RBC Capital Markets: Kosmos Energy Has 25% Upside Ahead

Recent oil highs and upbeat commentary from BP plc BP are bullish indicators for Kosmos Energy Ltd KOS, which has 25-percent upside potential, according to RBC Capital Markets.

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Share Price: $0.80

Min. Investment: $1,000

Valuation: $3.5B

The Analyst

Analyst Al Stanton upgraded Kosmos Energy from Sector Perform to Outperform and raised the price target from $7 to $10.

The Thesis

Stanton expects the company’s balance sheet to benefit in the coming months from a number of factors including higher oil prices, the resolution of issues at the Jubilee field and a full year’s contribution from the Ceiba and Okume fields. (See the analyst's track record here.)

Kosmos’ oil production for fiscal 2018 is projected to rise to approximately 49,000 barrels per day, a 50-percent year-over-year increase.

BP, Kosmos’ partner and operator in the 15Tcf Tortue gas development, recently made positive comments on the operation that Stanton said led him to bring his projections more in line with the companies’ guidance. Investors should watch BP’s second-quarter earnings report on July 31 for more detail, the analyst said.

Investors could see some “overdue” upside from exploration drilling over the next year, Stanton said.