Q1 2024 Kosmos Energy Ltd Earnings Call
Ladies and gentlemen, good morning, and welcome to the Cosmos energy first quarter 'twenty 'twenty four earnings conference call.
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A brief question and answer session will follow the formal presentation.
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It is now my pleasure to introduce your host Jamie Buckland.
Jamie Buckland: V P Investor Relations. Please go ahead.
Jamie Buckland: Thank you operator, and thanks to everyone for joining us today.
Jamie Buckland: This morning, we issued our first quarter 'twenty three 'twenty four earnings release.
Jamie Buckland: This release and the slide presentation to accompany today's call.
Jamie Buckland: On the investors page of our website.
Speaker Change: Joining me on the call today like I explained the materials around being the chairman and C U E.
Speaker Change: Oh sure Yeah right.
Speaker Change: During today's presentation, we will make forward looking statements that refer to our estimates plans and expectations.
Speaker Change: Actual results and outcomes could differ materially due to factors. We note in the presentation and in our UK and SEC filings.
Speaker Change: Please refer to our annual report stock exchange announcement.
Speaker Change: Filings for more details.
Speaker Change: These documents are available on our website and at this time I'll turn the call over to Andy.
Andy: Thanks, Jamie and good morning, and afternoon to everyone. Thank.
Andy: Thank you for joining us today for our first quarter results call.
Andy: It's been an active stocks the cosmos and I'll start off today's presentation looking at the operational and financial momentum we built in the first few months of the.
Andy: Neil will then walk you through this quarters financial results before I look ahead to the catalyst for the remainder of the year.
Neil: Well then open up the call Q&A.
Neil: Starting on slide three with the delivery of our major projects.
Andy: Cosmos had a strong first quarter with significant progress towards our goal of growing production by around 50% from the second half of 2022.
Andy: In 2024.
Andy: In Ghana, all the planned 2020 for Jubilee production Wells are online with one water injection wells expected online later this quarter.
Andy: Following completion of this well the planned drilling campaign will conclude approximately six months ahead of schedule as a result of efficiencies in the drilling operations.
Andy: In the Gulf of Mexico oil production of Windsor balance is expected to begin shortly from the initial two wells.
Andy: Third while it is due to come online later this year, increasing expected gross production to around 20000 barrels of oil per day.
Andy: In Mauritania and Senegal, the Sochi project continues to move towards first gas with several key milestones achieved already this year.
Speaker Change: I'll talk more about our progress on these projects later in the presentation.
Speaker Change: Looking further ahead, we continue to advance our next phase of growth projects.
Speaker Change: Long lead items are being secured for Tiberius to optimize the development timeline and project costs.
Speaker Change: We have also secured a two year license extension so yeah, that's right.
Speaker Change: While we see continued growth is an important part of the company's future as I said last quarter, it will be selective and more measured in the coming years consistent with sustained annual capex of around $550 million per year that is targeted from 'twenty to 'twenty five onwards.
Speaker Change: On the financial side of the business, we enhanced the company's financial resilience with a convertible bond issuance and the army our refinancing.
Speaker Change: Neil will talk about these in more detail shortly.
Andy: The transactions improved liquidity and extended our near term maturities.
Andy: The free cash flow inflection point, we've been anticipating around $100 million to $150 million per quarter. Once our development projects come on line isn't that I'm only a few months away.
Neil: I'll now talk through the operational progress across our different business units starting in Ghana on slide four.
Andy: Do you believe production in the first quarter was around 93000 barrels of oil per day gross almost 30% higher than the first quarter last year.
Andy: This reflects the progress made from both the startup of the Jubilee Southeast project and the ongoing infill drilling program.
Andy: Do you believe <unk> reliability continues to remain high at approximately 99% uptime for the first quarter.
Andy: What is replacement was also strong in the quarter around 110% as a result of high levels of water and gas injection.
Andy: Gross Jubilee gas sales for the quarter was around 16500 barrels of oil equivalent per day.
Andy: Recently, the partnership agreed in 18 months extension to the Jubilee gas sales agreement and approximately $3 five and then B C U E.
Andy: In the second quarter. There is some planned maintenance of the onshore plant, which receives the Jubilee gas and this is reflected in the <unk> guidance.
Andy: On 10 gross production of 18600 barrels of oil per day was in line with expectations with high F. P. S O uptime around 99% similar to Jubilee.
Andy: Turning to slide five production in the Gulf of Mexico for the quarter was approximately 14500 barrels of oil equivalent per day net in line with guidance.
Andy: Winterfell Cosmos is at 25% working interest first of all from the two initial wells is expected shortly with another well expected online in the second half of the year.
Andy: Gross production when all three wells are online as they expect it to be around 20000 barrels of oil equivalent per day.
Andy: We estimate total gross resource across greater windfall of up to 200 million barrels of oil equivalent providing significant future follow on potential.
Andy: To enhance existing production, we continue to invest selectively in high return projects like the all job subsea pump and Kodiak workout about.
Andy: Both are expected to finish around the middle of the.
Andy: The combined up lift from both of these projects is expected to contribute around 5000 barrels of oil equivalent per day net cosmos as year end exit rate.
Andy: The tornado field is expected to be offline for most of the second quarter, but scheduled routine maintenance at the <unk>.
Andy: <unk> floating production unit, which has been factored into our guidance for the quarter.
Andy: On Tiberius by Cosmos as operator, we acquired part of back when there was interest during the first quarter to maintain an aligned partnership.
Andy: We now hold a 50% interest in the project, which is already included in our 'twenty to 'twenty four capital guidance.
Andy: Despite these developments at subsea tie back to Oxy is nearby Lucius platform is progressing.
Andy: Project sanction I expected later in the ER setting.
Andy: Certain long lead items are being secured to optimize the development timeline and project costs.
Andy: Around the time of projects sanctioned Cosmos plans to farm down to optimize our working interest effect within our targeted capital program for 2025 and beyond.
Andy: Please turn to slide six.
Andy: Production in extra again, a averaged approximately 24400 barrels of oil per day gross and 8400 net in the first quarter Cosmos lifted one cargo factual again enjoying the quarter in line with guidance.
Andy: In early February as previously communicated the operator paused to sabre and <unk> drilling campaign as a result of safety issues with the previous rate.
Andy: The partnership has now secured the novel Ventura to resume the drilling campaign with a rig expected on location midyear.
Andy: The rig is scheduled to drill and complete two infill wells in block G before moving as thrilled at King deep <unk> prospect in block has.
Andy: The new infill wells are expected to add around 3000 barrels of oil per day net cosmos, a year end exit rate.
Andy: The result of the King deep well, which is targeting gross resource of around 118 million barrels is expected around the end of the year.
Andy: Turning to slide seven.
Andy: The greater taught you Acme and project continues to move towards first gas with significant progress across all work streams. So far this year with first gas expected in the third quarter and first LNG expected in the fourth quarter.
Andy: The floating LNG vascular arrived in the first quarter as being more to the hub terminal.
Andy: The ship is now working with the vessel operator to accelerate commissioning.
Andy: The subsea work is progressing in line with expectations with a flow line installation complete and final connection work ongoing.
Andy: Inspection and repair of yes, yeah. So families is now complete and the vessel has less Tenerife and his own roots to the project side with mooring work to commence thereafter.
Andy: Hook up and commissioning of the peso remains on the critical path first gas, which is expected in the first quarter.
Andy: I'll now turn it over to Neil to take you through the financials.
Neil: Thanks, Andy turning to slide eight which looks at the first quarter.
Neil: Production in the quarter of approximately 66007 hundred barrels of oil equivalent per day net was an increase of around 13% compared to the same quarter last year.
Neil: Costs for the quarter were within or slightly better than guidance, leading to the earnings be against consensus.
Neil: Capex for the first quarter was $286 million, which was in line with guidance is largely made up of the Ghana drilling campaign and the progress made on both winterfell and on tour too.
Neil: As previously communicated we expect the majority of this year's Capex being in the first half of this year with the free cash flow inflection that Andy talked about in his opening slide expected as the development projects complete and production ramps up throughout the end of the year.
Neil: Turning to slide nine which looks at our debt maturities.
Neil: We took two important steps this year to further enhance our financial resilience to the company.
Neil: The first was the convertible bond issuance in March which proactively replaces the liquidity from the $250 million Undrawn Our C F.
Neil: Due to expire at the end of this year.
Neil: The convertible also lowered our overall interest expense as we paid down a portion of our be out with the available proceeds which is our highest cost debt.
Neil: We've also seen the yields on our high yield bonds tightened should help pricing when we come to think about potentially refinancing those in the future.
Neil: The limit future equity dilution, we purchased a capped call which means there will be no dilution until the shares get to almost $11 per share.
Neil: We also have the option to cash settle the principal amount raised which also reduces any future dilution.
Neil: The second important step was the refinancing of our reserve base lending facility, but the terms are broadly in line with the previous facility.
Neil: The overall facility size increased to 1.35 billion from $1, two 5 billion with current commitments of around $1 $2 billion.
Neil: Through the refinancing we have extended the final maturity by approximately three years.
Neil: At the same time, we have had some of our banks transfer their commitment to the RBR from the Rcs, which as I mentioned expires at the end of this year.
Neil: I'd like to thank our banks for their continued support as we continue to grow the company.
Neil: The chart on the right shows the impact of both the convertible bond issuance and the RBR refinancing on the maturity schedule.
Neil: We now have no near term debt and the staggered maturity schedule from 2026 onwards.
Neil: As we reach the expected free cash flow inflection point plan to continue to prioritize paying down the R. B L. Reducing the amounts in the dark blue on the chart on the right.
Neil: We continue to target leverage below one and a half times at mid cycle oil prices with deleveraging expected meant once revenues from taught to start up later in the year.
Neil: With that I'll hand, it back to Andy to conclude today's presentation.
Andy: Thanks, Neal turning now to slide 10.
Andy: As I said in my opening remarks, it was a busy first quarter and we have achieved a lot in just three months.
Andy: Operational and financial momentum, we built has rolled into the second quarter with several milestones already achieved and more to come in the near future.
Andy: The graphic on the slide shows a rich portfolio of catalysts throughout the year across all our business units.
Andy: They contribute towards our goal by year end exit rate of 90000 barrels of oil equivalent per day, and our free cash flow inflection point combined we believe these will create significant value for our shareholders.
Speaker Change: Thank you and I'd now like to turn the call over to the operator to open the session for questions.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star and one on your telephone keypad.
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Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker Change: Okay.
Speaker Change: Our first question is from the line of David round with Stifel. Please go ahead.
David Round: Thanks, Thanks for the presentation guys.
David Round: Two questions from me. Please firstly can I just ask about cynical plays in and whether the following the recent elections that you're you've seen any impact at all to business activities in country Theres been quite a lot in the press sorry, I would appreciate any comments that place secondly.
David Round: Secondly, just on Equatorial Guinea, obviously, good to see activity. There again, that's obviously been a great asset from memory that was quite a big in place number there with with a relatively modest recovery factor. So far I'm, just wondering could that become a big.
David Round: The area of activity going forward once you see capex elsewhere drop off thank you.
Speaker Change: Yeah, Hey, David Yeah. Thanks for both of those are I'll pick them up I think you know turning to Senate go first I think you know the starting point is really is that all actions in our host countries and a new for Cosmos and ethos is to align with the countries and their needs irrespective of change.
Speaker Change: As a government.
Speaker Change: And then get in Senegal, our approach is no different wherever enabling the development of low cost gas to sustainably grow the Senegalese economy and drives social progress so the country.
Speaker Change: So there's a high degree of alignment between what we're doing in the new government's objectives, which are clear they want to lower the cost of living for its population and improve that improve the economic environment.
Speaker Change: I think it's early days for the New administration. There are many officials still to be appointed but my team in Senegal haven't have met with the new energy and mining Minister and.
Speaker Change: I am pleased to say it was a very constructive dialogue.
Speaker Change: You know that the conversation centered around actually how can we accelerate the development.
Speaker Change: Of the gas resources to accelerate the benefits to the country. So you know in terms of the day today. Our you know our business Senegal is unchanged you know we're working to bring phase one online later this year you know moved forward with a capital.
Speaker Change: Fishing phase two the expansion of phase one that will enhance the revenues to the states and the partners and and then move forward with a domestic gas LNG export scheme at Y T. All of which will bring economic and social benefits for the country. So I do think there's a real basis for wind.
Speaker Change: When I know and I'm pleased to say that we're actually in a constructive dialogue as to how we shape that shaped out agenda.
Speaker Change: On Echo show again, a I think you you're correct to say that there's actually a lot of undeveloped resource and.
Speaker Change: When we initially took over the assets. It was it was about enhancing the the production from essentially sort of Workover activities. If you remember I think it was you know we talked about it being gasless constrained. So we actually move to ESPN and we've seen the benefit of that activity.
Speaker Change: We're now moving I think into a different phase, which is about infill drilling which is as you know the current campaign as you rightly say, we're targeting an infill well and in Sabre and one in Kuwait and then actually we're following it up where the King date, which is a test a deeper test.
Speaker Change: The Albion.
Speaker Change: And clearly if it's if that comes in we've got.
Speaker Change: A significant amount of knowledge in the.
Speaker Change: And the facilities to do to bring that on in a very short tieback distances. So I think we've gone sort of you know two avenues and you know what we would see for for Sabre that came a is a N a and intermittent.
Speaker Change: You know infill drilling campaign, you know two or three wells every sort of 18 months something like that where I think you can certainly sustain the production profile all of that Capex is is in the the forward forecast of maintenance of the base and then you know with a king do you kind of think you've got the ability to I.
Speaker Change: Actually grow the profile. So I think we've got a clear plan about sustaining the profile and an actual guinea through that infill drilling you know with I think still some some sort of a work over type activities drugs coming if you have success.
Speaker Change: King D. So I figured out it's been a really good acquisition I think we went really well too.
Speaker Change: Go through a very programmatic a program to target these days.
Speaker Change: The quick wins, which were really around so the workover activities and now we're moving into a more phased approach with our within film.
Speaker Change: There's plenty to go out here and and clearly having you know the the capacity in the facilities enables us to move it forward quickly.
Speaker Change: Okay. Thanks sounded good thanks, David I appreciate that.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Charles Meade with Johnson Rice. Please go ahead.
Charles Meade: Good morning, Andy and Neil and into the rest of the Cosmos team there Andy I'm sure you're probably more excited than we are to see that that F. P. S O underway and so congratulations for that but I wonder if you can take us through just the highlights or what what the next.
Charles Meade: Pieces Oh.
Charles Meade: He says of the puzzle the milestones are to to to get your first guy. So I imagine that there's some pieces that would be getting the getting U S. P. S O more hooking up the risers, introducing the gas the F. L. O G and then going through the whole F. L O G cool down but maybe.
Speaker Change: Maybe you can elaborate that or add pieces to it that we should be on the lookout for.
Speaker Change: I love the questions, whether you've already answered the question Joe.
Speaker Change: Sorry about that [laughter], it's no I think you've got it I think clearly I think we've had a lot of progress and they are in this sort of first four months.
Speaker Change: We've got U S. LNG vessel now at the hub to them and know it's more than they in the connection work is ongoing.
Speaker Change: The last piece of equipment or honestly with F. P. S. O. As you said it will be on location and in the matter of a few days. The next step then is the as mooring amongst the moorings done we still have to work on the top signs in suburbs of the commissioning work.
Speaker Change: The hookup of the rises it is clearly the the stat that enables a gas to be introduced and then it's a question of the gas as you say coming into the U S. LNG vessels, you still have to cool down process and then you still have to make as LNG for Chicago etcetera. So I think.
Speaker Change: You know he is he looked through that process you described it really well.
Speaker Change: We're all we you know with the subsea equipment all the major pieces of that are now doing the the final tie ins and that work is.
Speaker Change: Preceding AR as we envisage. So we're pleased with the progress that you know.
Speaker Change: The F. P. S O works, the hookup and commissioning of the U S. P. S. O remains on the critical path, but clearly getting the vessel on location has enabled us to start to liquidate that that activity. So I think you know we were on trying to do what we said we were going to do and the milestones have been achieved so far this year. So.
Speaker Change: You know getting the P. S. O on location is clearly an important step and we'll update you next quarter as we you know get that work behind us and hopefully you know with the completion of the rise of hook up and then the which will then allow us to stop flowing gas.
Speaker Change: Got it and then the follow up I Wonder if you could you could add some some detail in the context around the beer all off.
Speaker Change:
Speaker Change: Exploration and I'm wondering if this is kind of along the lines of of how yok Arturo NGO.
Speaker Change: Played out and that B P. Maybe.
Speaker Change: Didn't want to be involved but you guys are still.
Speaker Change: You guys still have some some plans I mean you just.
Speaker Change: Tell us what's going on that's good yeah. Good question, Charles and I think that you're going to be sort of step back. It's worth sort of you know repeating the both you know why T. Ambarella will scale discovered gas resources, you know sort of in place numbers I think of why to you now.
Speaker Change: 25, Tcf variola, probably around 30, Tcf and we believe it is advantaged gas it has negligible C O two and its close to Europe.
Speaker Change: So with BP you no longer own either license, we can now work independently with the NOC or both countries on innovative cost sufficient schemes. The beef he didn't propose but we believe.
Speaker Change: Will it lead to attractive returns for both the project partners on the governments, we've secured the license on why T. We've secured the extension to allow us to proceed with that work.
Speaker Change: And we're in discussions with the with the Mauritanian government around how we can help them progress they develop lubrano that keen to move it forward.
Speaker Change: And we believe we have both the subsurface knowledge.
Speaker Change: And the concepts that will enable it to be an attractive project. So I think that's where we are and theres been a lot of third party interest in the assets as well. So we believe that actually working both with Petrosyan them why T N S M H umbrella.
Speaker Change: We're trying to create an equal partnership whether it properly represented which we believe is actually a good thing clearly for both governments and we're working with them to find ways to bring in a partner that will enable the the development to move forward. So I think you characterized it correctly and where we're <unk>.
Speaker Change: I used to work on that agenda.
Speaker Change: Great. Thanks for the detail.
Speaker Change: Great. Thanks Charles.
Speaker Change: Thank you. Our next question is from the line of Bob Brackett with Bernstein Research. Please go ahead.
Bob Brackett: Yeah. Good morning, Charles stole most of my Thunder, So let me try to follow up.
Bob Brackett: The torch U S. P. S O. So that vessel's been expected by the operator by you all passed muster and so it is ready to go.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: As with all things Bob.
Speaker Change: Was it because of having to do the work on the AR on the salads as a blessing that it does allow us to what we know we had additional sort of three months in generators close to three months in January to further progress the top sides work. So I think we understand the scope very well.
Speaker Change: And I think youre right to sort of push the question around S. P. O. So he's settled in the past with a lot of work to to execute so I think you know we've got a good understanding of what the work scope is clearly and therefore clear plans on how to execute that work scope.
Speaker Change: Yeah.
Speaker Change: Feel good about that you know nothing's done until it's done but clearly we've we do have the advantage of having extra time to work on the on the top sides. As a result of the time on the on the salaries.
Speaker Change: It's very clear the follow up good comes back to bear all of the the P&C had been extended for two years you have the government and BP had been working in good faith to kind of push that project along the clock ran out how do we think about whether you are the natural owner of the partnership that brings them.
Speaker Change: That asset to market or does it go to a competitive bid where you're in line with what is mendy and ive been treated by what you think the concept could be for a fast track development there.
Speaker Change: Yeah, No yeah interesting Bob I think that you know the government is actually trying to find a way of moving moving the project forward in a constructive way and what do I mean by that yeah, clearly they could go out to the open market with bids etcetera.
Speaker Change: You know clearly the.
Speaker Change: The negative is that is that is it creates an uncertain partnership you know you your bringing potentially somebody new that doesn't have the subsurface knowledge.
Speaker Change: We have you know we believe that there is a genuine desire to try and work with existing partners who have the knowledge.
Speaker Change: You know, we've we've probably you know we bring the knowledge of our two two wells ambarella one of 'em all assume one on okay. We bring the knowledge of all the appraisal wells on G. C E and the development wells on GTA and then they calibrate.
Speaker Change: And of the seismic against against that dataset. So there's significant knowledge I believe that there'll be bring in terms of the development concept is really about how do you get cost efficient in terms of the subsea lay out and ultimately that's why we've seen the big cost increases in the industry is in.
Speaker Change: They are is in the subsea so minimizing that architecture, you minimize that actually buying putting the yes, LNG vessel directly out of the field that has the additional benefit.
Speaker Change: Lowering the pressure drops which gives you enhanced recovery. So that those you know without going into the engineering and in too much detail, but those are the I. Those are the ways in which you can change the cost basis of the of the development and those are the concepts are working on a white tea and those are the concepts, where we're bringing to bear.
Speaker Change: Wow.
Speaker Change: Very clear thank you.
Speaker Change: Thanks, Bob.
Speaker Change: Thank you our next.
Speaker Change: Question is from Matthew Smith with Bank of America. Please go ahead.
Matthew Smith: Hi, Thanks, Good morning, guys. Thanks for taking my questions. A couple. Please the first one was just and apologies if I missed some of the commentary around this at the start of the call, but any any additional color you can give us on the performance of and gone or I guess at Jubilee in particular in the quarter.
Matthew Smith: Just how that spread versus your own expectations, what confidence that keeps you in the full year outlook, especially you got to add an additional oil producer online in April if you could sort of talk to that until and sort of exit rates, what you've seen post the quarter just to sort of frame.
Matthew Smith: How gone has started the year, Ralph and the confidence that gives you for the rest of the year that that would be interesting to hear them.
Speaker Change: Yeah, but perhaps I'll leave and come back to the second.
Ralph: Okay. Yeah. Thanks, Matt I think sort of updating you sort of if you look across March and April I think we you know we averaged around 95000 barrels of oil per day. So you know as you say we brought on the recently just brought on the the final produce and we're optimizing it.
Speaker Change: Setup in the subsea to maximize the benefits from from that and then finally, we've got the final water injection, which is currently being drilled and then we're gonna start the completion of that shortly.
Speaker Change: I think it's early days so as you look forward to the performance of the field over the remaining part of the year I think there was a sort of three fundamental things. We're focusing on you know the first is the contribution of the recently added wealth to the the ramp up in right.
Speaker Change: You know the second is we had really good reliability in the in the first quarter. I think you had close to 99% on the Jubilee M. P. S. So clearly we need to maintain that high level of reliability going forward and then I think the third one is really the most important point is around maintaining the high levels of our board.
Speaker Change: His replacement.
Speaker Change: You know that was that was a challenge last year, where we had downtime and didn't get to 100% now we sort of we're pretty good in the first quarter.
Speaker Change: We need to sort of maintain that going.
Speaker Change: Going forward.
Speaker Change: We have had a G T G down I think for a couple of weeks. So we probably you know being slightly under.
Speaker Change: The 110% in the last months, but that is you know that that's a critical factor. So I think those are the things where we're focusing on and therefore those are the things that are going to influence the outcome across the rest of the year.
Speaker Change: Outside the drilling has actually gone well you know.
Speaker Change: We've we've really drilled.
Speaker Change: <unk> done a great job on the drilling performance in the wells and the timing of the wells is absolutely Matt.
Speaker Change: Our expectations and you know when the final water injection has done I think over this program, we'd probably create probably close to six months.
Speaker Change: Duction in the overall program, which is pretty impressive.
Speaker Change: So that's sort of where we stand today Matt.
Speaker Change: Yeah perfect. Thanks, that's really helpful and perhaps the second one I'm, perhaps a b b for Neal I imagine just coming back to the the free cash flow sort of indication that you've given us 100 to 150 million per quarter.
Neal: You know once the growth projects are online I think if I remember right and ive talked to to that sort of been underpinned broadly speaking by 70 <unk> W. T. I 75, Brent. So please correct me if I, if I'm mistaken, but I just wondered if you could speak to sort of sensitivities and.
Neal: Upside to those free cash number say for right at 80 or 85.
Neal: Brent a world yes.
Speaker Change: Yes, sure, Matt and yes.
Speaker Change: That's that's about right in terms of the $100 and $50 million in cash flow free cash per quarter.
Speaker Change: Getting winterfell in Tor two online at a quarterly pace and that sort of $75, Brent 70, T I sort of brown and.
Speaker Change: Yeah, I think in terms of the price sensitivity generally.
Speaker Change: I will stay roughly the same as about $100 million of free cash flow for the for the year for every $5 change in the oil price and so $25 million plus or minus a quarter.
Speaker Change: If you move to $80, Brent and then $200 million for the year 50, almost $50 million a quarter at 85.
Speaker Change: Right. So it is a yeah and we currently have sort of full access to the upside. So yeah, we can fully participate in that.
Speaker Change: Alright, well, that's very clear thanks, Matt for your time and happy to pass it on.
Speaker Change: Great. Thanks, Matt.
Speaker Change: Thank you our.
Speaker Change: Next question is from the line of Mark Wilson with Jefferies. Please go ahead.
Speaker Change: Yeah.
Mark Wilson: Thank you for that.
Mark Wilson: Good afternoon gentlemen.
Mark Wilson: My question is regarding the the main drivers of production increase into the second half would you reiterate guidance 70 172.
Speaker Change: Sure.
Speaker Change: We know that torture comes on.
Speaker Change: First LNG in the fourth quarter can I just check if that is how you then start to report the gas from told you or is it in the third quarter as it comes across yeah. Yeah. So that that would be my first question.
Speaker Change: Yeah. So market were recorded on an entitlement basis similar to how we report but for just the quarterly production, but in terms of sales it'll be done similar to how we do it and gone in EG, where it's driven by cargoes and so overall entitlement production will be driven by.
Speaker Change: <unk> LNG that goes into the U S. LNG Oh I'm in condensate that goes into the F. P. S. L M.
Speaker Change: As a sort of entitlement volumes, but for sales volumes will ultimately be tied to cargos. The same way are we or do you just cargoes in Ghana and EG.
Speaker Change: Got it okay, I'm stunned that okay, So <unk> and <unk> and then entitled many and for Q.
Speaker Change: And my second question I guess, another big driver for production would be do you believe you just spoke to with that.
Speaker Change: And even to some degree so taking all those various.
Speaker Change: Points into account do you still expect that field can average 100 fold or the rest of the year or even higher.
Speaker Change: Yeah, Yeah, Yeah, Yeah as I said, you know what we're doing what we said we would do which is to deliver that outcome, we need to see the incremental benefit of the infill wells because the final two to finish and then optimize the system for the new well configuration and that's ongoing so that's the first sort of variable that we need to get.
Speaker Change: Right.
Speaker Change: That is clearly you know maintaining the reliability and good start to the year and we need to continue it and then I think the fundamental part that is really around what is replacement and the distribution of that water again, because we're changing the patents of all state because of the new wells coming in the optimization of that.
Speaker Change: Pattern of the new sort of reservoir offtake partners as <unk>.
Speaker Change: Critical so I think you know, there's there's lots to work on mark to to deliver that outcome. You know the first half is in all of that is to get the wells drilled in an online.
Speaker Change: And we've got sort of one more to go. So you know there's it's it's.
Speaker Change: There's work to do clearly and we.
Speaker Change: We will keep you up to date on progress as we go through the quarter.
Speaker Change: Okay. Thank you for that question for me as my understanding on the on the Yakov to Ranga mm is working towards that.
Speaker Change: Getting the pre feed out of the way and then that's when you'd be looking.
Speaker Change: To see what the where the market is that for farm outs or is that a fair.
Speaker Change: Representation Yeah. It is absolutely Mark. So you know we've if you sort of talk about the future that if you you know which is really what your question was about I think that we've got a piece of work not why we're doing the work completing the pre feed and pre feed done by by the middle of the year with a pre feed we've got the technical validation of the concept and then.
Speaker Change: We've got a cost base to.
Speaker Change: Then discuss with the with the New administration.
Speaker Change: Clearly this is about creating a new partnership for the extra Ranga. Our objective is for the Petro sense, I mean align partner around sort of a third ourselves with a new partner a third so we have to work with the new government to bring a partner in them, they're probably going to have to say and and we need to have a physical arrangement, which enables us to.
Speaker Change: <unk>.
Speaker Change: Crazy economics that support our low cost gas and in LNG.
Speaker Change: LNG exports scheme now where those two pieces in place you can then work on the financing the intent is to have the yes LNG vessel.
Speaker Change: Financed so there's a series of steps here.
Speaker Change: Technical work to be done you know, which is sort of there's a milestone and pre feed.
Speaker Change: It works, we've done on the alignment with the new administration around physicals and new partner and then there's work to be done that for on financing you bring all those four together then you can start work on the real world, which is on on feed but we won't be starting fade until we've got those those things done.
Speaker Change: So again, I think where we've made a lot of progress so far on the pre feed.
Speaker Change: Post election, we can now start working on those next time items.
Speaker Change: That's really appreciate than it did a catch me in in that asset that maybe the differences between Yaakov Durango Bear island, the respective governments would be interested interesting to comment on it did look like barilla was moving faster towards the development concept arguably when you left extended.
Speaker Change: And then Jack ups Ranga now has moved to this Uh huh.
Speaker Change: You have now so the respective differences.
Speaker Change: Would be interested to.
Speaker Change: He can comment on.
Speaker Change: Yeah look I I actually don't think there's a difference.
Speaker Change: Both governments are anxious to enable the development of that gas resources to benefit the country and I think you know I think the Mauritanian government has been equally clear about it its objective to to move forward with with barilla Postini exit or a P. P. So I don't think.
Speaker Change: Any fundamental differences.
Speaker Change: Mark and therefore, you know it's about how can we participate to help them on those agendas and come up with.
Speaker Change: Compelling investment opportunities.
Speaker Change: Okay. Thank you very much.
Speaker Change: Great. Thanks.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Neil Mehta with Goldman Sachs Asset management. Please go ahead.
Speaker Change: Yes.
Neil Mehta: With Goldman Sachs equity research they either.
Neil Mehta: Couple of questions I have here the first is.
Neil Mehta: Just hear your perspective on deleveraging as you get into that free cash flow inflection that Neil referred to and it doesn't make really big numbers now how do you think about reduce them.
Neil Mehta: On the balance sheet what are the priorities.
Neil Mehta: Now.
Neil Mehta: And how what's.
Neil Mehta: What's the target level and how quickly can you get there.
Speaker Change: Yeah. Thanks.
Speaker Change: I'll, let the other NATO.
Speaker Change: Uh huh.
Speaker Change: Yeah. So I think you know our objective on leveraging it hasn't hasn't changed you know, we want to get to less than one and a half times on a sustainable basis.
Speaker Change: Through the cycle and so.
Speaker Change: Yeah.
Speaker Change: The free cash flow that we generate once the projects are online are going to be allocated towards that and probably initially preferentially towards the R. B L. Just given up on.
Speaker Change: It's a floating rate instead of.
Speaker Change: Our highest cost interest piece.
Speaker Change: Piece at the moment.
Speaker Change: And so yeah, we've got some work to do on debt reduction and that's been a clear priority for the free cash flow and then again I think from our perspective.
Speaker Change: See sort of the front end of that free cash flow clearly directed towards the or be eldon and once we get to less than that one and a half times.
Speaker Change: Normalized oil price environment, then it comes around sort of the competing priorities in terms of.
Speaker Change: Some allocation towards debt repayment versus capital returns so.
Speaker Change: Yes that that's a discussion to happen in the future, but as of today. We will continue to focus on just getting to that less than one app onto your normalized price first.
Speaker Change: Okay that makes sense and then one give you an opportunity to talk about the convertible bond issuance because they create a lot of volatility around the stock, but I think a lot of it was just too many near term interest expenses around floating rate debt. So just your perspective on why that why you thought that was the most cost effective approach to finance.
Speaker Change: And how should we think about that over the long term.
Speaker Change: Yeah. So yeah again, we've had a number of discussions around that convertible on both debt and equity holders.
Speaker Change: The last couple of months since we executed that back in March and again I think for US is around where our current bonds were trading and how do we optimize access to the debt capital markets.
Speaker Change: You know at a sort of.
Speaker Change: The lowest cost available on the issue that we've had.
Speaker Change: For the past 18 months when you look back into 'twenty, two and 'twenty three is really where Ghana has traded and therefore the impact to our secondary levels on the bonds and therefore, a new issuance in the regular bond market would've been quite.
Speaker Change: <unk> expenses, just from a regular new issue new issue market and therefore trying to get ahead of.
Speaker Change: The liquidity.
Speaker Change: And the maturity wall.
Speaker Change: Yeah, it's something that we've always tried to be proactive about and so thought.
Speaker Change: That was the best instrument at the time.
Speaker Change: Yeah.
Speaker Change: To manage the maturity schedule and as you can see in the presentation and with that in the OBL was really cleared the runway for the next couple of years for us to execute and continue to pay down debt and so it's really around taking the balance sheet off the agenda focusing on the organic delivery the business plan and using it the most efficient tool at the time.
Speaker Change: To try to execute that.
Speaker Change: Yeah, Yeah yeah.
Speaker Change: That was really the background there.
Speaker Change: Thanks Neil.
Speaker Change: Uh-huh sure.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Sebastian tons out, but the benchmark company. Please go ahead.
Sebastian: Alright, thank you.
Sebastian: Following up I guess on Oh.
Sebastian: What a couple of a couple of other questions with regards to free cash flow and sort of the organizing principle you know beyond the next year to sort of be in that five to 600 mill a maintenance Capex number and then everything beyond that obviously, you know pay the RPE L off and then payouts et cetera.
Sebastian: Or are there some appetite that you might've deferred pending getting GTA on.
Sebastian: Other organic or acquisition oriented that might get us to a different spend level down the road.
Speaker Change: Yeah. Thanks, you buy somebody just take that.
Speaker Change: I think.
Sebastian: When we talked about the 550, we've talked about it with from two dimensions, we've talked about a sort of base maintenance capital of 300 to 350, which sort of covers the the infill drilling program in Ghana, the continuing development of the Jubilee <unk>.
Sebastian: As infill program in an actual G&A that you know that.
Sebastian: I talked about earlier and then you know Walker sort of post the start up of of Winterfell, and and and then Ty berries looking longer term you know the additional wells that so I think we've we properly allocating capital to that and clearly that was a very high return projects.
Sebastian: And then we've talked on top of that about sort of 200 to 250 of spend that would be in growth, including the two projects that we're focused on today, Oh, Tiberius and AR and the extra anger with an expansion project.
Sebastian: A torture and in that capital.
Sebastian: I've got two hundreds $2 50 and incorporates the spend on those projects. So the post financing bank financing of the <unk> of the.
Speaker Change: Yeah, So on Oh, let's say yadkin stronger so I think what we're what we're clear about the forward projection of the of the company why we believe we can not only we can grow it'll be at a more modest rate than we have seen happening over the last.
Sebastian: Two years, but there is growth in high quality projects and it'll be a mix of sort of low cost low carbon oil you know E. G. Tiberius you know low cost low carbon gas C. G in expansion of phase one.
Sebastian: You know you can shrink so you know and it's sort of you know.
Sebastian: Single digits middle single digits sort of growth rates, but at the same time with a comfortable level of 550. We believe we can we have significant free cash flow, which as Neal says, we can direct to the pay down of debt and then subsequently you know when we get into the right leverage levels.
Sebastian: We can look at shareholder distribution and I think that's you know that that's ultimately what differentiates cosmos as a company. It has an organic activity set which he can sustain really you know through the decade and beyond.
Sebastian: We have an R to P of over 20 on the two P basis. So the ability to you know creates.
Sebastian: Create something now which can not only continue to grow but can actually return cash and with the you know we think a really competitive.
Sebastian: Free cash flow yield is something that's quite unique so that's our objective now so we're but we're clear about the frame and I think that's the point that I already know absolutely want to emphasize on the cool. The final 50 in that sense is clear.
Sebastian: And where are were clear about and the capital frame and therefore, how it's going to be allocated.
Speaker Change: Got it okay. So I hear you loud and clear so no real interest in external opportunities.
Sebastian: I mean, given what seems like a greater churn and sort of.
Sebastian: The assets, whether they are stranded gas or in the Gulf of Mexico et cetera, you are you going to stick with the with the footprint you have.
Sebastian: Yeah, and I think one of them you know what we've been clear about it. She she bashes is that you know any inorganic has to be accretive from a cash flow basis that actually that for accelerates that journey, yeah, and I think that that's you know having set that out as the organic path of the company to improve upon.
Sebastian: One that you have to accelerate it through an organic and inorganic that actually is is cash significantly cash flow accretive, which it has been the case for the three acquisitions that we've actually done is we've grown the company equally well you know there may be opportunity, you know and particularly on the gas side to lighten the port.
Sebastian: Yeah, which again accelerates that that objective. So I think we're absolutely clear about the company we're building and therefore as it were how an inorganic opportunity would fit what we don't have to do clearly is buying things to mitigate decline you know we do not have declined.
Sebastian: And I think that's again, what differentiates us from from from others. So if something is accretive from a cash flow perspective, inorganically accelerates that quality assets. Then clearly those are the things we look for equally while the reverse if we can accelerate the delivery of our free cash flow for.
Sebastian: For our shareholders.
Sebastian: By Lightning, let sound on the gas assets, then we would do that.
Speaker Change: Thank you for that.
Speaker Change: Great Alright, thank you.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, since there are no further questions at this time I would like to bring the call to a close.
Speaker Change: Thanks to everyone. Joining today you may now disconnect your lines.
Speaker Change: And thank you for your participation.
Speaker Change: Yeah.
Speaker Change: [music].