Kosmos Energy Ltd. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Operational Momentum: Made progress with Winterfell first production, Kodiak and Odd Job projects performing well, Equatorial Guinea infill drilling, and GTA nearing startup.
• Financial Resilience: Extended debt maturities, enhanced liquidity, simplified capital structure, and active rolling hedging program to manage price volatility.
• CapEx Plans: CapEx expected ~$800 million for 2024, with Q4 CapEx ~$100 million. Prioritizing free cash flow in 2025, focusing maintenance CapEx on drilling at Jubilee and Winterfell, and being disciplined in allocating capital to growth opportunities.

Segment Performance

• Gulf of Mexico: In Q3, Winterfell achieved first production, Kodiak and Odd Job projects performed well. Current production is around 20,000 barrels of oil equivalent per day net to Kosmos.
• Jubilee: Gross production in Q3 was around 87,600 barrels of oil per day, YTD just under 90,000 barrels of oil per day. Voidage replacement was ~90% due to lower generator uptime for water injection pumps, but water injection restored to ~300,000 barrels of water per day. A 4D seismic survey over the Jubilee field started in early 2025.
• TEN: Gross oil production in Q3 was 18,500 barrels of oil per day, YTD 18,800 barrels of oil per day, FPSO uptime remained high at ~99%.
• Equatorial Guinea: Gross production averaged ~23,000 barrels of oil per day in Q3. Infill drilling campaign underway, first well online, second expected later this month. Akeng Deep ILX well to spud imminently.
• GTA (Mauritania and Senegal): Significant progress towards startup, LNG cargo brought in, FPSO near handover to BP operations, first LNG expected end of quarter.

Guidance

• Production: Q3 production 65,400 barrels of oil equivalent, up 5% QoQ but at bottom of guidance range due to Equatorial Guinea infill well delay and slightly lower Jubilee production, partially offset by higher Gulf of Mexico production.
• CapEx: Expected ~$800 million for 2024, with Q4 CapEx ~$100 million. Plan to prioritize free cash flow in 2025, with disciplined capital allocation to growth opportunities.
• GTA: First LNG expected end of Q3, with start of production recognition then.

Risks

• Voidage Replacement: Lower than target in Jubilee due to lower generator uptime for water injection pumps.
• Project Delays: Equatorial Guinea infill well online later than planned.
• Market Volatility: Impact of oil price volatility on cash flow, as highlighted in the hedging discussion.

Question and Answer

• Q: Charles Meade asks about 2025 CapEx outlook and Tiberius deferral.

A: Andy Inglis responds that 2025 CapEx focus is on free cash flow, with Tiberius deferral being the primary delta, shifting growth CapEx by about a year without damaging growth options.

• Q: Bob Brackett asks about Akeng Deep implications for 2025 capital and Tiberius farm down.

A: Andy Inglis states Akeng Deep success will impact '26 forward, and Tiberius farm down process is ongoing with alignment on development plan.

• Q: Matthew Smith asks about Tortue commissioning and commercial agreement with BP.

A: Andy Inglis clarifies commissioning process acceleration, with BP lifting cargoes during the six-month period and price differences during commissioning versus long-term.

• Q: Mark Wilson asks about U.S. Gulf of Mexico production and '25 drilling.

A: Andy Inglis says current production ~20,000 bbls/day without restarted Winterfell wells, and '25 drilling priorities include maintaining and growing production with insights from 4D seismic.

• Q: Neil Mehta asks about 90,000 boe/day target and GTA impact on 2025 OpEx.

A: Andy Inglis discusses production targeting and Neal Shah mentions GTA OpEx normalization to ~$2 per Mcf once production starts, with Q4 spend including one-off pre-commissioning items.

• Q: Stella Cridge asks about Tortue Q4 OpEx breakdown and leaseback refinancing.

A: Neal Shah and Andy Inglis explain Q4 OpEx includes pre-commissioning cargo and BP handover costs, with leaseback refinancing to reduce OpEx once completed.