Kosmos Energy Ltd.

Good day, everyone, and welcome to Cosmos Energy's third quarter 2021 conference call. Just 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 Cosmos Energy.

Thank you, Operator, and thanks to everyone for joining us today. This morning, we issued our third quarter earnings release, and 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 material are Andy Ingalls, Chairman and CEO, and Neil Shah, CFO. During today's presentation, we will make forward-looking statements that refer to our plans, estimates and expectations. Actual results and outcomes could differ materially due to factors we note in this presentation and in our UK and FEC please refer to our annual report, stock exchange announcement, and SEC filings for the 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. Thank you for joining us today for our third quarter results call. I'll run through the highlights for the quarter before handing over to Neil to take you through the financials. I'll then provide a few closing thoughts in summary before taking questions at the end. Starting on slide one, a lot has been achieved at Cosmos since our last quarterly call in August. We've delivered several transactions that have advanced the company's strategy and significantly improved our financial position. We'll talk more about the OxyGyn acquisition shortly, but in summary, the acquisition is expected to materially increase our free cash flow from high-margin oil assets, which we plan to invest in our portfolio transition to LNG at a time of rising global natural gas demand while reducing debt. The transaction is strategically consistent and financially compelling for Cosmos and is highly accretive across all financial metrics. In Mauritania and Senegal, we closed the FPSO transaction in mid-August, which materially reduces our capital expenditure to first gas. With increased production, including from the OxyGarner transaction and higher oil prices, we now expect to fund our remaining capex to first gas through organic cash flow. We expect the newly acquired assets and our base business to generate significant free cash flow from 4Q21 and are currently hedging our growing production at attractive levels. With EBITDAX growing and excess cash used to reduce absolute debt going forward, we expect to lever the balance sheet rapidly, and we are targeting a leverage ratio of less than two times at year-end 2022 at $65 Brent. Using current oil prices, that target would be around one and a half times. And finally on this slide, the recent transactions continue to strengthen our ESG agenda, with growing investment in Africa across our portfolio aligned with our objective of supporting a just energy transition. Turning to slide two. The acquisition of additional interest in the Jubilee and Tenfields in Ghana accelerates Cosmos' strategic delivery across three key dimensions. First, the acquired assets generate significant pre-cash flow. At $65 Brent, we expect the assets to generate around $1 billion of incremental pre-cash flow between now and the end of 2026, over two times our initial investment. At current prices, that figure could be materially higher. While we manage our business to perform at much lower oil prices, the recent strength in Brent and WTI does highlight the considerable upside potential if OPEC Plus continues to be disciplined on supply management over the coming years. Second, we expect the assets to materially enhance EBITDAX and cash flow, enabling us to grow the company organically while reducing our absolute debt. With rising EBITDAX and excess cash to further pay down debt, we expect the transaction to accelerate the pace of deleveraging to our target level of one to one and a half times. Third, we plan to use some of our increased Cash flow to fund our growing gas activities in Mauritania and Senegal, including our remaining capex to first gas on Tortue Phase 1. On the right-hand side of the slide, you'll see how the portfolio mix is expected to change as our LNG activities in Mauritania and Senegal ramp up. We plan to use low-cost, lower-carbon oil production to finance the transition to low-cost, lower-carbon natural gas, thereby shifting the balance of our portfolio over time and increasing our exposure to the fuel with the strongest long-term demand and a necessary part of the energy transition. In our 1Q results earlier this year, we detailed the five-year goal to get production up to around 100,000 barrels a day of oil equivalent by 2026, when Phases 1 and 2 of Torture are expected online. Clearly, this transaction accelerates that production goal by several years, whilst at the same time strengthening the balance sheet. Turning now to Slide 3. We announced the OxyGarner transaction on 13 October, with our intention to fund the transaction through a mix of new equity and new senior notes. With the green shoot, we issued around 43 million shares in total, raising approximately $140 million of equity in total. The shares were issued at a small premium to the previous night's closing price, with the transaction multiple times oversubscribed, with strong demand from new and existing investors in Europe and the U.S. We launched the senior notes up in the following week, issuing $400 million of five-and-a-half-year notes, non-call-to, which were priced at 7.75%. The issue was also heavily oversubscribed with strong demand from both high-yield and emerging market investors. I'd like to thank our equity and bond investors for their support for both the deal itself and the subsequent financings, which have put the company and the balance sheet in great shape to execute our strategy. It's very much appreciated. At the bottom of the slide, you can see the impact of the transaction on our near-term metrics. Pro forma for the assets acquired, we expect our year-end exit production to be greater than 75,000 barrels of oil equivalent per day, with pro forma EBITDAX of over $900 million for 2021, resulting in year-end pro forma leverage of around two and a half times. Turning to slide four. Operationally, we continue to make good progress in each of our production hubs. In Ghana, Jubilee is currently producing above 80,000 barrels of oil per day, gross, with the J56 producer coming online in July and the J55 water injector online in September. The second Jubilee producer is currently being drilled and is expected to be online before year-end. This should result in Jubilee production exiting the air above 85,000 barrels per day. At 10, gross production is currently around 30,000 barrels of oil per day. The gas injector came online last month and is expected to support current production levels. In offshore Guinea, gross production is currently around 30,000 barrels of oil per day. The partnership finished the Sabre reliability projects in the third quarter with completion of the Kumi upgrade project expected this quarter. The first of three planned infill wells in the Akume complex was completed in August, with hookup currently in progress. In the third quarter, the operator began drilling the second well, which is expected to be online in December. The third planned well is now expected to be deferred, as a rig is being utilized to plug and abandon an existing well in Exeral Guinea, and is required to mobilize for its next contract before it can complete the drilling of the last well. We do expect the output from the first two wells will largely compensate for any deferral of the third well, given reservoir data at the high end of expectations from the first two wells. In the Gulf of Mexico, as previously noted, production in the quarter was impacted by Hurricane Ida, which resulted in around 4,000 barrels of oil equivalent being shut in versus our previous guidance. While none of COSMOS' infrastructure in the Gulf of Mexico was damaged in the storm, lengthy shut-ins arose from key pipelines and receiving terminals being offline, leading to basin-wide shutdowns in the aftermath of the hurricane. Production across our GOM assets was restored to pre-IDA levels by the end of September. We should allow for a strong rebound in the fourth quarter. We are currently in the process of drilling the Winterfell appraisal well, with the results expected later this quarter. Turning to slide 5, which looks at Tortue, our world-class gas development. As you've heard me say in the past, Tortue is the right project at the right time. The chart on the left is one you've seen before. It shows that Tortue is the right project because of where it sits on the cost curve. With Phase 1 gas all sold to BP, the real upside potential is with Phase 2, where we have a huge amount of optionality because the gas is currently uncontracted. We believe that Tortue Phase 2 can deliver gas into Japan at a break-even cost of just over $4 per mm BTU, so therefore competes very favourably with other new LNG projects expected to start production in coming years. The chart on the right shows the project is due to come online at the right time, with global gas demand continuing to grow strongly as the world exits the restrictions of the pandemic. The chart shows the forward curves for JKM and TTF today versus the forward curves a year ago. If we ignore the near-term elevated prices and look further out to December 2023, the chart shows a re-rating of future price expectations, with both JKM and TTF levelling out at around $10 per mm BTU, approximately double the same curve from a year ago. This is fundamentally about robust, long-term demand for gas as it places more carbon-intensive alternatives and acts as a baseload partner to renewables in the energy transition. As demand grows, long-term gas prices are likely to be supported at a level necessary for the marginal cost of supply to meet that demand. In a recent research note, Morgan Stanley predicted that LNG demand is set to rise twice as fast as supply through 2025, with prices expected to be 60% higher over the next five years versus the last five years on average. In this environment, the lowest-cost gas projects should come out on top. With Tortue making good progress and other significant gas discoveries we have in Mauritania and Senegal, we believe Cosmos is well-placed to take advantage of these strengthening market dynamics. We have contracted Phase 1 volumes at a slope of around 10% to Brent, which means we'd be selling Phase 1 gas at around $8 per mm BTU at current oil prices. For Phase 2, we are yet to sell the gas, which gives us greater flexibility on pricing, whether we choose long-term contracts, different indices, spot sales, or a combination. Turning to Slide 6, Tortue Phase 1 continues to make good operational and funding progress, with the four key work streams all moving forward. On the floating LNG vessel, mechanical completion activities have commenced with instrument loop checks, Control system commissioning is expected to commence in the first quarter of next year. On the FPSO, topside integration and Hull and Living Quarters mechanical completion activities have commenced. Pre-commissioning activities are expected to commence later this quarter. On the breakwater, we've commenced fabrication of 20 of 21 caissons with 12 now installed. Jetty piling is expected to commence later this quarter. And finally, on the subsea, the Nouakchott and Dakar marine supply bases are being established. This is expected to enable the offshore installation campaign to commence in the first quarter of next year. As you can see in the top picture on the slide, the hub terminal and breakwater is now starting to take shape. The image shows the caissons in position, and you can see the impact on the sea state on the protected side of the breakwater. The bottom picture on the cover slide of today's presentation shows the top science modules being loaded onto the FPSO, another significant milestone for that key work stream. With regards to project funding, we've completed the FPSO transaction and now have a clear financing path to First Gas on Tortube. The FPSO transaction materially reduces our outstanding capex on the project, with all 2021 cash calls now funded through year-end and the remaining benefit expected in 2022. As mentioned earlier, we now expect to fund our outstanding capex to first gas with the free cash flow from our base business, which we are currently hedging at attractive levels. We're also working on the NOC loan refinancing, targeting completion around year-end. As BP flagged on its earnings call last week, the project partners and the governments of Mauritania and Senegal are working hard to advance phase two of the project, and we expect a final investment decision in 2022. I'll now hand over to Neil to take you through the financials for the quarter.

Thanks, Andy. Turning to slide seven. Production of approximately 49,000 barrels of oil equivalent in the quarter was in line with expectations, taking into account the unplanned downtime in the Gulf of Mexico from Hurricane Ida that Andy talked about, which had an impact of around 4,000 barrels of oil equivalent per day in 3Q. As guided last quarter, sales volumes for 3Q were expected to be low due to the number of cargo listings, which resulted in a significant underlift of around 1.5 million barrels at the end of the quarter. Low sale volumes, coupled with a working capital draw, partly related to the underlift and partly related to cash payments in Mauritania and Senegal prior to the FPSO transaction closing, led to a cash outflow within the quarter. The lower realized price in 3Q reflects regular monthly settlement of hedges despite lower sales volumes in the quarter. With 5.5 cargoes expected in Ghana and EG in the fourth quarter and GAM production restored to pre-Hurricane Ida levels, We expect a significant cash inflow in the fourth quarter as we close out the year with more production selling at significantly higher realized prices. The rest of the line items were largely in line with prior guidance. Turning to slide eight, you've heard both Andy and myself talking about our commitment to reducing leverage with a target of between one and one and a half times. The OxyGonna transaction helps to accelerate delivery of that goal. The equity debt mix we put in place to execute the GON transaction meant the acquired assets had a leverage multiple of less than two times using a trailing 12-month EBITDAX. This meant the transaction was deleveraging immediately. The chart on the sharp slide shows the pace of expected deleveraging through year-end 21 and into 22, as we benefit from growing production and higher oil prices, which we are able to lock in with new hedges. We have started to hedge the acquired barrels with two-way collars that have a floor of $70 per barrel and a ceiling of around $90 per barrel. This gives us EBITDAX and cash flow visibility, both of which should positively enhance leverage over the coming months. By the end of next year, we are targeting leverage of around one and a half times at current oil prices, which would be below the level at which we exited 2019 and before any benefit from new production in 2023. With that, I'll let Andy wrap up today's presentation.

Thanks, Neil. Turning to slide nine. As I said in my opening remarks, it's a transformational time for Cosmos, and I'm proud of what the team has achieved within the last quarter. As I look back, 2020 was a year of survival for the sector, where Cosmos took the opportunity to reposition its portfolio to be fit for the future. 2021 has been a year of resuming operational activity and strengthening the balance sheet, which has been significantly enhanced by the two major transactions I've talked about in today's presentation. Looking ahead, 2022 is a year in which Cosmos can really start to thrive. We have the right portfolio for the future and a clear pathway to unlocking shareholder value. Looking at some of the important milestones we see through 4Q and into next year. First, we expect our base business assets and the newly acquired assets from the OxyGarner transaction to generate significant free cash flow, which we plan to use to fund the Tortue project and to pay down debt. As we move through 2022, first gas at Tortue comes into view with the bulk of the capital funded. We also expect to take FID on phase two during the year. Now, 2021 hedges are now rolling off, and we are able to hedge our growing production base at significantly higher levels, giving us increased visibility to enhance future cash flows. And finally, building on Neil's comments from the previous slide, we're committed to deleveraging the company with 2022 year-end leverage of around one and a half times at current oil prices. Thank you, and I'd now like to turn the call over to the operator to open the session for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press star 2 if you would like to remove your line from the queue. And for a participant using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question is from Charles Meade with Johnson Race. Please proceed.

Good morning, Andy and Neil. My first question on the Phase 2 FID for Tour 2, are there any significant questions or unknowns you guys are still grappling with? Or alternatively, is this just, you know, you have to follow the process, but this is a, you know, this is, you know, a fait accompli.

Okay, Charles, yeah, I'll take that question. I think we're clear on the approach, which is we've pre-invested in the infrastructure to enable both the phase one and phase two developments. The Objective, therefore, is to ensure that we fully optimize the phase two. And to do that, we need to ensure that we've got the right approach for the subsea pipeline ashore and the LNG solution. I think the work on the offshore side of it is well described. We know exactly how we're going to get the most out of what we've pre-invested in, in terms of the FVSO and pipeline. So with a minimal incremental spend there, And we're now working through the commercial negotiations to optimize the LNG solution. So that's really the key activity to progress. And with that in place, that then enables us to move forward. So I would say that we're certainly in a position where we can complete that work in a timely manner. And clearly the external environment today is helping, you know, all parties, you know, the partners, ourselves, BP, and the NOCs.

Got it. Thank you for that, Andy. And then a follow-up question on your activity levels, your CapEx levels. From the outside looking in, it looks to me like your activity levels across your portfolio in 22 are going to be about, about the level that we're seeing for Q4, and I guess the question is, is that a fair read, and is 4Q activity and spending a reasonable baseline to use for 22 levels?

Yes, let me take that, Andy, or Charles. Yes, I'd say the piece that 4Q doesn't reflect in terms of the implications for 22 are really around sort of Mauritania-Senegal. And so I think from a Ghana business, the activity level will be the same. EG's spend sort of moves around by quarter, but broadly will be similar to sort of the levels we spent this year as well as within the Gulf of Mexico. And so, yeah, we will be spending a bit more in Mauritania, Senegal to get sort of the phase one to first gas when we've talked about that around having 300 million left to go post the FPSO transaction in the 22-23 timeframe. Thanks for that. Out of detail, Neil.

Yeah, sure.

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

Hi, David. Can you hear me okay?

Yeah, we hear you well, Neil.

Thanks, Andy. So, you know, first question is just around TOR2 and how you're thinking about Phase 2 and specifically the economics of Phase 2 relative to Phase 1. I think that the Brent slope on Phase 1 is lower than maybe some would have desired. although the economics will be better if we sustain an $80 rent type of environment. But phase two, it feels like there could be some outsized economics. Talk about where we are in terms of the gating process to getting to phase two and just how you think about the contracting environment, especially with global LNG prices having firmed up so much.

Yeah, thanks, Neil. I think, as I said to Charles, I think we're clear on the – the basis for the expansion of Phase 2, the minimum amount of capex to put into the expansion and using the capital that we've invested in Phase 1. So that enables some very low break-even costs, which is what we showed in the presentation. So as you look around the world for brownfield expansions, you know, we believe it is one of the most cost-competitive projects around. So hence, you know, the desire of the partnership to move forward. So, you know, it's advantage from that perspective. And then I think from a Cosmos perspective, it's advantage because we have flexibility now on how we price that gas, yeah? You know, we have flexibility because we have the cash flows clearly from phase one. You know, the funding for phase two is considerably lower than phase one. You know, we've talked as a partnership of the number gross being less than a billion dollars. So from a funding perspective, there are no sort of financing requirements that, you know, cause us to not optimize the pricing. So I think you'll see us going forward now look at how we capture the current market conditions in the best way. And as I said in my remarks, I think we have opportunities now to look at different indexation. we have the ability to look at some gas being contracted longer term, some proportion of the gas being spot. So we see it as a significant opportunity now to capture what I believe will be a strong LNG market going through the rest of this decade and firmly believe in a engineering sense, it's the right project at the right time because it has a very low cost of supply, and it's the right project at the right time because it's entering the market when there are very few competing projects, and therefore it can benefit from a very good price environment. So I think all of that is to come, Neil, and as you sort of sense, we see it as a major upside.

There are a lot of moving pieces with the business. Certainly, Tortua is in flight. The OxyGana transaction is in motion as well and obviously the oil price. But is there any way you guys can help us understand what the mid-cycle free cash flow power of this business looks like in a more constructive commodity price environment or at a minimum at the curve? once you have phase one on and layered in the Ghana assets as well?

Yes. So, Neil, I guess the way I'd answer that was, you know, we've sort of given guidance around sort of phase one and phase two free cash flow of around sort of $150 to $200 million of free cash flow per year. And the way to think about it is, you know, we've got the spend to get it online. Then phase one really sort of funds phase two. And then once phase one and phase two are online, then you get sort of that $150 to $200 million number out of that for sort of 20-ish years out of that business. I think the oil prices or the oil business should be pretty easy to model at this point. We are – all of the businesses between Ghana, EG – and the Gulf of Mexico are broadly similar in terms of operating costs in sort of the $10 to $15 range, additional sort of maintenance capex to keep sort of production at sort of that now sort of 75,000 barrel a day level, and then some cash taxes particularly on the front end in Ghana and EG. And then we will start paying cash taxes at some point within sort of three to four years or after three or four years in the Gulf of Mexico. So there's a number of moving parts on that piece, but all of them solidly produce free cash flow down to sort of a $40, $50 oil price environment, and then you bolt on sort of the free cash from the gas business in 2026 plus.

And Neil, just remind us again, the oil price sensitivity?

Yeah. So it's around $100 million unhedged every year. for a $5 change in the old price.

Okay, great. Thank you.

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

Good morning. I've got a short-term question and a longer-term question. On the short-term, can you talk about the path to the refinancing of the NOC loans by year-end? Anything we should watch for or worry about?

Yeah, so Bob, it's sort of a live discussion that we're in with a number of banks and financial institutions to get that across. So there won't be really any milestones between now and then. It's really been a function of being able to have the conversations. We needed to get the FPSO transaction done before we could have the conversations on the NFCs, and then clearly the last few weeks or months we've been working on the financing related to the OxyGona transaction. So, but yes, I wouldn't, there's no other sort of milestones expected outside of, you know, once we have a deal done.

Great. And then the bit of the longer term question, if I think about Winterfell going to appraisal, are you maintaining the ability to convert that appraisal well into a development well, or is that something you shy away from?

No, we're maintaining that optionality, Bob. So, as you rightly said, we had the first discovery well. We're now drilling the second fault block, and we're currently, you know, operations are underway. And, you know, once we have the results of that, we could then have the opportunity of an early production scheme that brought those wells back online.

Thanks for that.

Our next question is from Nick Stefano with REN Capital. Please proceed.

Hi, guys. It's Nick from REN Capital. Thank you for taking my questions. I've got three to ask, if I may. Andy, I think the first one is for you. If I go back a year ago, when BP and Armstead to reduce the scope of TOR2, make it a smaller project, but at a lower cost. At that time, it made a lot of sense. But gas markets moved up quite a bit since then. I'm just wondering, do you think that decision still made sense? And then as a follow-up to that question, how should I be thinking about future phases of TOR2? the optionality to do like a brownfield development after phase two not i don't think i don't think be that anymore so what would the you know the other phases look like and then my third question is for it's for me um i think we've got maybe less than a week left for either partners are done to exercise their preemption rights and can we kind of like you know, take it as a given, but they're not going to exercise it at this point.

Thanks. Yeah, Nick, good questions. I think, you know, fundamentally, every dollar we put into Cosmos has to earn the highest possible return. And our objective on the next phase of Tortue was to absolutely deliver the most capital-efficient schemes. And the scheme we've described of expansion to 5 million tons, essentially sort of utilizing fully the infrastructure we have in place, is, I believe, absolutely the right decision. And, you know, we're driven by ensuring that we create the highest possible returns and generate the most value. And this scheme is the one that actually does that. So I think it's absolutely the right objective, irrespective of the price environment. Clearly, in a higher-priced world, we'll make a much stronger margin, and that's great for any day of the week. I think when you then look beyond that, I think we would then look, I think, for the next phase, as it were, Phase 3, to sort of fully optimize the resource base which can support around 10 million tons per annum. And I think that's where you then make the next step up. You fully sort of utilize the existing offshore infrastructure in terms of the FPSO and the pipeline. How do you then increment to 10 million tons per annum? It will require additional facilities offshore. It will require additional pipeline. How do you then integrate that into the existing hub terminal? So I think that, to me, is a very logical process. You enabled the project through the first phase. Phase two is the logical brownfield development to fully utilize the invested capital and delivers the highest return. The third phase should then be about the long-term expansion to fully utilize all of the resource. So that was the objective. I think we've stuck to that plan in a really rigorous way. And I believe through that, we've optimized the rigor of that approach. We've optimized the capital efficiency and therefore the value creation.

Neil? Yeah, so just on the preemption, Nick, yes, you're right. I mean, there's about a week uh left within that uh that option and again we're not going to opine in terms of what the partners do i think if you sort of step back you know the transaction for us was around sort of gaining access to a materially larger stake in Ghana, particularly in the Jubilee field, where we've gone up from 24% to 42%. While preemption is possible, the good thing from our perspective is we retain a much larger stake in Jubilee, which is where we see the largest near-term upside, and the impact would largely be on a reduction in the 10 asset. It's still outstanding, and we'll know when the time's gone through.

Okay, cool. And that sensitivity you gave just a few minutes ago, I think that was the pre-Oxidil one, right? Shouldn't that be a bit higher now with the increased stake in Ghana?

Yeah, I mean, the number hasn't materially changed in terms of maybe there's another $15, $20 million per $5. But again, it's just sort of not a huge overall change.

Okay. All right, gotcha. Thanks so much.

Our next question is from James. Let's see with Barclays. Please proceed.

Yeah, hi, thank you. It's a couple of questions for me. Just first off, how should we think about shareholder returns now? Is that something that can come when leverage falls below one and a half times? Are there other considerations or metrics we can think of to trigger for that catalyst? And then just on Tortui, I was wondering what the carbon intensity of that production, what you expect it to be, and if there's scope for you to look at marketing carbon neutral cargos from that project.

Yeah, I'll talk as shareholder returns and Neil chime in. We talked about getting to a leverage range of one to one and a half times. Clearly, when we're in that range, I think it is a valid conversation to have. And I think the only commentary I'd add on top of that is it needs to be sort of sustainable. So how do we get to a world where we can see a sustainable leverage of one to one and a half times? And when we're in that world, we'll then have that debate. Clearly, our objective is to get there as fast as we can. And I think we're pretty clear today on how we're doing that while supporting this transition of the business from purely a low-carbon, low-cost oil business to a balanced portfolio.

Yeah, the only thing I'd add on that, Andy, is to Neil's question earlier, the business generates a lot of free cash flow in oil prices where we are right now. So as we do get leverage to that point within that range by the end of next year, we've gotten the capital from TOR2 largely behind us at that point and then additional production on the come. I think that's the appropriate time to have that conversation. And again, I think we'll be very well positioned to do it at that timeframe. There's still more work to be done on our end, but again, we've got a pretty clear line of sight to the delivery of that in a reasonably short timeframe.

When you look at how Tortu benchmarks from a carbon intensity perspective, it's pretty good. When you look across the range of both existing projects and new projects that are being brought on, it's got a significantly better than average carbon intensity. So we feel good about it from that perspective. And then looking forward to the marketing of carbon neutral cargoes. Yes, it is something that we're looking into. Clearly, we're a little ways from that point in terms of having those cargoes on the water. But it would be another opportunity, I think, for us to get a differential price for the cargoes. And that's ultimately what it is. Initially, the cargoes are obviously being sold to BP. So in that sense, that's their world. I think the opportunity comes when we start to think about phase two and cargoes that we may market through different mechanisms. I think that's where you can start to see a way to differentiate the cargoes and see potentially a more attractive price. So I think that's where we would focus that effort on, James, is the sort of the longer-term view of Tortue and particularly the unmarketed Phase II cargoes.

Okay. Thank you very much.

As a reminder, this is R1 on your telephone keypad if you would like to ask a question. Our next question is from Mark Wilson with Jefferies. Please proceed.

Hi, good afternoon, gentlemen. I'd like to talk about Ghana first. There was some discussion around the time of the deal, the potential implications for the operatorship of Jubilee. Is there any reason to think that could change post this deal? Reminders on the timing of a second break into Ghana and whether that might be accelerated. And then lastly, Andy, you mentioned about 10 gas injector supporting current levels. Is 30,000 level what we should be looking at through 2022, let's say, unless there's further drilling? That's on the Ghana side. And then lastly, if there's any commentary regarding the greater port to a bridge now, Birala, Yakar, whether there's any change to what you think about those assets with the project? Thank you.

Great. Thanks, Mark. Yeah, going through Ghana in terms of the sort of three areas you mentioned, I think, you know, I've been very clear on operatorship. You know, we have a very good working relationship with TELO, and we've seen as a result, I think, of a strong partnership, significant progress being made in terms of the operational delivery both in terms of reliability, in terms of the water injection, gas offtake, and actually drilling performance. So that's what we're focused on now is to ensure that that partnership continues. It's great for GNPC to have a large stake as well as part of the transaction. We have the same partnership. as it were, going forward now and our objective is to ensure that we continue to leverage that partnership to create more value through higher production, good cost management and delivery of the target. In terms of the second rig, we're clearly in a debate at the moment with our partners on the drilling program. You know, I think the timing is probably, you know, around year end. You know, why it allows us then to fully utilize, you know, a rig string on Jubilee itself. We're starting the drilling of Jubilee Southeast. And then, you know, there are other opportunities that we want to pursue in particular, I think, across the existing areas that are – under development in Jubilee and on TEN. So I think you'll see us make that decision towards the end of the year and then being able to sort of open up those work fronts. I think what we need to stay focused on at the moment is to ensure that we deliver, continue to deliver really good drilling performance, and that comes by having a very clear program that's well-described. and the targets are delivering what they said they would do. But you're absolutely right, longer term, and, you know, we see more opportunity in Jubilee, more opportunity in TEN, in particular in Jubilee, on Jubilee Southeast. And then in terms of TEN, you're absolutely right. You know, we completed the gas injection on Entome. That's about sort of supporting the Entome production going forward. You know, improvements in rate from 10 will come from additional wells. And so it is that balance of, you know, a one-rate program. What do we drill on Jubilee? What do we drill on 10? And how do we optimize that program in particular as we look forward to 2023 where, you know, we will then start to sort of want to focus on Jubilee Southeast. How do we bring the same focus to 10? So I think you're going to see, you know, a more rapid increase in production in Jubilee, sort of a longer-term ramp-up in 10. And in terms of 22, we'll depend on the ultimate optimization of that rig program. So turning to Mauritania and Senegal, you know, you're right, obviously, our initial focus, you know, our focus at the moment is on phase one, getting phase one onto production on time and ensure that we have a phase two that is moving forward in parallel, and I feel good about both of those pieces. We've clearly got significant gas resource in the north, in Borrella, in Mauritania and then the south in Senegal. In Senegal, Yaka Turanga is ultimately about a domestic gas scheme first. It's a scheme where there's real synergy with the country's agenda, you know, replacing diesel burning with gas. This is a gas resource that's close to the Dakar Peninsula. And so the work that BP and ourselves are pursuing is doing the front-end engineering around describing that scheme, and then it's ultimately a conversation with the government around the commercial basis for that moving forward. In Mauritania, Borrella, again, a very significant resource, and our objective there is to find the right way to advance that project as probably more of an export project. A much smaller population in Mauritania, lower energy demand, there will be gas for domestic consumption coming from Torchu. Therefore, it is about how do we have a follow-on project in Brala which leverages the technologies and approaches that we've established for So, you know, again, in a world where I see sustained long-term demand for gas and few areas of the world that have world-class low-carbon gas, you know, gas in Mauritania and Senegal, you know, very, you know, de minimis amount of CO2. This is very LNG-friendly gas. How do we facilitate its development? So those are the two areas where we're working on now with both of those projects. And I'm optimistic with both. I think we've got a huge resource to develop there. And the timing is sort of coming into the frame because of the need for that gas longer term.

Okay, thank you very much. I'll hand it over.

Our final question is from Matthew Smith with Bank of America. Please proceed.

Yeah, hi there, Andy and Neil. Thanks for taking the question. Just one to finish off, and that was just whether you were looking into revenue sharing at all on your cargos in Ghana in particular because it does seem as though the market sometimes struggles to assess the underlying sort of free cash flow or earnings potential of the company just due to the quarter-on-quarter volatility and I sometimes feel that the share price reaction is almost a bit inevitable based upon the nature of the quarter, and I think we've had a few questions on this call around the underlying sort of free cash flow potential of the business. So I'm just wondering if a revenue sharing agreement is something you're considering at this stage.

Yeah, thanks, Matt. No, that's a good question. It's something obviously we're cognizant of and actually has been almost exacerbated as production levels in Ghana are. decreased in the early part of this year and so increasing the production actually will help even out that issue so where it should be less of a concern and then to your point we are planning to sort of co-lift our own barrels so in terms of the acquired barrels plus our existing barrels if we lift them together we will also get rid of some of the regular sort of the timing issues so we'll have much more regular volume going forward so it is something that we're you know attempted to because I agree I think it does create a bit of a distraction around some of the quarterly numbers and it will you know as we look to 22 it does naturally become less of an issue as we're both a growing production and actually co-lift our barrels the ones that we acquired plus our existing barrels helps to move that out to where we don't have as much variation in 4Q and beyond.

Sure. Understood. Thanks.

Thanks, Matt.

Since there are no further questions at this time, I would like to bring this all to a close. Thanks to everyone for joining us today. You may disconnect. this time and thank you for your participation.