KOS - Earnings call transcript Q2 2021

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Operator

Good everyone, welcome to Kosmos Energy’s Second Quarter 2021 Conference Call.

Just 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.

Jamie Buckland

Thank you, operator, and thanks to everyone for joining us today. This morning we issued our second quarter earnings release. slide Investors’ accompany page the available call and the on of release presentation today's to are The our website.

the Inglis, and on material me call go to Joining through are Andy Shah, Chairman Neal CEO; and CFO. today the

our forward-looking we SEC During that I our and presentation for Annual our note to Report, results outcomes in the refer Actual SEC due materially in These statements could Stock today's are more call this expectations. filings. Please to will documents differ Announcement detail. refer and U.K. website. our to to we and Exchange presentation, At and make estimates will over factors and filings available on this Andy. time, that turn

Andy Inglis

and Thank Thanks, Slide on results quarter, Jamie you quarter financials the the the to you second for I'll guidance second us call. key before Neal the delivering and highlights remainder quarter our continues of our today handing slide. good joining morning in execute for outlined everyone. take through priorities to Kosmos through successfully three for X, Starting the plans run the on to the the on for over year. and to afternoon

of in in performance with we strong posted First, cash the free $XXX cash XQ flow million quarter.

performance online. We second half in wells coming increases strong continue expect of this production the to new the year with as

of oil target. day target we that communicated, per a year XX,XXX and equivalent previously barrels of are As progress rate making exit and towards good around

current roll Importantly, prices through generation at should as cash be off, around enhanced to XXXX our hedges materially oil continue XXXX levels.

XXXX current continue to fall prices. to we expect reduce by significantly a leverage year-end result, and at through As

Greater quarter. today strengthen our Ahmeyim the position Tortue funding in completion We The projects leaseback and we continue of our transaction important an in financial for Second, step additional announced savings transaction milestone BP. XXXX first future to FPSO of sale the partially from to with FPSO gas. The project through the outstanding payments will and and into requirements our the transfer XXXX capital fund to remaining the capital

the in appraisal Mauritania should in all Jubilee year-end has exit this May Gulf and producer key expect been Winterfell on facility amendments in quarter, pushed remain near-term of well online XXXX, well has come maturities around day year to third, to on And positive an plan drill delivery online an XX,XXX for far incremental with we so In quarter. quarter all more impact growth of In third to with levels Kosmos this addition starting we operational is lending forward later first Senegal our further gas online, building that levels. with in projects the wells wells example having XXXX. is year beyond. material out our of base active barrels infill of across which the and debt first a coming have oil ours One We the and the drill any to made rate. progress track new production GTA drive production. July per look on year, for to wells and completed the We we good which nine successfully Mexico, came see XXXX added which the towards extension In year expected of this third areas and targeted reserves work a portfolio. momentum streams production

capital Senegal of the was quarter benefit. performance base of excludes to business cash X, Mauritania slide the on $XXX related That to generated as flow the around for strong and delivered year free million the and cash million. second CapEx around previous half first with includes flow the company. in slide working mentioned Kosmos Turning for Slide the Free $XXX cash from

second allowed us around cash million The $XXX debt to generation by quarter-end. reduce net by quarter

on on chart the this shown top slide. As

quarter Our has over going year-end three forward. than and do XXXX times positively absolute since production higher driving Higher continue This last year-end year. look reduction leverage EBITDAX so and oil with with along XXXX. our and to should fallen to our higher same sharply EBITDAX further XXXX impacting forward the leverage into XQ, ratio prices growing are and progress ratio through we are debt

at fourth loan the fund million in year. their year. the amendment to Ahmeyim, for like which of mentioned, previously Mauritania expected is capital XXXX refinancing and remaining GTA Greater of leaves to XXXX XXXX, the about sale which Tortue year, savings which are XXXX we end is the beginning I size to In As we leaseback facility. in coming FPSO CapEx The additional total through to expenditures Senegal capital Mauritania pleased of continued with talked expected $XX of complete transaction, support. fund is of net $XXX was a and Kosmos complete of The XXXX. the we that Senegal in for This completed in to cover FPSO to previously delay around of short This occurred lending extension transaction, is slightly expected see but the half an aim billion the expect second now we NOC the benefit I'd drawn base given than first in billion is from million result. quarter to of additional and around financing in Kosmos the thank May, less closing banking million. The the group and quarter. around we the the our a expected The XXXX the million. $X our In savings in FPSO XXXX $XXX reserve as additional $X.XX for $XXX facility,

pushed we by another have two meaning no XXXX maturities and extension that maturities material until out the years, Importantly, beyond.

to in X, on and objectives. Turning across through to starting hubs continued I build up continued mentioned, quarter remain year's has barrels Mauritania now the seen producer project J-XX talked the to XX,XXX positive and We've achieve Jubilee campaign in first year. GTA three to activities each the per the as the online. May, pleased momentum our ramp quarter now drilling first progress we're production drilling business I'm XX,XXX with this say Taking with turn, to see Ghana hub Production our Slide this in starting Senegal. track momentum portfolio. results about day from results now second the to oil of returning to across in is at we barrels of around from with I our in Jubilee and of half up around

which are project completion upgrade further completed in flexibility post fourth drill water as expected the Equatorial enhance jubilee to The with has wells. lift we the Jubilee and power In April, conversion In to is electrical gas facility allow on the end upgrade additional gas The infrastructure at move into ESPs. XXXX. expected quarter, partnership will lift pumps online rig to Ceiba fourth of reliability greater completed move project expected producer integrity The been second with completed plans a year, injection to production at water second which adding the expected one production. was field injector necessary additional drill come is then project. major the that and Okume XXXX, ESP well increases online the The quarter. of online that further Guinea is is debottlenecking gas then a the or injector in further and TEN, expected shortly and around should ESPs additional capacity for further be improve to submersible expected a

producing the online the the the will was Mauritania the The all to drilled drilled across streams now rig to well. expected equivalent Mexico, the in wells at first three of wells, came June are the initial In X,XXX and The and with appraisal work move second in drill hookup be spudded first the second in the this the the quarter. barrels July results. positive XXXX. well Winterfell infill quarter partnership progress and commenced and five operators Later of to three for Gulf end well. make XX,XXX oil the well producing fourth in of continue of planning the online are be Okume major Tornado per currently to quarter Complex Senegal, All we day location top during quarter to guidance. of In has to is

that first to transit. The in in BP to the revised through noted take hand the is the Neal, first release, short We're we the three being more FPSO near to of delivered. I'll Energie, gas path built with ensure to gas delivery in with the shape concrete now Cosco by the financials. timeline diligently Technip several started working to take which yard terminal China. As you over is to critical with installed and now sits now caissons

Neal Shah

Thanks, Andy.

$XX cargos XX% Realized slightly fourth a higher Mexico. May production entitlement on the by to RBL as slightly volumes, the PSC. the quarter quarter indicated completed every per than quarter quarters. a XQ, items. for we Those in to EG $XX million affected with third to operational posted quarter-on-quarter, Net also second rose XX of some Andy of production million of in barrel $XX were to net was in more higher performance reversal Instead, our Slide handful fell end focus in continue X the hedges going includes the lower and mainly We're barrel we prices, has associated of of with also which extinguishment sales July this update by oil off strong slightly areas due the sold price. price the hedges Gulf OpEx extension. production around on impacted to post higher per costs to walk first key quarter through barrel higher rolling and plan first to of performance, with per EG Turning was saw as than continue interest a reducing line - solid debt XQ deliver during expected the on oil higher of higher and the second prices in our position this amendment back on downtime indicated move. rose in said, the OpEx million quarter due one-time and - I expected entitlement due responsible realized when with which during mix up the will don't in our largely improving was as reflecting a lower production slide. cash quarter, under together in which quarter-on-quarter, production

quarter. our activity in base and Guinea we CapEx increased business as Lastly, second drilling Equatorial in quarter-on-quarter begin the Ghana

expect we Ghana production Turning new EG, in at to it which wells and $XX to half in unchanged Slide cargo $XX come is perspective, lift for the and to the in higher third Full-year of cargo X. and quarter second guidance first lift fourth as with the quarter trend our reverse EG slide as sales the in OpEx under remains quarter Gulf expected barrel. during full-year. Ghana, which and to we a did From quarter, expect guidance of production to one - in similar third expected in lead to the for be will an This guidance the third half looks online for quarter, the the quarter quarter. between per second lift the in the Mexico. should

I'd We year. same, guidance XXXX are remains around call to in open operator now that far in capital flagged expect for Base portfolio some like we the to $X the to this $XX for Andy per of our we've barrel to by now for million seen year as the turn cost CapEx remarks, presentation. his the across higher OpEx any questions. around over funded the to GTA includes the session due today's business but earlier increasing thus be

Operator

from comes line with Ren with Stefanou Nick the question question. first Our Instructions] proceed your Capital. of Please [Operator

Nick Stefanou

It's got Nick may. you Stefanou questions. you. from ask, Ren my for if Andy is taking starting Cap. to two for Thank I I've

sense. if we policy, not sort upside, of about in market part question and months, LNG Mauritania strongly - down And was past of and you assets something few what the there, down like second So [indiscernible] the Senegal in like maybe so like nearly I are the quite just the like volatility consumer about there any has maybe see for make wondering, farm is evenly hedging don't too considering maybe downside. pay are But rebounded much farm [indiscernible] could they you way is think the they protect, premium, is pretty really of like protect give much but is you like when much much to don't [indiscernible]. the if the really they free, them don't a

status So maybe are the thinking way you you. do Thank of changing you going the forward?

Andy Inglis

the with we're Yes, question, will Nick. your GTA. thanks, I pleased Well, first progress I take on think

announced we for step next that on you thing create us on been I the and work NOC to know think important financing. has today an getting step is the FPSO the financing forward,

our direct can so we now gas. first see to get And in path to

as you have and of interest than Senegal, Senegal, ever in XXX resource in the through Mauritania we it's than at the of can the think the I that develop, Tcf scale place but there's and today. Kosmos of whole look trend more clearly gas across working Mauritania more

on on think LNG our much it's deliver the on environment part is focus project the the that Phase deliver time, I of GTA benefit from is I opportunity actually and project VAN] and that to stronger that the So part priced. the we and we project overall X, of [FID plan. get a currently And from is cash think the budget flow the important ensuring

to the Mauritania it the we - how more at advance the push from forward And the things is Mauritania for see Senegal well the that real have development going to you're longer-dated and there do, will are I flow cash lightning the that I we do opportunity and opportunities think think about all has the of direct be I is flow. see less where us we portfolio plans flows how in of can't look in there. the a Senegal, we developed in terms cash from cash And our and line that's some So there. to think focus and bring

outlined the in think that's past. can to Neal the talk that to focus if I I I I from And to different So think you hedging now our no we think hand over strategy the going and be and he it's strategy. about

Neal Shah

morning, good Nick. Yes,

as equity, because business think debt variety three-way going of I do continue sufficient a XXX% I of collars us, yes, we’ll sort hedging downside a of So agree, your provide onto have within we and for forward structures used the the portfolio. to the think of question protection. I think hedging doesn't I And portfolio that both sort

the looked have also we the retaining downside much protection, So right at upside had what's possible. as manage to potential - it balancing but cost and balance as the

can the And a of we we're for and again couple to clearly, so, of get that balance the with provide higher cost sort absolute trying is three-ways, it lower a two-ways things but floor protection.

structures. sort of today, XX-XX those So particularly in it's XXXX, at when mix look portfolio you between the a about two

comfortable get between of around but the that general I cost range. - the area portfolio, but where hedging sort manage $XX can think at shape needed it's the is same we're overall we of $XX something the time, to that mostly in where protection

Operator

Our of with next proceed question. Berenberg. the line James question Please with comes Carmichael from your

James Carmichael

just me. couple And from a

helpful Kodiak sensitivities? area? around any get the provide the us then color a about issues appraisal, specific so to fair $XXX Thanks. of key prices guess some finding and U.S., early the Slide if on in of of oil, in Just about of on mean of the on, I of on then be reservoir deleveraging moving chart obviously to MX a first well on solution. sort deeper and that sort And terms I bit. and the you timeline in you the and risks perhaps chart perhaps X perhaps prices oil first bit indications couple on Winterfell in remind sort could is potentially assumptions around current talked And just and around a and about the a any testing well million put there be context on de-risk could that the just that are to you wondered in

Andy Inglis

the deleveraging. I'll want just right, All to thanks, do up the Neal U.S. questions, cover you James. pick thanks,

Neal Shah

fairway the $XX think have generated to on current just The just still of been $XX results charts on answer question, which I so James. your the based Yes, prices. terms pretty the is chart to debt again in oil down

business there we And the lot there short into a anywhere cash which is is reality a I XXXX. movement the we're stay negative price. put in movement in in is the - hedged, why generates particularly The and faded assumptions more the there think clearly in of sort in number sort ballpark so, the chart. there's oil of so is and of regardless sort to the But as of clearly of

prompt on movement price the the an prices deleveraging more the that to that profile less access in that XXXX has delever upside So whereas higher impact help and business faster. in will

Andy Inglis

seeing than thanks, stronger of production we we Neal. terms U.S., yes, Okay, Tornado clearly James are anticipated. yes in from the

that ways with we of our that. has I can best Kodiak sort well. If of give performed not anticipated reviewing intervene and currently pleased where we're which would view were So on where we in well. you the had

probably year it's be need to the before we we think that. actually next going equipment into around do secure that I year-end to can

the you performance think more So that Kodiak than - in the at Gulf from look well. good of is is strong I as the news Mexico the offsetting the Tornado

So back got volume. a similar test the it. the same there we're also the to negative adjacent - testing see adjacent clearly Winterfell, online. is that and getting reservoirs, The creates the the the would the fault upside same we the same demonstrate sufficient the we're the that is testing The that the an while On real block it’s be upside signature. block got horizon would And in where from from discovery deepening XXXX the Kodiak in deepening same actually horizon, well. and North, from to a successful was well we're on fault seismic it’s

move there I development. To encouraging were know, whereby the see thereafter. side, think or appraisal you program results think in do a larger which initial had another appraisal basis is incremental results a need that step and starting an we the with to for the we forward if development of wells appraisal is to that I an initial we on development the phase

So the and I partners. obviously with to well all there's lots I think interested see phase optionality scale discussions and, of will its so, that to development of ensue and Winterfell it's would think be positive that results increase also then on the the

Operator

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

Mark Wilson

A congratulations few first, leaseback point FPSO done. housekeeping and that sale on for getting Tortue the

overall can across you XXXX, XXXX for check should inflow expect the but and please. Firstly, financing I that

and be OpEx, in should the Those OpEx that in is producing are go-forward XX,XXX factoring leaseback to XXXX? sort Thanks. for should terms the at looking finally of points? there be point there group [indiscernible] housekeeping through well. three what we of a we level out that of Second level for as FPSO What then are the include

Andy Inglis

Neal, do Okay you to…. want

Neal Shah

Yes, so just Mark. morning, on questions the good and

transaction, On the what FPSO is question, the of just rest see you'll year through this the first post-August. I in terms think of basically

more show will sort are Senegal sort and until no the of costs recovered. Mauritania related We to of past CapEx

on to report So against receivable did beyond it's basically of then corresponding day from the half it But to of back until flow sort on that related through you'll exhausted. receivable that, XXXX. FPSO related And the one that CapEx excludes CapEx Tortue offset the to we for portion income And for BP the up and flow statement. FPSO until of the cost nothing also to BP after first Tortue inception cash the liability will deliver to to shows construction. the the statement start gets see the sort recorded then

the million overall $XXX in expect $XXX XXXX. benefit million in in addition of in to around that savings terms makes Does sense? around we'd XXXX the So of timeframe a

Mark Wilson

was level yes No, if maintain we would, once that view looking OpEx point then XX,XXX then be, great, the has second Tortue expect we that's to the ticked and what on Neal stream? And for, was exactly what that's up a I could OpEx thanks.

Neal Shah

$XX.XX the barrel. raised of sort guidance we've of so to and the midpoint Yes, per around

to that sort XX%. I X% we think $X the down it the within or the of we ability actually have manage higher is per do to cost portfolio sort of by and $X bring production call as barrel, the

of Tortue, OpEx of the towards And you production and coming higher as OpEx sort back given we And haven't explicit sort in those you FPSO. costs. through will see guidance sort post rationalize for of have that both mid-teen the so, lower terms as

like later, a you come I'd to So that on back to bit okay.

Mark Wilson

strong to year no, in Neal, QX also quite Okay be been a fine. very quite a the sales you Then certainly from moving working quarter. piece that's so cargo is a very had second production. quarter for but positive low quarter, has sales this looks capital

So expect association or in working negative in should a we effect with see XQ. capital that

Neal Shah

around ultimately sort Mark it's lifting question. each of is - capital schedules Yes, of the is that of function just in contracts. are a driver Yes, our working which the very good good again the cargos, timing a biggest

did reverses a we see capital so, a benefit drop cargo XQ you will in get the we’ll third increased drop quarter in And likely a That on which so liftings. quarter. fourth the as in of reverses the XQ see in result a working

unfortunate and so, of sort is price year. And there the cargo sort the the sizing, but lumpiness due to of even the over out oil it does

Mark Wilson

one I'm and then is we difference Okay. leaseback is is is sale And this. the fit and there? not for the me maybe this or last point, just be it scenario struck about FPSO why it what's may the and more, one wondering FLNG then think broader just vessel as that

Neal Shah

FLNG leased operator FLNG started just the within to will basically started be piece project lease the the will as the that so so partnership same be now we're JV. it in is sort we similar switching sort of of the of the a and [indiscernible] will FLNG. to it the a similar as for Actually a lease arrangement, it OpEx the treated The to equipment accounted This future. they be

Mark Wilson

it it, sense. makes mentioned you complete now And

very you I'll hand Okay, it thank over. much.

Andy Inglis

Great, thanks, Mark.

Operator

proceed Please your [Operator from of Goldman next Instructions] question. comes Our Mehta the with line with Sachs. Neil question

Unidentified Analyst

for on Thanks questions. the Carly Neil. for is taking This

talk factors manage what is start you I the at are Just mentioned I guess, forward? the you other are, potentially that there then know about higher driven drivers cost just to guide. inflation Can cost you on going the side, there to looking play. wanted at OpEx or And

Andy Inglis

then that in. Neal can about also talk I'll chime maybe Carly Yes,

of TEN in the get in nature the unusual variability of XQ. was you a have a was - think because the costs liftings the quarter because occurred. little cargo There where I

a OpEx actually it So lease comes FPSO naturally it's so associated the is with with cost barrel. per that There - a higher higher.

have variation in that we the So quarter.

in strong is sort has had of also it. actually Tornado We Tornado. price associated production a factor PHA, with

the got higher of of reduce we that's a current the challenges that is underlying we the slight also in continue. at PHA a saw a would the have element small say we're prices and result obviously think the but prices, benefit And about which cost so in to protocols. smarter the I'd just but underlying world. those there think Delta, rise measures of and sort continuation - getting getting but how structural some ultimately - the levels using manage sophisticated of about we how I done obviously now is the and So by things I persist the what as much more I'll call COVID We’ll of it, COVID

in about of that the at I couple worried just one-offs think you the of with had the less sort a TEN which I'm it, is that So, look should cargo. and particular thing associated quarter

Unidentified Analyst

watching left helpful. the refinancing a really on there of expect what's any outstanding for? about financing, are should NOC year. in the follow-up talk that guys if to that's Could process, just mentioned Great, and you the loans And Thanks. just is be little later this you release the that Tortue we milestones complete then

Andy Inglis

pick Carly. that up Yes, Neal I'll have that

Neal Shah

- sort the financing, Carly waiting shapes FPSO the completion Hi really the thing of that was of we're of on NOC the project. for flows cash as the main obviously yes, the

initial And conversations so, banks we've some with we'll push the now. and had that

around defined We FPSO. have of sort the structure

quarter get best done is sort gives - our execute of go timing still plenty that so, the it. us of fourth And to on which to view in time which

Andy Inglis

financing say, what are we've FPSO sort they step we're I'd said moving the we to Yes do, executing most the Carly, done. We've that. would we was board got of that, get on with important we done NOC just know you the

refinancing with NOC place, move next the that is of in the have all - with loan. yes we the So alignment the then the with can we parties item which to of

everything I going we think anticipated. So along as is

Operator

questions Thank call today. like bring there are to you. time, would a Ladies no close. Thank you since joining to and I further gentlemen, the at this everyone to

participation. disconnect time. for your at Thank may this your You you lines

Kosmos Energy (KOS) 9 Aug 212021 Q2 Earnings call transcript