Q2 2020 Kosmos Energy Ltd Earnings Call
Good day, everyone welcome to Kosmos Energy's second quarter 2020 conference call.
Just a reminder, today's call is being recorded.
At this time, let me turn the call over to Jamie Buckland, Vice President Investor Relations Kosmos energy.
Thank you operator.
And thanks to everyone for joining us today.
We issued our second quarter earnings release.
This release in the slide presentation to accompany todays call or available on the investors page about website.
Joining me on the cold today to go through that material.
Andy angles, Chairman and CEO.
Neil Shah see outside.
During today's presentation, we will make forward looking statements that relate to our estimates and expectations.
Actual results and outcomes could differ materially future 'cause weeknight in this presentation.
Okay, and I see she filings.
Please refer to <unk> annual report stock exchange announcement FCC filings for more details.
These documents are available on our website.
At this time I'll turn the call like which one day.
Thanks, Jamie and good morning, good afternoon, everyone.
I'll start todays presentation with the highlights for the quarter before passing over to Neil.
Through the financials and the balance sheet.
I'll, then, but each with a look forward to the second call for the I didn't to 2021.
Turning to slide two highlights for the quarter.
Kosmos delivered strong operational performance in a challenging quota for the sector, which saw record low oil prices an unprecedented volatility.
We do not the production of around 60000 barrels oil equivalent a day, which is in line with the guidance, we gave but the first quarter and reflects the may shutdowns in the Gulf of Mexico, which reduce overall company production by around 6000 barrels oil equivalent a day in the quarter.
We remain on track to deliver the cost reductions set out early in the with reductions across all play football Angie and I have around 5% to 15% or the first quarter.
We project the increased impact in the third and fourth quarters additional opex and Gionee reductions are reflected in capex reduces in line with the decrease in activity set.
Importantly, these cost savings are not expected to have a longtime in parts of the portfolio or all operations and they will help position cosmology. The leaner company that can perform strongly as the sex of recoveries overtime.
In addition to the sustainable cost savings. We also took steps to ensure the balance sheet remains in a solid position.
During the quarter, we increased our liquidity position through a pre payment agreement with Trafigura, which Neil will talk about in more detail. Shortly we ended June with around $600 million of liquidity.
Importantly cover an oil prices, we've reached the cash flow inflection point, meaning we expect to generate free cash flow through the second half of the a and then the 2021, which we expect you to reduce our year end net debt and enhance liquidity.
As we looked at a peak yeah, we continue to make good progress on the greater Tortue development, It's Mike Koban 19 mitigation measures implemented in Mauritania and Senegal.
It's one of the project NIE around 40% complete with an increase of seven but sat in the quarter with activity ramping up in key areas.
One exploration well high grading our prospects for 2021 with a combination of proven bites and infrastructure led targets and self funded basin I'd be tests expected in 2021.
Slide three.
As I mentioned, the pre decide Kosmos 11 strong operational performance in second quarter with net production of 60000 barrels of oil equivalent per day in line with previous guidance.
In Ghana net production at 29000 barrels of oil today was that the high end of ongoing.
Usually continues perform well with high reliability, let me gross production around 90000 barrels of oil today within the quarter.
This was achieved through consistent water injection and gas off site.
More recently, we've continued to make further progress with record water injection rights since the field was commissioned coupled with increased gas offtake supporting our objective of lowering the field wide got so ratio.
We remain encouraged by the enhanced collaboration with the off right and alignment of the partnership to focus on consistent delivery and improving reliability.
A 10 gross production of around 50000 barrels of oil today was in line guidance. The N C O nine well expect it online shortly.
I can do increase 10 production to the second half of the.
Next we'll get a net production at 11000 barrels bulk today was in line with guidance.
In the Gulf of Mexico, net production was around 20000 barrels of oil equivalent per day in the quarter, which is in line with our guidance, reflecting the made shopping that we flagged in our first quarter results.
In addition, the Tonight, a full well was completed drilling we now completing the wells.
Thank the wells to be online around the beginning of the full quarter.
Late in July we experience to hide rights in the gas export lines, the Delta House platform, resulting in a temporary shots at the facility.
Yes, right is telling me working to remove the I'd like blockage, which we expect to occur later this month.
Full year guidance for the Gulf of Mexico remains at the low end of the guidance range.
Turning to slide four I want to talk briefly about October 19 response.
Since the pot dynamic began we focus on guiding the company through a challenging period.
However, we haven't lost sight of all responsibility to the countries and local communities, where we outbreak.
This slide shows a few examples of how we're doing Oh.
Working with governments are local community, we procured and donate medical supplies I know the vital equipment to assist Cabot 19 response efforts.
Well the slight <unk> features for countries in West Africa, we had been involved in similar projects across our entire portfolio.
It's important that reflects our commitment to be a force, but good it's consistent and how we have supported communities in the past, particularly joined the 2040 Ebola outbreak.
With that I'll now hand, I would see Neil will take you through the financials for the quarter in more detail.
Thanks, Andy turning to slide five the key financial items for the quarter.
As mentioned production of 60000 barrels of oil equivalent per day was in line with previous guidance and included the impact of the makes shut ins in the Gulf of Mexico.
One area I want to draw your attention to is the price realization during the quarter.
Andy talked about in May when we reported one key results. It was a significant dislocation between quoted oil prices and that was realized.
Dislocation was largely due to lower demand and buyers passing through materially higher shipping costs to the producers.
In addition, the timing of our sold volumes played a large role in our realized pricing.
The lifting timing you sold approximately 60% of our volume in the second quarter in the month of April.
Where benchmark prices were at the lowest.
Realizations have now returned to normal what's gone production and international cargos, so that benchmark prices or slightly above.
Don't plan to talk through every line item on the slide but as you can see we are in line with guidance in most instances.
Capex, we remain on target for full year guidance as the second half is expected to be materially lower than the first half due to the phasing of expenditures.
Similarly in Opex, we expect costs to trend lower in the second half.
We are making no change to our full year 2020 got it.
Turning to slide six the balance sheet.
We ended Q2 with over $600 million liquidity, including $160 million is cash.
Pre payment agreement with Trafigura announced in June enhanced our liquidity position and provides kosmos with a new source of liquidity secured against our future Gulf of Mexico production, primarily in 2022 in 2023.
It provides kosmos with low cost capital and gives us the flexibility to potentially take advantage of opportunities that may arise in a dislocated markets.
In addition, if oil prices rise, we can repay the prepayment earlier and benefit from higher oil prices.
Net debt increased in Twoq, you by around 65 million in the second quarter.
Jordi of which was the result of the build in working capital.
That should start to reverse in the second half of the year as that business is expected to generate free cash flow in the current environment.
As a result of the lower realized prices, we discussed earlier EBITDAX in the second quarter was lower than forecast will impact our net debt to EBITDAX covenant as we move through the year.
At the full year, we anticipate that leverage could get higher than our original three and a half times net debt covenant.
As a result, we are proactively sought out a waiver from our banks, which provides additional temporary headroom until the end of 2021.
Even with the waiver in place we are working to minimize future leverage.
Continue to have a very constructive dialogue with our banks and appreciate all of their support to ensure kosmos remains well positioned to take advantage of the current market.
Early actions taken to reduce costs have resulted in low cash flow breakeven of around $35 per barrel or the twoq to fourq, you period and position the company well to generate free cash flow in the second half the year.
At current prices, we expect to generate material free cash flow going forward, allowing us to pay down debt in the second half the year and into 2021, while continuing to fund selective growth opportunities.
With that I'll hand, it back to Andy for the remainder of the presentation.
Thanks, Neil turning to slide seven.
Mauritania and Senegal, the spike of at nine see Mitigations, the greater Tortue project continues to advance.
The four key Workstreams detail go on this slide of old see meaningful progress since we last reported in May.
Yeah, Yeah, so which is being constructed in China not around 40% complete.
The floating LNG vessel being built in Singapore is over 50% complete.
In Senegal, the case and construction yard in Dhaka is closed due to Cabot 90 mitigation measures.
However, progress on the bright water work stream continues with delivery of rock from Macquarie in Mauritania.
The progress made during the pod that make continues to de risk. The overall project schedule, which is now 40% complete.
The good progress itself, Greg for them, a bands and then sell down process, which remains ongoing.
Turning to slide eight.
As we start to generate free cash flow through the second call for the year and into 2021, we plan to prioritize the pay down a das in the near term.
That said, we still expect to be active with a high quality portfolio of exploration assets are proven bites NIE likes and frontier opportunities.
Our first use of discretionary cash is expected to be short cycle hybrids or lower risk I liked some students use the Gulf of Mexico electoral getting a well we're excited by our high graded opportunity set.
We also remain focused on reducing our interest in Suriname that they'd be a say somebody in principle.
Which would allow us to retain upside the future drilling activity at very little to no cost to cosmos.
These process continues to make good progress.
We expect to provide a full update on our 2021 exploration plans when report on Threeq you numbers in November.
Turning to slide nine and to conclude todays presentation I'd like to summarize the key points. We've made today before opening up the Q in AG.
Well if most of live it.
Good underlying performance, while navigating a challenging second quarter.
Operationally, we would get debit in volume guidance, when we maintain company guidance for the full year.
The balance sheet isn't a solid position.
Current strip prices, we've reached a free cash flow inflection point.
And finally, we're preparing for the future growth through LNG and hybrid to fast payback exploration in 2021 and beyond.
Thank you I'd now like to send to cool hybrids. The operator, the open the session for questions.
Thank you.
At this time will be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
Information Tome indicate your line is and the question Q.
The press star to feel they to move your question from the Q.
Okay, that's interesting speaker equipment, maybe necessary to pick up your handset before pressing the star Heath.
One moment, please feel we pull for questions.
Thank you.
My first question comes from the line of Charles Meade with Johnson Rice.
Good morning, Andy do you and your team there or afternoon as it may be.
I wanted to ask a question are you you've mentioned the the Tortue sell down efforts are our our ongoing news is there any is there any more color to out there or is there a timeframe that we should be thinking about four up.
For.
When they went a an announcement maybe more probable or less bubble.
Yeah, Hi, Charles I think you'd be business sort of stopped buying it looked at the hope they sell down process. I think 2020 was really about you know focus by the by activity was to get the data room set up with all of the and put from the exploration success, we out of the back end of last year.
And differentiate the buyers between those looking for the broader resource play.
And so we're looking to participate in the Tortue project.
Let me with a calibrated EUR nine see mitigation measures, we had a a project in tortue that was kind of stalled at the beginning of the quota I think what we've demonstrated or is that we've continued to might really good progress on the project into Q, which was important for those buyers looking at total cheap.
And you know we've worked alongside BP to reestablish the timelines I don't think build confidence around now so I think now the the process is about engagement with those buyers, particularly around tortue on the back of the progress we've made.
And a project that ultimately is going to come forward with first gas at a time when we see opportunity in the LNG market and I think it's just works is that a reminding that it is because the innovative development concepts.
A scheme that its top quartile of in terms of cost.
And is.
The vast resource in terms of the potential to continue to grow the project or a 10 million some problems getting so that's why we are in the process. Charles I think I don't want <unk> <unk> <unk>.
Get boxing with timelines, but what I would say is that there that the conversations are ongoing.
With the buyer pool and for US ultimately it is obviously getting to the right deal that deal that enables us to build a.
Project going forward, which you sell financing, but still a the meaningful contribution to cosmos.
Got a that's all that's helpful or her very helpful commentary and then.
If I could.
Ask a question about how about Suriname, you know Apache I think since last time, you spokes Apache has had no discoveries on the block inboard from you guys in the yeah, campaigning and and San Antonio and I'm. Just curious if if what they have found there would either elevate <unk> or <unk> or maybe elevated.
Your your Suriname your prospects for 21, or Alternatively, maybe a mere caused you to rethink your your targets there.
No I think you know well I think what's been important about the Apache well results in particular, the last well results.
Is the.
The San Antonio.
Clearly you know it's come in I think there's still some work to do I think on the topic of the hydrocarbon that but I think we did they have you know parents you've demonstrated both.
Hydrocarbon bearing zones in the companion App and in the San Antonia. So do you look at the blog you wait when looking at I.
Play, where we know that quality reservoir, Oh, we know that that exists down debt and the the down dip locations that were targeting other sign reservoir sanctions that it's a apache have drilled in the campaign in the San Antonia So from a reservoir comes back to it is encouraging.
We know it's this is Josh bison, and then make the success that Apache and I didn't sort of replicating the a the Lisa type structure on the the Oh, Michelle 'cause has demonstrated that and then clearly we're targeting it didn't play side I know, we're targeting and <unk>, which is which is down.
ER and outboard, but I think the a this success in the San Antonio and ER and the quality of the reservoir is clearly are an important part of a of understanding the overall prospect typically in the basin, particularly in block 42.
Thanks for those slots and.
Right. Thanks.
Our next question is from the line of David round with BMO capital markets. Please proceed with your question.
Hi, I do think that presentation I'm can I start with GE related non you're talking about that I seem to be up a pretty good outcome sites. All sorry, we didn't just trying to gauge your thoughts about the second half.
You had guided since I mean, it seemed to imply that it's possible could maintain production up at these levels, but just sort of wondering how likely you think it is but then you can maintain production after around 90000.
And.
I'm not just outcome on the golf as well you mentioned some high return projects that obviously, that's still an element of exploration risk attached to the I liked stuff sorry, do the harvest time project you talked about also come with very high chance of success on.
Maybe just trying to gauge the risk appetite to the Martin will watch change them and how quickly we could potentially see I'm going to ramp up there.
Yeah. Okay now thanks, David Yeah, just just on Jubilee I think you know I think he's just with sort of step you buying you sort of look you have the numbers I think you know.
Yeah. It today.
You know through the end of July and you have productions around 85000 barrels a day and not included they are the shutdowns and.
In the first quarter, you know as you said it.
Production was strong in the second quarter 99000 barrels a day in sales currently doing around knowing say you know that most important thing isn't temps signing that is managing the Gi firewall and as I said, we're managing to sort of inject record levels of water actually highest since the first year commissioning actually.
And we would consist in gas offtake. So I think that you know all of that I think you know underpins.
Our confidence in the forward projections that we have you know today performance is absolutely sort of represents a representative of what we think is possible going forward.
Gulf of Mexico, you know, it's interesting you know it sort of taking the interregnum as it wherever imposing allows us to go back and really you know high grade to halt and you don't rig driven you have the opportunity to absolutely sort through and make sure you're drilling the very best first.
And I think the opportunities the we've identified.
In ER, the Mississippi Canyon area, a high quality and you know we genuinely excited with had chance to sort of rework the seismic.
And ER and therefore I think it is about you know exploration success comes from robbing quality through choice focusing on the very best things and ensuring that you're doing the lowest risk opportunities first and the reminder is in that Miss Mississippi Canyon.
Area you know.
The full may know DG out of six cents rights of around 60% and I think we're absolutely targeting that type of a quality oh of opportunity. So I didn't think it's actually about.
Changing our risk Apixaban anyway, I think we're doing sort of back to the future in terms of the nature of the prospects would be drilling and actually taking a time out allows you to get absolutely confident that you're executing on that strategy that the data supports it and you don't time to do it. So it you know I'm very much.
You know genuine looking forward to getting on with that Ilex program now because I think we've got really policy set of opportunities.
Okay. Thanks, I'm in Mexico right. Thanks, David.
Next question there in Atlanta for tell Us with capital one. Please proceed with your question.
Hey, Thanks, good morning, everyone Andy.
You know you in the press release, you talked a little bit about.
Free cash flow possibility into 2021.
What kind of a free cash flow range might you be able to achieve next year using current state will outlook $40.
W.T.I. roughly $45 Brent.
Yeah. Okay. Thanks, Rich said in a I think I want to be slightly choices about.
Giving you not hard numbers for next year, because I think we're at a point, where where and I was still.
ER optimizing the activity so I wouldn't have what I would say his insight in how oh, yeah, we aren't going to see as move into about free cash flow positive Oh, Yeah. I'm you know why we're obviously seeing high prices.
We have actually gone more volume production.
In the second half the other than we would happen in the first off the 60% and the second half of the yeah, we're going to see the call Saxons flowing through and we believe those a sustainable we're gonna see the reverse the a working capital build.
I think the you know where where we're definitely at that point of in flashing why we're confident about the a the scale of free cash flow generation. The direction I think the you know absolute amount it will be around just the pace at which some other working capital movements unwind and that's about the pace in which the default activity.
He says, but I think you know what I can say today is that what component. This material at the current pricing and I think a threeq. Two we can give you a much more accurate prognosis is to wall. The a the figures will will be but you know it's material and you know I'm. We're at the point now where we can.
I actually see that trajectory imagine.
Okay and that's that's helpful. Thank you and just as a follow up [laughter].
At this point, what do you think the or estimate to the Capex level is to hold production flat next year say with.
What do you expect who are for Q 20 average.
Yeah, you see what I would say it it's going to be pretty consistent to this yeah. Yeah. So you know we were in the sort of 200 to 25 range I think it's absolutely within a range yeah, maybe a little better actually as you say, because you're sort of coming down to a normalized level. So I think in terms of a campaign.
Required to sustain the business.
Going forward, where were but we're absolutely not in that range.
Okay. Thanks, a bunch I appreciate it.
Right, Thanks, which it.
Your next question is from the line of Nick Stefano with Renaissance Capital. Please proceed with your question.
Hi, that's a good afternoon and thank you for taking my question quick couple of cost them because funnel. So it's just follow up to David's question full production gone up it was up the big Guy Thumps youre prone to they'll put a little bit people quite substantially so could you maybe outline what <unk>.
What the maybe you can decide and go to assumption what the what Todd lost streams that pull for put off from Kupol could you be need and Tinplate steel copper Yeah, and then my second question syndromes, Lucas who along to liquidity.
And then <unk> and <unk> you know total topics full clinics yeah in case, you don't see.
Equal malicious Dupont down what do you could cause people to finalize the up here and they include the Gulf of Mexico, corporate deserves a terms that boring base in order to upon the close though is not something lots more to explore doing.
Thank you.
Oh, I think snake why don't I I'll take the Jublia question, then I'll pass it over to Ah.
Suneel just sort of you know told through barrier on liquidity and then the LPL and then they the reserve base in a in Tortue yeah.
Look on Jubilee I. I think.
All I would like to repeat is fundamentally all forecast is based on the current performance of the asset yeah.
And you know what is that performance you know yet today, it's done 85000 barrels a day that included significant shutdown and was the quota twoq was 89 or whatever it maybe.
I I at or around EUR, 90000 barrels a day and you know what putting enhanced amounts of water in the reservoir and consistently taking gas out which actually manages agila. So I think you know I used the fundamental so I think would say an awful cast really is.
Being consistent.
You know we this is you know we haven't changed guidance I'm jublia from the start of the yet to where we are now I was seven months and and the performance of the field is replicating exactly wants a we initially a full cast at the beginning so I think that's the fundamentals.
No point that I want to get it crosses the.
You know we've had a very consistent approach to it performances as actually I'm being in line with that and we continue to make good progress on on the key performance parameter, which is ensuring that we got water in the ground and gas out of Asia The reservoir.
So Neil you do you want to cover the question on a on liquidity, a RBL borrowing base for up to torture.
Yeah, sure and so hi, Nick.
Yeah, I mean in for in terms of liquidity as you mentioned, we have around 600 million on the books today I'm, you know and we expect to generate free cash both in the second half of this year and into 2021. So good from that perspective, yeah. One of the options that we have looked that looked at sort of a fallback option.
Our backup option to the financing or to the sales process and toward two is yeah can you put financing against it and yeah, you're right that we have flexibility within the RBL to put it within the RBL. So that's something we got from the banks are actually in 2018, when we add and refinance that.
Let me and so there is any of the comedy adoption of put it within the RBL. There's project financing available options that we've looked at to provide some competitive tension or within the and the overall sales process and so we know those options exist and we'll continue to sort of pursuit.
That is but again it is a zealot option that where the capability of push forward.
Okay, that's a and just a quick follow up.
Pim and bonds and easy it's chujah pit bought by the phone so quite threat intelligence is.
Yes so.
In yes, it's not that from an accounting perspective, but to as part of the waiver process. We mentioned on the call. What we probably provided the banks are what we agreed with the banks should ultimately lose keep limiting count what was accelerated their advanced payments.
The prepayment in the leverage calculation and so even though it's not debt to will include it within the calculation in exchange forgetting.
Me at the waiver on a the absolute leverage limits.
Got it okay. Thank you.
Okay.
Our next question is from the line of James Carmichael with parent Burke. Please proceed with your question.
Hi, I'm afternoon, guys I'm, just too I think I'm, especially on the come away, but I think you said that was in place until the end of 2021 I'm just interested to know current oil prices. How long do you expect to actually need that waiver or is that just that's easy to predict that headroom and then on tour.
Too so just thinking about the delayed projects not giving the JV the chance sort of take some time up maybe reassessed the cost profile in phase one or is that how are they locked in and out. Thanks.
Yeah. Thanks, James Yeah, what I'll tell you thought you question and then then Pops up its new on the on the covenants. Yeah look I think on the on Tortue, it's actually been a really constructive processing the quota the the operator as sort of you know be bad sat back and look at each of the individual work.
Extremes and show the work streams that could progress you know how congrats after the wrong pace.
And and reschedule the key area, which is around the placement of the case arms, which was you know the interregnum that cause the the a shift I think what what you get out from all of that as you got two things, which is five really being sharply focused on the cash flows.
We've we've worked hard to preserve economics the of the project and then I think the second part about it days you won't see sort of de risking delivery, which has been an important conversation with one is because.
Yeah, we showed little photograph on the slide of the coring work in Mauritania is actually continued said, we're building up a stockpile a wrong, which means that when we start to build the case on we're not worried about that particular critical path. The yes, yeah. So it was always the tight as part of the.
Of the critical a cost from the the offshore facilities side and again, we've had the opportunity now to sort of read phase that and ensure that it's quite no longer on the critical path, so actually and I I'm I'm not I I sort of look at the project now it actually feel as though you know.
Do we have a very credible timeline, yes, yes, we do you know did have appropriate contingency unit, yes. It does and have we managed to refinance the contracts due to a secure the economics. You know you. Yes, we have so actually you know in some respects, it's actually a quote.
That's a project.
With that I'll pass over to nail just talk about the the covenants when the Weibo.
Yeah, Hi, James Yeah, so as far as the way forget is what we're really trying to solve around list a the impact to Q2 Q said to Q is clearly impacted by the differentials in the car the timing so really the inclusion of that Q2 number within the LTM EBITDAX count that's really what.
Yeah.
Creates the temporary pressure on the on the on the covenant and so it given that it's temporary and the result of sort of yep.
Yeah, the oil price Crunch last quarter via the banks were happy to support a around that and yeah, we push to extend that into the second half.
Of 21 beyond that ratio just to provide extra extra cushion you had given volatility in oil prices and ultimately continue to de risk.
Ah the story. So yes, Q2 is a real impact once you get beyond that it sort of normalizes by itself.
Okay. Thanks, so much.
Right. Thanks.
Your next question is from the line of Chaim choices with Barclays. Please proceed with your question.
Hello, and good morning rationing, Yeah, just a question on the $56 million appeared that classified as current is that just an indication of how you expect to feel that they'll tend to your RPL to change. The next 12 months are you assuming any if it is believed to be repaid the next redetermination in September.
Oh, I'm, sorry, I was in there.
Yes. It was 56 is really a forecasting artifact based on the the the borrowing base model that was approved in March and so yeah. We will go through that sort of another exercise here in September to briefly.
Forecast that yeah basins, where crop prices are now and and where yeah that the production profile ends up going but seeing as.
Prices it broadly improved.
Since we went through the last.
Redetermination the major issue.
The issue that we will eventually encounter sort of 11 life issue and you know how we see we plan to address that is having the normal course of business every few years, we will.
Extend a the time period on the and the RBL. So.
Yeah, I think there is yeah, we will plan to do that at some point.
The next year.
Okay then cover.
Yes. Thank you.
Right. Thanks.
[noise]. Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question.
Hi, guys. Unlike check on behalf of meal. My first question is just around capital spend for next year now you mentioned paulino being fairly consistent with what you're saying yeah.
Perhaps in the case that we can't sell down and Tortue by year end, maybe could you provide some color around you know what Pat sent the capital layout might have to be another like what's the what turns on the head for the next couple of years for that project.
Yes, I'd be sort of if you have you sort of step back we've sort of group you know we've talked around the fine, but we've got a low level of maintenance capex going into the business. So we think it's around yeah, that's sort of 200 million dollar Mark.
Sort of around where we we are we spoken about we sort of underpins the cash flow breakeven at 35. We've got then free cash flow a generation. The objective of that is to ensure that we have the ability to pay down debt as it was named talked about and.
This year, what we believe I is a very promising a high return the fast payback set of opportunities in particular in the go.
Mexico.
Again.
You know as we've said on the call. Our objective is that we have a self.
Funded guy gas business, we'll do that through the sound and presence or we'll do that through through financing.
You know we've already been around the fact, we have the potential to do that from a and I'll be al or project finance perspective, but in terms of the frontier wells are objective is to ensure that is a self funded program going forward. So I think that you know we were clear about where they count.
Next level needs to be to sustain the business, we care about what we'll do with the additional cash flow and our objective is to to use that.
Hey, good to kick off the a the I like struggling to Gulf of Mexico, where we see and I really good set of opportunities.
Okay, Great. Thanks, and then my follow up is just around the hedging program into the 2021, how you guys thinking about.
In terms of protecting the business from a macro volatility though.
Okay, Great 11, Mindanao pick that went out.
Yeah suddenly in terms of what we plan to do for 21 on the hedging part of the mail beep broadly consistent with what we've done in the past so continue to layering hedges.
On a regular quarterly basis and in the floors will sort of move around based on what we can achieve but yeah. We're trying to provide the downside security and nailing.
Yeah that there's going to be volatility so continue to enter into that program, but keep as much access to the a the upside as possible and so yeah. We have about 35% of our production hedged at the moment ER and the goal will be over the second half a year to get that to around two thirds and so we're about.
Adding.
About a million barrels a month or yeah, largely in colors, but.
And they loved it include some swaps at some point as well.
Great. Thank you.
Thank you.
Next question comes from the line of Pavel Molchanov with Raymond James.
Thanks for taking my question.
Yes, I'm kind of little conceptually what.
Or the measures you guys are taking action or offshore platforms, 2% Kobe outbreak. If you can just kind of pink official picture for us how operations have changed versus you know hundred days ago 120 days, though.
Yeah sure Pablo I think that again it you know if you look at our offshore operations you know we're not drilling currently so therefore, it is and sort of non operated world. Yeah. What does the operated and then bugs gone or an extra again, a they've used a very strict corn screening process. So.
Who basically the way that the corn seed works is persons tested before they come in Crohns in two weeks retested on exit then go off show.
So you know I've very comprehensive.
Process.
Yeah has it been flawless sorta, no and that was a break down in the protocol and im going up which led to some cases on the construct construction support that so it was isolated quickly contain a we know well the whether you. She was how it broke down and I think the.
Process is actually stronger as a result, and that girl DNA <unk> that that was a case Oh show and actually was because one of the government inspects is actually the walsum. Following the same routine went off shore. That's now been corrected by the government. So what I'd say the United see question. So I do like 100 days.
Then we're Glenn a lot of around how you do this and how you sustain it so that you know it's good for the future absolutely and I think that by bringing the rigor and discipline cigarette youve managed to situation whereby now that hasn't been impacted production and we've learned as we've gone along so I I.
I actually feel quite positive now around our ability to continue to execute all business a with these measures in place.
And one more about the sell down obviously, you're not getting any timetables and rightly so but it is it fair to say that.
Under current conditions.
Your focus is on.
Getting it done at you know the white multiple rather than getting it done quickly for the sake of getting it done quickly. So timing is less important than then the outcome.
Yeah.
My question public data, it's a balance okay. We're we're not being I get I sort of romantic about the price expectations I think the world's moving at the moment deals are getting done and they're getting done a a credible prices. So I think you know, we we clearly got options as well.
Do you pursue the you know the financing, but that did that nails talked about was competitive tension that between the sell down process. You know and you know we do need to get it down. So I think it's a balance between the the two I you know not all I want to get I was sort of reinforces that we don't have you know crazy price expectations.
Were realistic, but equally well we want to ensure that we got to the point, where we do have the ability to continue to execute the business because regarded to a point where it is self funded so I think it's just a combination of pulling all of that together, making sure that we make the line choice and we have options. So I think.
Since the the fundamental balance we're trying to get right.
I appreciate it.
Right. Thanks problem.
Your next question is from the line of Bob Brackett with Bernstein Research. Please proceed with your question.
Great. Thank you we saw recently a combination of a large integrated company and a successful LNG explore what's your appetite for similar type merger or agreement.
[laughter].
Yeah, and <unk> look you know I say the world is.
The World is moving forward, Yeah, I think we all seen more asset deals and we're also seeing more Ah more corporate deals. So I think it's not a surprise, but not really it's what you would expect so I I do believe.
The the that.
That restructuring of the or the sector is ongoing and quote will continue well, Minnesota irrespective of price actually.
And then good assets fundamentally will be a coveted. So you know ultimately it is about creating value for Ah all shareholders So who.
You know I I think that we'd go absolutely the ability to execute on our current business plans Oh, we have a great organic portfolio.
And we have the ability to.
Gross cash flows from the business and ultimately that's all first order or a priority is to make sure that we have a business school keyboard into 2021, which is cash flow generated and can can continue to access.
And ER and execute on a very strong organic portfolio. So that's where oh focuses but you know clearly you know the industry around does is throwing up opportunities and we want to make sure that where we can participate in.
Great appreciate that.
Alright, Thanks, Bob.
The next question isn't a line of Al Stanton with RBC capital markets. Please proceed with your questions.
Yes. Good morning, Thanks nails get off my sort of questions I was going to ask him. So just to random ones then if I may.
We still took about a sell down here in in Senegal, and Mauritania, but I I hear what you're saying Hey, Andy about testing done in pricing. So when will we start calling it takes a disposal rather than sell down.
[laughter].
Well I think your was ever would you want to use our I'm I'm open to I think you know the real point about this is how to recreate a value for our shareholders. Yeah. We've done well so far with all Mauritania Senegal process. You know, we were 100% Enbrel BP and we got a project moving it'll be the fastest pro.
Jay from discovery to first production, even despite the as interregnum that we've we've suffered so we know we've got great resource base that and we've managed to monetize that I believe and they are in a very credible way and I think that's the way that I would you know when I would like to use is we're monetizing it.
Ensuring that were creating value as as a result.
And you know that's what we've done so far and that's what we'll continue to.
Okay, and then just changing tax, but sticking with consolidation so I probably missed it I'm sorry, but was ever decision on the session publication.
No it's open.
I'm, sorry, Yeah, we're clearly and I were trading or.
In the and the rights zone at the moment and so.
We have the approval at the the a gym to do it in the Bordeaux, Oh considerate going forward.
Right. Okay. So that's another [laughter], okay, all right. Thanks al.
Thank you.
Is there no further questions at this time I would like to bring the cultural close thanks, everyone. Joining today you may now disconnect. Your last this time and thank you for your participation.