What happened
Shares of Kosmos Energy (NYSE: KOS) tumbled more than 17% by 3 p.m. ET on Monday. Weighing on the oil stock was its first-quarter results and a sell-off in the oil market.
So what
Crude prices tumbled today in another brutal day for the overall market. WTI, the U.S. oil price benchmark, plunged more than 6%, falling to around $103 per barrel. Weighing on the oil market was weak trade data from China. Given the country's pandemic-related lockdowns, oil traders are increasingly worried about its oil demand. This overall weakness in the oil patch and broader stock market weighed on Kosmos Energy stock.
Image source: Getty Images.
Adding to Kosmos Energy's weakness was its first-quarter results. On the one hand, the company posted strong numbers. Net production averaged 72,600 barrels of oil equivalent per day (BOE/D), which was at the top end of its guidance range. That enabled the company to generate about $220 million of free cash flow. When combined with a partial sale of its stake in the Jubilee and TEN fields in Ghana, the company was able to pay off $330 million in debt.
That sale will impact its full-year output. The company expects production to average between 63,000 and 67,000 BOE/D this year. However, that's a short-term impact. Kosmos has several projects coming online, which should grow its overall production by around 50% by 2024 while increasing its natural gas mix. If energy prices remain strong, these projects should enable the company to generate material and sustainable cash flow for its investors.
Now what
Crude prices cooled off today on concerns that China's demand might slump. That's weighing on Kosmos Energy, especially given its view that production will decline for the rest of the year. However, the company has more production on the way, which could fuel the stock in the future if crude and gas prices remain strong.
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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
