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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: CommanderCricket who wrote (170858)8/7/2012 1:19:21 PM
From: Dennis Roth1 Recommendation  Read Replies (1) of 206169
 
Kosmos Energy Ltd (KOS)
Jubilee Performance Improves

Bottom Line: There were pluses and minuses for this undervalued name on
the 2Q call. Jubilee production is ramping better than expected on the back
of acid stimulation results. We expect Jubilee production to fill the 120kbd
FPSO at some point in 1H13 without the need to drill costly sidetrack wells.
Good news. KOS should also sanction the 2nd FPSO, the TEN project in
2H12. These two FPSO’s alone would account for $12.7/sh of value. On the
negative side of the ledger, the Mahogany East, Akasa and Teak (MTAB)
fields could be used to extend the life of the Jubilee FPSO as opposed to a
standalone 3rd FPSO. This would be capital efficient but lower NPV in our
view. We lower our target price as a result to $17/sh.

Jubilee Performance a Stepping Stone to Longer Term Exploration
Upside: Filling the Jubilee FPSO is important for near term cashflows and
operational confidence. Sanctioning TEN underpins a further expansion of
cashflow. This should allow the market to refocus on KOS as an exploration
play. KOS already has discovered 500mmboe of 2P resources in Ghana, a
good achievement and 2012 included further success, albeit the main Teak
upside case was not supported by well results. Over the next 12 months,
KOS is drilling 3 sizeable wells in Ghana and Cameroon. However, the real
game changers will be success in the next potential basin openers in
Morocco and Suriname. These will not be drilled until 2H13/2014.

Valuation: KOS shares look undervalued against existing reserves. For
longer term investors, the exploration portfolio and management team
provide a low cost option.

Credit Suisse 06 August 2012
7 paqes, 2 exhibits
download available at sendspace.com
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