Kosmos Energy (KOS) stock plummeted 5.03% in the pre-market session on Tuesday, after the company reported its Q4 2024 earnings and outlined a conservative outlook for 2025, prioritizing cost reductions and debt repayment over aggressive growth plans.

The oil and gas exploration and production company highlighted several factors impacting its near-term performance and cash flows, including higher operating costs expected in Q1 2025 as it ramps up its GTA LNG project in Mauritania and Senegal. Commissioning and start-up costs will keep costs elevated before trending lower once the project reaches full capacity.

Additionally, Kosmos faced lower-than-expected Q4 2024 production at its Jubilee field in Ghana due to water injection and reliability issues, though management stated efforts are underway to address these challenges and improve production levels in 2025.

The company also guided for a significant reduction in capital expenditure to $400 million or below in 2025, a 50% decrease from 2024 levels as major growth projects are completed. While this could boost free cash flow, it raised concerns among investors about future growth prospects.

Furthermore, Kosmos stated its priority is to prioritize debt reduction until its leverage ratio falls below 1.5x, expected towards late 2026 under current assumptions. This means shareholder returns through dividends or buybacks are unlikely in the near term as the company focuses on deleveraging its balance sheet.