7G Drillship idle time has contributed to idiosyncratic E&P distress in credit and equity valuations with a critical Ghana drilling campaign ahead in 2H25-2026
I still see downside risk on Jubilee given rapid decline, possibly smaller field perimeter (viz J-69), impaired eastern flank of the field (inc JSE), and rising gas and water-cut with limited on-deck options to deal with it. Tullow equity looks likely to get wiped by the bond refi, but who knows - extend and pretend is an option. Also on the subject of infill wells, Whilst previous infill well first production of 10kbd have been reached, they have declined pretty quickly subsequently.
Thank you for sharing. Re: Jubilee, my focus was on Kosmos b/c I think a recovery is more reasonable to underwrite. Tullow is more speculative IMO. Yes, the last well will decline from 10k bpd but is a good result and I have seen good drilling success with 7G Drillships in recent years. If Jubilee results are mediocre, Kosmos also has the GTA Phase 1 start up.
Thank you Tommy, for the insightful analysis on KOS and Tullow. I am going to keep an eye out on their infill drilling outcomes. Do you think the prospects of aggressive interest rate cuts could help restructure its upcoming debt maturity to somewhat favorable terms?
As a side note, I have played with multiple AI tools, and it sounds more like an echo chamber at times and picks up the bias from the prompter. I use it to reduce large texts into meaningful summaries. I agree with you that it is a bit dangerous to trust what it spits out as opinions.
If aggressive rate cuts are because of capital markets weakness, then no. If the Fed is cutting bc they are less focused on fighting inflation and willing to accept a higher natural level of inflation, then it should help. With Kosmos most important things will be the global oil price, Jubilee infill, GTA start up and overall cap markets health (Fed impact) re: refinancing their bonds
Thank you for taking the time to read, Walker. Maybe not for you but will be a fun follow for drilling results when Venturer begins drilling again in 4Q25. Expect volatility!
Kosmos interesting because I think probability of success on Jubilee infill drilling is higher than exploration/appraisal, plus potential success translates to cash flows much quicker than a discovery b/c it has the infrastructure in place. I think the market is too bearish on Jubilee. No guarantees of success but anxious for the drilling campaign.
Great to see some commentary on this. I have taken a position in $KOS equity recently as I believe the ramp up in deliveries from the GTA field should help, plus the recovery in Ghana as you cover in the article. Not an easy investment though
I feel the same as you, David. It’s a messy story but I think the credit is Ok, as are the assets. Have never really liked Kosmos that much after 10 years of following but there’s a turnaround story here with asset performance upside in the near term
Thanks, Tommy, very insightful. In this situation, I think the share provides a better risk/return profile than the bonds, even at their currently high yields.
Agree the equity has the better risk/return profile but some are strictly debt investors. I understand there’s others critical of Jubilee — theres risk of failure but I believe the troubles are more operator error than the reservoir and they’ve taken the right steps. Will be fun to follow the upcoming wells
Tullow, Kosmos Energy's JV partner in Ghana (Jubilee and TEN oil fields) released a business update yesterday with new production guidance for 2026. This new guidance is much lower than expected and implies - at the mid point of guidance - that oil production at the Jubilee field won't rise above the depressed 2025 level despite a multi-well drill program that started this year and will continue all through 2026. The result of the business update was a large fall of Tullow's share and bond prices. Kosmos was caught in the crossfires and its shares and bonds traded lower too. Kosmos' 2028 bonds are now quoted in the low 70s. Some analysts think that Tullow deliberately sandbagged 2026 guidance in order to force bondholders to make concessions (2026 debt needs to be refinanced). It's noteworthy that Kosmos' production estimate for Jubilee is in stark contrast to what's implied in Tullow's guidance. Kosmos expects gross oil production at Jubilee to rise back above 80 kbopd once all new producer wells come online next year (see managment's comments during the Q3 earnings call).
Thanks, Fred. Tullow's update included comments on engaging with bondholders and seeking alternative options (LME) with capital structure. That suggests there could be strategic elements with the guidance.
Good note. Wrote about Tullow here and previously: https://brevarthanresearch.substack.com/p/tullow-oil-297
I still see downside risk on Jubilee given rapid decline, possibly smaller field perimeter (viz J-69), impaired eastern flank of the field (inc JSE), and rising gas and water-cut with limited on-deck options to deal with it. Tullow equity looks likely to get wiped by the bond refi, but who knows - extend and pretend is an option. Also on the subject of infill wells, Whilst previous infill well first production of 10kbd have been reached, they have declined pretty quickly subsequently.
Thank you for sharing. Re: Jubilee, my focus was on Kosmos b/c I think a recovery is more reasonable to underwrite. Tullow is more speculative IMO. Yes, the last well will decline from 10k bpd but is a good result and I have seen good drilling success with 7G Drillships in recent years. If Jubilee results are mediocre, Kosmos also has the GTA Phase 1 start up.
Thank you Tommy, for the insightful analysis on KOS and Tullow. I am going to keep an eye out on their infill drilling outcomes. Do you think the prospects of aggressive interest rate cuts could help restructure its upcoming debt maturity to somewhat favorable terms?
As a side note, I have played with multiple AI tools, and it sounds more like an echo chamber at times and picks up the bias from the prompter. I use it to reduce large texts into meaningful summaries. I agree with you that it is a bit dangerous to trust what it spits out as opinions.
If aggressive rate cuts are because of capital markets weakness, then no. If the Fed is cutting bc they are less focused on fighting inflation and willing to accept a higher natural level of inflation, then it should help. With Kosmos most important things will be the global oil price, Jubilee infill, GTA start up and overall cap markets health (Fed impact) re: refinancing their bonds
Excellent article. Concisely articulated. More than I can possibly take on board with just one read. Kosmos does look very interesting.
Thank you for taking the time to read, Walker. Maybe not for you but will be a fun follow for drilling results when Venturer begins drilling again in 4Q25. Expect volatility!
Thanks Tommy, that was a great case study. Cheers John
Will be breaking news when the drillship arrives at location for next well in Ghana lol
Thanks for the write-up Tommy! $KOS could be positively JUICY if Jubilee turns around with the new drilling and GTA executes as expected
Kosmos interesting because I think probability of success on Jubilee infill drilling is higher than exploration/appraisal, plus potential success translates to cash flows much quicker than a discovery b/c it has the infrastructure in place. I think the market is too bearish on Jubilee. No guarantees of success but anxious for the drilling campaign.
Great to see some commentary on this. I have taken a position in $KOS equity recently as I believe the ramp up in deliveries from the GTA field should help, plus the recovery in Ghana as you cover in the article. Not an easy investment though
I feel the same as you, David. It’s a messy story but I think the credit is Ok, as are the assets. Have never really liked Kosmos that much after 10 years of following but there’s a turnaround story here with asset performance upside in the near term
Thanks, Tommy, very insightful. In this situation, I think the share provides a better risk/return profile than the bonds, even at their currently high yields.
Agree the equity has the better risk/return profile but some are strictly debt investors. I understand there’s others critical of Jubilee — theres risk of failure but I believe the troubles are more operator error than the reservoir and they’ve taken the right steps. Will be fun to follow the upcoming wells
Tullow, Kosmos Energy's JV partner in Ghana (Jubilee and TEN oil fields) released a business update yesterday with new production guidance for 2026. This new guidance is much lower than expected and implies - at the mid point of guidance - that oil production at the Jubilee field won't rise above the depressed 2025 level despite a multi-well drill program that started this year and will continue all through 2026. The result of the business update was a large fall of Tullow's share and bond prices. Kosmos was caught in the crossfires and its shares and bonds traded lower too. Kosmos' 2028 bonds are now quoted in the low 70s. Some analysts think that Tullow deliberately sandbagged 2026 guidance in order to force bondholders to make concessions (2026 debt needs to be refinanced). It's noteworthy that Kosmos' production estimate for Jubilee is in stark contrast to what's implied in Tullow's guidance. Kosmos expects gross oil production at Jubilee to rise back above 80 kbopd once all new producer wells come online next year (see managment's comments during the Q3 earnings call).
Thanks, Fred. Tullow's update included comments on engaging with bondholders and seeking alternative options (LME) with capital structure. That suggests there could be strategic elements with the guidance.