Alexander Prindle
Global macro, quantitative trading

Kosmos Energy: Rich Valuation, Mediocre Production, Low Reserves

Introduction

Kosmos Energy (NYSE: KOS) is an oil and gas exploration and production company that focuses on off-shore plays. The company has good exposure to a variety of formations, emphasizing developing African and South American opportunities. Regions that Kosmos Energy is currently exploring include: Ghana, Ireland, Mauritania, Morocco, and Suriname. They are also exploring on-shore oil in Cameroon.

After sustained volatility over the past six months, KOS is down about 4%. August was a difficult month for KOS, but it has seen a ~10% rebound to current day. Even after the recent turbulence I believe Kosmos Energy to be significantly overvalued and therefore representative of a short opportunity. An abundance of negative catalysts are likely to encourage market correction:...

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