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Rating Action: Moody's changes Kosmos Energy's outlook to stable, affirms B2 CFRGlobal Credit Research - 25 Feb 2021New York, February 25, 2021 -- Moody's Investors Service, ("Moody's") changed Kosmos Energy Ltd.'s (Kosmos Energy) rating outlook to stable from negative, and concurrently affirmed the company's B2 Corporate Family Rating (CFR), B2-PD Probability of Default Rating, and Caa1 senior unsecured notes. Moody's also assigned a Caa1 rating to the company's proposed issuance of senior unsecured notes due 2028."The stable outlook reflects higher oil price expectations for 2021 and Kosmos Energy's improved liquidity and funding position that should allow it to sufficiently cover its significant capital expenditures in 2021," said Sajjad Alam, Moody's senior analyst.Assignments:..Issuer: Kosmos Energy Ltd.....Senior Unsecured Notes, Assigned Caa1 (LGD5)Affirmations:..Issuer: Kosmos Energy Ltd..... Probability of Default Rating, Affirmed B2-PD.... Corporate Family Rating, Affirmed B2....Senior Unsecured Notes, Affirmed Caa1 (LGD5)Outlook Actions:..Issuer: Kosmos Energy Ltd.....Outlook, Changed To Stable From NegativeRATINGS RATIONALEKosmos Energy's B2 CFR reflects its elevated financial leverage, high funding requirements for its Tortue LNG project, significant principal amortization obligations through 2025, and an increasingly complex capital structure. The rating also considers the company's modest scale, deep-water-focused assets and the attendant physical and operational risks, as well as the high level of volatility and uncertainty surrounding oil prices that are likely to persist through 2021. The CFR is supported by Kosmos Energy's high-quality and oil-focused producing assets that have low break-even costs and relatively low base decline rates, balanced geographic exposure in West Africa and the US Gulf of Mexico, a solid track record of organic and acquisition driven growth and a visible pipeline of low risk development projects.Kosmos Energy managed its liquidity position well in 2020 and should have adequate liquidity through early-2022, which is reflected in the SGL-3 rating. The company had $149 million of cash and $420 million in combined availability under its corporate revolver and RBL facility as of December 31, 2020. Moody's expects the company to generate over $100 million of free cash flow from its base businesses, excluding $350 million of capital expenditures associated with the Tortue project, which will be financed with proceeds from its FPSO sale-leaseback transaction and a separate financing. The company has downside price protection through hedging for roughly 60% of its projected 2021 production based on the mid-point of its guidance. Through pro-active maturity management the company has continued to improve its maturity profile. The $400 million corporate revolver expires on May 31, 2022, while the $1.32 billion borrowing base reserve-based lending (RBL) facility has a final maturity date of March 31, 2025. There is ample headroom under the interest coverage covenant governing the RBL facility, although the leverage covenant will likely get tighter in 2022 if commodity prices fall significantly below today's levels.The unsecured notes are rated Caa1, two notches below the B2 CFR, given their unsecured claim to the company's assets and their subordinated position to term loan facility as well as to the RBL facility with regards to a substantial portion of the company's producing assets in West Africa.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe CFR could be downgraded if the borrowing base of the RBL facility is significantly reduced materially weakening liquidity, the company produces negative free cash flow from its base businesses, or the RCF/debt ratio falls towards 10%. The CFR could be upgraded if the company can reduce leverage and sustain the debt/average daily production below 30,000/boe and the RCF/debt ratio above 20% while maintaining good liquidity.Kosmos Energy Ltd. is a Dallas, Texas based publicly traded exploration and production company with assets in offshore West Africa and the US Gulf of Mexico.The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1056808. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are unsolicited.a.With Rated Entity or Related Third Party Participation: YESb.With Access to Internal Documents: YESc.With Access to Management: YESFor additional information, please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Sajjad Alam Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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