Q1 2022 Kosmos Energy Ltd Earnings Call
Good day, everyone welcome to Kosmos Energy's first quarter 2022 conference call.
Just a reminder, today's call is being recorded.
This time, let me turn the call over to Jamie Buckland, Vice President of Investor Relations at Kosmos Energy. Please go ahead.
Thank you operator, and thanks to everyone for joining us today.
This morning, we issued our first quarter earnings release.
This release and the slide presentation to accompany today's call.
Billable on the investors page of our website.
Joining me on the call today to go through the materials are Andy Ingalls, Chairman and C I and Neal Shah CFO .
During today's presentation, we will make forward looking statements.
That's our estimate and expectations.
Actual results and outcomes.
Different materially.
As we noted in his presentation.
The U K and SEC filings.
Refer to our annual report.
[noise] announcement and SEC filings for more details.
These documents are available on our website.
And at this time I'll turn the call I could find it.
Thanks, Jamie and good morning, and afternoon to everyone. Thank you for joining us today for our first quarter results call.
I'd like to start today's presentation looking at the companies portfolio, focusing on the key characteristics, which differentiate cosmos and position us well in a rapidly changing oil and gas sector.
We will then talk about Dakota looking at both the operational and financial progress we've made year to date before opening up for Q&A.
Starting on slide three.
This is a slide we showed with our full year results in February update if it till I was pretty upset in Ghana.
The war in the Ukraine is fundamentally restructure the global oil and gas markets and we believe we have the right portfolio at the right time to address the challenges is it reversible change has introduced.
Production is expected to grow by approximately 50% in the next two years, helping to provide the oil and gas the world needs today.
We have a strategic LNG resource needed to support a just transition in Africa, while enhancing energy security.
We think these attributes differentiate cosmos and offer investors a compelling opportunity to own a company with a purpose and a portfolio that is fit for the future.
First on the left we have a low cost high quality assets, the company's underpinned by World class fields with a combined two P reserve life of over 20 years, and the longevity to deliver sustainable high margin cash flow.
This gives us the ability to invest in our existing assets to materially grow production and free cash flow, while simultaneously reducing debt and.
And we've made excellent progress on that during the quarter.
Second as the chart on the right shows we are increasing our exposure to LNG at a time when both the strategic and financial value of gas is rising we are.
Taught you phase one expected to come online late next year and another world class gas development opportunities in Mauritania and Senegal, They should provide further growth beyond 2024.
Third we have a robust balance sheet, which continues to get stronger liquidity is increasing in absolute death is reducing with leverage making good progress towards our year end target of less than one and a half times at current prices.
Fourth as planned Capex falls in free cash flow grows there is potential for meaningful shareholder returns once we resume collaborate sustainably below our target.
And finally, we have strong ESG credentials underpinned by our commitment to climate targets track record on sustainability and strong governance.
All stakeholders are asking us to do more than Fool me I E. S. G and our company has a bigger agenda.
With growing exposure to gas, we we support I just energy transition for our host countries in Africa as well as provide enhanced energy security for regions of the World Europe in particular that are looking to diversify that current supply sources.
Turning to slide four.
The events of the last two months have emphasized the importance of having a reliable access to energy and gas in particular.
Cosmos, we have no material stake in a significant and strategic gas resource that can play an important role in enhancing energy security.
Over the last 18 months and well before the war in Ukraine, we've seen the impact on gas market said rising energy demand and yes, its under an underinvestment in supply.
The chart at the top brine based on wood Mac data shows how LNG demand is expected to grow sharply over the coming years, almost doubling by 2035 and enduring forecast.
The chart on the bottom left of the slide shows the expected shortfall of new LNG needed to satisfy that rising demand has grown significantly in the last few months.
This is a as a direct result of countries in Europe looking to reduce their dependence on pipeline gas and replace it with LNG from international markets on the back of the war in Ukraine.
With demand expected to strengthen further over that period prices have responded accordingly.
Chart on the bottom right shows the forward curve for TTS today versus November last year with forward prices around $13 and then in Beecher you hire today on average over the next three and a half years than they were in late 2021.
While short term prices have tried it at all time highs it's important to look at the impacts of the current situation in Europe over the medium to long term.
We believe the longer term outlook for LNG has fundamentally changed with higher prices line. These specifics as a result of a premium placed on greater security and flexibility.
Thanks Cosmos, we have around 27% of an estimated 100 tcf of gas in place across Mauritania and Senegal, We expect this gas to have an important role to play in meeting rising demand with enhanced energy security.
Turning now to slide five.
Oh gosh in Mauritania, and Senegal is cost advantaged due to both location and also the quality of the resource is geographically advantaged into Europe with a major time and distance benefit of a U S supply, resulting in significantly lower transportation costs.
For an LNG cargo traveling from taught you into one of the existing U K terminals or into Williams hub and the proposed site, while the new German import terminals.
Selling distances around 2000 nautical miles or sailing time of five to six days.
From the U S Gulf Coast resistance, it's closer to 6000 nautical miles or three times as long to deliver the same cargo, resulting in shipping costs that could almost be a dull and then beach are you higher at long term charter rates.
We believe we can produce gas and upstream costs of approximately two to $3, but M. M. Btu of the life of the field, which compares favorably with current U S gas prices of around $8 per M. M. B T U.
Whilst we believe the U S will be an important partner to Europe for future LNG supply. The dawn on this line shows the torch you compete favorably on both upstream and transportation cost of Euro and therefore, it should have an important role to play in the growing European LNG market.
At southern gas in Mauritania, and Senegal also has a carbon advantage with almost no C O two in the feed gas coming from the field.
As a reminder, our gas from phase two of the project is yet to be priced which creates a significant opportunity for cosmos, when we bring that gas to market.
Turning to slide six this is also a slide we showed a yearend, which we've updated for the toy preemption in the first quarter, the AR, which are now behind us and.
In <unk> the business generated free cash flow around $220 million, excluding till I preadmission proceeds.
With minimal capital expenditure, Mauritania and Senegal in the quarter. The number demonstrates the steady state cash flow potential of the business once our growth Capex is behind us.
At 75 auto we'd expect the business to generate over $700 million of free cash flow in 2024 as production ramps up on Capex falls at current prices that number would be significantly higher.
We believe this level of cash generation is sustainable underpinned by a 22 P reserve life, putting us in a position to be able to let a consistent material shareholder returns at the appropriate time.
The combination of quality growth and cash flow generation of our portfolio is unique within our peer group, which is why my team is excited by the future potential of our company.
Next we'll look at the <unk> results in more detail starting with slide eight.
It was another quarter of strong operational and financial delivery.
Operationally, we performed well with production at the upper end of our guidance range helped by the sustained robust performance at Jubilee in particular, which continues to perform strongly.
Adjusting for the impact of <unk> preemption, where the top end of our original guidance.
And our developments, but torchy phase one in Jubilee southeast remain on track currently overcoming the more challenging operating environment, we're seeing with regards to supply chain issues and cost inflation.
And finally on Winter Valley is expected around mid year as we continue work to optimize the development in response to the current environment.
On the financial side as I mentioned, we had an excellent quarter for cash generation helped by the strong production and supportive commodity prices.
That strong cash generation, coupled with preemption proceeds from Tullow allowed us to reduce net debt by $330 million in the quarter, resulting in leverage at the end of <unk> of one nine times on.
On the balance sheet, we successfully completed all our financing requirements with the I'll be I'll Redetermination, all CF refinancing, which were important steps to secure our strong liquidity position.
Turning to slide nine which focuses on the operational performance in the quarter.
As I mentioned on the previous line Jubilee performance during the quarter was strong averaging just over 91000 barrels of oil per day gross with 99% uptime.
The field is currently shut in for the planned two week shutdown and is expected back online at the end of this week.
Prior to the shutdown do you believe is producing at a daily rate of around 95000 barrels of oil per day, gross which Denver demonstrates the potential of the field with improved reliability and disciplined investment.
We expect an additional production well and water injection wells to be online later, this quarter, which should help to support production levels through the end of the year.
On San gross production in the quarter of around 25000 barrels of oil per day again with high uptime of 99% is inline with expectations with the next wells planned for the third quarter.
On Jubilee South East, we're making good progress with the ordering of long lead items ahead of drilling which is expected to commence around the end of the.
Production from the first wells is targeted for mid 2023, which should push gross production at Jubilee over 100000 barrels of oil per day.
On the Oxy transaction the completion of the Petro I say preemption has not yet taken place and we'll update the market in due course once it has been done although the impact in our production and guidance is immaterial.
And actual Guinea gross production in the quarter around 35000 barrels of oil per day was supported by high uptime on the Sabre F. P. S O.
The reliability projects, we've invested in over the past several years are delivering with 99% uptime at sabre within the quarter.
Combined with the benefit of the wells, we drilled in the second half of the year first quarter production was 15% higher than full Q2 thousand 21.
In the quarter. We also successfully completed the accumulate upgrade project, which increases our ability to support additional E. S piece, which we started to install in April to further support production levels.
In the Gulf of Mexico average production in the quarter was around 19000 barrels of oil equivalent per day net impacted by unplanned facility downtime.
All facilities and are back online in April production was around 22000 barrels of oil equivalent per day net.
We're currently drilling the Kodiak sidetracked with production expected next quarter.
Turning to slide 10, which focuses on three low cost resource additions in the Gulf of Mexico next so again, a deepening in our existing asset base.
Combined running around 12 million barrels of resource at a total cost of around $4 per barrel with very attractive economics.
Firstly on Windsor found we increased our interest in the central Winterfell blocks, where we have the initial discovery and successful appraisal well we.
Required additional five and a half to send from one of the partners around $10 million, taking our overall interest in those four core blocks around 22% and to 36 and a half a cent in a derisked northern blocks there.
The consideration will be offset by capital reductions elsewhere in the Gulf of Mexico business unit.
Secondly, we exercise a preferential right to purchase an additional 6% in Kodiak for a total cost of around $28 million with the first installment in 2022 and a subsequent deferred payment.
It is important to note. The original transaction was negotiated laws in 2021 at much lower oil prices, which created the opportunity for cosmos.
On Kodiak the transaction as a forecast payback around 13 months at $75 per barrel and an IRR of over 95%.
At the current oil price strip payback should be less than they are with an IRR of above 180%.
To fund the cardiac friendship will re signed with small amount of the Ghana preemption proceeds to invest in this compelling opportunity.
Third alongside our JV partners, we've agreed with the Ministry of mines, and hydrocarbons and extra organized to extend the block G license to 2022 'twenty 40, adding 11 years to sabre in six years to achieve May which supports the next phase of investment in the country.
As part of the extension, we're paying a signature bonus which is already included in our full year Capex guidance and they've agreed to undertake a work program and focusing on the next infill and exploration drilling campaign.
The extension adds around 6 million barrels of <unk> reserves, which generates around $800 million of NPV 10 at $75 Brent net to Kosmos.
Turning to slide 11, our developments in Mauritania and Senegal.
Phase one of torture continues to advance with all major work streams, making progress in the quarter.
On the hub terminal construction continues on schedule with a 21st and final caisson shipped offshore in early March 2022, with three caissons less to be installed.
On the subsea the offshore installation campaign is expected to commence this month.
Drilling of the four wells required for first gas commenced last month with two top holes completed.
On the F. P. S O mechanical completion continues but there was a two week COVID-19 related lockdown of the Cosco yard in China in early April.
That now has been removed in the yard is back up and running.
As the operator communicating these first quarter results call last week. The S. P. S. O is on the critical path and the team is working hard to mitigate these disruptions and maintain the contracts a silo as schedule of an <unk>.
The <unk> is making good progress with the cafe yard in Singapore, where the pipe rack installation now can place.
Overall, the project was around 75% complete at the end of the first quarter with first gas target in the third quarter next year.
Until she phase two we continue to work closely with the operator of the governments and the N S sees to optimize the development scheme with regards to both scale and timing.
Work is progressing and we expect a development decision around midyear with formal fade in F D to follow.
It is important we manage future cost pressures in the right way to maintain the projects attractive economics.
[noise] umbrella and jackets Ranga, we continue to work with both governments and our partners to progress development concepts that will ultimately position the projects take advantage of the current market conditions.
With that I'll hand over to nail to take you through the financials for the quarter.
Thanks, Andy and good morning, and good afternoon to everyone.
On the back of the operational robust operational performance, Andy talked about for the quarter, we posted strong financial performance and key highlights outlined on this slide.
EBITDAX of $430 million was over 25% higher than the FERC in the fourth quarter. Thanks to the full impact of the <unk> transaction in the quarter and strong realized prices.
Net debt fell over 10% from yearend, which coupled with a strong EBITDAX performance drove leverage to one nine at the end of the <unk> a significant reduction from last quarter.
Free cash flow in the quarter was approximately $220 million an increase of over 60% on our on our previous quarter, demonstrating the cash generative ability of our low cost portfolio.
With good performance across it.
Across the portfolio liquidity rose by around 20% over that period.
Turning to slide 13.
We completed the <unk> redetermination and our CF refinancing at the end of the quarter with liquidity rising to over $900 million and we expect it to continue to increase further through year end.
The right hand chart shows we have no material maturities until 2025 after repaying around $100 million on the RBR in the first quarter.
As we generate cash and pay down additional debt looking debt maturities out even further.
Yeah.
Turning to slide 14, which was the quarter in more detail.
As Andy mentioned net production of 72600 barrels of oil equivalent per day was at the upper end of our guidance range of almost 40% from the same quarter last year.
Realized price per barrel after hedging impacts was $88 per barrel almost double the same period last year.
On cost we performed in line with guidance with higher Opex per barrel this quarter versus last year, largely a result of lifting at 10 cargos this quarter.
Total capex in the quarter was just over $100 million.
Excluding the impact from the Tullow preemption.
There was very little Capex for Mauritania, Senegal, and <unk> as we exit as we continued to benefit from the CSS sale transaction last year, although we expect it to increase in the second quarter.
The in place and we are forecasting for 2022 is minor as a result of the longer term nature of our contracts with the inflation.
Rising from the variable elements in those contracts such as steel.
We have also mitigated inflation this year by drawing down on existing inventory for some materials.
On our largest development projects. We have also locked in large components of our future capital expense reflected in the progress of DTA phase one due to the southeast and to a lesser extent winterfell, although even for that project. We are committed to long lease representing approximately 10% of the total cost of phase one of that.
Yeah.
That said, we do expect increased costs show up next year, if we remain in an inflationary environment.
Turning to slide 15, as I mentioned in my introductory slide we've made good progress on leverage in the quarter, the combination of rising EBITDAX and significant debt pay down.
Quarter end leverage of one nine.
Meaningful reduction from two and a half from around two five times at year end 2021.
At current prices, we remain well on track to hit our year end leverage target of below one five times with forever with further absolute debt reduction a key priority.
The bullets on the left shows the progress we have made so far in 2022 with more to go later in the year.
At current.
At the current strip.
A further $200 million plus.
Free cash flow and the likely payment from shell in the coming months on the back of the exploration success they've had from their first two wells in Namibia supporting the total debt reduction of approximately $550 to $600 million this year.
I'll now hand, it back to Andy to conclude today's presentation.
Thanks, Neal turning to slide 16 to wrap up today's presentation.
In summary, we are delivering on our promises for today, while building a company for the future.
Our producing assets are performing and generating material free cash flow.
Ill defined development projects are progressing well despite the challenging environment.
We're growing our exposure to international LNG at a time when gas and LNG demand is rising sharply.
On the back of strong cash and EBITDAX performance Leverages falling and liquidity is rising and.
And finally, we're committed to adjust energy transition and can play an important role in enhancing the energy security of those nations looking to diversify future energy supply.
Thank you and I'd now like to turn the call over to the operator to open the session for questions operator.
Thank you well now be conducting a question and answer session.
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One moment. Please so we poll for questions.
Thank you.
First question is from the line of Neil Mehta with Goldman Sachs. Please proceed with your question.
Okay.
Hi team. Thanks, so much for taking the time this morning.
First question is around the tour to phase two and would love your perspective, we got a little bit of color from the operator, a few days ago, but your perspective on are we tracking towards U S. D and then <unk>.
You can talk about it how do you think the economics of that incremental growth project have evolved.
Theres much lower capital intensity.
Yeah. Thanks Nate.
Yes, I think where we're taking the time to make sure that we've got the right scale.
Fundamental concept both in terms of the scale of the project and timing to fully optimize the resource I think there's been a lot of changes in the market and we need to make sure that we're bringing the right project forward.
With the right timing, we're clearly in an inflationary period.
And one of the things that I think both BP and Cosmos are aware of is we need to make sure that as you know is fully optimized and we're putting in the right capital for a long term project that potential inflationary period. So you know we have the ability to expand the project and build on the current infrastructure.
Show that we've put in place and that's clearly our focus and as we said in the past you know it would be the hub terminal will serve as a and Offloading point for future expansion of the project, we have the ability to expand the offshore at a relatively low cost. So we believe we've got a cost competitive.
Additive project, we just need to make sure that we're very disciplined about the capital that we are we put into that you know given.
The more challenging supply in China and in an inflationary environment was saying.
Got it.
I'll stick with <unk> for <unk>.
Question, which is as the projects up to 75% at construction now what's the biggest risk around execution is a COVID-19 or it's something else and how are you what steps are you and the operator, taking to mitigate that risk.
Yeah, well look as I said in my remarks as you go through the various work streams. The Fps is on the critical path nothing has changed.
The key next step is clearly the silo away from the yard and are in Costco, which is close to Shanghai and in China. Yeah. We have had a short interruption with a lockdown of the yard for a couple.
Weeks.
Again as the operator said on their call I think the team has done an incredible job to keep the project moving forward and in that environment. So that's the thing that we're really focused on now is the release of the <unk>.
To enable it to land sales Mauritania, Senegal, and then we can start as it were all of the hookup activities, which would commence in the beginning of.
Our next year. So that's the you know the critical issue that where we're focused on as I said, we've commenced the drilling that's going well I think the hub terminal.
We work inside in the past around Covid related issues, there, but obviously, we're making good progress on on that subsea installation work stops there.
This month.
They have U S. LNG basketball is being built in Singapore, where I think there's less of a risk of COVID-19. So I think the U S. P. S. I remains the item that we're wrong.
Thanks, Don.
Thank you Tim.
Yeah.
Thank you. Our next question is from the line of Charles Meade with Johnson Rice. Please proceed with your question.
Or do you need me on to the rest of the Cosmos crew there.
Yeah.
Good morning, Andrew I Wonder if you could elaborate a little bit more on <unk>.
On the.
The inflation.
That you're seeing I think you referenced it a couple of times in your prepared comments, but oh shoot.
Or are there. Other concerns you are confronting are they are they just cost or are they also on availability and.
And is it a is it.
I think you've touched on this some already with the F. P. S O but is it is it more around you know.
Just give us a flavor to more around drilling your facilities or or or or something else.
Yeah.
I think as I said in my prepared remarks, I think the deepwater.
The board is slightly different from onshore in a sense because you have longer term contracts I think we've done a really good job in mitigating the impacts and.
In 2022.
As Neil mentioned, I think we've probably seen a little bit in some of the sort of commodities almost fuel costs actually but apart from that nothing really of any really great scale and actually we've mitigated that and I and as we said we've included.
A couple of new opportunities in the Gulf of Mexico.
And in actual G&A and so kept also the capex guidance in the same place. So I think the first message Charles is that you know it.
It is a period, where we've got to be phenomenally disciplined around the allocation of capital and therefore to ensure that you know what.
We're absolutely focused on execution and doing everything in it to the highest possible standards.
So that's 2022 as you look forward to 2003, you know I think youre seeing inflation really across the.
The board you know, whether it's the deepwater rig market, whether it's actually connected to the fundamentals of commodity prices.
You were probably saying deepwater rigs you know over the last two years from sort of you know $200000 per day, probably into the low to mid three hundreds yeah. So it might be in or around 75% you could see casing sort of a similar sort of numbers.
Supply of vessels aside.
You know and you know.
I think the market is adequately supplied at the moment, but you are seeing a tightening of that of that market and our rigs would be an example of that which is why we're getting ahead with sort of the long leads are in particular on our projects both in and Jubilee southeast and on on when to file So I think.
It is a time for real discipline and anticipating the market tightness, and then actually trying to get a to.
To to get ahead of it.
You know and I got to figure it out and sort of put the COVID-19 related issues and and China sort of in a separate area because I think that that was a very very specific so hopefully that gives you a little more color I think around you know the our approach and you know to me.
It is about disciplined you've got to make sure that.
In a higher price World you you have to be able to execute to a high standard and that's what we're doing.
Got it that is helpful.
My second question is actually about the possibility of share buybacks and I know. This is this is looking you know maybe it seemed like it's looking too far down the time line, but the truth is your your you know 18 months away or 19 months away from.
700, plus million and I know your focus on projects between here and there and then you've got probably got some some.
Some work you want to do on your own.
The debt side of the balance sheet, but.
Can you give a sense for.
If for you and the board is this something that you guys have spoken about it we think about whether whether you know opportunistically on on a day like today or whether it's something that would be.
Perhaps programmatic if if if your share price is still the same.
Ballpark.
Well look I think we've been clear Charles the first.
Agenda item is around debt reduction and we need to get the balance sheet sustainably below our leverage level of around <unk>.
One and a half and clearly it's about.
Sustainable.
Price environment, the levers that so I think that is the first focus I think through 2022, that's absolutely what we intend to do.
Current oil prices, we can get below water off by year end and I think when you saw a slightly different conversation around what.
Do we believe we are on that reduction further debt reduction where are we in terms of a sustainable.
Leverage level and what opportunities would that create for us. So I think you know.
You know in a sense of messaging nothing's changed I think what you point, you're pushing on is the future.
Well be accelerating towards you and how do you take account of that but we just want to be very disciplined about what we're doing with disciplined about our capital.
<unk> of our growth options, we're disciplined around the cash flow how it's been used and then I think when we got to a position where we feel we have the balance sheet in the right place that I think share buybacks would be one of the things that we would look at it.
Got it that's helpful. Thank you Andy.
Thanks.
The next question is from the line of Bob Brackett with Bernstein Research. Please proceed with your questions.
Good morning, you highlighted a couple of transactions with acquisition prices around $4 a barrel of oil equivalent can you talk to how you did those deals.
<unk> appetite to do more of those and how it might inform your strategy.
Yeah. Thanks, Bob Yeah, you know look it's they're both.
I would say in that bracket of being opportunistic.
Relatively small, but they are important what I like about them, there and feels that we understand today with deepening in our existing asset base and I think that is actually a very efficient why as it were to continue to grow.
Company, So wince Valorize one of the partners had a large shadow that would typically carry through the development phase and we were able to negotiate that I think you know at a time when there was a favorable environment.
The Kodiak preemption actually was.
I think <unk> 10 back in 2021, it took some time for all of the the deal to close and therefore, the preemption to come forward, but again it was priced at a very favorable environment and therefore, we were able to take advantage of it.
You know as you look beyond I would say, we've been really disciplined with our M&A.
We're clear about you know.
Pursuing deals where we believe they are consistent with the strategy of the company.
Sure.
Hi call high margin oil growth.
They are supported by long dated.
Quality gas.
We're looking to deepen and in areas that we understand and therefore, whether it's true economic value that we can add.
And fundamentally they they need to be cash accretive in <unk>.
We continue to strengthen the balance sheet.
Our track record on deals is actually you know.
Aligned with those criteria and if we see opportunities that enable us to continue that we will do it I think clearly in today's price environment and I think it's slightly tougher.
But that's the path we're on.
I appreciate that the follow up would be the the journey time from Shanghai to greater toward twos, perhaps 60 days. If hookup is Q1sort of implies that even early for Q sail away would still be okay. On the critical path is that the right way to think about it or there is.
More complex than that.
I hope all that's always you've got the numbers, what I would say is depending on sailing time.
And.
Sort of a transit speed. It is probably 60 to 90 days and put it in a bracket like 60 to 90.
The 92 would be the asteroid 60 would be the shorter edge. Yeah. So look you're right. You know that that is there is a degree of flexibility.
But clearly this is the item that we're focused on intently because.
Then you know obviously the hookup of the S. P O F. P. S O.
That allows you to start the subsea completion, where the tie backs the FPA. So etcetera. Yeah. So he you know that it is absolutely on the critical path and as you well know with projects of this scale that that's always sort of opportunities to mitigate I.
Overriding one area with it with other activity yet, but you you basically got the the timeline.
That's clear.
Final very small when winter yourselves a tie back have you decided on the host to which it ties back.
No we're in good shape.
Listen with.
Several opportunities at the moment.
Thank you.
Thanks.
Our next question is from the line of James Hosie with Barclays. Please proceed with your question.
Hi, there yeah I've got a couple of questions on the talk today projects I guess first on the Sps dose daily schedule. I mean is the plan to hit in Q3 target by carrying over some of the work with the Bachelor arrives on location.
And then on the state's two is how should we think about inflationary pressures.
These cost estimate of less than a $1 billion growth I guess is that figure still valid.
Yeah. Thanks, James look Yeah, you, you've obviously you know the most important part where that project is to ensure that you've minimized that carryout cause that.
There is a across multiple up taking jobs out of a yard to offshore.
So that's clearly the point of optimization now how do you ensure that you're not taking a significant amount of hours off shore, yeah. So I think year over year.
Our objective is for the <unk>, so to say with.
Very little.
Carryover.
That traditionally has been the other way to deliver successful offshore projects and that's clearly the focus of BP today.
So I think you've asked the right question and clearly from our perspective. It is an important criteria to ensure that we deliver our.
Time and on budget.
Yeah and in terms of you know phase two is really important.
We put capital in it in a slightly inflationary period that is truly.
Efficient and.
Again as you go through cycles to ensure that we're not investing at a time, putting heavy amounts of capital and when inflationary pressure prices of that so that's the reason for going back and making sure that we've got a properly optimized concept both in terms of the scale and timing and within others. If there.
There is inflationary pressures and it's not only the inflationary, but it's actually the execution issues on the supply chain are being properly evaluated so thats the work thats going because there's ongoing at the moment with or without partners under the government.
Okay.
Just follow up on that last comment then is it potentially be end up looking at like a tour fees more than a half where you kind of you upscaled the project, but not to the besides you were previously talking about phase two.
Hello, again, what we're trying to do is make sure that we've got the right concept for the environment. So I think that you know as it were we're going back and making sure that the work that we're insuring fully captures the the timing and the scale to best execute the project Yeah. It's a great resource is.
The resource that the world needs, we've got to make sure that we've properly optimized that.
Okay. Thank you.
Okay.
Thank you.
Mind, you May press Star one to ask a question at this time.
The next question comes from the line of Mark Wilson with Jefferies. Please proceed with your questions.
Okay.
Hi, Good afternoon. Good morning, wherever you are I'd like to ask you about the great to talk to Ami or rather the volumes outside of a tool to in barilla Jackup triangle go very clear path to monetization until two phase one and then phase two you've got over 20 years of reserves.
Life. So these additional volumes pretty large gas volumes in terms of in place.
Would be the strategy for monetization of those now Oh Cosmos has the market view towards them changed in the last few years.
A few years before you have you had a sale process going on and then indeed would there be any additional appraisal drilling required do you think to maximize valuation there. Thanks.
Yeah.
Good questions Ryan are the significant resource yeah.
The fundamental strategy has not changed I think when you look at Yankees or Angus adjacent to the ER Doc competencies.
The first phase of Atkins Ranga is focused on a.
At gas power schemes are relatively low cost they almost early production scheme. It allows you actually to appraise while developing so you wouldn't do additional appraisal and for the country. What it does is it displaces fuel diesel burning power with gas burning both lower cost lower carbon.
So I think you know you can see yadkin surang being developed in that way and that see gender with the government about.
How do we.
Move forward with that scheme right sizing the initial development that gives them.
The sort of base load power gas power allows them to you know deal more credibly with a very volatile external world. So I don't think you know nothing has sort of changed on that normalizes. The volatility externally is actually probably reinforce ive agenda.
When you look at our barilla, it's different.
I think brown area is driven by our resources in a country with a relatively low population.
So around 4 million people power.
It useful domestically is probably not.
The long term our agenda there is a need for gas resource in the near time and there are other fields that can be developed to do that sabre hours fundamentally how do you get to a.
A low cost.
Modular development that allows you to access the market and you know.
With the right timing.
And sort of build another export scheme. So that's the concept work.
We're we're pursuing now so I think that Iran.
Clear plans and in our view today is we have a resource where significant value can be added by.
The progression of those development plans and making them real and I think the external environment has made that easier rather than harder and.
That's the work that we're pursuing with both with BP on the governments.
Okay and understood I suppose down the line and those concept.
Plans have gone through would be a decision of whether cosmos would enter into such developments, but understood and the second question. Therefore on winter. So just wanted to ask are you speaking about 100 million of resources in the area.
But what sort of percentage of that do you think.
You develop in the initial phase is tie back.
You, probably you know I think the initial two well scheme could grow to something as large as sort of the six wells probably to cover the full development. So you think about it in concept I think we might see three three phases of up to six wells. So the initial.
Phase its probably you know around a third of the resource something like that.
Yeah Okay.
On the upside.
Got it okay. Thank you I'll hand it over.
Our next question is from the line of Matthew Smith with Bank of America. Please proceed with your question.
Thanks, and thanks for all the detail so far it's just a quick point of clarification I left for me. Please and that was can I just check on your understanding on this Michelle.
Exploration campaign, so far whether it's your belief you've triggered the one of the contingent consideration payments of 50 million Oh, what do you think to them and therefore, you're you're already at the cap of 100 million, which you're expecting to receive place.
Yeah. Thanks, Matt Yeah, just so we're clear about what we said.
Payment comes following a <unk>.
An exploration well that is included in our appraisal Playa so shallow.
Shall have indicated that they anticipate to drill.
Drilling further at the end of this year, which would require an appraisal plan, whether it's 50 or 100 would depend on whether they include both discovery wells or one of them.
Sure I can thankfully.
Alright. Thanks.
Thank you at this time there are no additional questions I will hand, the floor back to management for any further or closing remarks.
Yeah.
Yeah. Thanks, everyone for joining today don't hesitate to contact me if you have any further questions.
This will conclude today's conference you may disconnect your lines at this time and we thank you for your participation.
Yeah.