Kosmos Energy Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2023

There are 9 speakers on the call.

Operator

Good day, everyone. Welcome to Kosmos Energy's Third Quarter 2023 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. Thank you.

Operator

You may begin.

Speaker 1

Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our Q1 earnings release. This release and the slide presentation to accompany today's call are available on the Investors page of our website. Joining me on the call today to go through the materials are Andy Ingalls, Chairman and CEO and Neil Shah, CFO. During today's presentation, we will make forward looking statements that refer to our estimates, plans and expectations.

Speaker 1

Actual results and outcomes could differ materially due to factors we note in this presentation and in our U. K. And SEC filings. Please refer to our annual report, stock exchange announcement and SEC filings for more details. These documents are available on the website.

Speaker 1

And at this time, I will turn the call over to Andy.

Speaker 2

Thanks, Jamie, and good morning and afternoon to everyone. Thank you for joining us today for our Q3 results Since our last call, we've continued to make good progress in our strategic objectives with several important recent developments. I'll talk about these in more detail in today's material as well as giving an update on the quarter. I'll then I hand over the call to Neil to take you through the financials before wrapping up the presentation and opening the call for Q and A. Turning to Slide 3.

Speaker 2

At Kosmos, we're pursuing a clear and consistent strategy To provide the world with the energy it needs today, while working hard to bring down the carbon intensity of our portfolio and providing the world with the cleaner energy It needs for the future. To achieve this, we're executing a differentiated set of projects that are focused on advantaged Low cost, lower carbon oil and advantaged low cost, lower carbon gas. This slide shows the progress we are making. First, on production growth, we set a target to grow our production in the second half of twenty twenty two by around 50% through the second half of twenty 24 from 3 core development projects, Jubilee Southeast, Tortue Phase 1 and Winterfell. In the Q3, we brought the first of these development projects Jubilee Southeast online, which increased Jubilee gross production to around 100,000 barrels of oil a day, up almost 50% from the production levels seen in the first half of the year.

Speaker 2

I'll talk more about Jubilee in the following slides, but we're pleased with the progress being made with more expected in the coming months. 2nd, our 2 remaining developments continue to progress. On Winterfell, the partnership recently completed the first production well, an important milestone for the which was previously on the Critical Path. 3rd, in recent weeks, we have deepened our portfolio of high quality advantage Oil and Gas Investment Opportunities. In October, we announced a discovery with the Tiberias well in the Gulf And today, we announced that we had assumed operatorship and increased our working interest in the world scale Iyaka Tauranga fields in Senegal, subject to customary government approvals.

Speaker 2

We're excited by both these projects as we expect them to create the next leg of value growth for Kosmos The chart on the right of the slide is one we've shown before, which has been updated for these recent developments. It Shows the progress we're making against our longer term strategic objectives. The first meaningful step up in production was in 3Q With production rising 17% from the 2nd quarter with further upside potential from Jubilee And then the planned start up of Tortue Phase 1 and Winterfell in 2024. We expect this growth to drive a material below our target level. Looking beyond that, we have a deep offer of high quality operated and non operated growth options across both short cycle oil and long dated gas that will continue to differentiate Kosmos from our peers over the coming years.

Speaker 2

We plan to balance the pace and working interest of these future projects to ensure we can manage our growth and generate material free cash flow. Turning to Slide 4, which looks at the quarter's operational highlights in more detail. Net production of around 8,000 barrels of oil equivalent per day was in line with guidance and an increase of approximately 17% versus the previous quarter due to the Jubilee Southeast startup. Jubilee produced an average of around 96,000 barrels of oil per day gross During the quarter, an increase of over 30% versus the previous quarter with 3 producer wells coming online across Jubilee Southeast and the Mainfield. While we've been successful in delivering the production wells, There were some delays in providing the necessary water injection, which has had a knock on impact to near term production, which I'll talk about in more detail on the following slide.

Speaker 2

On TEN, production in the quarter around 15,000 barrels of oil per day was in line with expectations and lower than the previous quarter due to a plan to reach shutdown. While working on the maintenance of the FPSO, we modified the gas train And the rerouted gas is now being reinjected in the intome field to support reservoir pressure and maintain production levels. This has resulted in around a 75% reduction in flaring, a major step towards our goal to eliminate routine flaring by 2026. The amended 10 plan of development and combined 10 and Jubilee Gas Sales Agreement has been submitted to the Ministry of Energy for approval. In the interim, we have extended the Jubilee gas sales agreement through the end of November at a price of $2.90 per MMBtu.

Speaker 2

Nextel, Guinea gross production averaged around 25,400 barrels per day during the quarter, in line with expectations. The infill drilling campaign is expected to start this quarter with the rig now in country. Ahead of the 3 planned infill wells, the rig is planning to carry out 2 workovers on the Sabre field, which should boost the year end production rate before The operator expects the work over an infill campaign to add around 10,000 barrels of oil a day to gross production. Post our infill campaign, the King Deep infrastructure led exploration well was approximately 15,700 barrels of oil equivalent per day ahead of guidance due to lower than anticipated storm activity. At all jobs, the subsea pump project continues to make good progress and is expected online in mid-twenty 24 as planned.

Speaker 2

Kodiak production continues to perform in line with expectations and will be supported by the workovers scheduled for mid-twenty 24. On Winterfell, the partnership continues to make good progress. The rig arrives in the Q3 and we have successfully completed the first of the 3 wells, Post quarter end, we announced the discovery of the Tiberias well in Keithley Canyon, which I'll talk about in more detail later in the presentation. Turning to Slide 5. The start up of the Jubilee Southeast development has driven a material uplift in production at Jubilee.

Speaker 2

3 producers were brought online during the quarter, taking gross field production up to around 100,000 barrels of oil per day, a level not seen for several years. As I mentioned earlier, water injection rates in 3Q were lower than planned. This is partly due to lower uptime on the water injection pumps and partly due to the delay in bringing 2 water injection wells online, which we originally planned to start in 3Q. Post quarter end, we did bring these 2 water injection wells online And our ramping up water injections support the elevated levels of production. The partnership had previously assumed we would the drilling rig in Ghana in the Q4.

Speaker 2

This was to allow time to assess our initial 3 wells in Jubilee And hi, Greg, the next set of wells. However, given the success in our well selection drilling execution, we are now planning to accelerate an additional producer and water injector into the Q4 from 2024. This should allow for continued Jubilee production growth into 2024 It both was expected online early in the New Year. The acceleration of this activity results in an increase in 2023 CapEx of around $30,000,000 net to Kosmos. However, the expected returns are very high with quick payback.

Speaker 2

As a result of the lower water injection rates, the operator is now forecasting that Jubilee will produce around 85,000 barrels of oil per day gross for 2023, down from its previous estimate of 90,000. This decrease is driving our lower production guidance for the year and is expected to result in 1 less 2023 cargo from Jubilee than previously It is just a timing issue and our view of 2024 production is unchanged with a shortfall in 20 Whilst there are always challenges in bringing new projects online and optimizing overall field performance. We're excited about the future potential of Jubilee and are continuing to work well with the operator to Turning to Slide 6. This is a slide we've used over the years to provide a status update on the key work streams on the Tortue LNG project. On the hub terminal, construction is finished and handover to operations has been completed.

Speaker 2

Within the quarter, we also made important progress on the subsea work scope, which was previously on the critical path to First Gas. Following the performance issues with the previous pipe lay vessel, the subsea work has been recontracted. AllSeas and Saipem have now been brought in to finish the deepwater pipeline and the infill flow lines with work expected to start in early December and finished in the Q1 of 2024. On the FLNG, sail away of the vessel is expected later this quarter With arrival expected early next year, the partnership is currently working with Golar to identify ways to advance Commissioning of the vessel. The critical path to First Gas on Phase 1 of the Tortue project Please now through the arrival, hookup and commissioning of the FPSO.

Speaker 2

The delivery of first gas in the Q1 of 2024 As signaled by BP, the operator in its Q3 results last week depends on the execution of this work stream, which has the potential to slip into the Q2 of 2024. Turning to Slide 7. Beyond these key projects, we have been focused on defining the next set of growth projects for the company, targeting high quality advantage oil and gas Investment Opportunities with Operating Control. Today, Kosmos announced that it increased its interest and assumes operatorship The Yakutaranger fields in Senegal subject to customary government approvals. Yakutaranger is a world scale gas resource With approximately 25,000,000,000,000 cubic feet of gas in place and was the largest discovery in the world in 2017.

Speaker 2

It is advantaged gas with negligible CO2 located approximately 75 kilometers from the Dakar Peninsula, Enabling a low cost development. Kosmos' working interest in Yacatiranga will increase to 90% With Penthesen holding the remaining 10%. Our aim is for Penthesen to participate as an equal partner in the full value chain with a greater working interest. Cosmos is working with Petrocent and the government of Senegal on an innovative development solution, prioritizing cost competitive gas Senegal's rapidly growing domestic market combined with a floating LNG facility targeting exports into international markets. Petrocen's Director General stated in today's press release that Yako Taranga is a strategic project and supports the planned Senegal and Bergeon, which aims to provide affordable, abundant and cleaner energy for the country.

Speaker 2

Kosmos and Petrochem plan to evaluate partnership strategies With the objective of creating an aligned partnership possessing the necessary upstream and midstream expertise, Coupled with access to cost effective financing and access to international LNG markets. Turning to Slide 8. Last month, Kosmos announced a successful discovery at the Tiberias infrastructure led exploration well In the Gulf of Mexico, where Kosmos is operator and has a 33.34 percent interest alongside Oxy and Equinor. Siberius is a four way structural trap in the outboard Wilcox trend, which was drilled using the partnership's ocean bottom node seismic. This modern seismic technology generates an enhanced image of the prospect, which help refine the location of the exploration well and derisk the future development The image on the slide shows the Tiberias exploration well, which was drilled on the crest of the structure in the central Technology improvements like OBM Seismic are a game changer for the industry and allow us to have a much better understanding of the subsurface pre drill.

Speaker 2

The well discovered a net oil column around 2 50 feet. We were able to conduct an extensive logging program recovering multiple fluid samples and sidewalk calls. Initial analysis suggests a fluid quality similar to other nearby discoveries in the Wilcox trend. The fluid samples of course have been sent to the lab for analysis That will enable us to better understand permeability and viscosity, which are key to confirming well flow rates in a future development. We are now working with our partners on the planning of a phased development scheme, which targets first production in around 2 years.

Speaker 2

The preferred host platform would be the Oxy operated Lucius facility located 6 miles to the northwest of the discovery with key commercial terms of the production handling agreement agreed pre drill. Success at Tiberias validates our proven base and Infrastructure led exploration strategy targeting low cost, lower carbon, short cycle oil opportunities to complement our deep hopper of long dated lower carbon gas opportunities in West Africa. I'll now hand over to Neil to take you through the financials.

Speaker 3

Thanks, Andy. Turning to Slide 9. Production for the quarter was in line with guidance. Gulf of Mexico was slightly ahead of expectations, offsetting the lower than anticipated production from Jubilee that Andy talked about earlier. OpEx was in line with guidance and higher quarter on quarter As a result of the 110 cargo that we have in the year falling in the Q3.

Speaker 3

As a reminder, 10 OpEx, which is higher than the rest of the assets in the portfolio is recognized when we have the listing. The guidance slide in the appendix shows OpEx falling down to normalized levels in the 4th quarter. CapEx is at the higher end of our range. It did include the extensive success case evaluation program associated with Tiberias that Andy mentioned on the previous slide. Turning to Slide 10.

Speaker 3

During the Q3, we saw a continued improvement in our financial position With leverage lower as a result of both increased EBITDAX and reduced net debt. We repaid the Gulf of Mexico loan within the quarter, an important step towards simplifying the capital structure. Following the pay down of the GOM term loan and the RBL amendment in October, Kosmos has no scheduled debt maturities until 2025. We've talked about reaching a cash flow inflection point as production rises and With our floating debt more now more expensive than our fixed debt, we are prioritizing the RBL, which allows us to maintain and grow Available liquidity over time. We anticipate that we still have a couple of quarters of higher CapEx ahead of us, completing Tortue and Winterfell, After which, we expect debt reduction to accelerate as free cash flow ramps up meaningfully in the second half of next year.

Speaker 3

We continue to make good progress on our hedging targets for next year. In line with previous practice, we are looking to hedge around 50% of the following year's production, which allows us to fund the capital plan for the year. Using collar structures, we currently have around 1 third of next year's production hedged is included in the appendix. There are a few points I wanted to flag. Full year 'twenty three production guidance It's now expected to be approximately 63,000 barrels of oil equivalent per day due to the delayed start up of Jubilee Southeast and reduced water injection levels.

Speaker 3

We raised full year GOM production guidance due to the lack of storms. However, 4Q GOM production is lower than the 3rd quarter due to both planned and unplanned downtime, which is expected to be largely complete this month. We also now expect total CapEx for the year to be around $800,000,000 reflecting the accelerated drilling in Jubilee in the 4th quarter And the increased activity at Tiberias following the successful well results. We still expect to step down in CapEx into 24, particularly in the second half as we finish our capital spend of our 3 key projects. With that, I'll now hand it back to Andy to close today's presentation.

Speaker 2

Thanks, Neil. Turning to Slide 11 to conclude today's presentation. I started today's presentation talking about the importance of having So far in 2023, Kosmos has achieved multiple important milestones in the delivery of that strategy, which sets us up well for further delivery in 2024. Whilst I don't intend to dwell on all of the bullets on the slide, I want to focus on some key themes. Kosmos has a differentiated growth story, which we've started to deliver with the start up The Jubilee Southeast project in Ghana with more growth expected to come in 2024.

Speaker 2

We continue to progress our other development projects at Tortue and Winterfell, which are expected to drive another In 2024, we've talked to providing further portfolio diversification, both geographically and by adding a new multi decade LNG revenue stream once online. We are also expanding our medium to long term growth hopper with high quality operating investment opportunities across both Advantage Oil and Gas through Tiberias and Yacacharangah. And finally, As we deliver increased free cash flow, we will prioritize debt pay down until we reach our target leverage level, which is when we plan to look at shareholder returns. The Kosmos management team is excited by the future opportunities set in front of us energized with the growth in value for our shareholders. Thank you.

Speaker 2

I'm now like to turn the call Over to the operator to open the session for questions.

Operator

Thank you. At this time, we'll be conducting a question and answer It may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Matthew Smith with Bank of America. Please proceed with your question.

Speaker 4

Hi there, guys. Thanks very much. A few questions for me, if I could. The first one would be on Tortue CapEx. I think at the last earnings call, we noted that there was an element of uncertainty over the phasing and also, I guess, the amount of additional CapEx to be incurred from the new subsea contractor.

Speaker 4

I think if I heard correctly, you didn't sort of note that As a reason for the increased 2023 guidance, so should I take it that there might be some deferred CapEx from this change So that would be the first question. And the second one, if I could, on Tiberias. I appreciate there's further analysis to be done here. But are you able to just remind us of the pre drill resource estimate that you had there and where you feel like you may have come out versus that, if you're willing to comment? And then lastly, squeeze a third on, if that's okay.

Speaker 4

I haven't that's just whether you can add anything on Taught you Phase 2 at this point. And I suppose the question that some investors would ask is, is there anything that we should read across from BP and their exit from Senegal in terms of their enthusiasm on the expansion at Tortue, please? Thanks very much.

Speaker 2

Yes. Thanks, Matt. Why don't we split up the 3 questions? I'll let Neil talk about the Tortue CapEx. I'll pick up Tiberias and then talk about Phase Tortue Phase 2.

Speaker 3

Yes. So Matt, just on the Georgia CapEx, yes, we mentioned last quarter there'd be a re phasing due to the subsea. Our overall view for 2023 hasn't And some of the CapEx basically related to the Subsea that was supposed to be in sort of the Q2 and Q3 as rephased to the 4th quarter. And then ultimately, some of that slipped into 24. And so 23 is roughly the same.

Speaker 3

There is an additional Amount of capital versus what we originally planned, probably in the order of around $100,000,000 net for Tortue in the 'twenty four Time period.

Speaker 2

Okay. On Tiveris, Matt, We're really encouraged by the initial exploration well. As we talked about in the material, We targeted the central fault block, and we believe that we probably in that central fault block derisked around About a third of the potential that we have pre drill. In terms of its development, We did a pretty extensive logging program, which was part of the additional CapEx that So I think we've got really good set of sidewall cores, fluid samples, Which gives us encouragement around being able to move ahead quickly with the development. We've obviously got to get all that analysis back from the labs.

Speaker 2

But the interim, we've already kicked off actually the planning of The tieback to TELUSIUS, I think within a week actually after the discovery was announced, the team had already put out The bid documents to build the Subsea layout. So I'm actually quite pleased around the pace at which we're moving and the fact that we have with that initial fog block, A significant increment to production for Kosmos and we'd anticipate that coming on within a couple of years. So again, sort of good progress. And I think the sub The architects will be laid out. There'll be a single floor line initially, but with the addition of maybe 2, maybe 3 additional wells from the additional floor blocks That we showed in the material.

Speaker 2

On Tortue Phase 2, I think sort of Step back and actually sort of think about how it links in to Yako Turanga. I'm sure there'll be more questions around Yako Turanga. But We have a very distinctive growth portfolio in Kosmos of advantaged low cost gas Adjacent to Europe. And our objective now is to phase the development of that in a way where we can Not only grow, but return capital to our shareholders. The first step of that is the completion of Tortue Phase 1, obviously, we've given you the forward timeline for that.

Speaker 2

With control now of Yacachaturanga, I think we can then position that As the next building block in that sequence, and I would imagine that Tawshi Phase 2 could sit behind that. So we have a phased set of developments now where you're building out around, I don't know, 2,500,000 tons of LNG, But doing it in a way where there's control now with an operated project and doing it in a way where You're limiting the capital outlay so that you have a credible and manageable capital profile. So we're pleased at what the future looks like now and we believe this is an important source of value growth for shareholders.

Speaker 4

Perfect. Well, thanks very much.

Speaker 1

I'll pass it on.

Speaker 2

Great. Thanks, Matt.

Operator

Our next question comes from Charles Meade with Johnson Rice. Please proceed with your question.

Speaker 5

Good morning, Andy and Neil and the rest of the Cosmos team there. Any, I wonder if I can just can pick up maybe just about where you left off. You said you're sure there'd be more questions about And that's what I'd like to ask about. I guess there's 2 parts to this. One, can you just give us The bigger context of where JAKER TRYINGGA, How you chose to develop Tortue over Jakach Teranje first?

Speaker 5

And where Jakach Teranje kind of sits in the I guess, in the In your mind, as far as the is it number 2 after Tortue? And then also as part of that, And I recognize that different companies have different priorities and have different viewpoints, but how would you make the case For the value of Yaakar Taringa to Kosmos, for people looking at BP and saying, well, if BP just Walked away from this, why is it valuable?

Speaker 2

Yes. Thanks, Charles. All good questions. And maybe I start at the end and sort of Work back. You know, Yakitoranga is a A distinctive gas resource, it has low CO2 content.

Speaker 2

It is close to shore, 75 kilometers off The Dakar Peninsula. And from both a domestic and an LNG perspective, it has Strong market pull. There's a need to replace heavy fuel oil as a source of power in Senegal. And clearly, Senegal is one of the closest sources, new sources of LNG to Europe. So you then sort of say, well, okay, how does that fit with various company strategies?

Speaker 2

And I think the To me, we're at a point now in the life cycle of the energy transition where different companies are placing different bets. And I I suppose nothing was clearer on that than the 2 big announcements over the last couple of weeks here in the U. S. And I think that strategic context actually influences the way that people look at various investment opportunities. As I said, I think Kosmos believes that this gas is distinctive and is well described.

Speaker 2

You're well described. What do I mean by that? I mean that in Tortue, we drilled 4 exploration and appraisal wells And the DST that enabled us to calibrate the seismic that led to 4 successful development wells. It's a huge amount of subsurface data that's directly correlates to Yacatiranga where we have 3 So we believe we have a well described subsurface and are confident in its ability to deliver a very commercial project. We also believe there's a low cost Solution to development given the geographic situation close to The Dakar Peninsula.

Speaker 2

Now I would say that BP doesn't have the same view. And I think it's not ultimately, I think it heavily influenced it is ultimately heavily influenced by the strategic context of where they are allocating capital And their ability to envisage a commercial development. So I think this is a great We've inherited their share. We start at 90%. Our objective is for Paterson to build their share, so that they are an equal partner With ourselves and whoever comes in, we'd anticipate therefore 25% to maybe 33% shares.

Speaker 2

We've got work to do now on fully describing the concept that we laid out in the material. And we've got work to do to bring in a partner and underpin the financing. But with all of that done, This is an incredibly commercial opportunity, but it has to be done in a low cost way That fully leverages all of the subsurface knowledge. So that's the essence of maybe of the difference, but I see as Huge opportunity for the company. And look, as you know, it's not without precedent.

Speaker 2

So you're very familiar with the Gulf of Mexico. You go back to something like Shenandoah. I think 2 large companies gave it up, a smaller company now has it and is now executing a very competitive scale project now. So those things There's many presidents in the industry of that, and I think the energy transition has simply made those That

Speaker 5

is helpful elaboration, Andy. Thank you. And if I could go back to your prepared comments, you talked about the 2 additional wells you're going to drill At Jubilee and Jubilee Southeast, I just want to make sure I understood. So you guys were going to farm out the rig, but then you decided You've got these two wells. One's in Jubilee.

Speaker 5

If I understand right, one's in Jubilee, one's Jubilee Southeast. Does this Lead to a higher plateau or is this or is this or were these wells just going to more Reduce the volatility around that plateau in case you have some more of these water injection. Can you kind of frame it up for us what the Yes,

Speaker 2

it seems to be Yes. It's simply really around accelerate activity out of 2024 into 2023, which allows us to actually build towards The facility limit faster. So that additional water injection well is important because it allows us to Address some of the water injection issues that we've been experiencing. And then the second well is a producer, which would come on in 2024. Then we have an ongoing drilling program on Jubilee that we build with additional producers.

Speaker 2

So ultimately now, it's about building to the facilities limit in terms of well capacity, probably building slightly Beyond the facilities limits, so we have a degree of well capacity in reserve and then holding the field at that level. With accelerating capital out of 2024 into 2023 to allow us to build towards that facility limit faster.

Speaker 5

Got it. Thanks for the clarification.

Speaker 2

Great. Thanks, Charles.

Operator

Our next question is from Bob Brackett with by Bernstein Research. Please proceed with your question.

Speaker 5

Good morning. Acknowledging that you don't yet have the ground truth of Sidewall core data for Tiberius. Are the wireline porosities in line with what you expected pre drill? And the follow-up Related is, how do I think about the capital cost of developing Tiberias given that the host is sunk cost and given that

Speaker 2

Yes. Hi, Bob. Yes, it's always good questions. The product was Absolutely in line with expectations. Yes.

Speaker 2

So as you're well aware, the next step then is To do the lab work to actually confirm permeability rather than it be a read across from porosity And then to finalize the fluid data with viscosity, armed with all of that, we can then optimize the completion design. So yes, everything is in line with what we expected. It's in line with analogs that are from adjacent field. So far so good. And as I said to Matt, we're moving ahead With a really cost effective development plan with the tieback to Lucius.

Speaker 2

Yes. Neil just picked up on the capital of that.

Speaker 3

Yes. Just Bob, I think, yes, you're right in terms of yes, there's minimal infrastructure to be laid and therefore, It should be a

Speaker 2

very cost

Speaker 3

effective tieback program. And we did envision we developed it similar to how we've done Winifel and other projects in terms of its staged Phase development to where we have a single well EPS, to where we install a full line to the facility And then grow the development over time with more information from the well and the reservoir over time. So Yes. I think we've talked about the capacity sort of F and D in sort of $10 to $15 range generically. Yes, I think This would squarely fall in that range.

Speaker 1

Very clear. Thanks.

Speaker 2

Great. Thanks, Paul.

Operator

Our next question is from Neil Mehta with Goldman Sachs. Please proceed with your question.

Speaker 6

Good morning, team. Thanks for the update today. The first question I had was just around capital spending. Can you bridge us from your previous CapEx guide to the current one? And how much of that was project related versus And as you think about 2024, recognizing you don't have the full numbers, but how should we think about the fairway that we're You're able to provide that.

Speaker 2

Yes, great. I'll have Neil pick that up.

Speaker 3

Neil, so yes, on 23, I think the 2 biggest pieces were really around the Tortue acceleration that Andy talked That being $30,000,000 and about $20,000,000 of it was sort of the additional drilling that

Speaker 2

was in Ghana. The

Speaker 3

So the additional 2 wells, 1.5 wells in Ghana, at Jubilee, there's $30,000,000 on that and then the $20,000,000 It's really additional drilling at Tiberias post the success and the extensive sort of logging campaign. So that sort of took us from sort of we were trending towards the high end of the range That basically moved us from 750 to 800. So that's kind of the acceleration of that sort of what we call value adding activity into 2023. If I look sort of going forward, I think we've talked about sort of a normalized CapEx, right, post our 3 big projects, Call it, dollars 3,000,000 to $350,000,000 of maintenance and $250,000,000 to $250,000,000 of growth, which sort of gets you around $550,000,000 of steady state at CapEx for the company. 2024 is a bit of a transition year because we saw the completion of Tortue and Winterfell, the residual CapEx related Those as well as sort of the sort of steady state CapEx.

Speaker 3

So again, we haven't given a 24 guidance yet. We'll do that in February. But that's 24 will fall in between the 2, where we are sort of this year and then sort of the steady state level as we finish those 2 key projects.

Speaker 6

Thank you, Neil. Thanks, Andy. The follow-up is just around Phase 1. And maybe you can get us A little bit more clarity around the work stream that you highlighted, which has the potential to slip into the Q2, but as of now, You're still on track for 1st gas in the Q1 of 2024. Can you get us into the field and give us more granularity, so we understand What specifically you're talking about?

Speaker 2

Yes, sure, Neil. Yes, if you sort of go through The key work streams, we've talked about the hub terminals sort of being finished, handed over to operations. That was a big milestone in the quarter. You then look at the FLNG vessel, which will obviously be moored in the hub terminal. That leaves Singapore around the in this quarter And it will get to site at the beginning of next year.

Speaker 2

So sort of not sitting on the critical path. The big breakthrough in the quarter was around getting all the subsea architecture finished, We are recontracting with All Seasons and Saipem. That work starts early next month And we have a clear program to complete in the Q1. So feel good about that. The piece that we have the issue we're At the moment, it's just around the FPSO.

Speaker 2

It's actually an issue that's sort of external to the vessel. The vessel has fair leads on it. The fair leads are used in the permanent anchoring of the vessel on location. They have a seat fastening and in the voyage across To the East Coast of Africa, those sea fast things were damaged. The boats currently sitting offshore at Durban at the moment.

Speaker 2

We're looking to get access to the port in Durban. So that work To address the issue with the fairlead can be conducted. So that's the thing where there's a little bit of sort of uncertainty in the timing. So not a big issue, but it's sort of it is a very singular issue that we're working. All that Seth, there's work ongoing on the FPSO itself and all the top side, so we can get on with work To do with the pre commissioning, so when it does arrive on-site, that work stream is shortened, yes.

Speaker 2

So look, like with all big projects, It is about the integration of the pieces. We're clearly getting closer and I actually felt good about the progress we made in 3Q. And we've got significant milestones now to hit in the remainder of this quarter and into the Q1 of next year. And the one that we're obviously intensely focused on with the operator with BP is to make sure that we get the FPSO on location, So that we can deliver 1st gas. So that's the color as it were behind the update.

Speaker 6

That's great. Thanks guys.

Speaker 2

Great. Thanks.

Operator

Our next question is from Mark Wilson with Jefferies. Please proceed with your question.

Speaker 7

Okay. Thanks, gents. And thanks for the color on the FPSO there. I was going to ask you about that journey. So that's clear.

Speaker 7

So yes, let's go to Yaakar Tarangi, you've actually outlined a very specific development concept in the press release today, 550,000,000 cubic feet a day With piped gas domestic and export via FLNG. And I think, Andy, you mentioned An FLNG vessel of a similar size to Tortue. That's what I want to check is what would be the split of that gas? How much does Senegal required domestically and therefore how much would be left to export? And you mentioned bringing in a partner.

Speaker 7

I guess that is a definitive requirement to move forward. And what sort of final Percentage stake would you envisage taking in such a development? Thank you.

Speaker 2

Okay. Yes, right. Good questions, Mark. Yes, so I think I think sort of covered earlier, but just sort of I think that it is a well described development scheme. I think I hope you get a sense from that We've been obviously been working closely with Petrosan in the development of that and a scheme that clearly It is competitive, commercially attractive, but meets the country's own development goals, which were around the domestic gas supply And the ability then to create additional revenue through LNG export.

Speaker 2

If you look at the split, It's around 150,000,000 standard cubic feet a day into the domestic gas. And as it were that, initially, probably there won't be the full power capacity to take that, but that will grow through time. Again, a steady state, we would be looking at an LNG scheme, which is about 2,500,000 to 3,000,000 tons, yes, which sort of takes you to a gas supply of 400,000,000 to 500,000,000 standard cubic feet, yes. So that gives you an idea of the scheme and therefore the number of wells that will be required. The well potential is very Similar to GTA.

Speaker 2

And I think, and sort of therefore, sort of linking back to the question, sort of why Why is VP not involved? This is a scheme that we developed in collaboration with And then ultimately, the decision by VP not to participate has allowed us to move forward with that. So as they step back, They're going to focus on getting Phase 1 of GTA finished and that creates us the opportunity to work this. So I think the scheme is sort of clear. In terms of working percentages, we typically have 25% to 33% In our current projects, I've envisaged the same.

Speaker 2

The objective is for Petrocell to step up To an equivalent share to other parties that would come in, if it's 2, it's maybe we are 25% there at 25%. If it's just one party coming, maybe we're a third, a third, a third. So it's that sort of shape. And to get there, we've got work to do now to bring in the partnership. That is a gating item for both ourselves Patroshan and secure the necessary financing to enable Patroshan to move forward.

Speaker 2

So you have lots to do on it, but it is a project which I believe has the full support of the government, As a very clear development concept and a very cost competitive proposal, now there's work to do to bring all of that

Speaker 7

Okay. Thank you for that. And on that development concept, can we just push it a little bit Harder on it. So Tortue, for instance, there's a very large breakwater being built and a lot of the Phase 1 was sized With a view to a follow on Phase 2 FLNG being added, could you explain what's Different in terms of Yacar Taranga, maybe in terms of its location offshore that might make it An easier or quicker development

Speaker 1

in its initial phase?

Speaker 2

Yes. No, again, Good piece of color, Mark. Yes. I suppose the way to describe is we don't envisage building a breakwater. We believe that there is a design to enable an FLNG vessel To be located on location there, different met ocean conditions, so that you don't have the significant cost So building a breakwater.

Speaker 2

So I think that it is about being innovative around the development solution that we've talked about. And we believe that we've done significant work and we have done significant work to enable us to be able to progress that concept.

Speaker 5

Okay. That's great. And sorry, I've just got one more.

Speaker 7

I just want to confirm, so bring in Jubilee now additional producer injector Before year end, but it's still the plan for that rig to continue in 2024 with a 3 to 4 well annual program. I That's been talked about before by the operator.

Speaker 2

Yes. No, you're right, Mark, in concept that's the proposal. So About half of it here, I would say, on Jubilee in 2024. And again, I think it was Charles' Question around the objective is to build the well capacity, so that we've got the total reserve capacity beyond the Beyond the facilities limit and together with reliable water injection, you then have the ability to sort of Hold the plateau at that level. And then, clearly, you then follow-up with additional wells as that well But so we're on a good track now to sort of continue to move forward with Jubilee As we have those wells and fundamentally underpin the new wells with reliable water injection.

Speaker 2

And so the increase in Jubilee is well described in terms of the forward activity set.

Speaker 7

Okay. Appreciate it. I'll hand it over.

Speaker 2

Great. Thanks.

Operator

Our next question comes from Stella Gridge with Barclays. Please proceed with your question.

Speaker 8

Hi, there. Afternoon, all many thanks for all the updates. And I want to ask on 3 things, please. And the first, just a tidying up question on Yako Turanga. Do you actually have to pay any consideration to BP For the additional stake, that would be the first one.

Speaker 8

The second, on the 10 gas development, I did see a figure in the press about potential cost of this. I just wondered if you would be able to comment directly about what CapEx you see there and how you would fund the Kosmos share? And then finally, do you have any updates on the Ghana tax situation? That would be great. Thanks.

Speaker 2

All right. I'll sort of go back those in reverse order. As regards to Kosmos, we have no ongoing dialogue with the GRA, which is the Ghanaian Tax Authority Regarding any tax issues. On 10, the I think the newspaper article talked about A $1,300,000,000 development, which would cover the full development of the next phase of the 10 POD. We would our share would be 20% of that and clearly that spend would be We'll spend through potentially 24, 5, etcetera.

Speaker 2

So, but we're still waiting for Progress with the government of Ghana in terms of that spend. So we don't yet Have any firm timing for that? And then on Yakatiranga, there was no consideration paid to BP.

Speaker 8

That's great. Thanks. And so you mentioned you don't have any ongoing dialogue with the government. Do you mean There is no tax claim anymore or the tax claim is still there, but there's just been no discussion about it?

Speaker 2

We have no tax claim.

Speaker 8

Right. Okay. Thanks for the clarification on that. Was there any particular reason that was dropped or?

Speaker 2

I don't think there's no with regard to ourselves versus other parties, there was never a tax Claim against? Never a dispute. Never a dispute.

Speaker 3

Yes. The

Speaker 8

Okay.

Speaker 3

Yes. Every partnership is different. We've never had any formal dispute with the GRA. We obviously have ongoing discussions with them, but we don't have any claims, but we're working through it.

Speaker 8

Okay. All right, many thanks for that.

Speaker 2

Great. Thank you.

Operator

As there are no further questions at this time, I'd 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

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Earnings Conference Call
Kosmos Energy Q3 2023
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