair & Chief Executive Officer Andrew Inglis said: "In response to the volatile market conditions, we have taken decisive actions to protect the business in 2020 and position it for increased activity in 2021. These measures include materially reducing costs and restructuring our hedging portfolio".
Kosmos has identified cost reductions of around 40% from discretionary expenditure largely from exploration activities in the Gulf of Mexico, basin-opening exploration portfolio, and other non-critical work that does not impact safety and asset integrity.
The oil company is now targeting base business capital expenditure of USD200 million to USD225 million in 2020, while keeping 2020 production within the range of previous guidance and with minimal expected impact on 2021 production.
Shares in Kosmos were trading 2.5% higher at 127.15 pence each in London on Monday morning.
By Tapan Panchal; tapanpanchal@alliancenews.com
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