Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kosmos Energy Ltd (KOS, Financial) reported a strong first quarter with significant progress towards their goal of growing production by around 50% from the second half of 2022 to the end of 2024.
- All planned 2024 Jubilee production wells in Ghana are online, with operational efficiencies allowing the drilling campaign to conclude six months ahead of schedule.
- The Tortue project in Mauritania and Senegal continues to advance towards first gas, with several key milestones already achieved this year.
- Kosmos Energy Ltd (KOS) enhanced financial resilience through a convertible bond issuance and RBL refinancing, improving liquidity and extending near-term maturities.
- The company anticipates a free cash flow inflection point of around $100 million to $150 million per quarter once development projects come online.
Negative Points
- There is some planned maintenance of the onshore plant which receives Jubilee gas, reflected in the 2Q guidance.
- The Tornado field is expected to be offline for most of the second quarter for scheduled routine maintenance.
- Operational progress and financial outcomes could be impacted by external factors such as changes in government in host countries, as seen with recent elections in Senegal.
- The partnership had to pause the Sabra and the two main drilling campaign in Equatorial Guinea due to safety issues with the previous rig.
- The FPSO hookup and commissioning remains on the critical path for the Tortue project, indicating potential challenges in meeting project timelines.
Q & A Highlights
Q: Can you discuss any impact from the recent elections in Senegal on business activities?
A: Andrew Inglis, CEO, stated that Kosmos Energy aligns with host countries' needs regardless of government changes. In Senegal, discussions with the new government have been constructive, focusing on accelerating gas resource development to benefit the Senegalese economy. Day-to-day operations remain unchanged, and the company is working on bringing Phase 1 online later this year.
Q: What are the prospects for increased activity in Equatorial Guinea given the significant undeveloped resources there?
A: Andrew Inglis, CEO, mentioned that Equatorial Guinea has a lot of undeveloped resources. The current focus is on infill drilling, which is expected to sustain production levels. Additionally, the King Deep well could potentially provide significant growth if successful.
Q: What are the next steps or milestones for the FPSO to achieve first gas?
A: Andrew Inglis, CEO, explained that the FPSO is on track with significant progress made. The next steps include mooring, commissioning work, hookup of risers, and introducing gas to the FLNG vessel, followed by the cooldown process and starting LNG production.
Q: Can you provide an update on the performance of the Jubilee field in Ghana, especially in light of recent well completions?
A: Andrew Inglis, CEO, reported that the Jubilee field's production was strong, with recent well completions contributing positively. The focus remains on optimizing well setups and maintaining high uptime and water injection rates to sustain improved production levels.
Q: How does the convertible bond issuance fit into Kosmos' financial strategy, especially regarding managing near-term interest expenses?
A: Nealesh Shah, CFO, explained that the convertible bond issuance was strategic to manage the maturity schedule effectively and optimize access to capital at a lower cost. This step helps clear the runway for the next couple of years, allowing the company to focus on executing its business plan without balance sheet concerns.
Q: What is the strategy for deleveraging, especially with the anticipated free cash flow inflection?
A: Nealesh Shah, CFO, stated that Kosmos aims to reduce leverage to below 1.5 times in a normalized oil price environment. The initial focus will be on paying down the reserve-based lending (RBL) facility, which is the highest cost debt. This is a priority for the allocation of the anticipated free cash flow.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
