Kosmos Energy Ltd. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Cash Generation Focus: Prioritizing cash generation via increasing production and lowering costs. GTA production ramping, Ghana drilling planned, and Gulf of America work ongoing.
• Cost Control: CapEx down over 50% YOY in 1Q 2025 ($86M vs. $286M same quarter 2024). Target to reduce annual overhead by $25M by year-end, with progress made by April.
• Financial Resilience: Refinanced and upsized reserve-based lending facility, rolling hedging program in place, minimal near-term maturities, and ample liquidity. Portfolio assets have low breakevens.
• Project Progress: GTA first cargo exported, 4 FLNG trains operational; Ghana 4D seismic and FPSO shutdown completed; Gulf of America Winterfell 4 well drilling underway; Equatorial Guinea seismic reprocessing ongoing.

Segment Performance

• Mauritania and Senegal (GTA project): First cargo exported, all 4 FLNG liquefaction trains operational with production ramping toward 2.45 million tonnes per annum. Full year gross cargo guidance remains 20-25 cargo, with condensate export expected in H2 2025. Costs targeted for reduction, including FPSO refinancing and exploring alternative operating models.
• Ghana: Drilling rig arriving this month with 2 Jubilee wells planned in 2025 and 4 in 2026. Completed new 4D seismic survey and Jubilee FPSO shutdown. Enhanced 4D image and AI-supported optimization aim to improve reservoir management.
• Gulf of America: Drilling Winterfell 4 well, expected online in Q3. Tiberius working on lower cost development plan with new OBN seismic, aiming to bring in partner ahead of project sanction.
• Equatorial Guinea: Production steady at ~9,000 bbls/day net. Focus on well work and seismic reprocessing to high-grade infill drilling potential.

Guidance

• GTA Cargo: Full year gross cargo guidance unchanged at 20-25 cargo. 2Q production expected 15% higher than 1Q due to GTA ramp-up.
• CapEx: Target $400M or lower for full year. 1Q CapEx $86M, down over 50% YOY.
• Hedging: ~40% of 2025 oil production hedged with floor ~$65/bbl and ceiling ~$80/bbl.

Risks

• Market Volatility: Impact on production, costs, and commodity prices affecting cash flow.
• Execution Uncertainty: Risks related to drilling progress, project upgrades (e.g., GTA facility modifications), and seismic reprocessing outcomes.
• Commodity Price Fluctuations: Potential impact on breakevens and free cash flow generation.

Question and Answer

• Q: David Round on GTA nameplate capacity test and breakevens A: Nameplate capacity test ongoing, expected to complete in 2Q. Breakeven target ~$50/bbl Brent in low price environment, with high returns from Jubilee infill wells.
• Q: Lydia Gould on credit, balance sheet, leverage A: Focus on generating free cash to pay down debt, maintaining liquidity, and leveraging unencumbered assets (e.g., Gulf of America, Mauritania/Senegal) for financing if needed.
• Q: Bob Brackett on Tiberius and Gulf of Mexico policy A: Tiberius development uses OBN seismic for lower cost optimization, with no immediate policy-driven changes in Gulf of Mexico.
• Q: Matthew Smith on Phase 1+ CapEx and Senegal/Mauritania monetization A: Phase 1+ CapEx not committed yet, with focus on low-cost front-end work. Monetization depends on fully describing GTA potential before dilution.
• Q: Stella Cridge on Ghana meeting and receivables A: Positive meeting with Ghana President Mahama, aligned agenda on maximizing Jubilee recovery. Cash outflow from receivables in 1Q related to NOC financing, with potential inflows as infrastructure builds.
• Q: Nikhil Bhat on LNG offtake agreement with BP A: Annual contract quantity 2.45 million tonnes per annum, price 0.95% slope against Brent FOB.
• Q: Mark Wilson on Tortue subsurface and domestic offtake A: Subsurface performance ahead of expectations with greater volume connection than mapped. Domestic offtake infrastructure built by NOC, no capital liability for Kosmos.