Kosmos Energy Ltd.

Good day, everyone. Welcome to Cosmos Energy's first quarter 2021 conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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 Cosmos Energy.

Thank you, Daryl, and thanks to everyone for joining us today. This morning, we issued our first quarter 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. Actual results and outcomes could differ materially due to factors we note in this presentation and in our UK and SEC filings. Please refer to our annual report, stock exchange announcement, and SEC filings for more details. These documents are available on our website. And at this time, I will turn the call over to Andy.

Thanks, Jamie, and good morning and afternoon to everyone. Today, almost to the day, marks the 10-year anniversary of Cosmos' IPO on the New York Stock Exchange. The official birthday is tomorrow. So I want to start the call with a look back at how far the company has come over those 10 years and also look forward to where we expect the company to head over the next decade. I'll then talk about the operational highlights for the quarter. review our upcoming appraisal and infrastructure-led exploration activity before handing over to Neil to discuss the 1Q financials and the balance sheet. Starting on slide two, in 2011, at the time of the NYSE listing, Cosmos was a successful frontier explorer. The company's operations were centered around Ghana with production from a single FPSO at Jubilee. Oil prices averaged $111 per barrel that year, and consensus was there wasn't enough supply to meet growing future oil demand. Full-year production in 2011 was just 16,000 barrels of oil per day, and Cosmos had net 2 pre-reserves of around 70 million barrels, almost all of which was oil. Over the last 10 years, Cosmos has successfully transformed from a frontier oil explorer to a full-cycle E&P. We've brought online the 10 fields in Ghana, discovered multiple giant gas fields in Mauritania and Senegal, and have since taken FID on Phase 1 of the Tortue LNG project. We have diversified our production and added ILX opportunities with value accretive acquisitions in Equatorial Guinea and the U.S. Gulf of Mexico. And last year, we monetized our longer-dated frontier exploration assets. Over that time, production also nearly quadrupled and our reserve base increased around sevenfold to where we are today. While we've grown the business and adapted the strategy to meet the rapidly evolving world around us, one characteristic that hasn't changed is our commitment to corporate responsibility and our dedication to supporting the economic and social development of our host countries. Around the time of our listing, Cosmos set out to improve transparency across the oil and gas industry by publishing all of our petroleum contracts online. To this day, we believe we are still the only U.S. oil and gas company to do this. To enhance the society's In which we work, we set up the award-winning Cosmos Innovation Centre in Ghana, which later expanded into several other countries in West Africa. The Cosmos Innovation Centre invests in promising young entrepreneurs and small businesses to bring lasting benefits to the host countries and contributes to the creation of healthier and more diverse economies. In recent years, we have increased our commitment to the environment integrating the impact of climate change into our strategic business decisions, shaping our portfolio to be fit and relevant for the future, and setting a goal of carbon neutrality in our Scope 1 and Scope 2 emissions by 2030 or sooner. As we look at the company today, Cosmos is an oil-focused full-cycle exploration and production company with production from three separate hubs, a world-scale LNG development, a deep hop for proven base and ILX opportunities. We've created a strong platform which we believe will allow us to successfully navigate the next 10 years with defined high-quality projects in our current portfolio to further grow and diversify production. Over the next several years, we believe we have line of sight to grow organic production to around 100,000 barrels of oil equivalent, with potential options to supplement that further with compelling value-enhancing inorganic opportunities. In 2023, we expect first gas from Torchy Phase 1, with the second phase planned to come online the middle of this decade. This significant ramp-up in company production is expected to make Mauritania and Senegal a major production hub for Cosmos, with the gas weighting of our portfolio increasing considerably. All credible scenarios by leading analysts, from economists to financial advisors to scientists, have modeled a pathway to 2050 with a significant proportion of natural gas in the energy supply mix. It's our view that the world cannot achieve the Paris goals and let millions of people out of poverty in a developing world through a just transition without natural gas playing a major role. With our growth in natural gas and a firm commitment to emissions reduction, COSMOS is playing its part towards the Paris goals. We are already making good progress towards those goals with our measure-reduce-mitigate approach to emissions and our investment in high-quality nature-based carbon capture projects in Ghana and the U.S. This consistent agenda to tackle climate as part of our broader commitment to advancing our ESG responsibilities has been a major part of Cosmos' business over the last 10 years. With a portfolio of advantage assets, we expect to remain well positioned to further drive that agenda over the next 10 years. Turning to slide 3. I spoke at our 4Q results in February about the operational momentum that we expect to see return in 2021. We've made a strong start to the year and this slide shows the progress we've made across the portfolio in the first quarter. On production, we planned to drill nine infill wells in 2021, three times as many as we drilled in 2020. This activity has started in line with our 2021 work plan, with infill wells already drilled in Ghana and the Gulf of Mexico, and our second well in Ghana currently drilling. In Equestrian Guinea, our production enhancement activities for this year have started successfully. We expect to shortly begin our initial infill drilling campaign of three development wells, with the rigs scheduled to arrive at the end of this quarter. On development, Phase 1 of the Tortue LNG project is continuing to advance, with 58% complete at the end of the first quarter. On the FDSO sale and leaseback, the documentation has been finalised and the government approval process is well underway, with the transaction expected to close this quarter as previously guided. On expiration, we started the year with success at Winterfell in the Gulf of Mexico and partners have fast-tracked an appraisal program with an appraisal while expected in the third quarter. We're also planning to drill the Zora ILX while in 3Q. More on this shortly. On financing, late February, we successfully completed a high-yield bond offering, and this morning we announced the completion of our RBL extension in conjunction with our spring redetermination. These transactions have collectively strengthened the balance sheet, increased liquidity, and pushed out all near-term debt maturities. Having started the year strongly, we remain on track for the full year to deliver between $100 and $200 million of free cash flow from the base business at $55 per barrel Brent. Slide 4 looks at the ramp-up in activity across our three production hubs in more detail. In Ghana, we continue to work closely with the operator to enhance facility performance and drive higher reliability, and we're making good progress. FDSO uptime in Wonkyu was 98% at Jubilee and 99% at TEN, carrying on the momentum from the second half of 2020. Water injection at Jubilee, which is helping provide reservoir support, is now at levels not seen since 2012. Gas offtake of approximately 110 million standard cubic feet per day from Jubilee in 10 is around double the 2019 level, and there is scope for this to increase further. Greater gas offtake means less gas being injected into the reservoir. Combined with improved water injection, this is expected to have a positive impact on the GOR at Jubilee, which should mitigate decline from existing wells. The Karam Abuia Jubilee was commissioned in the first quarter, removing the need for shuttle tankers, which reduces OPEX and streamlines our operations. As I mentioned in my opening remarks, we're back to drilling in Ghana and have just finished drilling a producer well at Jubilee. This is the first well drilled on Jubilee since 2019. It came in as planned and is the first of four wells planned in Ghana this year. The rig has now moved to drill a water injection well at Jubilee, after which it's expected to complete both wells, increasing Jubilee production by an estimated 15,000 to 20,000 barrels of oil per day gross, which should continue to drive our production higher. In 3Q, after initial two wells, the partnership plans to drill and complete a 10 gas injector well before drilling and completing a third Jubilee well in 4Q, which is expected online around year-end. In Exxon Guinea, we've been active 1Q with a QME upgrade project nearing completion, adding additional power, water injection and gas lift capacity necessary for further facilities, de-bottling and additional ESPs. In April, we completed the first of three ESPs for 2020, won and upgraded the G19 flowline, which has significantly enhanced production from that well. We've contacted a rig for our upcoming drilling campaign and is expected to arrive in-country later this quarter. The three planned wells this year will be the first infill wells drilled in Equatorial Guinea since 2015. In the U.S., Gulf of Mexico, Kodiak 2 was brought back online late in 1Q after a successful remediation of the subsea infrastructure issue identified in the fourth quarter of 2020. The Kodiak 3 well came online last month, and we plan to drill the Tornado 5 in full well this quarter, with production expected in 3Q. Cosmos delivered approximately 53,000 barrels of oil equivalent per day for the first quarter, in line with guidance, and our production activities remain on track to hit a year-end exit rate of 60,000 barrels of oil equivalent per day. Turning to slide 5, the momentum we've seen in one queue across our production activities is matched in our development projects. Torture Phase 1 ended the first quarter around 58% complete, with strong progress across all of the major work streams, which can be seen on the images on the slide. The top image is the FPSO, where the hole was launched last month. The bottom image shows the progress being made on the breakwater. Five cases are complete, with work ongoing on the next two. And in April, the first case on offloading took place. The full caisson construction process through to offloading has all gone to plan and the offloaded caisson is now in wet storage ahead of transit to the final breakwater location later this year. This is an exciting time for the project as the infrastructure starts to move offshore. Overall, we're making good progress and Phase 1 is expected to be around 80% complete at year end. On the FDSO sale and leaseback, documentation is being finalized and the government approval process is well underway. Late last month, the energy ministers from both countries held a joint meeting on the project where they endorsed the FDSO financing, continuing the strong and consistent support by both countries for the project. As a result, we feel good about where we are and as previously communicated, we're made on track for a 2Q completion. Turning to slide 6. We talked in February about the ILX success we had with Winterfell in the Gulf of Mexico at the beginning of the year. Winterfell is a Miocene subsoil discovery found in a trap type common in the Gulf of Mexico. The exploration well tested two reservoir sections in a single fault block and the seismic response has now been calibrated with the well data. The Winterfell discovery derives more than 100 million barrels of gross resource potential across Cosmos' acreage position across multiple fault blocks and reservoir section. Over the last quarter, the partnership has been working on a fast-track appraisal plan, expected to begin in 3Q with an appraisal well. This well is designed to test the fault blocks to the north-west of the discovery, which is the same seismic signature as Winterfell. The well is also expected to test a deeper horizon with an exploration tail, which can be seen on the seismic cross section on the bottom image of this slide. We believe that with a successful appraisal well, we have discovered more than sufficient resource potential in the core development area to underpin a development decision. We anticipate the development will likely be phased with up to three potential drill centres. This discovery, located in an infrastructure-rich part of the Gulf of Mexico, provides the potential to develop a highly economic, low-carbon project. Turning to slide 7, which looks at Zora, our next potential ILX hub. Zora is planned to be the first exploration well in another mini-basin. The initial prospect, Zora, is a super-solid miocene target. in the same play as nearby analogous producing fields such as Oddjob, Horn Mountain and Marmalade. Cosmos will operate the well with a planned working interest of 37.5%. We have received all of our permits and the rig has been contracted with drilling planned in 3Q. As you can see from the map on the slide, the Zora crossfade is near host facilities which can facilitate a low cost and lower carbon development in the event of success. The image also shows that Zora sits near several other prospects where Cosmos has built a material interest. We believe that a successful Zora well will lower the risk of these nearby opportunities, thus providing the potential to create a new production hub with around 200 million barrels of gross resource potential in total. With that, I'll hand over to Neil to take you through the financials on slide 8.

Thanks, Andy. Good morning and good afternoon to everyone. Flight 8 shows the financial results for the quarter, which were in line with our previous guidance. As previously anticipated, production was down year on year, largely due to the lack of drilling activity in response to the pandemic. Drilling activity is ramping up back quickly in 2021, and we expect to see these declines reversed as new wells come online in Ghana, Equatorial Guinea, and the Gulf of Mexico. The realized price in 1Q, which had been adjusted for derivatives and cash settlements, is slightly lower than at this time last year, reflecting the hedges we have put in place that catch some of the oil price upside within the quarter. Importantly, the lower per barrel realization also reflects the lower sales volumes in 1Q, a result of our lifting schedule in Ghana and Equatorial Guinea. We only lifted 1.5 out of 12.5 cargoes expected in 2021 in the first quarter. This, combined with our spend in Mauritania-Senegal and working capital movement, resulted in negative free cash flow in the quarter. As cargo timing evens out over the rest of the year and we lift more volume than entitled, we would expect the opposite effect, improving realizations as well as free cash flow. In addition, as we complete the FPSO and NOC financing for Mauritania and Senegal, we expect there will be a net cash inflow in Mauritania and Senegal for the balance of the year. We worked hard in 2020 to drive down costs to make Cosmos a leaner organization, and this can be seen across the OPEX, expiration expense, interest, and CAPEX lines on this slide. We have provided second quarter guidance in the appendix to the slide pack, and our full year guidance remains unchanged. Turning now to slide nine, we have taken big steps this year to further strengthen the balance sheet in our liquidity position. In late February, we successfully completed a $450 million senior dose offering to reduce outstanding balances on the credit facilities and for working capital. This morning, we announced the extension of our RBL facility along with the spring redetermination. The facility maturity was pushed out two years, with final maturity now in 2027, and we agreed a borrowing base with the banks of $1.24 billion, with $1 billion currently drawn on the facility. We have reduced the facility size to $1.25 billion from $1.5 billion to reduce our liquidity reliance on the RBL facility as planned. The two charts on the slide show the debt maturity profile at year end compared to the end of the first quarter, adjusted for the RBL extension and the second quarter RCF repayment. As you can see, we have taken important steps to address the maturity schedule early and clear all material near-term debt maturity. At the end of the first quarter, the company had approximately $0.8 billion of liquidity. With the maturity schedule largely addressed, we remain focused on reducing the absolute amount of debt and leverage through pay down of debt from free cash flow. We expect leverage to fall rapidly from 2Q and throughout the year as cargo timings normalize and hedges roll off. We are forecasting 4.5 cargoes in the second quarter from Ghana and Equatorial Guinea, which is three times higher than the 1.5 cargoes from the two production hubs in the first quarter. With that, I'll hand back to Andy to wrap up on slide 10.

Thanks Neil. So to summarise, we've made a strong start to the year, executing our planned activity in the quarter on schedule with momentum building across the portfolio. Production is expected to increase through the year with nine infill wells across our three production hubs. Tortue Phase 1 remains on track to be around 80% complete by year end, with the FBSO Salem leaseback expected to close this quarter. We plan to drill the first Winterfell appraisal well and the Zora ALX well in the third quarter to deliver near-term production growth that is low cost and lower carbon. And finally, on finance, having completed the bond and the RBL financing, we will now kick off the work stream to refinance the Mauritania and Senegal NRC loans and expect that to complete in the second half of the year. With all of that, we're firmly on track to hit our year-end exit production rate target of 60,000 barrels of oil equivalent per day, remain on track to generate $100 to $200 million of free cash flow from the base business at $55 per barrel Brent. Thank you, and I'd now like to hand the call over to the operator to open the session for questions.

Thank you. We will now be conducting the question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation phone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line with James Hosey with Barclays. Please proceed with your question.

Hi, thanks, Andy and Neil. A couple of questions from me. First off, you've retained your 2021 base business free cash flow guidance to $100 to $200 million at 55 rent. Can you give us some indication of the sensitivity to prices currently being about $10 higher, if not more? and also there was a $95 million working capital outflow in the quarter. Should we expect that to reverse for the remainder of the year? And then in Ghana, with the resumed drilling on Jubilee and increased production late for the year, when do you expect the Ghana partnership to make a decision on the contract and a second drilling rig?

Okay, yeah, hey, thanks, James. We'll do those in reverse order. I'll take the Ghana question and then just pass over to Neil for the price sensitivity and the working capital shift. Yeah, I think in Ghana we're actually sort of in the midst of our planning process with partners at the moment. It's part of our normal sort of mid-year review that then flows through to the approval of the work programs and budgets for 2022. So I think that's actually going to be a 3Q decision. What I would add as a backdrop to it, though, is that we clearly see a significant set of opportunities both in Jubilee and TEN. I think it's good that we've got off to a good start, actually, on the drilling program for this year. We started on schedule, and we've actually got the first well drilled absolutely on time. So I think that strong start then actually sort of builds the momentum for and supports the conversation for additional drilling capacity in next year. So I think, you know, sort of two points for the debate with partners will be around, you know, the depth of the portfolio, which is strong, and the quality of the performance, and we've got off to a good start.

Okay, and James, on your first two questions, in terms of Free cash flow around it, I think the best way to think about it is around every $5 change in the oil price is about an extra $30 or $35 million to free cash flow. Sensitivity for 21, and that's really taking account of the current hedge position as well. Normally, you'd expect that to be larger, except we have kept some of the oil price upside through the existing hedging. On your second question, as far as working capital goes, there's a couple of key components driving that. One of those is clearly the underlift within the quarter. We're continuing to pay jibs on a monthly basis, and you only recognize once you've sold the oil volume. As I mentioned as a oil cargo timing sort of evens out over the rest of the year, we'll recognize that, and the working capital position for that component will reverse. There are some typical sort of 1Q outflows that normalize over the course of the year, and then there is a piece in there related to Mauritania-Senegal. And so I would expect largely most, if not most of that, to reverse over the course of the year.

Okay, thanks very much. Just to follow up on Andy, on the second drilling rig, should we think of that as being a second rig dedicated to Ken with one of the other rigs in Jubilee, or is there more kind of flexibility around it than that?

Yeah, look, there's more flexibility around it than that, James. Obviously, we want to make sure that we're efficient in terms of the way in which we deploy the assets. So I think that's a conversation that's still... still ongoing in the partnership. And then clearly what we need to do is ensure that we're high grading the drilling opportunities to drill the best wells first. So I think, you know, you will see a larger activity set on 10. And so, you know, how we optimize that sort of rig timing and then the rig deployment is just part of that process of taking the deep inventory of opportunities and making sure we're doing the best wells first.

Very good. Thank you.

Right, thanks, Dan.

Thank you. Our next question has come from the line of Charles Meath with Johnson Wright. Please proceed with your question.

Good morning, Andy and Neil. Good morning. I wanted to ask first about the elevation of Tim Nicholson and John Shonnell to the Lead Your Exploration program. Can you Can you give us a sense of what, if anything, we're going to see different from Cosmos, whether in the kinds of things you're pursuing or the way in which you pursue them? And can you give us a sense of how much those two fellows have worked in the EG assets of late?

Yeah, in a nutshell, you know, I think that – Both Tim and John have got an incredibly strong track record of exploration in proven basins, you know, sort of heritage, cobalt, and obviously, you know, deep water, Gulf of Mexico, an incredible track record there. So I think, you know, we have the right skills for the strategy, yeah? We're clearly focusing on our proven basins in actual Guinness, in the Gulf of Mexico and also Ghana. So it's bringing those skill sets to bear across that, you know, high grading those opportunities and opportunities that deliver a fast payback, high return projects by leveraging the infrastructure. So I'm very pleased to have both of them in the company and very pleased for them to be taking a leadership position now with that proven base and strategy. And yes, actually over the last more than two years actually, They've both been working on Equestrial Guinea. They've been working on the Gulf of Mexico, and they've also been working on Ghana, right? So actually, the work products that we're generating in Equestrial Guinea, they've been very much part of. If you go back in time, I think we acquired the assets in 17. Champa Science make in 18. You know, the processing was done in 19, and 2020 was all about the interpretation of it, the high grading of the opportunity set. So they've been absolutely involved in all of that.

Thank you, Andy, for all that added detail. And then if I could ask you to – this is on the TOR2 project – just peer ahead to to year-end and it's 80% complete, what is the last 20% that will be remaining or that you anticipate will be remaining when we get to year-end 21?

Yes, when you get to year-end 21, you've then got the joint campaign. So the target is to have the subsidy infrastructure laid that will enable you to start building drilling the wells for the initial startup. By the end of the year, the target is to have the caissons fully deployed. That then allows you in 2021 to build out the jetty structure behind the caissons, which then allows you to bring in the FLNG vessel at year end. You know, with drilling of the wells complete, you then have the ability to position the FBSO, you know, in location, which is a sort of year-end 2021 activity. And then, of course, you've got the integration of the project and the pre-commissioning through the commissioning work on each of the individual components and then the integration of that leading to first gas. So, yeah, those are the big things that would remain for execution in 2022. Thank you, Andy. Great. Thanks, Charles.

Thank you. Our next question has come from the line of Neil Mehta with Goldman Sachs. Please proceed with your question. Good morning, team. Thanks for taking the question. I just wanted to build on the Tour 2 comments earlier. You know, you're at 60,000 barrels a day as a company right now. By 2026, I believe, you want to get to 100,000 barrels a day. Phase one we talked about, but phase two is also really important. What are the gaining factors to get to FID on phase two, and how are you thinking about the incremental economics of phase two relative to phase one?

Yeah, thanks, Neil. Yeah, no, so, you know, interesting. Yeah. Part of it is about ensuring that we've fully optimized Phase 2. And I think, as I've said in previous quarters, the work that we've been doing with BP as the operator, we've taken the time out on the project to sort of step back and say, what is the most important? efficient next step. The most efficient next step is to fully utilise all of the infrastructure we're putting in place for phase one. You've heard me say that before, which means that we're fully utilising all of the gas processing facility on the FPSO. We're fully utilising the pipeline capacity and we've clearly got the breakwater built, so how do we expand the the FLNG capacity behind that breakwater. So those are the key things that we've been working on and I think with BP today we're aligned around that concept where the next step to essentially a 5 million tonne per annum facility fully utilises all of that. So it is the most economic step that we can take. It limits the amount of capital that we have to put in to generate that and actually makes it far more financeable from a Cosmos perspective. So I'm actually, you know, genuinely, we're excited about, I think, the construct that we have for Phase 2. And so the incremental economics are a lot stronger. We believe that as you look at brownfield expansion around the world, which this is a brownfield, it's an expansion from Phase 1, It is one of, if not the most, economic project. So it has very strong economics because of that leverage. And then it's about ensuring that you get the engineering work done at the right pace. We're clearly focused hugely on getting phase one to the right level of completion. But through the concept optimization and then, you know, which is this year, then you have feed in 2022, you know, an FID around the year end 22 is the target, which sort of delivers first gas sort of, you know, three and a bit years later.

Yeah. Thanks, Eddie. Just following up, you talk about carbon neutrality on the project, scope one and two emissions by 2030. Can you help us understand how you get there and give us some granularity upon achieving that goal?

Yeah, so look, Neil, there are two big things that we're working on. One is to sort of measure and reduce the carbon from our own operations, and that is something that we're focused on. We start from a very strong position in the Gulf of Mexico, because of the natural lower carbon intensity of those assets. You know, because you're using existing infrastructure, you don't have flowering there. You know, you're tied into the gas networks. You have, you know, a carbon intensity of around, you know, sort of under, slightly under 10 kilograms per barrel produced. You're starting with a strong set of assets, but there are opportunities to continue to mitigate and reduce. And then in terms of those emissions that we can't address that way, we're addressing through nature-based offsets. We're looking at a reforestation project in Ghana. and a sort of wetlands reforestation in the US, and then also a potential wetlands project in the Gulf of Mexico. And again, all of these, it's about, you know, finding a way of a nature-based solution, which is high quality, both in terms of the carbon offset, but also in terms of it creates jobs, it's sustainable, and there's a larger economic impact to the economy. You know, the wetlands projects have another benefit in terms of there is erosion of the coastline, and how can we pursue projects that are helping to mitigate that? So it will be a combination of both of those.

Thanks, Andy. Thank you. Our next question has come from the line of Bob Brackett with Bernstein Research. Please proceed with your questions.

Thanks for taking my call. And at the risk of over-interpreting your slide, too, where you talk about the next 10 years, that long-term number of around 100,000 BOE per day is consistent roughly with keeping production of your existing assets, oil assets, flat and getting to phase one and phase of tour two. Is that the strategy which which then defines what to do with cash or barrels if you're above or below that, or is that sort of a conservative baseline of what you'll achieve with the potential to be bigger? Or am I over-interpreting?

No, good question, Bob, and I think you've captured the point very well. I think what it says is we have a strong resource potential today which allows us from both, you know, from the oil side, continue to high-grade the portfolio, invest in the best projects that have the characteristics we're looking for, and generate free cash flow, yeah? So we have a strong oil business that we know that we can absolutely sustain. And I think, you know, ultimately the level of investment will depend on you know, ensuring first that we generate the free cash flow from that business, yeah? So we're not sort of resource short, we're not opportunity short, but, you know, the objective ultimately is to ensure that we deliver the company and generate the free cash flow, yeah? And then I think in torture, you have a growth leg for the company, which is significant. And then what differentiates it as a growth leg is It's a sustainable source of cash flow for many years. And as you know, with the LNG project, the challenge is the upfront investment. We're largely through that on phase one. Phase two, as we discussed with Neil's question, is a very low capex solution to first gas. And then you have a sustainable brick, a flat brick of cash flow coming out of the business. So I think that's the underlying strategy that delivers that picture and sort of integrates the resources to the projects to the cash flow.

Okay. And so that plan achieves an increased gas percentage, but you'll still be predominantly oil-based. Are there thoughts of strategically selling down oil assets to rotate into gas assets, or is that too far out to think about?

Yeah, Bob, again, great question. I think that ultimately the gas component in the portfolio is significant because the The world will look at upstream companies in terms of what they sell and the carbon intensity of what they sell, not from just the production aspect, but in terms of their usage. So having a growing gas element to our portfolio is important. Equally, we need to make sure that those are quality projects and compete for capital. So I think we've got a strong internal growth wedge. And as you know on Tortue, you know, there is growth beyond 5 million tonnes per annum. So the pace at which that continues to grow. So I like the optionality we have. I like the balance we have. And I think we have the ability to dial up or dial down as the world continues to evolve around us. But I think, you know, the inherent strength of the portfolio from both dimensions, gas and oil, is important.

Great. Thanks for that.

Great. Thanks.

Thank you. Our next questions come from the line of Mark Wilson with Jefferies. Please proceed with your questions.

Well, thank you. My first question, I'd like to ask about the ILX program coming up. And the Winterfell, well, I think you said that if this appraisal of the North Fault Block is successful, that should de-risk a commercial tieback development. There's quite a few prospects shown, which I think covers the 100 million. So what threshold of 2C would you be looking to prove up with the discovery and the appraisal? And I guess the same question for Zora, the 200 million gross resource potential, I imagine covers all those prospects that you show on the slide. Just how much does Zora sit within that 200? Am I right in, you may have said it, but you're trying to just palm down slightly ahead of drilling at Zora. Thank you.

Yeah, so if you sort of look at Winterfell first, I think, you know, It's important that we're not to sort of, you know, get ahead of our skis. I think that we see significant, you know, additional potential in Winterfell. We had a successful first well on the fall block that we drilled. We've got a follow-up well to come. It's on the fall block to the North West. You know, we de-risked it with the... with a well result from the first well, you know, same size signature. I think, you know, there we, you know, we will have got to a commercial threshold mark where a sort of significant, you know, proportion of that, you know, 100 million barrel plus potential in that middle sector will have been proven up, which gets you to that commercial threshold. Yeah. So, you know, there is quite a lot of reserve intensity in that central part of the opportunity set. But I think there, you know, there remains additional upside from drilling both to the south and to the north. So I'm not going to give you a hard number, but, you know, the 100 million barrel plus, I think we'll get, you know, get up to a number that's, you know, close to that from that central area. where we've circled on the view graph from those initial two fold blocks. Obviously, it'll depend on the appraisal result and the expiration tail, but that's the opportunities that we're looking at. So that in itself is material. On Zora, again, we see Zora as a... It's around... a 30 to 40 million barrel type prospect. So you've got four or five prospects there, you know, that's what builds out the opportunity set that you see, the 200 million barrel potential. So again, to sort of underpin an initial development, you probably need, you know, probably two of those to have come in that would underpin the initial development. And again, I think you'd probably see a phase type approach where you, you drill, bring on the initial prospects, use the nearby infrastructure, and then build from there. So a similar approach on both.

That's very clear. Thank you. Thank you very much. And a point, I guess, for Neil, OPEX in the first quarter was actually below guidance, 13.9 BOE, the guidance for the rest of the year stayed. I was just wondering if any of the infill drilling costs in other areas actually go into that OPEX to make it retain that it's higher than Q1 for the rest of the year. That's one point. And then if I may, I'd just like to ask about Ghana production and the 15 to 20,000 that could be added from the first producer-injected pair. Speaking to your exit rate of 60,000, are you also assuming a Ghana exit rate 15,000 higher than the two fields are producing at the moment at a gross level.

Thank you. Sure. Let me take the ILS one and then Andy can handle the production forecast. The 1Q OPEX was largely lower than guidance as a result of the production mix so that we have a larger proportion of relative production given the underlift from the Gulf of Mexico, which has a lower sort of op-ex per barrel on the And so if you look at sort of quarter-over-quarter guidance as we lift some of the – depending on where the cargoes are lifted from, they have very different levels of OpEx, and therefore the overall number isn't materially different. So it's good to see sort of some of the cost reductions coming through, but in the overall scope of our OpEx guidance, there hasn't been sort of a material push one way or the other. The ILX – to answer that question, doesn't impact the overall RPEX amount.

Yeah, Mark, just on the sort of Ghana forecasting, yeah, you know, 1Q was strong, yeah. We were, you know, 70,000 barrels a day in Jubilee and, you know, 39 in 10. So, you know, sort of strong, strong performances. As we look forward from the existing wells, we've had good reliability. So if that were to continue, that certainly shores up the base from the existing wells. And we have been getting water in the ground and gas out, which again, as I said in my remarks, helps sort of slow down the rate of decline. So I think, you know, as you forecast forward, you know, there are two things that need to happen, all right? We need to, you know, maintain that level of operational reliability, maintain the base management, you know, water and gas, and, you know, that, if it's maintained, will obviously strengthen the year-end exit rate from the existing wells Then, of course, we have to, you know, the drilling has started strongly. We've got to drill the second producer or the second injector on Jubilee, you know, complete both wells, quote, bring them on. So, you know, they have the potential to add 15,000 to 20,000 barrels a day gross. And, again, you know, that would add to hopefully a firm-based production. So I think it's a little early to give you new guidance, I think, for the exit rate of Jubilee. But, you know, all I can say is the trends that we're seeing, if sustained, are positive.

Okay, that's fine. Thank you. I'll turn it over.

Great. Thanks, Mark.

Thank you. Our next questions come from the line of Nick Stefano with Renaissance Capital. Please proceed with your questions.

Hi, guys. It's Nick from Renaissance Capital. Thank you for taking my questions and happy 10-year anniversary on the lifting. So I had a couple of questions to ask, if I may. The first one is for Neil. Neil, I found it extremely interesting that the RBL banks had ESG KPIs for the margin. And basically what I'm trying to ask here is two sub-questions. The first one is, how did this come about? Was this, you know, initiated by Cosmos, trying to, you know, I mean, was it their banks actually, are the banks actually changing their focus in the oil lending business and trying to take an ESG angle. So you could talk a bit about that. That would be helpful, please. And my second question is for Winsor & Ferrell. I just want to go back to Mark's question. The way I was looking at this slide, for me, what I was understanding was that you have for each appraisal or exploration, well, you would drill in each of the four blocks. If it's a discovery, you could basically complete it and attach a flow line and make it a producer. And if that's the case, it would just be counting well locations. but you're trying to prove this up to build something bigger. So it doesn't really feel like it's ILX per se if you do need to add a bit more infrastructure to it. So can you talk a bit about, you know, what is the additional infrastructure you might need to do versus just a pure, you know, add a flow line and then complete the web? Thanks.

Yeah, so thanks, Nick, for that question. I'll take the first one and I'll hand over to Andy on the second one. But I think On the first point, again, I think we had a good support discussion with the banks over the last several months around the extension of the facility. We've had access to the banking market and the whole at attractive levels because I think really two points, which is one, the strong cash generation capability of our existing assets and the defined growth in the portfolio. with Tortu and the second piece being sort of a strong ESG story in terms of where the company is headed and we've been very sort of open and vocal around our agenda and getting to where we need to get to over the next several years. I'd say you know In terms of putting it within the facility, you know, we've seen it come in some other facilities, not within sort of our region, but we thought, you know, it's important for us as a company, and therefore, you know, our banks should be aligned with that agenda. And as we went through the discussion, you know, we proposed sort of putting it within the banks, and I think a number of the banks saw it as a large positive. So it wasn't something pushed onto us so much as something that we pushed onto the banks to make sure that Our vision in terms of where we're taking that is aligned with where they want to go. And I think with ESG in general, I think along with sort of investor focus on it, you are seeing more bank focus on it. the bar is clearly going up, and they will support banks who have – the banks will support companies who ultimately have the strong assets that produce cash and have the right sort of asset quality, but also the companies that support the right ESG agenda as they're focusing on in terms of putting their capital behind those companies. And so I think we got it to a very good place, and overall – It's sort of a differentiator in terms of Cosmos providing or creating additional sort of rationale around supporting the company.

That's a very interesting comment.

Thank you. Yeah, Nick, on Winterfell, I think the... The task for the second appraisal, well, is ultimately to prove up a core area for the initial development phase. What we want to do is ensure that we're right-sizing the flow lines back to potential hubs. There are several that we could tie back to. And we want to ensure that we've designed that initial piece of infrastructure optimally. Yes? So the question is, you know, certainly you'll have a drill manifold there. You drill the wells. You can come back and complete those wells. And so the optimum size of flow line is really the case. And then with that infrastructure in place, then it's about, you know, then creating some optionality around that infrastructure that's laid in to then look at the second and third drill centers that would be tied back. And then there's opportunity to tie back a certain volume if it's successful. And then if you get to a tipping point, you would potentially add a second flow line. So this is all about ensuring that the capital that goes in is properly sized at the initial point. You don't overinvest, you know, you don't underinvest, but don't overinvest, but, you know, create the optionality for the future. So, you know, we see significant, you know, upside beyond the initial core development. We need to put in the right flow line size. and then create the optionality for it to be for the tiebacks from a potential second and third hub, and then, you know, what incremental flow line capacity would you put in at that point?

Okay, understood. Thank you.

Okay, thanks.

Thank you. Our next questions come from the line of Richard Tullis with Capital One Securities. Please proceed with your questions.

Thanks. Good morning, everyone. Andy, just one question for me. One of the partners in Jubilee and Ten has been looking to monetize its position there. Does Cosmos have preferential rights option in those properties and could Cosmos look to exercise its prep rights in Ghana, you know, depending on pricing?

Good question, Richard. You know, as with all agreements, you know, I think sort of prep rights are in the eye of the beholder. So I think I don't want to sort of get into a debate, as it were, on the line around, you know, how and if, you know, those could be exercised. It obviously depends on the structures, all sorts of things, yeah? So the answer to the question is that I, you know, in one of the licensed blocks, I think that there is the opportunity for press rights, but it depends on the structures that come through. I think what's sort of more important is really back to sort of our agenda, which is about we want to generate free cash flow from our existing assets. We want to ensure that we're deleveraging the company. And if we were to look at an opportunity like that, it would have to fit into that construct. Yeah? So I think, you know, the answer to the question is ultimately that, you know, we continue to screen opportunities that will be, you know, cash flow generating that would deliver the company. And, you know, if there are opportunities that turn up that look like that, we would certainly consider them.

That's helpful, Andy. That's all from me. Thank you.

Great. Thanks.

Thank you. Our next questions come from the line of Charles Mead with Johnson Rice. Please proceed with your questions.

Andy, thanks for letting me hop back in here. This will be quick. On slide six, that Winterfell slide, the lower right, one thing that's curious here, I don't know if there's anything to this, but I just wanted to pull on this thread and see if there's, see what the story may be. It looks to me that you've got the pliocene here underlying these myosin targets. And I was wondering, what's going on here? Is this a big inverted section, or am I misunderstanding something? Is there any kind of bigger narrative there?

No, I don't think so, Charles. You know, I think, you know, when we look at Winterfell, we see an opportunity that has – significant upside to it, what we need to pursue through a proper appraisal program. I think we're happy with the initial well. It's proven up. The seismic, we've calibrated it to the wells, and we're off with the second appraisal well with a deeper tail on it. So I wouldn't over-read anything into it. I think this is... you know, a good start to a subsoil prospect where the tougher part of it is always getting the seismic calibration correct. And, you know, we've made a strong start to that with the initial discovery one. Right. Thanks, Andy. Great. Thanks, Charles. Appreciate it.

Thank you. Our next question has come from the line of Mark Wilson with Jefferies. Please proceed with your questions.

Yeah, brilliant. I thought I'd jump back on because we all seem to be asking about Winterfell now, Andy. So I'm reading that slide as being there's 100 million in the central area that appraisal can prove up and the additional prospects. There's another 100 million in the other fault blocks as well.

What we're saying is we've got, you know, over 100 million barrels of potential, Mark. Okay. Let's not get ahead of ourselves. I think that's the most important thing. We believe that with the initial discovery well and the drilling of the second fault block, we've got enough resource to get to an initial development phase. And so a significant proportion of the 100 million barrels. What lies to the north, what lies to the south will depend on the drilling results. But clearly, if we have success with the appraisal well and we continue to calibrate the seismic, then obviously we will gain confidence.

Got it. Okay. Very good, Andy. Thank you. Great. Thank you.

Thank you. Since there are no further questions at this time, I would like to bring the call to a close. Thanks to everyone for joining today. You may disconnect your lines at this time. And thank you for your participation.