S&P Global Ratings has downgraded Kosmos Energy Ltd. to 'CCC' from 'CCC+' and assigned a negative outlook, signaling the agency's view that the likelihood of debt restructuring has increased. The rating action follows a series of near-term liability management moves by Kosmos but reflects S&P's assessment that those steps have not materially improved the company's longer-term credit profile.
S&P named a mix of tender offers and refinancing actions among Kosmos' recent efforts to ease short-term maturity pressure. Management intends to allocate proceeds from newly secured Nordic notes toward a tender offer to repurchase up to $250 million of its 7.750% senior unsecured notes due 2027, to repay borrowings under its RBL facility and for general corporate purposes.
The rating agency warned that Kosmos could breach its debt service coverage ratio in March or September 2026 if it does not obtain additional waivers from RBL lenders. Such a breach would allow lenders to accelerate the RBL's maturity. The RBL had $1.125 billion outstanding as of September 30, 2025, according to S&P.
Under the company's RBL agreement, Kosmos must keep a net leverage ratio below 3.5x. In July 2025, lenders granted a temporary waiver that raised the permitted threshold to 4.0x for September 2025 and to 4.25x for March 2026. Nonetheless, Kosmos reported a net leverage of 4.6x as of September 30, 2025, exceeding those temporary thresholds and leaving the company exposed if further waivers cannot be secured.
To address the shortfall, Kosmos has outlined a mitigation plan that includes cuts to operating expenditures in Ghana, reductions in administrative expenses, potential monetization of hedges and strategic transactions such as asset sales. Despite these measures, S&P stated there is "heightened risk" that Kosmos may fail to implement the plan in time to avoid a covenant breach.
If the company is unable to execute the mitigation program or obtain timely waivers, S&P said a covenant breach would constitute an event of default. That scenario could result in the accelerated maturity of outstanding obligations and a deterioration in liquidity. A default under the RBL could also trigger cross-default provisions in other debt instruments, compounding financial stress.
S&P highlighted substantial scheduled debt service in 2026 and 2027 as an additional source of pressure. Much of that load stems from scheduled amortization under a Gulf of Mexico term loan that begins this year and from RBL amortization that starts in 2027. The agency also projects negative free operating cash flow for Kosmos, noting that this would hamper the company's ability to meet its obligations without additional financing or operational improvements.
Earlier this year, Kosmos took on a $250 million senior secured term loan to repay its 7.125% senior unsecured notes due April 2026. That term loan carries scheduled amortization estimated at $54 million in 2026, $71 million in both 2027 and 2028, and $54 million in 2029.
On the production front, S&P expects Kosmos' output to increase in 2026. The agency cited ramp-up from the Greater Tortue Ahmeyim LNG project and higher production from Ghana's Jubilee field as contributors. Total net production is forecast to average between 70,000 and 80,000 barrels of oil equivalent per day in 2026, up from roughly 65,000 in 2025.
Looking forward, S&P said it could lower the rating again if a default appears probable within six months. Conversely, the agency noted that improved operating performance and a reduction in projected free cash flow shortfalls could lead to a revision of the outlook or stabilization of the rating.
Contextual note: The company's available mitigation options and the timing of lender waivers will determine whether Kosmos can avoid covenant defaults and the potential acceleration of its secured facilities.