Kosmos Energy Ltd.

Good day, everyone, and welcome to Cosmos Energy's fourth quarter 2021 conference call. 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, sir. You may begin.

Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our fourth 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. 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 fourth quarter results call. I'd like to start today's presentation looking at the company's strategy and the defining characteristics which differentiate Cosmos and position us very well in a rapidly changing oil and gas sector. I'll then talk about the operational momentum we saw in 2021 before handing over to Neil, who will walk you through our financials. I'll then outline our plans for 2022 and the key investments we're making to deliver significant shareholder value in the next 12 to 24 months. We'll then open the call up for Q&A. Starting on slide two, Looking back, 2020 was a year of survival for the sector in which Cosmos took the opportunity to high-grade its investment options to create a stronger company for the future. 2021 was a year of resuming operational delivery and strengthening the balance sheet, both of which were significantly enhanced by the OxyGarner and the Tortue FPSO transactions. 2022 is the year in which Cosmos can really start to thrive. We have the right portfolio for the future, and the boxes on the left of the slide highlight the key characteristics that define our portfolio. First, we have low-cost, high-quality assets. The company is underpinned by world-class fields that have the longevity to deliver sustainable, high-margin cash flows. That gives us the ability to invest in our existing assets and materially grow production and free cash flow while simultaneously reducing debt. The right-hand chart shows the company's production is forecast to grow by around 50% between 2022 and 2024 as we bring our planned developments on the street. Second, as the chart also shows, we are increasing our exposure to GAPs and LNG as Tortue Phase 1 comes online in the second half of next year. We also have a deep hopper of world class gas opportunities in Mauritania and Senegal that we expect will provide further growth well into the future. Third, we have a robust balance sheet which we expect to strengthen further in 2022 with a year end leverage target of around one and a half times the current prices. Fourth, as planned capex falls and pre-cash flow grows, there is potential for meaningful shareholder returns once leverage falls sustainably below our target. And finally, we have strong ESG credentials, driven by a portfolio shift towards lower carbon natural gas and a commitment to our host countries in Africa to support a just energy transition. Cosmos has emerged from the last two years with a strong team, excited about the future and hungry to deliver the significant value we see in the portfolio for our investors. Turning to slide three, one of the key areas of differentiation for Cosmos is a long reserve life of our portfolio, which underpins the growth we are planning. At year end 2021, Cosmos 1P and 2P reserves were both at record levels. The top chart on the slide shows the oil gas split of our 1P and 2P reserves. On a 1P basis, oil makes up around 60% of our reserve base, whereas on a 2P basis, gas is over 55% of the portfolio, reflecting the longer term direction of the company. a bias for oil in the near term and gas longer term. The bottom chart shows the diversification of the portfolio on a 2P basis. Ghana and Mauritania, Senegal each make up around 40% of the portfolio, with actual Guinea and the Gulf of Mexico making up about 20% between them. This diversification is important as it means we're not dependent on a single field or a single geography to deliver our future plans. In 2021, our 1P reserves more than doubled to approximately 300 million barrels of oil equivalent with a booking of torture phase one and the OxyGarner acquisition. Our 2P reserves are approximately 580 million barrels of oil equivalent, which gives us a 2P reserves to production ratio of over 20 years. Even excluding the OxyGynac acquisition, our reserves replacement ratio was strong, with 114% of the placement of our 2P reserves demonstrating the underlying quality of our acid base. Turning now to slide four. As you're well aware, for the last 18 months, we've been focused on deleveraging and have made good progress. With a portfolio of highly cash-generative assets, we expect leverage to continue to fall sharply this year. As guided, we ended 2021 at around 2.5 times, a significant year-on-year reduction. We remain on track to end this year below pre-COVID levels. Our year-end target for 2022 is around 1.5 times as strict pricing. We expect to achieve this due leveraging through a combination of rising EBITDA and absolute debt reduction. EBITDA is expected to increase materially year-on-year through several drivers, including higher production and stronger oil prices, which we've been able to hedge in much higher levels than 2021. In addition, with greater production for Jubilee, we expect our unit costs to decrease as well. We also plan to reduce absolute debt by up to $500 million this year, which will further drive the leverage multiple lower. This absolute debt reduction is driven by the free cash flow we generate, but could be enhanced with the potential for contingent payments from Shell, the OxyGyn preemption proceeds, and the NOC loan refinancing. I'll provide an update on the preemption process shortly. On the NOC loan, we had initially aimed to get that done by year-end 2021 and received several term sheets for the transaction. We continue to progress those discussions. However, we want to ensure any deal done is in Cosmos' best long-term interests and are taking the time to get it right. Our liquidity position is strong and could get stronger with potential proceeds from Ghana preemption and the shale exploration bonus. Therefore, we continue to pursue the NOC loan refinancing, but timing is less pressing. Turning to slide five. I've talked about the embedded growth we expect to see over the next two years, which is driven by Tortue Phase 1, Jubilee Southeast, and Winterfell, delivering an expected production increase of around 50%. As these developments start up, our capital commitments are expected to fall by more than 30%. With production up and CapEx down, we expect free cash flow to more than triple from the levels we expect in 2022 at $75 per end. This cash generation is sustainable and underpinned by our 20-year 2P reserve life, putting us in a position to deliver material shareholder returns. Turning to slide six and our commitment to sustainability. As I've noted on the previous slides, we have a long-dated portfolio of high-quality assets. Our goal is to help our host nations develop their hydrocarbons in a responsible way and expand access to affordable, reliable energy. Through creating economic benefits, we help to drive sustainable development in our host countries. Two years ago, Cosmos set out a policy to achieve carbon neutrality for our Scope 1 and 2 operating emissions by 2030, and we're working to accelerate that timeline. We'll give further updates in this year's sustainability report, which we'll publish in the first half of this year to give investors access to the 2021 data sooner. We also plan to provide additional disclosure on our equity emissions. On social performance, we care deeply about the people who work for Cosmos and those who work with Cosmos. In our host countries, we employ 100% local nationals, and our US offices in Dallas and Houston are consistently named in the top places to work. In our host countries, we aim to be a trusted partner and good corporate citizen. We work with a range of stakeholders in our communities to facilitate sustainable development. We worked in this manner for nearly 20 years going back to when the company was founded. Each year we fund important social investment programs in Ghana, Equatorial Guinea, Senegal and Mauritania that are aimed at creating economic opportunity, advancing social progress and improving standards of living. The success of the Cosmos Innovation Center is a prime example. This initiative in Ghana, Mauritania, and Senegal invests in young entrepreneurs and small businesses outside the oil and gas industry. We train and empower young people to turn their ideas into viable businesses. And we work alongside promising startups to help them scale and reach their full potential. And finally, governance. Governance has always been a key pillar of our business. and cascades down from our experienced and diverse board of directors through the executive leadership team to our employees. We have always taken an industry-leading position on transparency, publishing all of our material petroleum contracts online. In summary, our consistent commitment to sustainability is a core value and supports our ability to deliver long-term value to our shareholders and stakeholders. Turning to slide 8, looking back at 2021, a year that saw an acceleration of our strategic progress with operational momentum across all areas of the portfolio. On production, we hit our year-end production target of 75,000 barrels of oil equivalent per day, boosting fourth quarter cash flow and reducing leverage at year-end to approximately two and a half times. Our LNG development made significant progress during the year. We tore through phase one around 70% complete at year end. We enhanced our reserve base and now have a 2P reserve life of over 20 years with a growing gas weighting. We executed a highly accreted transaction in Ghana, acquiring a stake in the Jubilee and Tenfields from Oxy, which has helped to transform the balance sheet and increase free cash flow generation. And finally, we continue to advance our ESG agenda, supporting a just energy transition in Africa. On the following slides, we'll briefly look at the progress we've made in each of our core geographies. Turning to slide nine and starting in Ghana. 2021 was a pivotal year for Cosmos in Ghana, where we got back to drilling after a pause in 2020. Cosmos had net production of around 39,000 barrels of oil per day across Jubilee and TEN in the fourth quarter. The increased drilling activity in 2021 was promising, particularly at Jubilee, where the partnership drilled three wells, and Cosmos has a much greater interest. The chart shows Jubilee production for mid-year when new wells start to come online. And you can see production rising from around 70,000 barrels of oil per day in July to over 90,000 barrels a day by year end, which is where the field is producing today. On 10, the partnership drilled one gas injector, which is helping to support existing producers. However, this has not been enough to fully stem production declines. Turning to slide 10. In October, we announced and completed the acquisition of additional interest in Jubilee and 10 from Oxy for a total cash consideration of around $460 million. At the time, we talked about the attractive economics of the deal in a $65 world, which is highly accretive on all metrics and had expected payback of around three years. With the ongoing strong operational performance of the assets and the recent strength in oil prices, we believe payback will be reduced to under two years with significant future upside as we continue the infill program. Once again, I'd like to thank our equity and bondholders for their strong support. I'm pleased to see the benefit of this transaction delivering so quickly. On preemption, both partners exercised their preemption rights in November. The impact of preemption on COSMOS is a small reduction in our Jubilee state from around 42% to around 38%. In 10, the reduction is more meaningful with our state reducing from around 28% to around 20%. Assuming preemption is completed, we would expect to receive a bit more than $100 million of closing, which we'd use to pay down debt. The impact on COSMOS production would be about 5,000 barrels of oil per day. We are working with the partners on the transaction, and the preemption remains subject to the approval by the government of Ghana. Turning to slide 11. In actual Guinea, 4Q gross production was in line with the full year at around 30,000 barrels of oil per day. Similar to Ghana, we saw increased activity in 2021 with the first wells drilled on the assets since 2015. The partnership drilled two jacket wells, both of which came online in the fourth quarter. We've been pleased with initial performance and the combined impact on gross production can be seen on the chart. We saved when accumulating collectively producing at levels not seen for over 18 months. In the Gulf of Mexico, turning to slide 12, 4Q production was 21,000 barrels of oil equivalent per day, slightly above full-year production of 20,000 barrels of oil equivalent per day. On drilling, the successful tornado dump flood boosted output in the second half of the year, as the chart shows. The highlight in the Gulf of Mexico last year was the Winterfell discovery and the successful appraisal well. With around 100 million barrels of gross resource potential in the central Winterfell area and proximity to several nearby host platforms with ULH, we're excited about the future potential of this asset. Turning to slide 13. The Tortue project saw a ramp up in activity in 2021 with all key work streams making significant progress. At year end, phase one of the project was around 70% complete. Looking at each of the work streams, on the FPSO, the final four process modules were lifted onto the deck in December, and mechanical completion of the process subsystems is now underway. The images of the FPSO on the slide show the high level of completion. On the hub terminal, we complete the construction of the 21st and final caisson, and the piling installation for the jetty has commenced ahead of the hub terminal facilities delivery. But the subsea activity is ramping up. The pipeline vessel has recently completed its nautical trials in the North Sea and should be ready for the offshore installation campaign in the second quarter. And on the floating LNG vessel, the four mixed refrigerant compressors have been lifted on board, and the pipe rack installation operations have commenced. So 2021 was a busy year for us, and with the operational momentum we have built, we are well-placed to take delivery this year. With that, I'll hand over to Neil to take you through the financials.