Q4 2021 Kosmos Energy Ltd Earnings Call

February 28, 2022

Stronger with potential proceeds from Ghana, preemption Michel exploration bonus.

Therefore, we continue to pursue the NFC loan refinancing, but timing is less pricing.

Turning to slide five.

I talked about the embedded growth, we expect to see over the next two years, which is driven by told you phase one Jubilee southeast and winterfell delivering the expected production increase of around 50%.

These developments not up our capital commitments are expected to fall by more than 30%.

With production up in Capex down, we expect free cash flow to more than triple from the levels. We expect in 2022 at $75 Brent.

This cash generation is sustainable and underpinned by our 'twenty.

Two P reserve life, putting us in a position to deliver material shareholder returns.

Turning to slide six and our commitment to sustainability.

As I've noted on the previous slides, we have a long dated portfolio of high quality assets.

Our goal is to help our host nation's develop the hydrocarbons in a responsible way and expand access to affordable reliable energy through creating economic benefits, we help to drive sustainable developments in our host countries.

On environment, two years ago Cosmos set out a policy to achieve carbon neutrality for our scope one and two operated emissions by 2030, and we're working to accelerate that timeline.

We will give further updates in this year's sustainability report, which will publish in the first half of this year to give investors access to the 2021 for.

But sooner.

We also plan to provide additional disclosure on our equity emissions.

On social performance, we care deeply about the people who work for Cosmos.

As we work with Kosmos and our host countries, we employ 100% local nationals.

U S offices in Dallas, and Houston are consistently named in the top places to work.

In our host countries, we aim to be a trusted partner and good corporate citizen.

We work with a range of stakeholders and our communities to facilitate sustainable development. We worked in this manner for nearly 20 years going back to when the company was founded.

Each year, we find important social investment programs in Ghana, Equatorial Guinea, and Senegal and Mauritania.

Aimed at creating economic opportunity advancing social programs and improving standards of living.

The success of the Kosmos Innovation Center is a Prime example, this initiative in Ghana, Mauritania, and Senegal invest in young entrepreneurs and small businesses outside the oil and gas industry.

We train and empower young people to turn their ideas into viable businesses.

We work alongside promising start ups to help them scale and reach that full potential.

And finally governance.

Governance has always been a key pillar of our business and Cascades down from our experienced and diverse board of directors through the executive leadership team to our employees.

We have always taken an industry leading position on transparency publishing all of our material petroleum contracts online.

In summary, our consistent commitment to sustainability is a core value and support our ability to deliver long term value to our shareholders and stakeholders.

Turning to slide eight looking back at 2021.

A year that saw an acceleration of our strategic progress with operational momentum across all areas of the portfolio.

On production, we hit our year end production target of 75000 barrels of oil equivalent per day, boosting fourth quarter cash flow and reducing leverage at year end to approximately two five times.

Our LNG development and made significant progress during the year, we told you phase one around 70% complete at year end.

We enhanced our reserve base and now have a two P reserve life of over 20 years with a growing gas weighting.

We executed a highly accretive transaction in Ghana, acquiring a stake in the Jubilee and 10 fields Remoxy, which has helped to transform the balance sheet and increase free cash flow generation.

And finally, we continue to advance our ESG agenda supporting adjust energy transition in Africa.

On the following slides, we will briefly look at the progress we've made in each of our core geographies.

Turning to slide nine and starting Ghana.

2021 was a pivotal year for Kosmos in Ghana, where we got back to drilling after a pause in 2020.

Cosmos had net production of around 39000 barrels of oil per day across Jubilee and 10 in the fourth quarter.

The increased drilling activity in 2021 was promising particularly at Jubilee, where the partnership drilled three wells and Cosmos has a much greater interest.

The challenge as you believe production from mid year, when new wells start to come online and you can see production rising from around 70000 barrels of oil per day in July to over 90000 barrels a day by year end, which is where the field is producing today.

On 10, the partnership drove one gas injection, which is helping to support existing producers. However, this has not been enough to fully staffed production decline.

Turning to slide 10.

In October we announced and completed the acquisition of additional interest in Jubilee and 10 from Oxy for a total cash consideration of around $460 million.

At the time, we talks about the attractive economics of the deal and a $65 world, which is highly accretive on all metrics and had an expected payback of around three years.

With the ongoing strong operational performance of the assets and the recent strength in oil prices, we believe payback will be reduced to under two years with significant future upside as we continue infill program.

Once again I'd like to thank our equity and bond holders for their strong support.

Pleased to see the benefits of this transaction delivering so quickly.

On preemption, both partners exercise that preemption rights in November the <unk>.

Practice of pre Emption on Cosmos is a small reduction in arguably stake from around 42% around 38%.

The reduction is more meaningful with our stake reducing from around 28% to around 20%.

Assuming preemption is completed we would expect to receive a bit more than $100 million at closing, which we'll use to pay down debt.

The impact on Cosmos production will be about 5000 barrels of oil per day.

We are working with the partners on the transaction and the preemption remain subject to the approval by the government of Ghana.

Turning to slide 11.

And so again, a full Q gross production was in line with the full year at around 30000 barrels of oil per day.

Similar to Ghana, we saw increased activity in 2021 with the first wells drilled on the assets since 2015.

The partnership drove two jackup bonds, both of which came online in the fourth quarter.

We've been pleased with the initial performance on the combined impact on gross production can be seen on the chart, we say Brent accumulated collectively producing at levels not seen for over 18 months.

In the Gulf of Mexico, turning to Slide 12, <unk> production was 21000 barrels of oil equivalent per day slightly above full year production of 20000 barrels of oil equivalent per day.

On drilling the successful tornado dump floods boosted output in the second half the year.

As the chart shows.

The highlight in the Gulf of Mexico last year with the Winterfell discovery on the successful appraisal well.

With around 100 million barrels gross resource potential in the central Winterfell area and proximity to several nearby host platforms with always we're excited about the future potential of this asset.

Turning to slide 13.

The torture projects or a ramp up in activity in 2021 with all key work streams, making significant progress.

At year end phase one of the project was around 70% complete.

Looking at each of the work streams.

On the Fps. So the final four process modules were lifted onto the deck and December mechanical completion of the process subsystems is now underway.

Images of the DSO in the slide show the high level of completion.

On the hub terminal, we completed the construction of the 21st and final queso and the piling installation for the jetty as commence ahead of the hub terminal facilities delivery.

But a subsea activities ramping out the pipeline vessel has recently completed nautical trials in north sea and should be ready for the offshore installation campaign in the second quarter.

And on the floating LNG vessel for mix refrigerant compressors are being lifted onboard on the pipe rack installation operations have commenced.

So 2021 was a busy year for us and with the operational momentum. We have built we are well placed to take delivery this year.

With that I'll hand over to Neal to take you through the financials.

Thanks, Andy.

I'd like to start on slide 14 by talking about the financial delivery, we saw in 2021.

Accomplished a lot have positioned the company well to prosper over the coming years.

First we successfully refinanced the reserve based lending facility, which now has a total facility size of one 5 billion with $1 billion drawn at year end.

In August we announced the completion of the sale and leaseback transaction, which funds around $375 million of our Capex on the project.

A key part of the financing path, we laid out in November 2020.

Our producing assets generated strong free cash flow of around $175 million during the year, excluding working capital in line with our guidance.

Yeah.

The combination of these along with the bond transactions, we executed have deferred all of our near term debt maturities and helped increase our liquidity to over $750 million available at year end.

Through strong operational performance and the Oxy, Ghana transaction, we materially reduce leverage during the year ending at around two and a half times as planned.

And finally, we have taken advantage of higher commodity prices to put in hedges at significantly higher floors and ceilings and we had in 2021.

Around 55% of our production is hedged with an average ceiling of around $80 per barrel with direct exposure to current prices.

All in all with a good year for Kosmos, while there's still more work to do in 2022, we start the year in a strong position.

Turning to slide 15.

Kosmos delivered a record quarter in <unk> with our highest ever sales volumes in EBITDAX.

Net production of approximately 70000 barrels of oil equivalent in the quarter was in line with our expectations.

Sales volumes at 82000 barrels of oil equivalent were higher than guidance as a result of an additional jubilee cargo in Ghana loading in late December .

The realized price of around $65 per barrel, which includes the impact of hedging.

Really higher than in the previous quarter, a trend we expect to continue in 2022.

First quarter. This year, we anticipate a realized price net of hedging of over $80 per barrel.

Costs were all in line or slightly below previous guidance, which helped that drive today's positive <unk> results.

Turning to slide 16 as.

As I mentioned in my opening remarks made a lot of progress with the balance sheet in 2021 and the chart on the left of this slide shows that liquidity remains at a healthy level.

This quarter, we expect to complete the refinancing of the Rcs pushing that maturity to late 2024.

The chart on the right shows that we expect to have no material debt maturities until late 2024 at the latest although we do plan to utilize the flexibility to prepay some of our existing debt well before that.

With that I'll hand back to Andy to take you through the year ahead.

Thanks Neil.

Across our business. This is an important year for the company.

We are investing in our key assets to drive the increase in production and cash flows that we discussed earlier.

Turning to slide 18.

In Ghana, we have a world class field in Jubilee that has the potential to produce at the elevated levels for the next several years as we deliver on our plans.

In 2022, we're investing capital in three infill wells won't produce seven two injectors to support the base production with these new wells combined with the benefits of the wells, we drilled last year, we expect the year on year growth of <unk> of around 10%, which includes the impact of.

The two week shutdown planned for the second quarter.

Around the end of the year the partnership plans to start drilling the first Jubilee South.

East Wells Djibouti southeast at an untapped area of the reservoir, where we will be drilling lower <unk> wells.

Once online in mid 2023, these wells should push gross production at Jubilee to around 100000 barrels of oil per day.

On 10 as the operator guided previously production is expected to trend lower until we see the benefits of the wells that are being drilled later this year.

The partnership plans to invest in two infill wells this year, one producer and one injector, which should help stem the decline in 2022.

We're also drilling to rise our base wells, which are targeting an undeveloped the extension of the enzyme reservoir closer to the FDA is allowing us to take advantage of existing infrastructure.

These are only the base wells are expected online in 2023, and it should help to increase production.

The operator recently communicated the longer term plan with 10 is to double current production levels by increasing the activity of 10 with a second rig in Ghana.

And finally, we are aligned with the operate and the government of Ghana to eliminate routine flaring by 2025.

As a first step we plan to modify the gas handling system on the Jubilee <unk> joined the shutdown in the second quarter of this year, which is expected to allow us to inject and export more gas volumes.

Turning to slide 19.

And then for sure DNA production year to date has continued to be strong as a result of the wells drilled late last year.

In 2022 investment will be focused on facility maintenance well work and a second DSP program with the aim of keeping production around these levels through the year.

There is a lot of untapped upside next we will get a and we have several high grade <unk> opportunities, particularly in the untested deeper Albion.

The Gulf of Mexico will finally to sidetrack, the Kodiak well in the first half of the year.

The bi insurance proceeds with one expected to contribute in the second half.

In addition to some production optimization projects should support existing production levels.

On Winterfell, we're working with partners on our low cost lower carbon development targeting sanction for the initial two well development scheme in mid 2022.

First of all as expected around 18 months from sanctions.

In addition, we continue to mature multiple prospects for future ilex drilling in 2023 and beyond.

Turning to slide 20.

And as I said last year, we continued to make strong progress on torchy phase one with all the major work streams advance as evidenced by the images on this line.

In 2022, we expect to hit several important milestones ahead of us gas plant for the third quarter of next year.

We plan to begin drilling the initial four wells next quarter with offshore installation of the subsea infrastructure expected to commence in the second quarter as well.

On the hub terminal and we expect to commence facilities hook up in the third quarter. This year.

On the Dsos fell away from the yard in China as you late in the third quarter with the vascular expect to arrive on site around the end of the.

And on the floating LNG vessel Golar will be testing the same turbines later in the year.

Enabling commissioning of the vessel power management system with cellular anticipated early in 2023.

Turning to slide 'twenty, one beyond phase, one or two or three we also have a significant amount of low cost gas across our assets in Mauritania and Senegal, where we are.

We're working to commercialize.

Given the ever tightening supply demand backdrop of global LNG, We believe I discovered resource has significant value upside to cosmos.

For the second phase of tools, you were working with BP in the NSE to optimize the upstream facilities to deliver another two and a half million tons of capacity at an upstream cost less than a $1 billion of growth Capex. We have previously communicated we expect to make a development decision related to the <unk>.

<unk> around the middle of this year.

This will kick off the feed work to fully support the detailed contracting costing required formal last Friday.

But rather we expect to complete the seismic reprocessing and reservoir modeling, which should allow development concept to be selected.

And then yes, it's Ryan the partnership plans to advance pre feed studies and the met Ocean and geophysical surveys, while also progressing domestic gas sales discussions.

Turning to slide 22, which looks at our high level guidance and capital plan for 2022.

There is a more detailed guidance slide included in the appendix.

We expect company production for the year to be in the range of 67000 to 71000 barrels of oil equivalent per day, which is at the midpoint would be a year on year increase of over 20%.

Capex of around 700 million is broken out in the chart on the bottom line.

We plan to spend between $250 million to $300 million of maintenance capex on the producing assets, which is development drilling and integrity spending Ghana, Equatorial Guinea, and the Gulf of Mexico.

We also plan to spend between $100 million to $150 million of growth Capex on the base business for production growth in 2023 and beyond.

This includes Jubilee Southeast 10, riser based wells Winterfell as well as long lead items ahead of our 2023 drilling program in Equatorial Guinea.

On Torchy, probably as long, we expect to spend around $350 million during the year, which reflects the timing of accrued capex based on the CRU budget from the operator.

We also expect to spend a further $50 million in Mauritania and Senegal on Torchy phase two and increase activity umbrella, it's ranga to support progress on those developments.

At $75, Brent, we would expect to generate around $200 million of free cash flow, which we plan to use to reduce debt.

As I mentioned in the opening slide of today's presentation, we can see absolute debt reduced by up to $500 million. This year through a combination of organic free cash flow contingent payments from shell. If that's successful with a drilling campaign. This year gone of preemption proceeds in the NFC.

On refinancing.

So turning to slide 23 to wrap up today's presentation.

Cosmos have a differentiated portfolio and exciting outlook, we have low cost high quality assets with significant embedded growth.

We are investing in world class gas projects that will help facilitate the energy transition will provide the company with long term sustainable cash flow.

We have a robust balance sheet that continues to get stronger as we de lever this year and beyond as our leverage improves we anticipate our assets will generate significant amounts of cash flow, which will enable meaningful shareholder returns, especially at current commodity prices.

And finally, we have strong ESG credentials that gave us the license to operate in our host countries in our portfolio that is fit for the future.

Thank you and I'd now like to turn the call over to the operator to open the session for questions.

At this time, we'll be conducting a question and answer session. If you would 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 press star two to remove your question from the queue for participants using speaker equipment and may be necessary for you to pick up your handset.

Before passing the snarky one moment, while we poll for questions. Our first question comes from the line of Charles Meade with Johnson Rice you May proceed with your question.

Good morning, Andy and Neil.

And to the rest of the team. There did you want to go back to Europe your prepared comments specifically be.

The timeline that you've laid out for phase two did I hear that.

Youre going to have a front end engineering process sometime around midyear that precedes Friday or could you just go back to that kind of set that set the timeline for us.

Yeah, Yeah, Hi, Charles.

Yes, the timeline is to get to the the concept select decision by.

By mid year, and we're working hard with the team to ensure that we fully optimize that.

As I said in the remarks, I think we think there's real opportunity to lower the cost per loan.

The $1 billion growth for the upstream.

We talked about so that's the process going through to the middle of the year.

And then the second part with the concepts.

The way forward.

And we'll do the feed engineering to go through the formal process.

That Friday for RFID, obviously, the government approvals, we need the final engineering costs and contracts in place that some of the real world.

We will kick off in the middle of the year.

Got it.

It'd be sometime.

Sometime in the back half of the year.

List.

It is.

And again, it's really important I think in the current environment.

Yeah.

All of the engineering done to ensure that we have been like basis of the capital and the right contracts in place. So I think that we want to ensure that they get.

Quality that was it.

Good project.

With with clients.

Sure.

We see a lot of opportunity.

Removing costs upfront when we want to make sure that we do that.

Got it. Thank you and then a quick question about the Gulf of Mexico.

Well winter fill development just to just to get kind of an order of magnitude here should we be thinking about grew.

Gross rates from that development in the range of five to 10000 barrels a day.

Yes.

So growth rates for the T mobile will be around.

Maybe just a little while.

Basically it's a lot of constructive.

Got it.

Got it thank you I appreciate it.

Alright, Thanks, Joe.

Our next question comes from the line of Neil Mehta with Goldman Sachs. You May proceed with your question.

Good morning, Andy. The first question is just around your marketing strategy, obviously with everything going on in Europe right now.

The value of poor too and the barrels continues to move higher potentially as you think about cargoes for either phase one and phase II can you ultimately market some of those cargoes into.

Into Europe .

Talk about how you see this asset fitting in the broader natural gas natural gas macro.

Yeah, Thanks, Neal I think that.

If you sort of go back and so start from where we are today on phase one we have the 2 million tons being marketed buying b pieces.

Non of percents low to our brand.

The real upside of cool stuff will comes from the from phase two.

Those cargos.

You know not sold today.

We believe there is a real opportunity for us to take.

The benefit I think from strengthening prices.

For LNG globally.

And I think.

As you look at the World today, and obviously one of the consequences of the situation in Ukraine is that Europe needs to look at how it can ensure energy security.

Look for new sources of gas.

Thank you know in Mauritania, and Senegal, we have a resource which is low cost gas is low carbon.

<unk> and its proximity.

So I think we believe and I believe deeply but this was an important resource for the world.

Our job is to support the energy transition as a company, bringing forward new sources of supply that helps support energy security I think we can do that with the gas lines from Mauritania and Senegal I think.

Phase one will come on at any point in time and as we discussed with Charles we're moving forward with phase two which I think again, we'll come on it is important time to continue to support our growing gas demand and hopefully create another.

Another source of energy security for the World.

Gas is.

A part of the energy transition.

I think it's becoming more widely recognized that it plays a role.

We believe the Mauritania and Senegal is therefore part of that so I think when you look at the big macro.

A lot has changed since we started the journey.

So I think there's a lot to look forward to and then specifics around your fuel.

Initial question around so would you say.

Two I think there's a lot of optionality on the on the gas pricing for that.

Thanks, Andy and then as a follow up is just around hedging strategy, obviously 'twenty one.

There were a lot of those barrels that were sold at a discount relative to spot price as you roll into 'twenty to remind us what percentage of unhedged U R.

And as you think about that remaining unhedged.

Portion is the intention to leave it open to give yourself that sort of exposure to potential a stronger commodity price realizations.

Yeah sure sure Neil I'll take that yes.

Yes, we're about 55% hedged on 22 oil volumes between the 45% unhedged, we plan to keep that.

That exposure to the rest of this year.

And I think the interesting part that we're working through now.

Three and so with less than 10% hedged today with upside to $95 on a couple of million barrels that we have hedged and we are looking at structures that give us.

More downside protection and more access to the upside too.

That's the main focus for the next few quarters is really get 2030 in a place where the downside protected well and we've kept as much access to the upside as possible.

Thanks, Tim.

Our next question comes from the line of Nick <unk> with Renaissance Capital You May proceed with your question.

Hi, guys.

Thank you for taking my questions I have three.

To us some soft than.

Follow up and so.

Just wanted to.

Pos.

The idea about total phase II was.

It's not that this would be a.

To fund the development from the cash flow that phase one will generate but you know if dysfunction this year.

Then.

It's a very you collect disposable scenario for fall.

So maybe six months after pay for both phase one phase two topics. So can you give me kind of like some comment on how you think about that or is it something you might might play faster towards the eventual suffering the project and then the secondary Sim.

On the sensitivity.

But to the sensitivities because it looks like the reduced from last quarter to $50 million from a 100 million to $5.

I'm not sure if this is.

Surely because of the additional languages.

Quarter over quarter, because it could be.

Manny.

Most of that and then I've got a follow up thank you.

Okay why don't we let Neil take the second question first and then I'll come back to the torture you a price.

To timing and funding.

Nick So just on your question Yeah. Most of it's just a function of where we are in the oil price now so again I think what we said before which is.

Selected an unhedged basis.

Five elements around $100 million change in.

In an annual free cash flow.

And said what.

The guidance, we gave you around sort of $50 million for 'twenty, two basically 55% of our production like I said is hedged and therefore and that sort of caps have a D D.

The upside in <unk> and the average ceiling on our hedges around 80, so right around that pinch point. So it's maybe a little higher than that from 75 to 80, and then a little lower than that just given the staggering the ceilings that we have through the year.

Through the hedge book.

Okay.

Chuckling mania.

For while we are not buying a bunch of me about how much low cost smart anymore.

Correct Yeah.

And then on page two.

It sort of goes back to challenge. This point I think that will start to incorporate capex aside from sort of mid year.

This will be the sort of the.

So you're spending that's incorporated.

And our current budget.

I wouldn't anticipate any significant spend on place to commence until 2023.

Therefore, the overlap with with phase one is almost exactly not quite but almost exact yeah and I think the second thing.

But I think it's important to recognize is as we've said, we think there's real opportunity to drive down.

Upstream costs for the project are significantly and therefore.

Then that outlines cosmos is getting less and less so I think I feel good about the ability to.

Take you to actually self funded and enjoying it.

Is.

It is very small so we're well placed here I think we've got a follow on project, which is really exemplary.

It will fully utilize all of the infrastructure, we have from phase one but for the <unk>.

Capital costs are coming down and we're finding those savings as we speak so I think the overlap between phase one and phase two that or is it going to be relatively small.

Okay fair enough.

Hi, My other question is Sir.

And then on <unk>.

G 13 discovery, you're making Equatorial Guinea excuse me a spot.

So last year was more about basically drilling of those of those words.

Which you know the details of results. So I also expect this year to be kind of lagging inflation, what's going to be in.

And it doesn't seem to be the subject to be much at TVT or kind of like talk about about the Scarborough anymore. So I'm just wondering.

How you think about it then.

What are the next steps for four for EG.

Yeah, Nick I'm happy to take that I think we're.

Some sort of or it's five six is ultimately continuing to assist Sydney appraisal Kim.

We do have additional plans for drilling in EG.

Yes.

<unk> for US is how do we maximize the value of the existing discovered resource that we have across the portfolio clearly we have opportunities in Mauritania, Senegal, and Ghana, EG and the Gulf of Mexico that we're moving forward, we can't move them all together at the same time we're.

Phasing out the development project and if we can find more resource in EG, which you know we talked about.

Potentially 23 additional ILEC.

Drilling campaign.

We could make a new development more attractive from a risk reward basis going forward and then then would be in a position to allocate more capital to it. So I think that's kind of.

Yeah.

First question is on the 100000 barrel a day.

Target for 2024, just to get some of the bigger moving parts in that and I hate to say that expectation that 10 could double from here. It sounds like one of them and the other would be the Jubilee is a over 100000 would those be the those main moving parts and then also would you expect both gone.

And actual guinea to be higher than they produced.

In the past year.

Yeah, Hey, Paul Yes, it's Andy I'll take that.

So if you think about the buildup from where we are today to two one.

100000 barrels a day.

24 torture.

Stream net on a Boe equivalent.

King.

<unk> thousand barrels of oil equivalent per day, or so and then the next increment is do you believe you're talking about going on to a 100000 barrels a day.

With the.

Current working interest.

An additional 8000 barrels a day and then winterfell knock.

We're down about 4000, so if you sort of doing it.

The math on that you sort of get to the 100.

Underlying that you've got additional contribution from 10 low working interest.

And you.

You have the Gulf of Mexico, and you have actual gain a benefiting from an infill program in.

In 2003, so I think you take it.

As those countries contributions against the underlying decline and you can see your way to a healthy 100000 barrels a day.

Big Big contribute as I told you the growth.

Growth in Jubilee and 10 being the most significant pop edition of clinical trial and then.

The underlying activities.

After looking at it.

Got it okay. Thank you for that and then also you gave guidance towards when the $700 million guided for this year, how that tapers down towards 24, but just thinking about next year with Jubilee southeast.

With winter I suppose theoretically in the beef.

Before we get to a tool to phase two.

And post 202 phase one we would expect capex to come down into 'twenty three overall.

Well clearly that's not giving any guidance yet so it's a little early but I think you've talked about the moving costs. Okay.

The amazing part in it.

Torchy phase, one where they're moving from the sort of 'twenty. Two is a video spend we can draw the fabrication activities going on we moved to a different phase in 'twenty. Three so obviously plenty of loan loss model, we have that coming down.

The.

The sustaining spending in JV southeast, we have an additional spend and when to sell so I think.

We're we're sort of we're on a glide path, which sort of and we've shown in 'twenty, two and 'twenty four and the chance, but we're on a glide path.

If we had a decrease in capex, we're on a glide path of increasing production, which ultimately will create.

Incremental free cash flow growth in 2003 out of 22, and then the growth in 'twenty four 'twenty.

So I think I feel good about the the shape, we are building out going forward.

<unk> thousand two will be an important year and deliver.

Deliveries followed by 'twenty three 'twenty four but we're clear about the things that we need to do.

<unk> said, we're being very conscious about the capital inputs.

It's about ensuring that we don't put capital into things, where do you think you got it.

So a real difference.

We need to ensure that we're putting the capital into the highest quality opportunities.

Player with Torchy phase, one and two with.

With when to file them with jewelry families.

We're very excited about the activity tracker clear about the capital.

Contribution that will make and growing cash flow through 'twenty three 'twenty four.

Okay. That's very helpful and just one last one if I may.

Shell exploration payments.

The steps and.

Okay.

Certification hurdles to be done from here.

Okay.

Any money and from that what would be what should we be looking for.

Yes.

Again, Mark we are.

Understand the Shanghai to success.

The initial well I think what's interesting is that they decided to go and drill the wells back to back.

And have a second well ongoing.

As we speak and I think that we would see that as a positive sign.

In terms of the steps forward the payment comes one.

Submit an appraisal plan so the current well I suspect.

Was probably a couple of months away from.

As a result.

Our appraisal plan and then we get to.

Our payment. So those are the steps I think they carry chose not to submit new enterprise. Upon at this stage because it would have slowed down the ability to move ahead to drill the next well back to back.

Okay. Thank you I'll turn it over.

Alright, Thanks, Bob.

Our next question comes from the line of Matthew Smith with Bank of America. You May proceed with your question.

Yes, hi, thanks very much.

And just wanted to ask around the future.

<unk> in Mauritania, and Senegal quite rightly, there's still sort of talking about the long term potential of gorilla in Yucca turan.

I just wondered with the.

Equally.

The optionality for a phase III or a further expansion of the <unk> project.

Still on the card the potential next step.

Rather than going into one of the other two projects.

And then linked to that just on boral or in New York.

Just wanted to ask whether you thought there would be any potential or any appetite for you to farm down.

Interest in those projects at this early stage.

But would it be fair to assume that that value crystallization points.

It would be closer to a development concept.

Yeah. Thanks, Matt.

Yes good.

Good question, so I think that.

Our focus on <unk>.

So we'll see what the environment is to sort of maximize the value from their infrastructure.

And I think as we've discussed on prior calls.

The $5 million in thompsons sort of fully utilize all of the land and infrastructure.

Terms of the full capacity.

The pipeline is Shaw etcetera. So I think the focus is to I think the focus is therefore to ensure that we get that we get it underway I think when.

As has.

Has been achieved and we have some.

Some production history from the reservoir will be in a better position I think to fully describe what phase III would look like yeah. So I think that absolutely remains.

And our objective to increase beyond the 5 million tons, but I think we have some work to do some production history to garner people in a position to make that opex that.

You have been.

Disciplined around the capital that we put into that is.

Vertical.

But I think it's about how do we progress.

Yeah.

Given the resource, which is which is significant.

Yeah.

Gorilla Ranga developments of different gorilla, there isn't as large a need for domestic gas.

In Montana, there isn't even novel as launches there isn't Senegal after that ultimately would be an export project.

We are working hard now with BP.

A development concept and again you know as we've discussed how the prior questions. It has to sort of compete against gas from the from the U S. But there is a growing need for it in Europe , and how can we put together.

A scheme that enables us to staff in the right way. So it's low cost it's benefits of being low columns.

So I think that's the goal of Mauritania foot morale up to increase their exposure.

The European market basket.

That you're buying it from us that lives defined tools different production facility. Therefore, it has a.

It becomes a more diversified source of gas yeah. So I think there's a good rationale for looking at that.

In parallel with potentially ahead at all.

Phase III.

When you look at your concern I hear differently, the ultimate reactor and it will be part of Senegal domestic gas drugs in Nevada as they enter they pursue their own anesthesia transactions Hawkins moving to a lower carbon world.

And it makes renewables with with gas.

So that project is driven by that time.

Purpose, and therefore would be.

Hey.

We took a very different purpose incentive lines from the expansion of.

Torture, so I think that.

The way you can see it I think there are different.

Role that each of the projects can can play in.

We need to be very clear about it.

During the.

Quote and allocate the capital in a very disciplined way against those objectives and the projects for the right pace, but I think that our objective is to ensure that we absolutely maximize the returns.

From from told you and then I think with confidence and that on the production history from that yes that will be another phase, but I believe that.

I could try and blah blah blah.

We'll go to.

In parallel though.

Different in Boston, Washington.

Perfect. Thank you Andy.

And then one final question if I could just be them be the shell sort of continued consideration of C cap up to a $100 million could I just clarify how you might get to that $100 million in 2022. So presumably you know, we're hoping 50 million and it maybe it's not.

And then where the opportunity might come for the residual.

Okay.

Yes.

<unk>.

There are.

The drilling plan as we believe for shell will be when the rig finishes and and the baby with them too.

Wherever it went really well.

Well come out with the next well in the program.

And beyond that.

Well, it's really not so.

So I think you know.

In Charlotte.

I think very clear about that.

This of course will get on with that.

Exploration program.

And so I think we'll see those wells.

Yes.

Okay. Thank you very much.

After after Namibia second the movie.

Thanks, Andy.

Alright.

Our next question comes from the line of James Hosie with Barclays. You May proceed with your question.

Hi, Thank you I've got a couple of questions. Just firstly does the 2024 production free cash flow slide five does not incorporate the impact at the kind of pre emption process. It would presumably have completed by that.

And then just Martin in Senegal, just wondering if the work program for <unk> is that.

To get the assets to a point, where you could look at monetizing them.

Do you see for those assets today.

The first one James I'll, just come back to saying, yes. It just all the numbers in the presentation and all of our guidance doesn't include the preemption and like we said preemption is about a 5000 barrel a day impact now clearly said, it's greater than 100000 real estate to theirs.

So the flexibility around that but it does everything through throughout.

Presentation does include the impact of pension.

Okay.

And then just on the second question.

I think the world is the world of LNG continues to.

So I think as a company we've been <unk>.

Strong on the.

The underlying demand for LNG and I think you know.

That picture remains unchanged.

What's sort of changing is the the supply challenges.

For new projects to set forward to meet that.

That demand I think there are various forecasts out there.

Hopefully by the end of this decade, so I think there's going to be real opportunity to move projects forward and have the right captures things going on.

This is Mike and I keep repeating myself, but it has to be low cost it has to be.

The low carbon gas so it isn't that it doesn't happen this benefit of bringing with.

With it and it has to address the market shortfall in a geographic sense.

The dollar imaging, so I think we.

Our strategy remains unchanged, we see real value in the undeveloped resource and monetizing them in Senegal, where.

We're excited about the the Optionality that a phase two that's all she brings because not only is it is it low cost leveraging from the prior investment in phase one, but we believe we can get greater access to the.

Price upside because the gas is on contracted and that's why we would want to guide for instance, where the gorilla, where we would be bringing that gas to market and I think we have the ability to benefit from the.

The optionality that the market could bring so ultimately.

With that for a lot of opportunity to monetize it Mike, but I think what we have to do and demonstrate.

The value in the assets and I think we're doing that well talk to you face vomiting at well sites and we need to do with gorilla stopping to work that.

We will undertake this year will be an important part of that and I think that the backdrop. The macro backdrop for LNG is not only supporting the inherent value of those assets.

Great. Thank you.

Great.

Our next question comes from the line of James Carmichael with Bamberg You May proceed with your question.

Hi, Thanks, guys. Just a couple a couple of quick ones I guess, just firstly on winter belt.

In the.

The release it says you guys targeting a lower carbon development the winter fill so just sort of wondering.

I'm wondering what that really means.

And then I suppose.

And how are you going to look to achieve that through the development.

And then just a quick second one if I missed this earlier.

I appreciate it's difficult to be precise with you.

You can or have said on timing youre likely timing.

Thanks.

Yes.

I'll do the preemption first James.

Scott on the process was two critical ways.

The transaction documents.

I can tell off from work very close with them.

And I'm going to preempt.

That documentation is now complete.

<unk> will be submitted shortly.

G&P decision the government of Ghana for their approval so the timing will therefore.

Pat Vaughan on that process.

Terms of ourselves in total I think right now.

We made a lot of progress in the pipe looks now and will be submitted shortly.

I'm going to sell I think the point, we're making is simply that the Gulf of Mexico. As you know has a very low carbon intensity.

For its oil production.

Because they are there.

Reservoir.

Typically driven by Knapp track office, they don't have.

A huge amount of water injection and secondly.

I guess as you can see is part for sure Bethesda I can of course is that you were using existing facilities and so your incremental use of energy and almost facilities to bring onboard a tie back.

So we sell will be a tieback.

With a two well development and existing infrastructure around the field.

Therefore, the combination of Nashville, Hot and dry not flaring.

You saw our existing facilities, where the incremental energy tomorrow on all of those mindful.

Our lower carbon oil project.

And that's why even at one of the things Brian I believe in the Gulf of Mexico has a role to play.

Is that.

You'd have the infrastructure in place that enables you to.

How to develop it.

Telecom and question Yeah. So that's the description of a weak sell in while we feel it is.

It's an important part of our portfolio going forward.

Great.

Quickly.

Good alright, thanks James.

Since there are no further questions at this time I would like to bring the call to a close thanks to everyone. Joining us today you may disconnect. Your lines at this time. Thank you for your participation enjoyed the rest of your day.

[music].

Yes.

[music].

Okay.

Yes.

[music].

Okay.

[music].

Yes.

[music].

Okay.

Great.

[music].

Okay.

Yes.

Sean.

[music].

Okay.

Yes.

[music].

Good day, everyone and welcome to Kosmos Energy's fourth quarter 2021 conference call.

As a reminder, today's call is being recorded at this time, let me turn the call over to Jamie Buckland, Vice President of Investor Relations at Kosmos energy. Thank you Sir you may begin.

Thank you operator, and thanks to everyone for joining us today.

Morning, we issued our fourth quarter earnings release, this release and the slide presentation to accompany today's call are available on the investors page of our website.

Joining me on the call today to go through the materials.

The Ingalls, chairman and CEO and Neal Shah CFO .

During today's presentation, we will make forward looking statements that refer to our estimates plans and expectations.

Actual results and outcomes could differ materially due to factors. We note in this presentation and in our UK and SEC filings.

Please refer to our annual report stock exchange announcement, and SEC filings for more detailed.

These documents are available on our website.

At this time I will turn the call over to Andy.

Thanks, Jamie and good morning, and afternoon to everyone. Thank you for joining us today for our fourth quarter results call.

I'd like to start today's presentation looking at the company's strategy and the defining characteristics, which differentiate cosmos and position us very well in a rapidly changing oil and gas sector.

I'll then talk about the operational momentum we saw in 2021 before handing over to Neil who will walk you through our financials.

I will then outline our plans for 2022 and the key investments, we're making to deliver significant shareholder value in the next 12 to 24 months.

We will then open the call up for Q&A.

Starting on slide two.

Looking back 2020 was a year of survival for the sector in which Cosmos took the opportunity to high grade investment options to create a stronger company for the future.

2021 was a year of resuming operational delivery and strengthening the balance sheet, both of which were significantly enhanced by the oxy, Ghana and the towards you at DSO transactions.

2022 is a year in which cosmos can really starts to thrive.

We have the right portfolio for the future and the boxes on the last of the slide highlights the key <unk> that define our portfolio.

First we have low cost high quality assets, the companys underpinned by World class fields that have a longevity to deliver sustainable high margin cash flow.

That gives us the ability to invest in our existing assets to materially grow production and free cash flow, while simultaneously reducing that.

The right hand chart shows the Companys production is forecast to grow by around 50% between 2022 and 2024 as we bring our planned developments on the street.

Second as the chart also shows we are increasing our exposure to gas and LNG is sold you phase one comes online in the second half of next year.

We also have a deep hopper of world class gas opportunities in Mauritania, and Senegal, we expand we will provide further growth well into the future.

Third we have a robust balance sheet, which we expect to strengthen further in 2022 with a year end leverage target of around one five times at current prices.

Hello Office planned Capex full is on free cash flow grows there is potential for meaningful shareholder returns once leverage full sustainably below our target.

And finally, we have strong ESG credentials driven by our portfolio shift towards low carbon natural gas and our commitment to our host countries in Africa to support just energy transition.

Cosmos has emerged from the last two years with a strong team excited about the future and hungry to deliver significant value we see in the portfolio for our investors.

Turning to slide three.

One of the key areas of differentiation for Cosmos is a long reserve life of our portfolio, which underpins the growth we are planning.

At year end 2021, Cosmos <unk> reserves were both at record levels.

The top chart on this line shows the oil gas split of lumpy into P reserves.

On a one P basis oil makes up around 60% of our reserve base, whereas on a TCE basis gas is over 55% of the portfolio.

Reflecting the longer term direction of the company a bias for oil in the near term and gas longer term.

The bottom chart shows the diversification of the portfolio on a <unk> basis.

Ghana on Mauritania, Senegal, each make up around 40% of the portfolio with actual gain in the Gulf of Mexico, making up about 20% between them.

This is Todd verification is important as it means we're not dependent on a single field, alright single geography to deliver our future plans.

In 2021 are lumpy visit is more than double to approximately 300 million barrels of oil equivalent with a booking it towards your phase one and the Oxy Ghana acquisition.

Our <unk> reserves are approximately 580 million barrels of oil equivalents, which gives us the to pay your reserves to production ratio of over 20 years.

Even excluding the <unk> acquisition, our reserves replacement ratio was strong with 114% replacement of our <unk> reserves.

The underlying quality of our asset base.

Turning now to slide four.

As you are well aware for the last 18 months, we've been focused on deleveraging and have made good progress.

With a portfolio of highly cash generative assets, we expect leverage to continue to fall sharply this year.

As guided we ended 2021 at around two five times, a significant year on year reduction.

On track to end this year below pre COVID-19 levels.

Our year end target for 2022 is around one five times at strip pricing.

We expect to achieve this deleveraging through a combination of rising EBITDAX and absolutely that production.

EBITDAX is expected to increase materially year on year through several drivers, including higher production and stronger oil prices, which we've been able to hedge at much higher levels than 2021.

In addition, with greater production from Jubilee, We expect unit cost to decrease as well.

We also plan to reduce absolute debt by up to $500 million this year, which will further drive the leverage multiple lower.

Absolute debt reduction is driven by the free cash flow, we generate but could be enhanced with the potential for contingent payments from Shao. The oxycodone a branch in proceeds in the NFC lives of refinancing.

I'll provide an update on the Amgen process shortly.

On the NFC loan we had initially aim is to get that done by year end 2021 and received several term sheets for this transaction.

We continue to progress those discussions however.

However, we wanted to ensure any deal done is in Cosmos is best long term interests.

The time to get it right.

Liquidity position is strong and could get stronger with potential proceeds from Ghana preemption.

Shell exploration bonus.

Therefore, we continue to pursue the NFC loan refinancing the timing is less pricing.

Turning to slide five.

I talked about the embedded growth, we expect to see over the next two years, which is driven by towards your phase one jewelry southeast and winterfell delivering the expected production increase around 50%.

As these developments not up our capital commitments are expected to fall by more than 30%.

With production up in Capex now, we expect free cash flow to more than triple from the levels. We are expecting 2022 at $75 Brent.

This cash generation is sustainable and underpinned by our <unk>.

<unk> reserve life, putting us in a position to deliver material shareholder returns.

Turning to slide six and our commitment to sustainability.

As I've noted on the previous slides, we have a long dated portfolio of high quality assets.

Our goal is to help our host nation's develop the hydrocarbons in a responsible way and expand access to affordable reliable energy to creating economic benefits, we help the drawn sustainable developments in our host countries.

On environment, two years ago Cosmos set out a policy to achieve carbon neutrality cross scope, one and two operated emissions by 2030, and we're working to accelerate that timeline.

We'll give further updates in this year's sustainability report, which will publish in the first half of this year to give investors access to the 2021 does assume that.

We also plan to provide additional disclosure on our equity emissions.

On social performance.

Deeply about the people who work for Cosmos, and those who work with Kosmos and know how.

Most countries will employ 100% local nationals.

U S offices in Dallas, and Houston are consistently named in the top places to work.

In our host countries, we aim to be a trusted partner and good corporate citizen.

We work with a range of stakeholders and our communities to facilitate sustainable development.

We worked in this manner for nearly 20 years going back to when the company was founded.

Each year, we find important social investment programs in Ghana, and Equatorial Guinea, Senegal and Mauritania.

Creating economic opportunity advancing social progress and improving standards of living.

The success of the Kosmos Innovation Center is a Prime example.

This initiative in Ghana, Mauritania, and Senegal invest in young entrepreneurs and small businesses.

The oil and gas industry.

We train and empower young people to turn their ideas into viable businesses and we work alongside promising start ups to help them scale and reach that full potential.

And finally governance.

Governance has always been a key pillar of our business and Cascade down from our experienced and diverse board of directors through the executive leadership team to our employees.

We have always taken an industry leading position on transparency publishing all of our material petroleum contracts online.

In summary, our consistent commitment to sustainability is a core value and support our ability to deliver long term value to our shareholders and stakeholders.

Turning to slide eight looking back at 2021.

A year that saw an acceleration of our strategic progress with operational momentum across all areas of the portfolio.

On production, we hit our year end production target of 75000 barrels of oil equivalent per day, boosting fourth quarter cash flow and reducing leverage at year end to approximately two five times.

Our LNG development made significant progress during the year, we told you phase one around 70% complete at year end.

We enhanced our reserve base and now have a two P reserve life of over 20 years with a growing gas weighting.

We executed a highly accretive transaction in Ghana, acquiring a stake in the Jubilee and 10 fields Remoxy, which has helped us transform the balance sheet and increase free cash flow generation.

And finally, we continue to advance our ESG agenda supporting adjust energy transition in Africa.

On the following slides, we will briefly look at the progress we've made in each of our core geographies.

Turning to slide nine and starting Ghana.

2021 was a pivotal year for Kosmos in Ghana, where we got back to drilling after a pause in 2020.

Cosmos had net production of around 39000 barrels of oil per day across Jubilee and 10 in the fourth quarter.

The increased drilling activity in 2021 was promising particularly at Jubilee, where the partnership drilled three wells and Cosmos has a much greater interest.

The challenge as you believe production from midyear when new wells starts to come online and you can see production rising from around 70000 barrels of oil per day in July so over 90000 barrels a day by year end, which is where the field is producing today.

On 10, the partnership drove one gas injection, which is helping to support existing produces however, this has not been enough to fully staffed production decline.

Turning to slide 10.

In October we announced and completed the acquisition of additional interest in Jubilee and 10 from Oxy for a total cash consideration of around $460 million.

At the time, we talks about the attractive economics of the deal and a $65 world, which is highly accretive on all metrics and had an expected payback of around three years.

Once again I'd like to thank our equity and bond holders for their strong support.

Pleased to see the benefits of this transaction delivering so quickly.

I'll preemption, both partners exercise of preemption rights in November the.

In practice of preemption on Cosmos is a small reduction in our <unk> stake from around 42% around 38%.

The reduction is more meaningful with our stake reducing from around 28% to around 20%.

Assuming preemption is completed we would expect to receive a bit more than $100 million at closing, which was used to pay down debt.

Impact on Cosmos production will be about 5000 barrels of oil per day.

We are working with the partners on the transaction and the preemption remain subject to the approval by the government of Ghana.

Turning to slide 11.

And so again a full two gross production was in line with the full year at around 30000 barrels of oil per day.

Turning to Ghana, we saw increased activity in 2021 with the first wells drilled on the assets since 2015.

The partnership drove two jackup balance both of which came online in the fourth quarter.

We've been pleased with initial performance on the combined impact on gross production can be seen on the chart, we say Brent accumulated collectively producing at levels not seen for over 18 months.

In the Gulf of Mexico, turning to Slide 12, full production was 21000 barrels of oil equivalent per day slightly above full year production of 20000 barrels of oil equivalent per day.

Drilling the successful tornadoes floods boosted output in the second half the year is.

As the chart shows.

The highlight in the Gulf of Mexico last year was the Winterfell discovery on the successful appraisal well.

With around 100 million barrels of gross resource potential in the central Winterfell area and proximity to several nearby host platforms with always we're excited about the future potential of this asset.

Turning to slide 13.

The <unk> projects, so a ramp up in activity in 2021 with all key work streams, making significant progress.

At year end phase one of the project was around 70% complete.

Looking at each of the work streams.

On the Fps. So the final full process modules were lifted onto the deck in December on mechanical completion of the process subsystems is now underway.

Images of the DSO on this slide show the high level of completion.

On the hub terminal, we completed the construction of the 21st and final queso and the parting insulation for the jetty has commenced ahead of the hub terminal facilities delivery.

But a subsea activities ramping up the pipeline vessel has recently completed <unk> trials in North sea and should be ready for the offshore installation campaign in the second quarter.

And on the floating LNG vessel the full mix refrigerant compressors are being lifted onboard on the pine rack installation operations have commenced.

So 2021 was a busy year for us and with the operational momentum. We have built we are well placed to take delivery this year.

With that I'll hand over to Neal to take you through the financials.

Thanks, Andy I'd like to start on slide 14 by talking about the financial delivery, we saw in 2021.

We accomplished a lot at positioning the company well to prosper over the coming years.

First we successfully refinanced the reserve based lending facility, which now has a total facility size of one 5 billion with $1 billion drawn at year end.

In August we announced the completion of the <unk> at PSA with sale and leaseback transaction, which funds around $375 million of our Capex on the project and a key part of the financing path, we laid out in November 2020.

Our producing assets generated strong free cash flow of around $175 million during the year, excluding working capital in line with our guidance.

The combination of these along with the bond transactions, we executed have deferred all of our near term debt maturities and helped increase our liquidity to over $750 million available at year end.

Through strong operational performance and the Oxy, Ghana transaction, we materially reduce leverage during the year ending at around two five times as planned.

And finally, we have taken advantage of higher commodity prices to put in hedges at significantly higher floors and ceilings and we had in 2021.

Around 55% of our production is hedged with an average ceiling of around $80 per barrel with direct exposure to current prices.

All in all over the Goodyear for Cosmos, and while there's still more work to do in 2022, we start the year in a strong position.

Turning to slide 15.

Kosmos delivered a record quarter in <unk> with our highest ever sales volumes in EBITDAX.

Net production of approximately 70000 barrels of oil equivalent in the quarter was in line with our expectations.

Sales volumes at 82000 barrels of oil equivalent were higher than guidance as a result of an additional jubilee cargo in Ghana.

Adding in late December .

The realized price of around $65 per barrel, which includes the impact of hedging.

It was materially higher than the previous quarter a trend we expect to continue in 2022.

In the first quarter. This year, we anticipate a realized price net of hedging of over $80 per barrel.

Costs were all in line or slightly below previous guidance, which helped that drive today's positive <unk> results.

Turning to slide 16.

As I mentioned in my opening remarks made a lot of progress with the balance sheet in 2021 and the chart on the left of this slide shows that liquidity remains at a healthy level.

This quarter, we expect to complete the refinancing of the Rcs pushing that maturity to late 2024.

The chart on the right shows that we expect to have no material debt maturities until late 2024 at the latest although we do plan to utilize our flexibility to prepay some of our existing debt well before that.

With that I'll hand back to Andy to take you through the year ahead.

Thanks Neil.

Across our business. This is an important year for the company.

We're investing in our key assets to drive the increase in production and cash flow that we discussed earlier.

Turning to slide 18.

In Ghana, we have a world class field in Jubilee that has the potential to produce at the elevated levels for the next several years as we deliver on our plans.

In 2022, we're investing capital in three infill wells won't produce seven two injectors to support the base production.

These new wells combined with the benefits of the wells, we drilled last year, we expect the year on year growth of <unk> of around 10%, which includes the impact of the two week shutdown planned for the second quarter.

Around the end of the year the partnership plans to start drilling the first <unk> South East Wells Djibouti Southeast is an untapped area of the reservoir, where we will be drilling lower <unk> wells.

Once online in mid 2023, these wells should push gross production at Jubilee to around 100000 barrels of oil per day.

On 10 as the operator guided previously production is expected to trend lower until we see the benefits of the wells that have been drilled later this year.

The partnership plans to invest into and full allowance this year, one producer and one injector, which should help stem the decline in 2022.

We're also drilling to rise our base wells, which are targeting an undeveloped the extension of the enzyme reservoir closer to the <unk>.

Allowing us to take advantage of existing infrastructure.

These are only the base wells are expected online in 2023 and should help to increase production.

As the operator recently communicated the longer term plan with 10 is to double current production levels by increasing the activity of 10 with a second rig in Ghana.

And finally, we are aligned with the operate and the government of Ghana to eliminate routine flaring by 2025.

Turning to slide 19.

And then for sure DNA production year today is continues to be strong as a result of the wells drilled late last year.

In 2022 investment will be focused on facility maintenance well work on a second DSP program with the aim of keeping production around these levels through the year.

There is a lot of untapped upside that we will get and we have several high grade <unk> opportunities, particularly in the untested deeper helping.

In the Gulf of Mexico will finally decide track the Kodiak well in the first half of the year.

Funded by insurance proceeds with a while expected to contribute in the second half.

In addition to some production optimization projects should support existing production levels.

While winterfell, we're working with partners on our low cost lower carbon development targeting sanction for the initial two well development scheme in mid 2022 first of all as expected around 18 months from sanctions.

In addition, we continue to mature multiple prospects for future highlights drilling in 2023 and beyond.

Turning to slide 20.

And as I said last year, we continued to make strong progress on sourcing phase work with all the major work streams advance as evidenced by the images on this line.

In 2022, we expect to hit several important milestones ahead of first gas plant for the third quarter of next year.

We plan to begin drilling the initial full wells next quarter with offshore installation of the subsea infrastructure expected to commence in the second quarter as well.

On the <unk> terminal and we expect to commence facilities hook up in the third quarter. This year.

On the <unk> sail away from the yard in China as you late in the third quarter with the vascular expect to arrive on site around the end of the.

And on the floating LNG vessel Golar will be testing the same turbines later in the year.

Enabling commissioning of the vessel power management system with cellular anticipated early in 2023.

Turning to slide 'twenty, one beyond phase one of <unk>. We also have a significant amount of low cost gas across our assets in Mauritania and Senegal that we are working to commercialize.

Given the ever tightening the supply demand backdrop of global LNG, We believe audit scope at resource has significant value upside to cosmos.

So the second phase of tools, you were working with be pushing the NSE to optimize the upstream facilities to deliver another two 5 million tons of capacity at an upstream cost less than $1 billion of growth Capex. We have previously communicated we expect to make a development decision related to that.

The project is around the middle of this year.

This will kick off the feed work to fully support the detailed contracting costing required for full will add five D.

<unk>, we expect to complete the seismic reprocessing and reservoir modeling, which should allow development concept to be selected.

And then yes, it's Ryan the partnership plans to advance pre feed studies and the met Ocean and geophysical surveys, while also progressing domestic gas sales discussions.

Turning to slide 22, which looks at a high level guidance and capital plan for 2022.

There is a more detailed guidance slide included in the appendix.

We expect company production for the year to be in the range of 67000 to 71000 barrels of oil equivalent per day, which is at the mid point would be a year on year increase of over 20%.

Capex of around 700 million is broken out in the chart on the bottom line.

We also plan to spend between $100 million to $150 million of growth Capex on the base business for production growth in 2023 and beyond.

This includes Jubilee southeast the 10 riser based wells Winterfell as well as long lead items are ahead of our 2023 drilling program in Equatorial Guinea.

On Torchy, probably as long, we expect to spend around $350 million during the year, which reflects the timing of accrued capex based on the crude budget from the operator.

We also expect to spend a further $50 million in Mauritania and Senegal on <unk> phase two and increase activity umbrella any assets around to support progress on those developments.

At 75 solid brands, we would expect to generate around $200 million of free cash flow, which we plan to use to reduce debt.

As I mentioned in the opening slide of today's presentation, we could see absolutely debt reduced by up to $500 million. This year through a combination of organic free cash flow contingent payments from shell if theyre successful with a drilling campaign. This year gone of preemption proceeds in the NFC.

Loan refinancing.

So turning to slide 23 to wrap up today's presentation.

Cosmos has a differentiated portfolio and exciting outlook, we have low cost high quality assets with significant embedded growth.

We are investing in world class gas projects that will help facilitate the energy transition and provide the company with long term sustainable cash flow.

We have a robust balance sheet that continues to get stronger as we de lever this year and beyond as our leverage improves we anticipate our assets will generate significant amounts of cash flow, we assume will enable meaningful shareholder returns, especially at current commodity prices.

Finally, we have strong ESG credentials that gives us the license to operate in our host countries in our portfolio that is fit for the future.

Thank you and I'd now like turn the call over to the operator to open the session for questions.

Before pressing the star Keith one moment, while we poll for questions. Our first question comes from the line of Charles Meade with Johnson Rice you May proceed with your question.

Good morning, Andy and Neil.

And to the rest of the team there I wanted go back to Europe , you commented specifically be.

The timeline that you've laid out for phase II did I hear that.

Youre going to have a front end engineering process sometime around mid year that precedes Friday or could you just go back to that and kind of set that set the timeline for us.

Yes, Hi, Charles.

Yes, the timeline is to get to the the concept select decision by.

By mid year, and we're working hard with <unk> to ensure that we fully optimize that and as I said in the in the remarks I think we think there's real opportunity to lower the cost per loan.

The $1 billion growth for the upstream.

You talked about so that's the process going through to the middle of the year.

And then the second part with the concepts selected and the way forward defined will do the feed engineering to go through the formal process.

Friday for correctly idea, obviously, the government approvals, we need the final ends.

And costs I mean, even contracts in place that some of the real world will kick off in the in the middle of the year.

Got it.

It would be sometime in the back half of the year at the earliest.

And again, it's really important I think in the current environment.

Can we get.

Quality engineering done to ensure that we have the right basis of the Capitol underlying contracts in place. So I think that we want to ensure the quality of that this is a really good project.

We have with clients.

<unk>.

We see a lot of opportunity actually to remove cost upfront and we want to make sure that we're doing that.

Got it. Thank you and then a quick question about the Gulf of Mexico.

Well winter fill development.

Just to get kind of an order of magnitude here should we be thinking about <unk>.

Gross rates from that development in the range of five to 10000 barrels a day.

Yes.

So growth rates for the two well development will be around 20000 barrels a day old Navy's let alone.

Basically for a lot of construction.

Got it.

Got it thank you Neil I appreciate it.

Alright, Thanks Jos.

Our next question comes from the line of Neil Mehta with Goldman Sachs. You May proceed with your question.

Good morning, Andy. The first question is just around your marketing strategy, obviously with everything going on in Europe right now.

The value of <unk>, two and the barrels continues to move higher potentially as you think about cargo is for either phase one phase two Kent can you ultimately market some of those cargoes into.

Into Europe .

Talk about how you see this asset fitting in the broader natural gas natural gas macro.

Yeah, Thanks, Neal I think that.

If you sort of go back and so start from where we are today on phase one we have the two 5 million tons being marketed by <unk>.

Non of percents low to brand.

The real upside of course, therefore comes from from <unk>.

You too.

Those cargos.

Not sold today.

And we believe there is a real opportunity for us to take.

Greater benefit I think from strengthening prices.

For LNG globally.

And.

I think.

As you look at the World today, and obviously one of the consequences of the situation in Ukraine.

Europe needs to look at how it can ensure energy security and look for new sources of gas.

In Mauritania and Senegal, we have a resource which is low cost gas is low carbon it hasnt I cotwo in it and its proximity to Europe . So I think we believe and I believe deeply but this was an important resource for the world.

Phase one will come out of it and call. It in time and as we discussed with Charles we're moving forward with phase two which I think again, we'll come on it is important time to continue to support our growing gas demand and hopefully create.

Another source of energy security for the World gas is.

A part of the energy transition.

I think it's becoming more widely recognized as it plays a role and we believe monetizing in Senegal is therefore part of that so I think when you look at the big macro.

A lot of Chinese taxi since we started the journey with us.

So.

I think there's a lot to look forward to and then specifics around your fuel.

Initial question around towards you.

Two I think there is a lot of optionality on the on the gas pricing for that.

Thanks, Andy and then as a follow up is just around hedging strategy, obviously 'twenty one.

There were a lot of those barrels that were sold at a discount relative to spot price as you roll into 'twenty to remind us what percentage of unhedged U R.

And as you think about that remaining unhedged.

Is the intention to leave it open to give yourself that sort of exposure to potential stronger commodity price realizations.

Yeah sure sure Neil I'll take that.

Yes, so we're about 55% hedged on 22 oil volumes, which grew 45% unhedged, we plan to keep that.

That exposure to the rest of this year.

And I think the interesting part that we're working through now 23, and so less than 10% hedged today with upside to $95 on those couple of million barrels that we have hedged and we are looking at structures that give us.

More downside protection and more access to the upside.

That's the main focus for the next few quarters is really get 2030 in a place where the downside protected well and we've kept as much access to the upside as possible.

Thanks Neil.

Our next question comes from the line of Nick <unk> with Renaissance Capital You May proceed with your question.

Hi, guys. It's Matt Thank you for taking my questions.

To ask please.

So we assume then.

Follow up.

Yeah.

In the past.

The idea about total phase II B whats left.

To fund the development from the cash flow about phase one generates spot.

This function this year.

Then.

So maybe you could like plausible scenario for full for.

Maybe six months after pay for both phase one phase two topics. So can you give me kind of like some comment on how you think about or is it something you might.

Mike.

So towards the eventual sell through the project and then the second.

Since the days that they want to go back to the sensitivities because it looks like the reduced from last quarter to $50 million from the $100 million to $5.

I'm not sure if the BTC is reflect purely because of the additional hedges.

Quarter over quarter, because it could be.

Not many.

If you most about them then I've got a follow up thank you.

Okay why don't we let Neil take the second question first and then I'll come back to the towards U S price.

Two timing and funding.

Nick So just on your question, yes, most of it just a function of where we are in the oil price now so again I think what we've said before which is.

So accurate on unhedged basis.

Five elements around $100 million change in <unk>.

Annual free cash flow.

And so.

<unk>.

The guidance, we gave it's around sort of $50 million for 'twenty, two basically 55% of our production hedged and therefore net sort of cash half of the.

The upside and the average ceiling on our hedges around 80% so right around that pinch point. So it's maybe a little higher than that from 75 to 80, and then a little lower than that just given the staggering the ceilings that we have through the year.

Through the hedge book.

Okay.

India.

For while we are about <unk> remember, how much low cost not anymore.

Correct, Yes, yes.

On page two Nick.

It sort of goes back to Charles's point, I think that will start to incorporate capex. Besides continue from some of those may be.

Which will be the sort of the spending thats incorporated.

Our current budget.

I wouldn't anticipate any significant spend on place to commence until 2023, and therefore, the overlap with with phase one is always the exact not quite but almost exact yeah.

I think the second thing that.

It's important to recognize is as we've said, we think there's real opportunity to drive down the <unk>.

Extreme cost for the project significantly and therefore.

The net outlay to Cosmos is getting less and less so I think I feel good about the ability to.

Actually self funded on the join if any is.

It's very small so we're.

But well types here I think we've got a follow on project, which is really exemplary.

It will fully utilize all of the infrastructure, we have in phase one but for the capital costs are coming down and we're finding those savings as we speak so I think the overlap between phase one and phase two that ore is going to be relatively small.

Okay and.

Hi, My other question is C C.

And then on <unk>.

G 13 discovery, you may deem Equatorial Guinea.

Spot.

So last year was.

Basically drilling of those wells those wells.

Which deliver results. So I was expecting this year to be kind of lagging inflation, what's going to be in EG and it doesn't seem to be the subject to be much on CVT or kind of like talk about let scarborough anymore. So I'm just wondering.

How you think about it than others.

The next steps for four for EG.

Yeah, Nick I'm happy to take that I think we're at some sort of <unk>.

That's five cities ultimately continuing to assistant in the appraisal.

We do have additional plans for drilling in EG.

And.

Question for US is how do we maximize the value of the existing discovered resource that we have across the portfolio clearly we have opportunities in Mauritania and Senegal.

Gone in EG and the Gulf of Mexico that we're moving forward with them all together at the same time.

Facing out the development projects.

And if we can find more resource in EG, which we talked about.

Potentially 23 additional ILEC.

Drilling campaign.

We could make a new development more attractive from a risk reward basis going forward and then then would be the traditional allocate more capital to it. So I think that's kind of.

Yes.

There will continue to move forward, but likely continue to derisk, it and make the economics better.

Okay makes sense. Thank you.

Our next question comes from the line of Mark Wilson with Jefferies. You May proceed with your question.

Thank you good luck.

Good afternoon gentlemen.

First question is on the 100000 barrel a day.

Target for 2020, just to get some of the bigger moving parts in that.

I would just say that expectation that 10 could double from here it sounds like one of them and the other one.

B do you believe is.

Over 100000 would those be the those main moving parts and then also would you expect both gum and <unk>.

Next to Guinea to be higher than they have produced.

In the past year.

Yeah, Hey, Bob Yes, Andy outside of that so if you think about the build up from where we are today.

200000 barrels a day clearly 24 towards you is onstream net on a BOE equivalent that's about 18.

<unk> barrels of oil equivalent per day, or so and then the next increment as Jubilee you've been talking about growing to 100000 barrels a day.

With the.

Our current working interest.

As an additional 8000 barrels a day and then winterfell.

And that would add about 4000.

If you sort of do the quick math on that you sort of get to the 100.

Yes underlying that you haven't got additional contribution from 10, we have a lower working interest and <unk>.

You have the Gulf of Mexico, and you have actual gain a benefiting from an infill program in.

In 2003, so I think you take it.

As those come through contributions against the underlying decline and you can see your way to a <unk>.

100000 barrels a day so.

A big big contribute as I told.

<unk> growth.

Growth in Jubilee and 10, <unk> being the most significant part of the addition of wind to file and then.

The underlying activities.

Goodnight.

Got it okay. Thank you for that and then also you gave guidance towards where the 700 million guided for this year, how that tapers down towards 20 full but just thinking about next year with Jubilee southeast.

With winter I suppose theoretically.

Before we get to a tool to phase two.

And post 202 phase one we would expect capex to come down into 'twenty three overall.

Well clearly that's not giving any guidance yet so it's a little early but I think you've talked about the moving costs. Okay.

Moving in.

And told you phase warm weather moving from the sort of 'twenty two is a video spend.

The fabrication activities going on we moved to a different phase in 'twenty three so obviously plenty of loan loss model.

We have that coming down we have.

The sustaining spend in GB southeast, we have an additional spend and when to sell so I think.

We're we're sort of we're on a glide path, which sort of and we've shown in 'twenty, two and 'twenty four the chance, but we're on a glide path.

The decrease in Capex, we're on a glide path of increasing production, which ultimately will create.

Incremental free cash flow growth in <unk> and 'twenty three out of 20, <unk> and then the growth in 'twenty four or 'twenty.

So I think I feel good about the the shape, we're building now going forward.

2010 with Maidenform Europe .

Delivery, followed by 'twenty three 'twenty four but we are clear about the things that we need to do.

Naval said, we're being very conscious about the capital inputs.

Tom is about ensuring that we don't put capital into things, where do you think you got it.

Make a material difference.

To the.

Making sure that we're putting the capital into the highest quality opportunities.

<unk> phase one in food with.

With winter trial on the jewelry families.

We're very clear about activities Apple care about the capital.

Contribution that will make and growing cash flow through 'twenty three 'twenty four.

Okay. Okay. No that's very helpful and just one last one if I may.

Shell exploration payments.

The steps and.

You too.

Certification hurdles to be done from here.

Okay.

Any money and from that what would be what should we be looking for.

Yes.

Again, Mark we understand the channel had a successful.

The initial well I think what's interesting is that they decided to go and drill a well back to back.

And have a second well ongoing.

We speak and I think that we would see that as a positive sign.

In terms of the steps forward the payment comes one.

Submit our enterprise and cloud so the current well I suspect.

Was probably couple of months away from.

Our result.

Our appraisal plan and then we get to.

Our payment. So those are the steps I think the acreage has not submitted enterprise upon at this stage because it would have slowed down the ability to move ahead to drill the next well back to back.

Okay. Thank you I'll turn it over.

Thanks, Bob.

Our next question comes from the line of Matthew Smith with Bank of America. You May proceed with your question.

Yes, hi, thanks very much.

Just wanted to ask around the future.

Attunity is in Mauritania and Senegal.

Quite rightly, there's still sort of talk about the long term potential of gorilla <unk>.

I just wondered with the.

Equally.

The optionality for a phase III or a further expansion of the <unk> project is still on the cards.

Potential next steps.

Rather than going into one of the other two projects.

And then linked to that just on barometer in the ACA.

Just want to ask whether you still there would be any potential or any appetite for you to farm down.

Interest in those projects at this early stage.

Or would it be fair to assume that that value crystallization points.

It would be closer to a development concepts.

Yes, Thanks, Matt.

Yes good.

Good questions I think that.

Our focus on.

So we'll see what the environment is this sort of maximize the value from the infrastructure that we've laid out.

And I think as we've discussed on prior calls.

The 5 million tons is sort of fully utilizes a little delayed in infrastructure in terms of the full capacity.

The pipeline is Shaw et cetera. So I think the focus is to I think the focus is therefore to ensure that we get that we get it underway I think when.

As has.

Has been achieved and we have some.

Some production history from the reservoir will be in a better position I think to fully describe what phase III would look like.

So I think that absolutely remains.

And our objective to increase beyond the 5 million tons, but I think we have some work to do some production history to garner people in a position to make that capex that I think have been.

<unk>.

Disciplined around the capital that we put into that is political.

But I think it's about how do we progress.

Hi.

Given the resource, which is which is significant.

Yeah.

Morale or any of its ranking of developments are different.

There isn't as large a need for domestic gas in <unk>.

There isn't even novel as launches there is a cycle after that ultimately would be an export project.

We are working hard now with BP.

A development concept and again as we've been discussing on the prior question that has to sort of compete against gas from the U S. But there is a growing need for it in Europe , and how can we put together.

<unk> scheme, but enables us to staff in the right way. So it's low cost it's benefits of being low.

So I think that's the goal of Mauritania foot morale up to increase their exposure.

The European market actually is good for you.

You're buying it from us diversifying tools different production facility. Therefore.

<unk>.

It becomes a more diversified source of gas yeah. So I think there's good rationale for looking at that.

In parallel with potentially ahead at all.

Phase III.

When you look at your concern I hear differently Ultimately act triangle will be part of Senegal domestic gas growth in Nevada, as they add as they pursue their own anesthesia transaction targets moving to a lower carbon world.

Got it makes renewables with with gas.

So that project is driven by that time. So it has a different purpose and therefore would be.

Hey.

We took a very different purpose incentive law from the expansion of.

Torture, so I think that.

The way you can see it I think there are different.

Role that each of the projects can play.

We need to be very clear about.

Ensuring that we allocate the capital in a very disciplined way against those objectives and the projects for the right pace, but I think that.

Our objective is to ensure that we absolutely maximize the returns from from towards you and then I think with confidence and that on the production history from that yes that will be another side, but I believe.

The Yankees triangle gorilla.

Google's in.

Palo Alto.

A different investment opportunity.

Perfect. Thank you Andy.

And then one final question, if I could just be on B b.

Shell's sort of continued consideration of the capped.

Up to a $100 million could I, just clarify how you might get to that $100 million in <unk>.

'twenty two so presumably.

$50 million.

Yes.

That's right and then where the opportunity might come through for the residual dot com.

Yes.

<unk>.

There are.

The drilling plans, we believe for shell will be when the rig finishes.

And with.

Thanks, so much.

Whereas we drill.

Well, so that would be the next well in the program and then beyond that.

<unk>.

The well is doing that so I think you know.

In south of Shanghai.

Goodbye.

In fact, this quarter, we get on with that.

Exploration program.

And so I think we'll see those wells.

Yes.

Okay. Thank you very much.

Sure.

After <unk> second the visual.

Thanks, Andy.

Great.

Our next question comes from the line of James Hosie with Barclays. You May proceed with your question.

Hi, Thank you I've got a couple of questions. Just firstly does the 2024 production free cash flow on slide five does not incorporate the impact at the kind of pre emption process. It would presumably have completed by that.

And just Marty in Senegal, just wondering if the work program.

<unk> does not intend to get the assets to a point, where you could buy the sizing them and what sort of market do you see for those assets today.

Maybe the first one James I'll, just come back to saying, yes. So just all of the numbers in the presentation and all of our guidance doesn't include preemption and like we said preemption is about a 5000 barrel a day impact clearly said, it's greater than 100000 barrels a day for this.

So the flexibility around that but it does everything through throughout the year.

Presentation does include the impact of preemption.

Okay.

And then just on the on the second question.

I think the world is the world of LNG continues to.

I think as a company we've been.

Strong on the.

The underlying demand for LNG.

Yeah.

That picture remains unchanged.

What's sort of changing is.

The supply challenges.

For new projects to set forward to meet that.

That demand I think Eric.

Various forecasts out there.

Holes by the end of this decade.

Think there's going to be real opportunities and move projects forward and have the right cancers.

This is Mike and I keep repeating myself, but it has to be low cost it has to be low carbon gas side of it.

It doesn't have this benefit of bringing with.

With it and it has to address the market shortfall in a geographic sense.

The dollar imaging, so I think we.

Our strategy remains unchanged, we see real value in the undeveloped resource in Montana in Senegal, where.

We're excited about.

The optionality that a phase two until two brings because not only is that is it low cost leveraging from the prior investment in phase one, but we believe we can get greater access to the.

Price upside because the gas is done contracted and Thats why we would want to guide for instance, where the gorilla, where we would be bringing that gas.

Mark and I think we have the ability to.

<unk> from the.

The optionality that the market could bring so ultimately.

With that provide an opportunity to monetize it may but I think what we have to do is demonstrate.

The value in the assets and I think we're doing that well talk to you folks want monitoring of world facing and we need to grow with gorilla stopping to work.

<unk>.

We will undertake this year will be an important part of that and I think that the backdrop. The macro backdrop for LNG is not only supporting the inherent value of those assets.

Great. Thank you.

Right.

Our next question comes from the line of James Carmichael with Bamberg You May proceed with your question.

Hi.

Thanks, guys just a couple a couple of quick ones I guess, just firstly on winter fill in the.

The release. It says you may be targeting a lower carbon development that went to bill So just sort of wonder.

What that really means.

Then I suppose.

And how are you going to look to achieve that through the development.

Then just a quick second one if I missed this earlier.

And I appreciate it's difficult to be precise but.

You can have said on timing, it's likely timing.

Thanks.

Yes.

I'll do the preemption first James.

The first step in the process was too great.

The transaction documents.

Telecom work very close with them.

And as I announced that we're going to preempt.

That documentation is now complete.

It will be submitted shortly.

G&P decision the government of Ghana for their approval so the timing will therefore.

Pat Vaughan.

In that process.

Terms of ourselves in total I think.

We made.

A lot of progress in the type of work is done and will be submitted shortly.

I'm going to sell I think the point, we're making is simply that the Gulf of Mexico. As you know has a very low carbon intensity.

Oil production.

Why because.

The reservoirs.

Typically driven by Knapp track office or they don't have.

Huge amount of water injection.

And secondly.

GAAP.

As part of the show.

The third thing of course is that you are using existing facilities.

So you will yield incremental use of energy and almost facilities to bring onboard a tie back as well so we sell will be fine.

Jack.

We'll start off with.

Two well development that existing infrastructure around the field.

Therefore, the combination of Nashville, Hot and dry not flaring.

You saw existing facilities, where the incremental energy demand.

All of those nine four.

Our lower carbon oil projects.

That's why even at one of the things I believe in the Gulf of Mexico Hospital supply.

<unk>.

It has the infrastructure in place that enables you to do.

To develop.

At a lower comp cost.

So thats the description.

And while we feel it.

It's an important part of our portfolio going forward.

Great.

Okay great.

Good alright, thanks James.

Q4 2021 Kosmos Energy Ltd Earnings Call

Request a DemoDemo

KOS

Kosmos Energy

Earnings