Q3 2020 Kosmos Energy Ltd Earnings Call
Good day, everyone welcome to Kosmos Energy's third quarter 2020 Conference call. Just a reminder, today's call is being recorded.
This time, let me turn the call over to Jamie Buckland, Vice President of Investor Relations.
Thank you operator and I still.
So everyone for joining us today.
We issued our third quarter earnings release.
Please turn to slide presentation to accompany todays call.
On the investors page website.
He me on the call today to go through the materials.
On the Angola chime in and say, yes.
Neil Shah our CFO.
During today's presentation, we will make forward looking statements that refer to our estimates.
An expectation.
Actual results and outcomes.
They really see too because we know in this presentation.
Okay, and I see filings.
Please refer to <unk> annual report stock exchange announcement, I see filings for more details.
These documents are available on our website.
At this time I will turn the call I get you on that.
Thanks, Jamie and good morning, and afternoon to everyone I'll start today's presentation with the highlights for the quarter before passing it over to Neil's talk through the financials.
I didn't want to spend the bulk of the coal talking about Tortue project and the significant progress. We've made this year and our plans for this quarter the asset going forward.
Neil will then cover the balance sheet I'll conclude the presentation be broadening out to Q.
Turning to slide two of the key messages for the quarter.
Sales both delivered robust operational performance in the quarter with production of around 57000 barrels of oil equivalent per day.
This was slightly below our prior guidance largely due to the elevated storm activity in the Gulf of Mexico.
Oh, the production and gone actually in a study with both assets performing in line with expectations. They should allow us to deliver annual production in the range of 61 to 62000 barrels of oil equivalent per day near our initial guidance at the start of the year.
Our town Center go we'd be working closely with BP and the NFC to optimize the Tortue project.
I'll talk more about that.
Project later in the presentation, it's a world class development is progressing well, Brian when many projects they're getting to sales.
Phase one remains on track for first.
In the first half of 2023, coinciding with the time the LNG market is expected to time yeah.
The optimization, it's nice to targeting expansions at 5 million tons per annum simplifies the project by leveraging existing infrastructure from phase one significantly reduces cost boost the overall project, which Uh huh.
With the prospects of enhanced future returns now it is not the optimal time to reduce our interest in the project, we've established a financing path, which funds our capital obligations to sales gas.
And finally, we continue to strengthen the balance sheet in September we monetize our frontier exploration portfolio is a shallow for around $100 million in upfront cash consideration, we expect to receive the proceeds shortly we.
Weve also put in place they find a Gulf of Mexico facility, which provides the company with additional liquidity and replaces our Gulf of Mexico prepayment facility.
Well the actions we've taken this year, we expect the base business generated free cash flow at current oil prices going forward.
Turning to slide three.
As I mentioned on the previous slide Kosmos delivered solid operational performance in Threeq you.
And going and that production around 28000 barrels of oil per day was in line with guidance.
Jubilee continues to perform well with high reliability delivering gross production of around 88000 barrels of oil today within the quarter.
Uptime on the facility was over 98% the Threed you no.
Now well over 95% for the year so far.
A 10 gross production around 50000 barrels of oil today was in line with guidance.
So do you have time at 10 was 98% in Threeq, you and 99% for the Oh.
For the full yeah, we still expect 10 cargos to be Delevering from gone.
And that comes all getting that production of around 11000 barrels of oil today was in line with guidance and is expected to stay flat and so drilling begins next year, we still expect full one off target is to be delivered from EG.
In the Gulf of Mexico, net production was around 18000 barrels of oil equivalent per day in the quarter up around 10% lower than guidance, reflecting the elevated hurricane activity.
2020, and has seen one of the most active storm seasons in history and that's the result was not fields have 17 days of downtime during the quarter, which is significantly higher than the six day total downtime, we typically forecast for storm season.
That said the banks production from our Gulf of Mexico assets is encouraging.
The tornado for injection well came online in late September and initial results have been positive.
We also expect to begin the Kodiak completion this month.
During the wells online early in 2021.
You know I lacks portfolio, we expect to spud the wintertime exploration well previously named Mark This quarter with results expected early next year.
Stepping back it's been a tough year operationally Judy code in the Gulf of Mexico shut Downs in night, an increased level of hurricane activity.
That said with all of these challenges full year production is still expected to come in at 61 to 62000 barrels of oil equivalent per day near our initial guidance at the start of the year.
This highlights the quality and diversity of the asset base, which enables kosmos to be resilience in a low price environment.
With that I'll hand over to Nate will take you through the financials for the quarter.
Thanks, Andy turning to slide four the key financial items for the quarter.
I'm not going to touch on every line item as most are consistent with our annual guidance so focusing on the key areas as.
As Andy mentioned production of 57000 barrels of oil equivalent per day was slightly below guidance due to the increased storm activity in the quarter.
Excluding the impact of this allocation elevated hurricane activity the company would've been cash flow positive in the quarter.
Realizations improved significantly around twice as high in Threeq, you as compared to Q.
This was due to a combination of higher oil prices, but also the normalization of the wide differentials we saw in Twoq you.
At present, we are currently selling oil across all three hubs at prices in line with the benchmarks.
Total opex is continuing to trend lower although not as low as we would like.
Three key <unk> was higher on a per barrel basis than guided impacted by the lower production and higher ongoing operating costs related to cope with such as mandatory two week quarantine periods for workers going offshore.
Looking at the year total op, that's expected to be around 20% lower than 2019, which reflects the continuing progress we are making.
Our base business Capex came in at $53 million in Threeq you in line with expectations.
In addition, there was $47 million of accrued capex in Mauritania and Senegal. This.
This is noncash and we expect to continue and we expect to carry of our capital obligations to extend to around the end of the year with a small payment expected in the fourth quarter as a result of the progress achieved on poor two phase one.
Now I'll hand, it back to Andy to give an update on activities in Mauritania and Senegal.
Thanks, Bill turning to slide five.
I'd like to start with the progress made on the Tortue project this year.
Over the past six months the partnership between Kosmos and the NFL season, Senegal, and Mauritania has worked hard to transform the projects, reducing the capital cost and boosting the overall project returns.
In that time for the outlook for LNG has continued to improve and the project looks set to deliver first gas at a time when LNG pricing is expected to strengthen a direct result of the many project deferrals in the U.S. and internationally.
And this recent annual Energy Forum Wood Mackenzie presented the two charts on the slide.
On the trough in 2020, woodmac expects a much tighter LNG market over the coming years, driven by growing global demand and the deferral cancellation as higher cost LNG projects.
2020 is seen the lowest LNG supply growth since 2014, with only 5 million tons per annum, new liquefaction added this year.
It's 2020 demand to be roughly flat with 29 team even with the impact is coded spot LNG prices have already.
Most triple from the lows in the second quarter.
In addition, there have been no new LNG project I finally in Twentytwenty.
The first time in almost 20 years not as huh.
As a result, woodmac expects the supply demand gap to open up around 2023, just as the Tortue project plans to live the first gas and creating a positive backdrop for marketing the volumes associated with phase two.
With a significantly enhanced projects and improving LNG backdrop, and a financing path established where I'm more excited than ever about the project.
Turning to slide six which shows the continuous progress we've made on phase one of the projects over the quarter.
As BP flying than in Threeq two results call two weeks ago. The partnership is working very very hard and very well onto phase wall.
With activity I know full key words screens now increasing after periods of walk down Joe in Twoq and Threeq here.
At the end of the year phase one of the projects is expected to be around 50% complete with first gas on track for the top 2023.
Turning to slide seven which shows the optimization of the phase two project.
This slide which also uses wouldn't mind also compares the breakeven cost I've told you face to deliver it into Asia alongside other LNG project.
Using our latest cost estimate which incorporates a significant reduction in capital of the project Tortue phase two sets of the far left of the chart with the delivered cost enjoy Asia just over $4 per M and BG you competing very favorably with other expansion projects.
In wood Mack's analysis.
Shipping into Europe hasn't even low is 11 costs further demonstrating the competitiveness of the project.
Yes, the migration of phase two is targeting expansion at the scale of the overall development to 5 million tonnes, Brian the sweet spot the leveraging all the major infrastructure from phase one but.
For example, phase two will utilize spare capacity in the sub C infrastructure Enphase wall.
The processing capacity, yet so it will be expanded without requiring a second facility. There's no need for a second gas export line from the F.B.I. so to the hub terminal.
As a result, we believe phase two will be the most competitive brownfield LNG expansion project globally.
With a limited upstream capital requirements are expected to be less than $1 billion gross that those guys. We expect to be able to finance on that share of the phase two development laws, yet assays one cash flows.
Turning now to slide it is.
As I mentioned, we've established a financing path for a self funded project allows kosmos to retain its current share of the project, which when bill town can deliver an expected return on remaining investment of approximately seven times.
<unk> net capital the first gas from 2021 through 2023 is forecast to be around $725 million, which can be seen on the chart on the upper right of slide eight.
[noise] reengage with BP to sell the athlete so to Oh sheet.
Off balance sheet special purpose vehicle for the back cost paid so far or around $160 million net cosmos.
Beeping Kosmos are in negotiations with the anticipated purchase of the ASP, So and we plan to close in the first quarter of next year.
Yes, TV will take on the future capital obligations of U.S.P.S., So which means another $160 million of Kosmos is future capital obligations will be transferred to and funded by the SPV.
That was my hotel intends to refinance on National oil company line with commercial banks, and 2021, which is expected to see around $100 million returns Cosmos.
The combination of these two activities expects to fund Kosmos is obligations in 2021.
Yeah standing Capex balance of approximately $300 million June 2022, and 2023 is expected to be funded by direct investment in Mauritania and Senegal.
Sales losses totaling discussions is secure this financing by mid 2021.
Today Kosmos is development Capex on the project is being funded by the BP development calorie and we expect with forward investment post Sps, so financing be around $400 million net to Kosmos.
We face is wanting to taught you expect to generate $150 million to $200 million per year NASA Cosmos I'd at 550 gas price. The optimize project is expected to deliver a return on investment is approximately seven times, which is why we're excited about moving the optimized.
Project forward.
With that I'll now hand back to Neal to run through the balance sheet and liquidity.
Turning now to slide nine.
At the end of Threeq, you, we announced total liquidity of around 650 million since.
Since then we've successfully completed our RBL Redetermination, we agreed to a total borrowing base of 1.32 billion, which reduced liquidity to just under 500 million.
This reduction was largely due to the banks adjusting their forward price decks.
This quarter, we expect to receive around 100 million of proceeds from the shell transaction with key approvals already granted we therefore expect the business to generate significant free cash flow in the fourth quarter.
Including the impact of the shell transaction today, we revised our base business capex guidance to $140 million to $150 million in 2020.
This also reflects the acceleration of the Kodiak completion and the start of the drilling of the winter fell ilex prospect in for Q.
We expect Fourq, you, Mauritania, and Senegal cat accrued capex to be flat with the third quarter.
We've also closed the Gulf of Mexico facility in the third quarter, which refinanced the previous prepayments facility.
This facility has a $100 million accordion feature providing potentially additional liquidity if required ensuring that we have a solid financial position as we close out the year.
With that I'll hand, it back to Andy to wrap up.
Let's move on the final slide 10, it has been and continues to be a challenging year for the sector, but it's important to step back and look at how a company competes today.
Cosmos as a high quality portfolio of world class conventional oil and gas assets with strong U.S.G. prevention.
Our focus on offshore exploration development production, along the Atlantic margins no change.
We have three production hubs and gone out of the Gulf of Mexico, and actual getting as well as the world scale LNG development with the first I expect to be or over 50% complete by year end, which now has a CLIA financing path and.
In addition, the optimization the second phase leverages existing infrastructure and delivers enhance returns.
These advantage assets have low volume rice, bran, sorry, july's price benchmarks and overall carbon intensity that is significantly lower than the industry average.
As our recent Tcfe. The report shows we're making good business decisions in capital choices to deliver shareholder value consistent with a low carbon world.
Given the low cost nature of the assets and low decline rate. These assets produced significant free cash flow even at low prices.
We have a corporate free cash flow breakeven of approximately 35 dialog about brand, we expect to generate free cash flow going full covering all prices into 2021.
On the gas side, the phased development associated with first gas bond in the first half of 2023 is expected to generate a self funded long term free cash flow stream to complement the cash generative oil assets in the portfolio today.
On exploration, we continue to high grade exploration portfolio with a focus on returns.
Oh acquisitions actual DNA in the Gulf of Mexico targeted opportunities that created value through optimizing the existing production base and sort of infrastructure led exploration.
We now believe the opera biomass opportunities across Cosmos that we continue to high grade six.
Success in exploration comes from having quality through choice. This means prioritizing proven basins, where we have a deep technical understanding a large resource portfolio and can leverage infrastructure.
And finally, we have a solid balance sheets to execute our plans.
Neal just outlined we have ample liquidity no near term debt maturities and the business is expected to generate cash and reduce leverage.
Thank you and I'd now like to turn the call obviously, the operator to open.
And the session for questions.
Right.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May proceed star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing Mr.
Our keys one.
One moment, please while we poll for questions.
[noise]. Our first question is from Charles Meade with Johnson Rice. Please proceed with your question.
Good morning, Andrea or afternoon, as maybe Andy and Neil as well.
I wanted to ask a question I recognize that you guys haven't you are likely still working on the details of this oh the sale lease back, but I just wanted to explore a little bit.
More what you what you all are.
Comfortable talking about what you are not it is what's you're looking from the outside it seems like one of the more of the challenges you guys had to dresses that obviously a project finance would make sense for you, but it's not it's clear that would make sense for your partner BP. So I'm curious should we be thinking about this is that the BP is also.
Is also going to contribute their interest into the SBB or or perhaps alternatively is.
If we could get a sponsored this SPV and it's going to be leveraging off their balance sheet.
Yeah, why do you think about yes, I think Charles I think that you know yeah, we're still working through the process, but I think there's optionality for BP to do it in several different ways to.
Where they get participating both both sides of the transaction to where they benefit from the transaction as well so.
I'd say, there's a couple of different ways that we could end up in terms of bps participation.
Okay, all right well, we'll stay tuned on that and then.
And then one other question on just to interpret your out your slot on the upper right on page eight if you're putting this so it makes sense that you're that you're doing this this financing for the P.S.L., because that's where you can put a year the ring fence around the tolling operation with production, but is the right way to interpret this is that that the remaining 300.
Million, that's all the other pieces like the sub sea.
LNG and breakwater.
No I think the way to think about it Charles this is thinking about is that we were working in engagement. Many pity on the Fps So side at least not in as Neil said you know they can choose how they participate in it yes, but you know clearly where we're sitting alongside basket might in the negotiations with the preferred buyer.
Of the of the FCS a when it comes to the other fun over $300 million, we have choices in which the ways in which we would actually secure lap it will be sold through some drops in investment and were told when looking at various options today as to how we do clearly what we're looking to find the most compelling.
Good way to secure left on it.
Got it thanks for that detail.
Right. Thanks, Josh.
And our next question is from David ground with BMO capital markets. Please proceed with your question.
Hi, guys.
<unk>.
Im not saying that.
Oh I'm sorry.
Clarify.
Capex number there, which was potentially quite a bit lower than some of the numbers out in the market.
Just really wanted to understand how looks down and.
When you consider that sort of falling to less than <unk> or was there a bit of movements still to be expected in that number.
And then just on the that threat.
<unk> investment so for the balance of phase one funding.
Sounds like you're leaving the door open for potentially a smaller format. So potentially it covered the balancing account.
You get the sense that might be more I'm, sorry, that's where a small mistaken.
Thanks, David Yeah.
Let me just sort of I'll say the phase two one on the capital Yeah. So if you sort of sort of talk through you know the the capital estimates yet you know.
If you look to the first taught you phase one on capital to first gas yeah, we forecast that at slightly over full $4 billion and so if you you take down the ASP. So it's around so the guest rounds for around $3 billion to two so as gas, which is sort of consistent.
The numbers, we will move to three.
What's interesting about phase two though is that it leverages all the pre investment that's gone and societies want yeah, and as I noted in my remarks, we're leveraging the available capacity in the subsea infrastructure Robin put a new facility in for.
The.
Expanding the gas throughput you can do it off the off the back of the Afghan So there's no need for another gas export line from the asset side. So the initial processing and actually we picked the sweet spot of 5 million tons per annum.
Because it optimizes the use of that infrastructure.
And I think that you know that that's been the big breakthrough.
You know working alongside BP was to re imagine how you get the most out of the next phase by fully utilizing the infrastructure and therefore, the minimum amount of Capex. So that's why the campuses. So Ah you know that the capex to have that additional sort of two.
<unk> million tons for the upstream piece of it is is as I said in my mom, yeah slightly less than a than a billion dollars not sankara current view. So you know I I think you know as I move on to the next question of sort of the current environment I would say that you know from a sales perspective.
Yeah. The current environments been tough you know there aren't many companies that have gone off the balance sheet today to be able to participate but by the way. The current environment has allowed us to really sharpen the pencil with BP to come up with the right next to the next phase and you know and I'll make a joke.
Genuinely excited about the way in which we manage to create they are the right project now and as we sort to say on the slide to the right projects at the right time, and it's incredibly efficient in that space because of the of the pre investment. So when you look at the at where we are in a week.
We we currently we're faced with a choice so unless you sell a piece of the infrastructure the 320 million or would you sell a piece of the project and clearly Russia oldest today that the right decision is known to sell the project for the salary infrastructure, Yeah now going forward.
That could be an opportune time in the future to crystallize the right value and then you know I found down its something we would consider and I think as you rightly say with MPS I financing in place a smaller piece of the project will will be attracted but what we're focused on at the moment it's unsure.
During the the the financing path is delivered on time, and we're well engaged in that today and you know I'm I'm I'm clear now would be paid we've got the right size of projects 5 million tons per annum, expanding so not level is the right project.
Incredibly efficient because you're leveraging all of the one of the pre investments. So you know we got a good project.
Okay. That's like I commented that really quick follow up forgive me 10.
Tend to really compressing the time table as well because I used to do that.
No it doesn't actually because it's you know you've still got some stuff to do you know you got.
Yeah, there will be you know a a next brownfield project to to put the you additional gas processing on you. So it doesn't all sort of time wise shrink, but it does make it a simpler projects I'd say the execution risk has gone down.
Timeline is probably typical of what you that.
Your next but yes. So we know we've got work to do would be to get a little not sequencing done and so on but its a much simpler projects to execute so that would have lower execution risk.
That's great. Thanks, a lot right. Thanks, David.
And our next question is from Neil Mehta with Goldman Sachs. Please proceed with your question.
Thanks, guys for all the incremental color. This morning that the first question is on the U.S. elections, and what impact does that have on the way you think about your Gulf of Mexico business, unless we size up the value of that business. How are you thinking about the moving pieces, particularly around federal leases.
Yes, thanks, Neil and I'm.
Yeah elections, and political transitions are not something new from Cosmos, Oh for our industry. You know we we we lived through that process in all the countries that we we operate in and you know what I'd say is that there's a couple of Truisms I think you know one is.
Yeah, it's a quality of your assets is it good.
You can continue to compete there is back to the government in power.
I I think the second tourism is it's important to have a line agenda, where the country I know actually being focused on the individual policy.
Ah So have you sort of what does that mean for the Gulf of Mexico I think.
The first thing I'd say is that well, it's about a third of all current production.
It has actually the lowest cost and lowest carbon intensity in our portfolio.
Competencies around like Q aground style, which is significantly lower than the global average isn't an actually significantly lower than alternative.
Oil production in the U.S. I.
I think the second thing is that we clearly made a strong commitment to the energy trends the transition and you know, we're targeting carbon neutrality and Oscar I would want to scale to buy 2030.
That will involve mitigation measures and we've got some really interesting projects on the Gulf Coast. These are blue carbon projects focused on wetland restoration.
And actually there that carbon sinks, which still around 10 times the the carbon of a terrestrial tropical forest. So.
I think the point there is to say that.
We believe we can be a a solution to two or a problem rather than be an impediment and these are low cost projects.
So you know I I believe me out both the portfolio and the approach now where we can continue to be very competitive because we got low cost low carbon assets.
And we have some innovative low cost mitigation measures that will allow us to deliver on our commitments. So actually sort of nothing changes from our commitment on that side. When you look at it from a leasing perspective, I think that there's been a lot of rhetoric before and I'm sure there will be a little at rest.
Right after the election so.
Yes, you know is there a risk that there's no new leasing on federal lands Awards is I think that that remains an issue. The important thing for US is we built the offer of more than five years of future drilling opportunities in the gom. So there's no immediate concern yet so you know I I believe we've got a business.
Which is competitive today and actually in a sense will be more competitive going forward because of the nature of the assets and the way in which we're conducting our business.
And it and just to clarify you guys still have five years of drilling opportunity without.
That require incremental federal lease right correct.
Correct, Yeah, and that's actually drilling.
For prospects, yes, yes, we have which is sort of moving on probably more than than we would anticipate catching.
Okay, Great and then the follow up question is just on on your Brent breakeven do you talk about $35 a barrel that's before growth capex or how do you think about let's call. It over the next three years, you know that the level at which Ah you cover your free cash flow sustaining plus growth capex.
How that evolves over time and then this might be a question for Neil that you just can you remind us what the sensitivity is to every dollar change in oil price. So we can sort of frame out a with the free cash flow profile looks like at our well back.
Yeah. Good question there what.
I think it's incredibly important to the free cash flow above $35 for the targeted to paying down debt and they knew who will give you the numbers on the sensitivity in a moment the first call on cash, but that's cool and on cash but in terms of the growth opportunities you know we'll be focused on limited.
Hi last project, we have the first one of those in the winter so opportunity and not something they are less than $10 million in that not to us yet.
The the most I can see isn't we would need to see quite a sort of positive oil price is sort of you know up to $50 million in growth projects. We've got plenty of competing projects for that at the moment and you know you're going to see is really driving that capital allocation decision. So you know.
Hi, I'm a focus on the the free cash flow generated paying down debt and then it's going to be very limited.
Yeah, I like the opportunities in and I think it sort of zero to 50 would be the number that we'd be looking at that yeah, [noise], yes, as said to add on that Neil yes around sort of 50 million will probably be the upper limit at least and then in the short term on the ilex portfolio, but as you can imagine given our.
Exposure to oil prices were.
Pretty levered and yeah, there's a general rule of thumb that we use is about.
Around $100 million of a free cash flow impact.
For every sort of five dollar move in oil prices now, there's some sort of offsetting hedging et cetera, but that's the <unk>.
We can generate a significant kinda cat free cash flow from the base business and a 45 ish dollar world.
Yeah.
Thanks, guys right fine.
And our next question is from Bob Brackett with Bernstein Research. Please proceed with your question.
Thank you I had a clarification question on stage two so if I understood correctly pays one was about 4 billion of which maybe a billion was the F.P.S., so and you're saying phase two at slightly less than 1 billion is that net to kosmos or not.
Gross for the whole expansion.
Gross so yeah, let me just sort of talk to the numbers barbassa.
Slightly over 4 billion units of which the Fps so its slightly out of it yeah. So yeah, the rest of it a bright water, which.
Which is a significant cost rise, it's clearly youre not building on phase two yet the break water or the pipeline from the Fps so to the the bright water.
To ensure a processing, which are not doing on phase two so phase two is ultimately they know that the capex spend is for the expansion of the other gas processing, which is brownfield project on the F. He has a there's limited build out of the.
The sub sea because I've got capacity and then you're drilling some incremental well yeah, let me think about it.
There is a significant capital efficiency by utilizing all about infrastructure that you put into sales alone.
And to be clear that that makes a lot of sense and this expansion takes you from say two and a half million tonnes per annum phase one and another two and a half million tons to get to the five so it wasn't the 4 million tonne per annum expansion that might not be part of it yeah.
Yeah, No exactly Bobby I said, what you've done is good on it and that's the work that we've done over the last six months is this I love how did you get the best project for the expansion, Yeah and yeah. It you know the obvious way to do that is to find the sweet spot that enables you to sort of utilize all of that in.
Restructure you like that anyway, and when you do all of the concept work to optimize it between what do we got into subsidy what have you got in the Fps. So in terms of the DAC you cannot gas processing to walk to limit on the gas export pipeline you take all of that and optimize it. This is what you get.
Got it thanks for that and how should we think about F.I.D. for phase two.
Timing yeah.
Yeah, when you get out and again you know, we're working with BP on a on that at the moment, but I would anticipate you know at five I'd to be 2023, yeah.
So around the time my first round the town of its gas upsize assays wall yeah.
Thanks, a lot.
All right. Thanks, Bob.
And our next question is from Nick Stefano would rent cap. Please proceed with your question.
Hi, guys. It's a it's Nick yes. Thank you for taking my questions like.
Got a couple on the on talk to.
Hello.
10, so you still I'm talking about the free cash flow number of 150.
200 million around for coach who is wanting to for a while but.
I was under the impression but that was on just the old sort of like design of the project.
Sure. So I think something like seven Ronald.
Ronald how can you make the same amount of cash.
That's my that's my first question and second one you say could you maybe talk a bit about how we bought them looks about the topics for.
For the 650 million looks a bit high around 700 million and maybe talk a bit about around but then the you know I mean he'd be sent me.
Potential maybe something like well stay over on thank you.
Yeah. Thanks, Yeah, I'll take the second question isn't that enable concise the.
The question is around the cash flows.
Yeah, we were thinking around do you have sort of fixed 50 or something like that for.
The phase long or the capital side wall clearly the yet has cost us some additional capital you know there's no other way of describing it yeah. So you clearly go off and you have an additional year of project execution and whilst we've optimized the project to reduce the.
The impact of that there there is a cost from the the delay. So I think you know we were where were clear about that and then obviously the numbers we represented.
Today, our best estimate is that as we speak but with the project, 50% complete yet. So you know the the risk of execution has gone down now and I think we've got a very credible timeline as well to be able to deliver the project. So I didn't feel that the schedule is under pressure and therefore you've gone.
The pressure on that on that capital number.
Neil Yeah, and then just on the free cash flow that the 150 to.
200 million free cash flow that is for sort of our current working interest in the past and I think maybe that's where you might be sort of mixing we talked about 150 million from 10% of the project of the expanded 10 million tons ski area and so the numbers are similar but youve reduced yeah, we were talking about half.
The scope of the project.
At our current working interest versus a larger project at a lower working interest and the numbers happened to be around the sales.
Okay, Mckesson and just a quick follow up for 10, I'm, just the production will say sequentially, a bit or below and not by much but I'm just a little bit of 50000 bus that day and I was wondering and is it.
You know we've been told me nine coming on stream whats the reasonable decline.
Nothing <unk> onshore I mean not much like.
Yeah, No you know they they the the decline is ultimately around you know no revolvers you have no drilling over on the other reservoir or any era or a being a big contributor to the.
So you know they are booked on a production level. So you are saying something I mean, we saw an uptick and then you're going to get some some natural decline associated with the.
With the within Yeah, right and then you know, but you know I'm actually reliability has been been been good. So you know the sales continue to to Rome. So, yes, sorry, I'm, sorry, nine offset some of that but but that will be.
You know ongoing decline because of the.
The factory about no activity this year, well see batches only next year, but dr. Susan.
Yeah. Thank you.
Hi.
And our next question is from James Posey with Barclays. Please proceed with your question.
Hello, There are high but just a couple of questions from me on the two funding plans first off it's the $100 million, you're trying to get better see refinancing because I also transfer and the risk of course is that money or that's really caused boss.
And then just on the.
And the million dollar gap is one option, it's about refinancing your RBL to incorporate tortue into that are you thinking of other risks to getting that cash.
Yeah, no one entitle us to sell on the NFC financing, we talked a bit about would topped with the banks about a number of different structures in terms of where does that.
Yeah risk ultimately set and so we haven't finalized.
That you know whether they need some backstop at in the day, Yeah, we will finalized or any sort of the negotiations with the banks, but whats clear sort of near there is appetite from the banks to support and government projects.
In developing.
Africa.
So there's good appetite in terms of pursuing that.
And then on the Ns or the $300 million. He yeah. We've left it sort of open for a number reasons because there are a couple of different options that we have yeah. We do have the ability to put it within the RBL today I do think there are other options that may be a more attractive as we go down.
That ROE and have had discussions with a number of other interested.
Parties and so.
Yeah that is an option, but it's one of the few that were looking at.
Okay. Thank you.
And again as a reminder, if anyone has any questions. You may proceed start wanting telephone keypad.
Our next question is from Richard Tullis with capital one. Please proceed with your question.
Hi, Thanks, Good morning, Andy deal.
Staying with the same theme on the.
Remaining 300 million investment for 2021 to 23 poor torque to phase one.
Roughly what oil price.
Realized oil price could allow kosmos to simply fund that development firm cash flows and is that still an option on the table as you know, even I'd say, oh $45 oil price.
Yes, Richard I'd say, yeah. It at $45 I think we can internally funded out of cash left but that said I think yeah, we've been pretty clear and as Andy you had just mentioned our priority in terms of the free cash flow to use that to repay the debt and.
And we've said for a while we will you know it's our plan an expectation to deliver a self funded project yeah. The Fps a sale leaseback is step one of that and like I said, we're there's a number of ongoing discussions to secure.
The last bit and so while it's certainly possible the funded out of that.
Free cash flow, even in a $45 world, it's not our intention of it.
Okay understood.
Looking back at the at the refinancing the planned refinancing with the National oil company loans.
Provide a quick overview of the mechanics, there what do you expect is the total balance is going to increase by roughly 100 million what would be the expected due terms.
Yeah, It's a big you know today, we have alone with both the governments in Mauritania as well as as BT to cover their share of the <unk>.
Yep.
Yeah.
The goal of the objective the financing would be transfer that interest ER and ER the liability to the banks and sort of get Kosmos out of the middle and so it's attractive.
Yep competitive rates.
I would say that we do but the goal would be to make up a profit or any TNL on it would just be pure sort of transfer the economic yeah.
Interest both on the interest side and the rest.
Yeah very good thank you.
And since there are no further questions at this time I would like to bring the call to equals thanks to everyone. Joining today you may disconnect. Your lines at this time and thank you for your participation.
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