Kosmos Energy Ltd.KOS
Kosmos Energy Ltd. Fair Value Disclosure
Fair Value Measurements
In accordance with ASC 820—Fair Value Measurements, fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are classified into two categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. We prioritize the inputs used in measuring fair value into the following fair value hierarchy:
•Level 1 — quoted prices for identical assets or liabilities in active markets.
•Level 2 — quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data by correlation or other means.
•Level 3 — unobservable inputs for the asset or liability. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.
The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2025 and 2024, for each fair value hierarchy level:
| Fair Value Measurements Using: | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Commodity derivatives | $ | — | $ | 50,497 | $ | — | $ | 50,497 | |||||||||||||||
Decommissioning trust fund: | |||||||||||||||||||||||
Debt securities | — | 23,707 | — | 23,707 | |||||||||||||||||||
| Total | $ | — | $ | 74,204 | $ | — | $ | 74,204 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Commodity derivatives | $ | — | $ | 7,226 | $ | — | $ | 7,226 | |||||||||||||||
| Provisional sales contracts | — | 2,242 | — | 2,242 | |||||||||||||||||||
| Interest rate derivatives | — | 2,202 | — | 2,202 | |||||||||||||||||||
| Decommissioning trust fund: | |||||||||||||||||||||||
| Debt securities | — | 10,653 | — | 10,653 | |||||||||||||||||||
| Total | $ | — | $ | 22,323 | $ | — | $ | 22,323 | |||||||||||||||
The book values of cash and cash equivalents and restricted cash approximate fair value based on Level 1 inputs. Joint interest billings, oil sales and other receivables, and accounts payable and accrued liabilities approximate fair value due to the short‑term nature of these instruments. Our long‑term receivables, after any allowances for credit losses, and other long-term assets approximate fair value. The estimates of fair value of these items are based on Level 2 inputs.
Commodity Derivatives
Our commodity derivatives represent crude oil collars, put options, call options and swaps for notional barrels of oil at fixed Dated Brent or NYMEX WTI oil prices. The values attributable to our oil derivatives are based on (i) the contracted notional volumes, (ii) independent active futures price quotes for the respective index, (iii) a credit‑adjusted yield curve applicable to each counterparty by reference to the credit default swap (“CDS”) market and (iv) an independently sourced estimate of volatility for the respective index. The volatility estimate was provided by certain independent brokers who are active in buying and selling oil options and was corroborated by market‑quoted volatility factors. The deferred premium is included in the fair market value of the commodity derivatives. See Note 9—Derivative Financial Instruments for additional information regarding the Company’s derivative instruments.
Provisional Sales Contracts
The value attributable to provisional sales contracts derivative is based on (i) the sales volumes and (ii) the difference in the independent active futures price quotes for the respective index over the term of the pricing period designated in the sales contract and the spot price on the lifting date.
Interest Rate Derivatives
Our interest rate derivatives in 2024 consisted of interest rate swaps, whereby the Company pays a fixed rate of interest and the counterparty pays a variable SOFR-based rate. The values attributable to the Company’s interest rate derivative contracts are based on (i) the contracted notional amounts, (ii) SOFR yield curves provided by independent third parties and corroborated with forward active market-quoted SOFR yield curves and (iii) a credit-adjusted yield curve as applicable to each counterparty by reference to the CDS market.
Decommissioning Trust Fund
In April 2024, a decommissioning trust agreement with the Jubilee unit partners to cash fund future retirement costs associated with the Jubilee Field was finalized. Each partner will contribute annually to the trust in proportion to its respective paying interest of the estimated future dismantlement, abandonment and restoration costs associated with the decommissioning of the Jubilee Field. Contributions to the trust are used by the trustee of the fund, the Bank of Ghana, to purchase and sell authorized securities at the direction of the Jubilee unit partners.
As of December 31, 2025, the investments held in the decommissioning trust fund are US Treasury debt securities. We have classified the investments as trading securities and recorded such investments at their fair market value as other long-term assets in our consolidated balance sheet using observable inputs including Kosmos’ share of the fund and broker/dealer bid/ask prices of the investments held by the fund at December 31, 2025. Contributions made to the decommissioning trust are reported as investing activities in our consolidated statement of cash flows. All realized and unrealized gains and losses resulting from the sales and maturities or changes in fair value of the securities are recognized in Other income, net. For the years ended December 31, 2025 and 2024, we contributed $11.5 million and $11.5 million to the decommissioning trust fund, respectively.
The following table summarizes the cost and fair value, purchases, proceeds from the sales and maturities, and the unrealized gains (losses) for Kosmos’ portion of the investments in debt securities held by the decommissioning trust at December 31, 2025 and 2024:
| Years Ended | ||||||||||||||||||||
Type of Security | Purchases | Net Proceeds (1) | Unrealized Gain (Loss) | |||||||||||||||||
| 2025 | ||||||||||||||||||||
Debt securities | $ | 12,857 | $ | — | $ | 197 | ||||||||||||||
Cash and cash equivalents | — | (749) | — | |||||||||||||||||
| Other(1) | — | 171 | — | |||||||||||||||||
Total | $ | 12,857 | $ | (578) | $ | 197 | ||||||||||||||
| 2024 | ||||||||||||||||||||
Debt securities | $ | 10,708 | $ | — | $ | (55) | ||||||||||||||
Cash and cash equivalents | — | 752 | — | |||||||||||||||||
Other(1) | — | 101 | — | |||||||||||||||||
Total | $ | 10,708 | $ | 853 | $ | (55) | ||||||||||||||
(1)Represents net receivables relating to interest.
The following table presents the costs and fair values of investments in debt securities held in the decommissioning trust fund according to the contractual maturities at December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
Cost | Estimated Fair Value | Cost | Estimated Fair Value | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Less than 5 years | $ | 23,565 | $ | 23,707 | $ | 10,708 | $ | 10,653 | ||||||||||||||||||
5 years to 10 years | — | — | — | — | ||||||||||||||||||||||
Due after 10 years | — | — | — | — | ||||||||||||||||||||||
Total | $ | 23,565 | $ | 23,707 | $ | 10,708 | $ | 10,653 | ||||||||||||||||||
Debt
The following table presents the carrying values and fair values at December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
7.125% Senior Notes | $ | 99,942 | $ | 99,303 | $ | 249,315 | $ | 246,565 | |||||||||||||||
7.750% Senior Notes | 348,757 | 321,394 | 347,910 | 339,927 | |||||||||||||||||||
7.500% Senior Notes | 398,426 | 270,125 | 397,672 | 379,404 | |||||||||||||||||||
8.750% Senior Notes | 495,564 | 283,575 | 494,997 | 470,965 | |||||||||||||||||||
3.125% Convertible Senior Notes | 393,097 | 172,704 | 391,603 | 332,792 | |||||||||||||||||||
| GoA Term Loan Facility | 150,000 | 150,000 | — | — | |||||||||||||||||||
| Facility | 1,200,000 | 1,200,000 | 900,000 | 900,000 | |||||||||||||||||||
| Total | $ | 3,085,786 | $ | 2,497,101 | $ | 2,781,497 | $ | 2,669,653 | |||||||||||||||
The carrying values of our 7.125% Senior Notes, 7.750% Senior Notes, 7.500% Senior Notes, 8.750% Senior Notes and 3.125% Convertible Senior Notes represent the principal amounts outstanding less unamortized discounts. The fair values of our 7.125% Senior Notes, 7.750% Senior Notes, 7.500% Senior Notes, 8.750% Senior Notes and 3.125% Convertible Senior Notes are based on quoted market prices, which results in a Level 1 fair value measurement. The carrying values of the Facility approximate fair value since they are subject to short-term floating interest rates that approximate the rates available to us for those periods.
Nonrecurring Fair Value Measurements - Long-lived assets
Certain long-lived assets are reported at fair value on a non-recurring basis on the Company's consolidated balance sheet. These long-lived assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Our long-lived assets are reviewed for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company calculates the estimated fair values of its long-lived assets using the income approach described in the ASC 820 — Fair Value Measurements. Significant inputs associated with the calculation of estimated discounted future net cash flows include anticipated future production, pricing estimates, capital and operating costs, market-based weighted average cost of capital, and risk adjustment factors applied to reserves. These are classified as Level 3 fair value assumptions. The Company utilizes an average of third-party industry forecasts of Dated Brent, adjusted for location and quality differentials, to determine our pricing assumptions. In order to evaluate the sensitivity of the assumptions, we analyze sensitivities to prices, production, and risk adjustment factors.
As a result of negative proved oil and gas reserve revisions at the Winterfell and Marmalard fields in the Gulf of America, primarily driven by a change in the planned development work scope for the fields, we reviewed the Winterfell and Marmalard long-lived assets for impairment at December 31, 2025, which resulted in impairment of long lived assets in our consolidated statement operations of approximately $177.6 million for the year ended December 31, 2025, reducing the carrying value of the proved properties to their estimated fair value of $64.4 million as of December 31, 2025. As part of our impairment analysis, the average per barrel WTI price of third-party industry forecasts used for purposes of determining discounted future cash flows was in the mid-$60s adjusted for inflation. The expected future cash flows were discounted using a rate of approximately ten percent which the Company believes is a market-based weighted average cost of capital for industry peers determined appropriate at the time of the valuation.
No impairment of proved oil and gas properties was recognized for the year ended December 31, 2024.
As a result of negative proved oil and gas reserve revisions at TEN, primarily driven by a change in the partnership’s development work scope for the TEN Fields and well performance, we reviewed our TEN long-lived assets for impairment at December 31, 2023, which resulted impairment charges of $222.3 million for the year ended December 31, 2023. The impairment charges resulted in a full impairment of the remaining book value of TEN reducing the carrying value of the TEN Fields to zero. As part of our impairment analysis, the average per barrel Dated Brent price of third-party industry forecasts used for purposes of determining discounted future cash flows was in the low-$80s adjusted for inflation. The expected future cash flows were discounted using a rate of approximately ten percent which the Company believes is a market-based weighted average cost of capital for industry peers determined appropriate at the time of the valuation.
These impairment charges are included in Impairments of long-lived assets on the consolidated statement of operations. If we experience material declines in oil pricing expectations, increases in our estimated future expenditures or a decrease in our estimated production profile, our long-lived assets could be at risk of additional impairment.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 22, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.