Q3 2025 Kosmos Energy Ltd Earnings Call
Speaker #1: Good day, everyone. Welcome to Kosmos Energy's third quarter 2025 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.
Speaker #2: Thank you, Operator, and thanks to everyone for joining us today. This morning, we issued our third quarter 2025 earnings release. This release and the slide presentation to accompany today's call are available on the investors' page of our website.
And finally, an extraordinary production is set to increase with the partnership. Installing repaired subsidy pumps and saber. With the first pump, complete the second in country and a third due to be delivered in the first quarter of 2026.
We're pleased to see production near record highs for the company, with further near-term growth expected quarterly through 2026 as we push GTA towards nameplate capacity and bring on additional wealth to Jubilee.
Turning to costs we're focused on 3 areas of making good progress across all.
First on capex.
Capex continues to fall and we now expect capex for the year to be below our 350 million dollar forecast, an absolute reduction year on year of around 500 million.
Second on overhead. We remain on track to deliver the 25 million targeted savings. By the end of the year, with the full benefit, being seen in 2026 and Beyond.
Third on operating costs. They're coming down across all of our businesses.
As discussed last quarter, the biggest opportunity for additional Opex reduction going forward is on GTA where we're seeing unique costs. Improved as production ramps up and costs come down,
We're trying to get in the refinancing of the GTA fpso by year end. And I'm working with the operator to implement a lower cost operating model, which should further drive down costs across the project.
And finally the balance sheet where we've been a lot in recent weeks on liquidity, we've taken important steps to address our upcoming debt maturities through the 250 million dollar Term Loan from Shell with the proceeds being used to repay the outstanding 2026 Bond maturities.
Of the rbl, we successfully completed, the semi annual redetermination in September and passed the maturity test for the 2027 bonds at the same time.
We also added more hedges for 2026 During the period.
Neil would talk about all of this in more detail later. But in summary, we're making good progress against our financial objectives.
The combination of rising production, lowering costs, and a lack of near-term maturity gives us resilience to weather a period of volatility. I remain confident that we have a unique, world-class portfolio of assets, and we remain focused on maximizing long-term value for our shareholders.
Jenny's line 4, which looks at operations for the quarter.
Starting in Ghana's total. Net production was around 3130, barrels of oil, equivalent per day.
Jubilee growth oil production in the third quarter was around 6,200 barrels of oil per day, which is 13% higher quarter on quarter, driven by the first new oil from the 2526 drilling campaign coming online in July.
Growth gas production was around 15,000 barrels of oil. Equivalent per day in the third quarter sequentially lower due to Extended scheduled maintenance of the onshore gas processing plant.
A 10 gross oil production in the quarter was around, 16,000 barrels of oil per day.
In Sagal, Mauritania, the net production for the third quarter was around 11,000 barrels of oil equivalent per day, an increase of just over 60% from the previous quarter.
the partnership listed, 6.8 gross LNG, cargo during the quarter in line with guidance,
We also lifted the first gross condescend cargo early in the fourth quarter.
There were some startup maintenance on 3 of the 4 LG trains. During the third quarter, a slightly detailed production, but with all trains online, we're now running around 2.6 million tons per annum equivalent. And on the path, the name Lane production, this quarter
Work on the last LNG train is planned for this quarter and has been incorporated in our guidance.
In the Gulf of America net production was around 16,600 barrels of oil equivalent per day in line with guidance driven by strong performance from odd job, and Kodiak and no major storm activity. During the quarter.
This was upset by command plan facility downtime and the abandonment of the Winterfell well, which I'll talk about in more detail in a following slide.
Development, when it comes online.
We expect to take FID in farm down our interests for around a third in 2026.
Next, organi net production was around 6,200 barrels of oil per day, down quarter on quarter due to the sub pump issues flagged in May.
As I mentioned, we're making good progress on the repair of those pumps with normal lines. Production is expected in the first half of 2026.
Tony, slide 5.
We talked in depth last quarter about Jubilee and the opportunity to deliver the field's full potential as a return to drilling.
A child on the slide shows that the first well of the 2526 drilling campaign was drilled in the second quarter and came online in July.
The well continues to perform in line with expectations, delivering around 10,000 barrels per day of gross oil production.
Drawing at the second producer has commenced and is expected to come online around the end of the year. We anticipate it will also be a strong producer.
The next 12 months is an important period of activity. For the field with a committed drilling program of five, we plan to drill more producer wells next year. However, we have worked with the partnerships to drive a more efficient program that allows for a fifth well, an injection well, to be added in 2026 while maintaining the same budget.
The blue dots on the chart. So production moving higher. Through 2026 is a new wells, come online.
And while this upward trajectory won't be linear as individual wells contribute different volumes, we expect Jubilee production to be maturely higher than current levels. As we finish the current drilling program in late 2026,
With improved water injection and a regular follow-on infiltrating program, we're targeting sustained production of those higher levels.
The other important point to note on the chart is the OB in seismic acquisition, which is taking place this quarter.
The state-of-the-art imaging technology that I talked about. Last quarter will further enhance our understanding of the subsurface providing better data on historical fluid movement and help identify more unreal, loes and unswept oil.
This is a step change in imaging technology, which we expect will support Optimum well selection in future drilling campaigns. Ultimately, the enhancing resource recovery over the remaining life of the field,
With the licensed extension expected to be completed by year, end, the partnership can now plan on long-term investment in Jubilee, which should drive the material uplift in, 2p reserves, all the required, documentation for the extension is now being prepared for submission to the government for their approval.
Chinese Line 6.
And GTA, we continue to see a lot of positive progress as we work with BP, the national oil companies, and the governments to improve profitability.
As the green line and the chart shows production continues to rise with net production of 11,400, barrels of oil equivalent in the quarter.
This equates to 6.8 gross LNG Cargoes during the quarter in line with Guidance, the partial cargo number replaced, the cargo that was loaded over the quarter end, with a remainder of the cargo recognizing the following quarter.
The project is now listed at 13.5 gross cargo through October.
With 7 to 8.5 carros expected in the fourth quarter.
Last month, the first gross conversate cargo was listed, another important milestone for the project, and was priced at a small discount to Brent.
Looking ahead, we expect production to continue to rise, targeting the 2.7 million temp, plan, and nameplate towards the end of the year.
With its higher production level, we see the potential for the cargo count in 2026 to be almost double what we expect to see this year.
On cost, the blue bars on the charts show the absolute operating expenses continue to fall.
We expect further progress into 2026 with a refinancing of the FPSO, and as we work with the operator to implement a lower-cost operating model.
To rising production and focus on costs, we expect unit costs to be $4, down by over 50% next year.
That said, we continue to advance Phase 1 plus expansion targeting online in 2029 materially, increasing the volume from our existing infrastructure.
With that growth in production, we expect the unit economics to improve substantially.
New which was more about it in the financials but the working capital out of 1 of the third quarter was larger related to the crude GTA capex post project completion, that was due in the third quarter, effectively marking the end of the capital outlay for Phase 1 of the project.
Turning to slide 7.
In the Gulf of America, third quarter performance was in line with expectations, with the continued strong performance from Odd Job in Kodiak and a lack of storm activity.
Offset by some unplanned facility downtime and the abandonment of the Winterfell 4. Well,
As we communicated in this morning's earning release Winterfell 4 was abandoned in September by the operator due to the challenges encountered during completion operations, arriving from the collapse of the production casing.
Unfortunately, the operator has recently struggled with completion issues.
So, while we'd like the resource upside of Winterfell, which contains around 100 million barrels or equivalent of potential, we plan to focus next year's activity just on restoring production from the Winterfell 3 block. This will allow time to better plan and design the future world to capture the full resource potential of the field.
Our development activities continue to progress in Siberia with Oxi, with an improved, lower-cost development plan. We have executed a PHA, which locks in attractive commercial terms.
FID and farm down a plan for next year.
We also continue to advance Gettysburg we shall which is a discovered resource opportunity. We acquired in a previous resale
We're progressing a single well development that would be tied back to Shell's operated aerators platform.
That concludes the review of the portfolio and Neil will now take you through the financials.
Thanks Andy turning now to flight 8, which looks at the financials for the third quarter in detail.
Production was again, higher sequentially due to the First new well on Jubilee and GTA ramping up.
Set by expected downtime in the Gulf of America.
And lower gas volume.
Current production is now in the low 70s. With more to come in the fourth quarter, as GTA approaches name plate. And the second producer, well on Jubilee is expected online around the end of the year.
Operating costs were down almost 40% quarter on quarter, with improvements across all our business units. This reflects the focus on costs that Andy talked about earlier and also the 10 lifestyle that fell in the second quarter.
GNA was also lower, highlighting the progress we are making in reducing overhead.
CapEx of $67 million came in lower than guidance, and with year-to-date CapEx of just under $240 million, we are firmly on track to close out the year with full-year CapEx below our $350 million forecast.
Last quarter, I flagged an expected working capital outflow in Q3, largely associated with the final crude capex on GTA.
With Phase 1 now delivered into the capex behind us, we don't expect any material capital outflows in GTA for several years.
So, to summarize, production is growing and is approaching record-high levels, while CapEx...
And overhead.
Have all fallen quarter on quarter.
Our efforts to improve the overall cost base for the business and enhance profitability and cash flow generation.
Turning the slide 9.
As Andy said, in his opening remarks 1 of the priorities for the company, this year is enhancing the resilience of the balance sheet and we've made progress in several key areas recently.
On the liquidity front, we announced a four-year, senior secured term loan with Shell for up to $250 million, with attractive terms for Kosmos.
We use the first drawn to the facility to repay 150 million of our 2026, unsecured notes early in the fourth quarter and anticipate, using the remainder to repay the outstanding 100 million in the first quarter of 2026.
On the rbl facility. We completed the semi annual redetermination with the borrowing base remaining in excess of the 1.35 billion facility size.
Alongside the exercise with our lending banks, we updated the liquidity test for the 2027 bonds, which was successfully passed.
Our lenders remained supportive of the company as we complete our project delivery phase, and we appreciate their continued support.
With the Shell transaction complete, we have created more space until our nearest maturity, as can be seen on the top right chart.
We remain proactive in securing additional sources of liquidity, that enables us to repay some of our other upcoming maturities.
I'm hedging. We have continued to increase downside protection against near-term commodity price volatility.
For Barrel floor and the 77 dollar per barrel ceiling.
We also took advantage of higher prices in the third quarter to add more hedges for 2026.
We now have 8.5 million, barrels of oil hedge next year with the floor of 66.
And the feeling of $73 per barrel with more than 50% of oil sales hedged through the first half of 2026.
We've talked on today's call about our focus on costs, and the chart on the right shows the progress we're making with quarterly capex reductions over the last year.
As we start to look ahead to next year, the capital program is largely focused on Jubilee Drilling. And we are confident. We can stay within this year's budget or below to maximize near-term, cash, generation and reduce Leverage.
At current prices, backwards leverage remains elevated. Given the ramp-up in GTA and lower production in Jubilee, in the first half of the year.
We expect that to improve quickly into 2026 as production and cargo sales increase. And the lower first, half 2025, you eat the decks is adjusted out of the trailing 12-month leverage calculation.
As you will see with our fourth quarter guidance. We remain close to our revised year end Covenant, but our actively working Solutions such as the 10fps PSO purchase to remain compliant.
Did it conclude? We will continue to be proactive in improving, our financial position by reducing costs, raising the liquidity, to manage our maturity schedule at attractive rates and adding new hedges.
While we have more to do, I'm pleased with the progress we've made, and we will continue to focus on the delivery of that agenda.
With that, I'll hand it back to Andy.
Thanks, Neal. Turning now to slide 10 to conclude today's presentation.
As I stated in my opening remarks, we have three near-term priorities.
We're growing production, with current production approaching record highs, and there's more to come through the end of the year and into 2026 with a jubilee drilling campaign in GTA at nameplate.
Longer term, we have an attractive portfolio of growth opportunities across both oil and gas, with our existing discovered resource base both internationally and in the Gulf of America.
On cash switching, solid progress. Across our three main areas of focus: capex, opex, and overhead.
And continue to work hard on further reductions.
And finally Neil just talked about the work. We're doing to protect the balance sheet to ensure. We have a sustainable business in a lower price World while retaining the significant opportunities for future upside.
We look forward to delivering on these near-term objectives to support long-term value creation for our investors.
Thank you, and I'd now like to turn the call over to the operator to open the session for questions.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation will indicate that your line is in the question queue.
You may press star 2 to remove your question from the queue for participants using speaker equipment, and made me necessary to pick up your handset before pressing the star key.
1 moment, please for your first question.
Our first questions come from the line of Matthew Smith with the Bank of America. Please proceed with your questions.
26.
Yeah, sure, sure, Matt. And it's Neil. I'll take, uh, I'll take those. Um, so if we start on 10, you know, again, one of the themes we talked about today is sort of reducing the cost of business. Um, when we look at 10 specifically, you know, it's been high operating costs at the field. A large portion of that is because of the lease; the lease makes up more than 60% of the operating cost at 10, and so it's been naturally an area for us and the partnership to focus on how do we get that cost down? And so, we've been working with a purchase option together with the, uh,
Details on consideration and things. Um, we can't, uh, disclose those terms until it's signed. But what I can tell you is, you know, what we're trying to do, or what we agreed to is, sort of, you know, no additional payments in terms of what we're paying for the lease until a sort of close-out payment in 2027. Um, and that payment would be basically, uh, you know, a reduced buyout payment for the FPSO. Um, and it would, you know, be done on very attractive terms, um, with payback similar to what, um, we've seen on M&A transactions, you know, like Oxygon, etc.
And so, you know, no additional cash up front. Um, you know, we serve out the lease until 27 we have an A discounted purchase option at that point which lowers the operating cost, um, and uh, allows us to get access to the extended life for the field uh and additional sort of upside and opportunities in the future. And so um again it's it's a it's a good transaction. Um, we're we're happy to see it progressing and uh hope to see more news on that here. Uh by the answer, before the end of the fourth quarter.
Um, on your second question, just, in terms of cash generation. Yeah, you're absolutely right. You know, we're sort of getting to that point to where uh production quarter on quarter. We can see increasing uh and costs across the business are coming down again. In terms of where we get to in terms of free cash flow into 26 and Beyond, I don't think it's very different in terms of what we've just said. Um, we've talked about a company that can break even, you know, in the in the mid uh fifty dollar per barrel range across all
Uh, and then how much excess free cash flow? We generate will really be a function of, you know, oil prices beyond that. Um, and what we've tried to do is, is remain proactive on the hedging side to ensure that there's some price floors uh, at rates, uh, ahead of that that which, uh, you know, ensure that we're generating some free cash flow into 26 and then have the optionality to in the portfolio for the future. So again, I think directionally everything, uh, is headed the right way across both the, uh, production side, and the quarterly, and the cost side which year, you'll see frogs spoke in the fourth queue, uh, and sequentially into the subsequent quarters into 26,
Got it. Thank you now. I appreciate the detail.
Good. Thanks, Matt.
Thank you. Our next question comes from the line of Bob Bracket with Bernsen Research. Please proceed with your questions.
Good morning. I would like to talk a little bit about GTA Opex. You've disclosed a little more this quarter. It looks as if I got my math right, running around $60 a barrel, and you talk about taking half of that roughly away. Is that the right way to think about it, getting towards $30s of Opex?
Yeah, so again, I think 25 is a is a tricky year to to Baseline off of Bob. But if, when you look at sort of the quarterly off effects, you know, we were at 70 million dollars in 2q, $60 million, in 3Q, and we're expecting at the midpoint of guidance about $50 $50 million per quarter. Net to Cosmos in in 4 q, uh, and beyond that we see up,
Or down side, in terms of being able to run into a slightly lower, operating cost into 26. Um, I'd say today we're closer to and again we're referencing in gas terms, but closer to a 6 dollar per Mich Break Even uh on just where we are from the production perspective with the goal to get that a bit lower.
Very clear, and a follow-up. Um, any lessons learned on Winterfell? Is there a common theme to some of the challenges, or is it too early to know?
Yeah, Bob, I'll take that. Um,
I think the first thing to say is that these are operational issues, not reservoir issues. Yeah. So, you know, we've had two mishaps. You know, the first was...
Placing the screen in the horizontal. Um, you know, wasn't, um, wasn't fully packed off and and and therefore we we had the, the, the screen clamps. So that's for 1 issue. I think the, uh, the issue of the casing collapse, sort of, on exit of self. Actually is a little early to, um,
You know, probably you reusing the the world war to recomp complete, the well, but it will be a very simple completion. And I think if you were to just go to a very high level, uh, view a bit, I think a lesson learned is to
quote, you know, keep it simple, uh, make sure you've got regular planning and then you execute. So I think, you know, there isn't anything new in that. Um, but I think it's something that we need to. Uh, we need to come back to
Very clear, thanks. Alright, thanks. Bye.
Thank you. Our next question comes from the line of Charles Me with Johnson Rice. Please proceed with your questions.
Yes, good morning, Andy and Neil to the, the rest of the cosmos team. Um, Andy, uh, uh, on side, 5, thank you for all this, this detail on the, uh, on on Jubilee. Um, but I, I want to ask a question uh about what's going to drive 2
Fall in Q4. Give you he, he was a sense of what the drivers are there.
No, but I know uh Charles it's just really just around, you know, this is a year in cargo. So it's a it's a timing issue and ultimately the timing of that will be, you know, dictated by, you know, you know, performance is also a holding flat at the moment where we can sort of sort of see a relatively flat profile in uh, in Jubilee as we end the year. But it's going to be just around, literally around the the timing effects of that on a year-end cargo.
Okay, great. And then, uh,
Uh another cargo question but from a GTA the uh the context of cargo that you mentioned, you sold, how does that? Uh, how can you, how does that fit in your guidance? And how is that going to appear when when you report for Q, right? I'll let Neil handle the details of that. So yeah and it's it's a bit tricky because you don't get them all the time. There's probably a lifting on on a growth basis out of the field, maybe quarterly but this is the first 1 for the partnership and so we split it evenly again. This, the thinking going forward is, they'll all be allocated on a, on a
Going forward. And so, you know again I think between um,
1 out of 2, out of every 5.
Condensate cargo. So it'll be a bit irregular. Um,
Charles.
but,
You know.
A nice source of additional income, um, for for the partnership.
So, if I understand you correctly, Neo that you're, you're you're, you know, taking turns the way, the way you are at Ghana. And so even though you you've, you've listed lifted this first cargo, it's someone else's cargo and it's, it's not going to going to have no Financial impact on on Cosmos, for 4 q. Is that? Right? No, this 1. We listed all together. I'm saying going forward. So we'll we got, we'll get our we learned. Yeah. We'll get our Pro out. A piece of that cash flow.
In for you, uh, going forward, we'll lift it like, as you mentioned, which is sort of taking turns between us and the NSE. And, um,
and,
Okay, great. Thanks for the detail. Okay, great. Thanks, Joe.
Thank you. And our next question comes from the line of Neal Shah with Goldman Sachs. Please proceed with your questions.
Yeah, good. Good morning, Andy. Good. Good morning, Neo. And you know, it's obviously a lot of focus on the balance sheet and the credit that it hasn't traded very well here um because of the macro, but also because of some of the challenges you guys talked about. So maybe you could just take some time to for for investors who are worried about the balance sheet to to talk about how you're feeling about liquidity. Why you have confidence, what are
What are you doing to mitigate some of the risks? And, you know, spell it out in good detail.
No great. Yeah, thanks, uh, thanks for the, I'll get Neil to, to talk through it. But I think, you know, the first point I actually to make is sort of how much progress we've sort of made. Actually, this quarter, you know, new or talking through the, um, the gong Term Loan. You know, the rbl redetermination, um, that's allowed us to deal with the most immediate issue, which is the the 26th Bond maturity, but then thereafter 1 of the steps we're going to take to address the uh, the upcoming maturities, uh, beyond that. So I think it is a
Getting in front of the refinancing issues. Um, and so, you know, we, you know, the Shelf termine was important to get a early, uh, you know, to early repay, the 26s, um, you know, we've gotten through, you know, we've gotten through the redetermination liquidity test that where people have some questions around, so hopefully the address some concerns on that side, and then now being proactive around the 27th and looking at, at at, you know, as I mentioned secured debt options. Um, you know, potentially at the MS, level to early attack,
Clear the maturities on, create a bit of runway so that we can focus on, you know, the near-term volatility and the oil price.
Uh, you know, we've created a lower cost company uh without any debt maturity we can use all the free cash flow to repay debt on on the revolver. Um and um and then create more financial resilience to that process, you know? So again, I think what we're doing all the things we said we would we're going in a step-by-step.
Fashion.
Continue to look for cost.
Ways for us to get ahead of uh, issues. Um, while you know, we're finishing up the project delivery phase and again, like I said, I think the most important thing for us as well as any other questions and the equity holders is we're seeing the benefit of of Verizon production coming through, as well as the lower the overall cost structure. So, again, I think, you know, we're doing the right things in the business. We'll continue to be proactive, uh, around securing the financial resilience of the company. As we go through, sort of a bit of a
On the macro.
Yeah, I would like to just deal. Is there any addition to looking at, you know, secured debt against the, uh,
The GTA asset. I think we're also you know, looking at the assessments of non-core assets. Yeah, you know, we've we're we're through the bill phase, we have some very strong assets, both, in in Ghana, and in in in Ms, uh, you know, Gulf of Mexico. So what are the options we have now to sort of high-grade, the portfolio and use that as an as an additional source of of, of, of debt reduction. So I think, you know, that's another area where we're, we're being proactive. So, I think there are, you know, too big a gender items that that Neil's working on both, you know, you know, secure debt against Ms and, uh, and the non-core assets.
Yeah, thanks, Andy. And you know, that was very thorough. And then, um, the follow-up is just, can you talk about the upfront investment required for the GTA expansion? And how do you think about, um, the differences of the lease rates for a 5 mtpa floating LNG facility versus, uh, the goal of our facility that you had previously mentioned?
Yeah, no, thanks, Neil. I think it's sort of, um, maybe that is an important question, and I think it’d be good to give you a little bit of detail. Um,
Yeah, I'm fresh back from a meeting that took place last week in Paris, where we spent a lot of time with the NFCs and the governments of Mauritania and Senegal, you know, sort of thinking through their um...
Uh, future needs. And, and it's clear in, in, in both countries, but in particular, in Sagal, uh, the need for additional need, um, uh, domestic gas. So, uh, I I think that we see the, the next phase The Phase 1 plus expansion. Actually, you know, targeting that the domestic Market. You know, I I think we're sort of almost, you know, umbrella into the pricing there, you know. We we were sort of looking at at pricing that would be equivalent to the fob of the LG, you know, without the liquid function cost. So ultimately, it's a win-win for everybody at that point. The government gets a, a, a source of gas, which is very competitively priced, you know, and, and we can, you know, secure the expansion of of, of phase 1 plus without having to go through, you know, complicated, um, redesign of the facilities. So,
Um, their demand to, to pull gas earlier than the the 29 day that that we talked about. So, actually, 1 of the things that we talked about in Paris was, was getting on with a, in an early negotiation of of a gas sales agreement. So I think if you think about it there, sort of, you know, 200 that you can get at zero cost today, that's the way to think about it. Then there's another hundred that you would get if you debuff on that the fpso and that is just the bottlenecking, you know, that is, you know, small modifications to the, the gas system to, to give you that extra, uh, 100. So, you know, I think the great thing about GTA is you can expand it. Now at at very, very low cost, so there's no additional cost to go in other than the um, the fpsl debuff making. And then at some point you will need additional Wells but but that sometime in the future so it, it it it's, it is about online to gender. I think with both,
Um, how do you get the most out of the infrastructure with the least amount of capital going in? And then how do you get the most benefit actually for the host countries and build, you know, through win-win? So I'm, you know, that for me is a way to think about the project, Neal, rather than I think.
You know, I think Phase 2 and 3 can be more biased towards lmg, but I think that initial sort of expansion as we call a phase 1, plus of the existing facilities being more targeted to um, to the domestic gas. Now, there is some debottlenecking you can do on the Gimme as well, you know? So move it beyond the 2.7 name plates. I think there's an increment of of LNG to come there and so when you think about it, you know, there's a there's there's a piece of, it goes to that increment of of the Gimme, but it's not 5 million tons. It's an increment on the Gimme and then there's there's there's the the residual amount that would go to domestic gas. So all in all the, you know, essentially comes at very, very low caps.
Thank you, Andy.
Good. Thanks. Neil.
Thank you. Our next question is coming from the line of Christopher Bake with Clarkson. Please proceed with your questions.
Hi guys. Um, thanks for taking my questions. I have three questions today, if I may. Um, so the first is on Jubilee performance. First of all, could you briefly touch upon the underlying decline rates at Jubilee right now and what exit rates we should expect? We expect 400,000 in 2025.
The second question is related to topics. CapEx came in below expectations this quarter, and our full-year guidance is now below $350 million. Is this primarily driven by timing and deferrals, or is it real cost savings? In addition to that, related to the FPSO lease refinancing for GTA, what kind of cost savings should be realized once completed? I think we can start with these two.
Right here. I I'll do the uh do the first 1 on on on on Jubilee. And then, probably I'll hand over to Neil. Um, yeah. I do believe I think the way to think about it Chris is this and then you know how to keep it sort of
You know, stream, simple but, but, but straight forward what I would um, say, you know, filtering around sort of 60 to 63,000 barrels of oil per day today, we've got a new world coming on just started drilling. Uh, by the way, uh, we're doing the 26 in section as, as we speak, um, and I think that pleased to get back to Drilling and sort of, uh, actually getting back on the timeline, the the, the, the the, the be targeted. So, um, we expect that well, to be on at the end of the year and and so you're going to exit as a at a at a, you know, sort of around sort of 70,000. Uh,
Possible today.
We're clear about the world selection and say that you know the producers were we're targeting in the main part of the field. Um, they're they're targeting areas where we've got good pressure support. Um, you know, a sense of challenges we've had uh, in the past with the end of the last drilling program, we're in, you know, Jubilee Southeast area where there's, you know, less concentration of of of injectors. And therefore, I think we had challenges around the connectivity in particular on 1. Well,
So you can't, you know, you got to be careful. We talk about decline rates, as you've got to think about it. Both for the 2 damage, where you put in the wells, what's the pressure of sport? And also the difference in the as you change the world. Um uh, the production between the, the new wells and the existing Wells. Yeah, but I think that's the the right way to sort of think about Jubilee. So I think the things to monitor going forward, you know, first thing, have you started drilling? Yes, we have the objective then will be to get the well, um, on production around the end of the year, what production rate do we get there? And then you start to build it up as usual, the next. So, it's 46. And as I said, the marks will actually sort of high grow to the program, a bit, uh, to optimize it. So we can squeeze in a water injector, which is important for the next program or within the original capital budget.
Yeah. And and that, of course, if you go to your second question, which is what are the savings again, I think there's a bit from Ghana which is, you know, is Andy alluded to was, you know, from, you know, drilling efficiencies and some lower contract, uh, rates for the program in Ghana and, you know, that's part of what allows us to squeeze an additional well into 26. And so there's a real savings in 25. And then there's part in terms of lower costs in the Gulf, in terms of the 25th will be lower than the, uh,
350, um, in terms of what we're projecting for this year. So those are real savings, not just deferrals of capital from. Yeah, that might be the thing I'd add to that is, Chris, you know, you know, it's a lot of small things about our.
And and and I think in 1 of the big messages, we want to get across I think to today in the results is we're really managing our cost base rigorously. So it's every dollar counts, whether it's campaigns, whether it's Opex and you can see the momentum on the Opex side, you can see as you know continuing to make progress on on on on capex. And then how do we sustain that as we go forward into the 26 program but it it's it's about the rigor and discipline, you know? I mean I'm saying both and going around the gulf. It's adding up small things that ultimately allow you then to make Savings of of 10 to 20 million overall in the year. Yeah, yeah, yeah. And again, that sort of feeds your third question as well around sort of the the FPS at least cost. And you know, we're spending about 16 million dollars.
This year, $15 million a quarter on the lease. Uh, and the goal would sort of get that to sort of the $40 to $50 million range. So again, I think there's still some work to be done to figure out where exactly, um, we get an instrument priced, um, but it'd be a material CapEx savings or an OpEx savings, um, as we get that complete.
Perfectly clear. Uh 1 last question on DTF ma um and I know you touched upon this earlier but with the phase 1 ring name paid now. Uh how do this discussions or evaluation for Phase 1? Please look like and what are the key factors for FID timing and to follow up on that as well? What upside do you see on? Give me from current name plates capacity?
Okay. Yeah I I don't want to sort of repeat everything I said, you know, and answering Bob's question but I think sorry Neil's question. But you know if you go back to phase 1 uh
Plus and you know, you asked a question about FID timing. Yeah, the point I'd like to make is that you can get 200 million today, events for gas without spending any money. So no FID required on that. I actually the, the Big Driver is you need to get a, a GSA signed and
Turn around. Yeah, so you need a lead time to get you to that time period. So when the FPSO has a normal shutdown, that's when you do the work. Then that means that the additional $100 million will be available in '29. Yeah, in terms of the, the Gimme um.
You know, it can do, you know,
We're we're targeting getting to up to name plate and I think we're demonstrating that. So I think the progress we're making it literally month on month quarter on quarter. We we'll get to that position at the end of the, uh, the end of the end of this year, you know, beyond the the name play, you really have to do some, some modifications to the Gimme, which is really about better Cooling and more power. That is the 2.7 LNG plants and that works on going with uh, with Galo at the moment. So I don't want to give you an an an, you know, a hard number um Chris until we we get through that work. Um, but you, you know, it's probably in the range of, you know, maybe 10 to 20% depending on where that that work comes out. So there is more to you, you can get more out of the Gimme for the 2 things. You've got to work on other power and the uh and the cooling. And again, when would you do that? You probably do it as a
A good turnaround time so that you did, at the same time as the FPSO work was going on. So I don't think, you know, in terms of sort of, you know, pulling out spreadsheets, I wouldn't, you know, include anything until sort of 29 on that.
Right. Very good. Thanks, Chris. Appreciate it. Um,
Thank you. Our next question has come from the line of Stella Krige with Barclays. Please proceed with your questions.
Hi there afternoon, everyone. Many thanks for all the updates today. Um I wondered if I could just follow up on the point of looking at secured borrowing on GTA. Um we could you just see what what you think the borrowing capacity of this business might be at the moment and what sort of structure might be possible? Given that you know, it has has a different profile to the more kind of liquids businesses that you have elsewhere. That would be great. Thanks.
Yeah. So so again without sort of getting too far ahead of ourselves but the the um we think there's enough capacity there to take care of the 27 bonds um from a secure capacity perspective. Um, at like I said, relatively interactive rates um and we looking for sort of more bond-like solutions um for that access and
Again, we were pretty. Yeah, we, we, we.
test options before we, we
look at anything or go live, but
I feel pretty good about our ability to go.
At the right time.
Super, thank you.
Good thanks. S.
Thank you. Our next question is from the line of Nicole Bot with JP Morgan. Please proceed with your questions.
Morning. Uh, thank you for taking my question. I have a couple.
Of first, the second quarter report mentioned that your net leverage covenant on the RBI.
Raised to 4 times, as of September 25th and the quarter end, Leverage is higher than the threshold. Can I check if Cosmos is under a cure period or the Covenant as well has been waived and if that's if sorry, this has affected the March 26th uh Covenant test as well.
and then,
You, um, sorry. There's also
A question, I had on the liquidity test for the 2027. Does this by any chance need to be redone in March 26th or not that you completed the test in September. Uh, there's no more. Um, no more of redoing this test,
Correct. Okay, so just uh, to to your 2 questions. So the waiver we got through 4 times, uh, was for the September test, which uses the June financials on an LPM basis. Instead of June financials, we were at 3.8 times, we increased it to, to 4 times from the banks. Um, so that gets officially tested as of September 30th not using the September 30th Financial. So the September 30th financials don't technically, get tested from a leverage Covenant perspective. Um, so again, I think we got the waiver and, and, and advance of any breach to avoid any issues.
Um, you know, the 4 and a quarter is the relevant test.
Um, with that.
There wouldn't be any test of that, Covenant, until all the way until the end of March, uh, for my talking perspective.
It does. Thank you.
Thank you. Our next question is coming from the line of Mark Wilson with Jefferies. Please proceed with your questions.
Um, thank you. Most of my questions have been answered already, but I would like to know, just to check, you know, a big drilling program is now underway at Jubilee, and there was the additional ocean bottom seismic that was being taken and reprocessing of other seismic. I just wonder where that is. Do you have all that and what it has given you in terms of new knowledge? Thank you.
Yeah, no thanks. Uh, thanks Mark. Um, yeah, there's a lot going on at Jubilee. Um, we've, um, we still have the current drilling program. As I said in the earlier remarks, we're targeting their, uh, the at the main field areas where we have really good. Well, control. And therefore, you know, we're drilling lower as targets. We've used the, uh, the fast track of the nas for that. So it's an early product that, you know, incredibly good at, you know, when I look back in my days of water fast track looked like to what you're getting today. So in essence, we have been able to to leverage their that mass the the data which is you know the uh
The 40, you know, therefore, the comparator of the 40 on a, um, you know, 2025 back to 2027. So, I think that's a, you know, that drilling program is well, underpinned. By the nature of the targets with it, the Well Control and the ability to leverage the, uh, the early products of the nas. Then I think you sort of think through time is, you know, to, to sustain Jubilee production at the Alberta levels that we've talked about. You need to be drilling 3 to 4 Wells per per year and and we we, you know, we've been clear about that. Uh, and we have a deep Hopper of opportunities that will only get hydrated as we start to leverage the full uh, final product of the nas, but most importantly the obn which ultimately gets you a much better velocity model and that velocity model, therefore High.
rates of quality of of of about 40 picture uh and we think will lead to, you know, you know, greater Clarity on that high grading of a hopper and all I'd say, you know, it's early days but we've got, you know,
a a a really
Good view. Now, today of new targets that we hadn't been able to to you see before it's all about identifying unswept oil under all loes correlation of that from the 4D with a much higher uplift in the seismic, you know, ground truth in it with the history match Reservoir model, you know, gives you much much better view of, of the future. So, uh, you know what I say is our view of the, the long-term potential of the field remains absolutely unchanged. I'd say that sort of 3 months on having a chance to play with the nas, we're probably going to, you know, a stronger view. Uh, there's more opportunity rather than less and, and then ultimately it's about now high-grading the next set of wells for a drilling program that we would Target starting in in, in, in 27. So, I think, you know, that's sort of where we are with the program uh, Mark and and and again, I think you know we'll
We'll see the results of the uh of this 25/26 program. The first world's gone, well the next well done, by the end of the year, you you you then got 4 more producers and a award injector. That will take us through the, the back in the 26th. And then it's about, you know, optimizing the, uh, the next set of Worlds. And the only bit that add, is that the the 40 does help you optimize the, the ward injection patterns as well. So I think,
You know, deliver those, you know, five producers going forward and um, that's our objective.
Got it very clear, and, uh, yeah, good luck with the forward plans. Thank you.
Great. Thanks. Mark.
Thank you. Our next questions come from the line of K. Hope with Bank of America. Please proceed with your questions.
Hi, thanks so much for taking my question. I just have a quick one. I can see on slide 11 you say you expect production in the fourth quarter of 66,000 to 72,000 barrels a day, but you mentioned in the comments that you're at about 72,000 barrels a day now. I mean, is there a reason we should expect that average to be as low as 66?
Uh again I'd say yeah there's normally some downtime uh but planned and unplanned, you know, we talked a bit about there's a little there's a little more training in GTA. That'll be down for a few days uh within the quarter that stops you from producing that sort of yeah call.
Sort of full rates. Um, and then we have some sort of recurring downtime through the field. So, again, I think, you know, on a regular basis, we should be doing better than that. But again, we allocate some for sort of.
Playing down time and things to go.
Uh, wrong.
But that's just generally how we sort of get into the forecasting process.
Okay, perfect. And then I know that you flagged the working capital issue on the second quarter call on, I think it was August 5th. I'm not sure. But on that call, should we expect any of that to come back? Alternatively, do you expect to be free cash flow positive for the fourth quarter alone and for the full year? It may be a bit tough.
But what about the fourth quarter on its own?
Yeah, and so you're right in terms of we, we... yeah, we.
...and went into the operational phase at the end of the second quarter and into the early part of the third quarter. So we flagged that into the third quarter call. We haven't seen any of those into Q4. Again, working capital is really hard to predict in terms of...
Where we are. Uh, and again, I think there, you know, Andy mentioned sort of there's a cargo timing piece that sort of moves on one side or the other, which has an impact as well. So, but again, I think we don't flood again. If we see any big working capital, we'll usually flag it. We don't see any at the moment and there's no reason to expect that to sort of occur going forward. Given we were in the project delivery phase before and now we're into more normalized operations, but cargo counts still make it a sort of quarterly difference in terms of variation, and then some of the cash flows, it will be sort of different. But again, I think with our view,
We don't see anything immediately, but...
Then we'll just have to continue to manage.
But you're not telling me that you're going to be free, cash flow positive in the fourth quarter.
If you tell me what oil prices are going to be,
Well, we're up to November; we'll cross our fingers.
Yeah, what I say okay is what we've got a strong start to um the first month. Yeah. So we we obviously we sit here today. We know what October was like and and we've we're we're well within uh, the guidance that you talked about for, for 4K. Yeah. So I think this is about, you know, you talked about the downside of what would cause you to hit 66. So the alternative question would be, what would you have to do to believe the the the the the the upper end of that range. And that's clearly what we're targeting. So we're targeting to deliver well within the range in uh in 4k. And all I'd say is we're off to a, a strong start so far in the quarter.
Thank you. Since there are no further questions at this time, I would like to bring the call to a close. Thanks to everyone joining today. You may disconnect your lines at this time, and thank you for your participation.