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Kosmos Energy to Raise Fresh Capital

Nilanjan Choudhury

Hamilton, Bermuda-based Kosmos Energy Ltd. (KOS) has commenced a secondary public offering of 17,000,000 common shares – being sold by two major owners – while providing the underwriters with a 30-day option to purchase up to 2,550,000 additional common shares.

The energy explorer will not get the net proceeds from this offering, which will go to the sellers – The Blackstone Group L.P. (BX) and Warburg Pincus LLC – Kosmos Energy’s top two shareholders.

Kosmos Energy, which went public in May 2011, is an independent exploration and production company engaged in the acquisition, finding and development of deepwater oil and gas properties. The company’s operations are concentrated primarily in the under-penetrated regions in Africa. In particular, Kosmos Energy’s asset portfolio consists of world-class production/development assets offshore Ghana and Morocco.

Having done a stellar job at raising production and reserves from its assets, analysts are predicting strong earnings growth for Kosmos Energy over the current year. The 2014 Zacks Consensus Estimate is 17 cents, representing 24% earnings per share growth over 2013.    

With a proven exploration strategy, stable free cash flows, and a robust hedging program that minimizes oil price exposure, Kosmos Energy is primed for attractive returns. Moreover, a track record of consistent distribution hike, together with a business model focused on operational efficiencies and attractive acquisitions/growth projects, makes the oil and gas finder a good choice for investors looking for substantial value.

As a result, Kosmos Energy currently retains a Zacks Rank #1 (Strong Buy), implying that it is expected significantly outperform the broader U.S. equity market over the next one to three months.

Apart from Kosmos Energy, investors interested in the ‘International Exploration & Production’ sector may consider stocks like BPZ Resources Inc. (BPZ) and Vermilion Energy Inc. (VET). While BPZ Resources holds a Zacks Rank #1 (Strong Buy), Vermilion Energy carries a Zacks Rank #2 (Buy).

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