Kosmos Energy Ltd.

Greetings and welcome to the Cosmos Energy third quarter 2022 earnings 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. As a reminder, this conference is being recorded. I would now like to turn the call over to Jamie Buckland, Vice President of Investor Relations. Thank you. You may begin.

Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our third quarter earnings release. This release and the slide presentations to accompany today's call are available on the investor's 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, funds, 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 third quarter results call. I'd like to start today's presentation with a few comments on the macro environment and the role COSMOS can play in addressing the energy challenges the world is facing. I'll then give an update on the quarter and a progress report on the oil and gas development projects we have across the portfolio. I'll then hand over to Neil to talk through the financials before I wrap up today's presentation and we open the call for Q&A. Turning to slide three. The world's grappling with a need for affordable, secure, and cleaner energy with a balanced approach required to address the three dimensions. Cosmos has the right strategy and portfolio at the right time to be part of the solution. we have a strong oil-weighted portfolio that can supply more of the energy the world needs today. We're investing in growing oil supply in each of our core production hubs with an emphasis on high-graded projects that yield low-cost, lower-carbon barrels that are highly cash-generative. At the same time, we're working with our partners to bring new sources of natural gas into production. These projects address affordability and increase energy security by supplying more gas to global energy markets, as well as into domestic markets in Africa. This should benefit our host countries in two ways. First, the revenues from the export of LNG can be invested in critical infrastructure to promote economic development. Second, providing base load domestic gas supply will help expand access to electricity, a key goal in each of the countries where we work in Africa. Over the next two years, we expect to increase oil and gas production by about 50% as we optimize current production and bring new projects online. The COSMOS, the cash flow from our current and planned activities, enables selective reinvestment into the most compelling opportunities in our deep natural gas portfolio, which can help meet demand and support the energy transition for decades to come. Longer term, we plan to continue shifting the balance of our portfolio from oil to natural gas and LNG to help meet the world's energy needs as clean and natural gas displaces coal, heavy fuel oil, and biomass as a primary source of energy in both developed and emerging economies. The world's demand for energy continues to grow, particularly in Africa, and few E&P companies are investing to meet this demand. Given the quality of our asset base and the wealth of opportunities within our differentiated portfolio, we believe Cosmos has an important role to play in responding to these global energy challenges. The next slide highlights the characteristics that differentiate Cosmos. On the left side of the slide, we identify the distinctive features of our portfolio. First, we have a high-quality and long-dated asset base that 2P reserves for production life of over 20 years. Second, Our low-cost, high-margin assets are highly cash-generative, particularly at current commodity prices. First, we forecast around 50% growth in production from now into 2024 from three development projects, which are progressing well. The largest portion of that growth is expected to be driven by tortue, which increases the gas content of our portfolio materially just from phase one. with a larger transition anticipated as we deliver subsequent phases in our other gas projects in Mauritania and Senegal. On the right are the embedded values and qualities of the company that underpin our strategy. We have a strong focus on capital discipline, only pursuing the most compelling value-added projects in the portfolio, while making sure the balance sheet remains robust. We continue to reduce absolute debt and drive down leverage. And Neil will talk about the progress we've made this year. We have a highly experienced management team who have the energy to deliver our strategy and respond to the challenges we see across the industry today. And finally, we have a strong track record across the E, S, and G spectrum from near-term emission reduction targets the contract transparency, the funding social programs in our host countries. MSCI, one of the leading ESG rating agencies, recognizes this commitment and the progress we are making and has recently upgraded POSMOS to AAA, its highest possible rating. The combination of these qualities makes POSMOS unique and supports our ability to create substantial shareholder value. over the short, medium, and long term. So to summarize, I strongly believe Cosmos is well positioned for the future with a clear, compelling strategy, and we continue to live a progress on our strategic priorities each quarter. Turning to slide five. Looking at 3Q, it was another quarter of solid execution for Cosmos as highlighted by the boxes on this slide. Our production assets are performing as expected with production for the quarter in line with guidance. We continue to grow the value of our oil portfolio with progress at the Jubilee Southeast and Winterfell development, and we have high-graded our ILX hopper for next year's drilling activity. We are also growing the value of our gas portfolio with the continued execution of the torching projects, And at Borala, where we've signed a new PSC with the government of Mauritania. And finally, the balance sheet continues to improve as the portfolio generates cash, which drives down leverage, with our year-end target leverage at one and a half times achieved with further progress expected. We'll dig into each of these themes in today's presentation. Turning to slide six, which focuses on the performance of our production assets during the quarter. In Ghana, the Jubilee field continues to deliver gross production for the quarter, around 89,000 barrels of oil per day. Following the excellent drilling performance year to date, which has seen wells drilled safely and quicker than planned, we have now started to drill the first of the three Jubilee Southeast wells ahead of schedule. We have completed a handover of the Jubilee FBSO operations and maintenance from MODEC at the beginning of the third quarter, and the results so far have been encouraging, with multiple opportunities identified to drive further efficiencies and reduce costs. Since transition, the operating performance has been strong, with no reportable safety incidents and facility uptime of over 98%. On costs, we've identified potential savings through direct contracting, focused work scopes, and competitive re-tendering. At 10, gross production of around 22,000 barrels of oil today for the quarter was in line with expectations. The EN21 well was brought online in late September and has since been shown back awaiting pressure support from the injector pair, which we expect to see soon. The partnership also drilled a second intonally riser-based well during the quarter, which encountered approximately five metres of net oil pay, but with poorer quality reservoirs than expected. The data from the two riser-based wells will be incorporated into the expansion plans for 10, which will now be focused on proved accumulations in areas where we have existing well control. In actual Guinea, gross production has been consistent and stable, with around 30,000 barrels of oil per day for the quarter, again in line with expectations. In late August, the partnership entered into a rigged contract for next year's drilling campaign, activities scheduled to begin in the second half of 2023, when the partnership expects to drill several infill wells in Block G, followed by an ILX well. In the Gulf of Mexico, net production of 14,700 barrels of oil equivalent per day was slightly below expectations due to an extended Delta House turnaround and leaf currents impacting production of tornadoes after the planned ride-off of the production vessels concluded. At Delta House, there was an unplanned shutdown for around two weeks last month due to an outage of the gas compressors. The issue is being resolved and factored into our 4Q guidance for the Gulf of Mexico in the appendix slide at the back of the material. On Kodiak, the number 3 well came online in mid-September. Well results in initial production were in line with expectations. However, as one of our partners flagged in their results last week, well productivity has declined and workover plans are being developed. So there have been a few issues with unplanned downtime over the past couple of months, but we're now back at around 18,000 barrels of oil equivalent per day net and focused on growing argon production. Work also began on the Oddjob subsea pump project during the quarter, following sanction in Tuku, which is an important step in sustaining the long-term performance of the field. Turning now to slide seven. As we move our development projects forward, we continue to grow the value of the portfolio. This slide looks at the recent progress we've made growing the value of our oil portfolio. On Jubilee Southeast, the project is now over 50% complete, with the drilling of the first wells now underway. Initial production is expected in mid-2023, and the partnership is targeting a ramp-up in gross Jubilee production to around 100,000 barrels of oil per day. At Winterfell, all partners signed the field development plan in September, and the operator has signed a recommitment letter to drill and complete three wells starting mid-23. Those facility production handling agreements and midstream export agreements are also expected to be completed within the next several months, supporting our target of first oil at the end of the first quarter in 2024. Given the scale of the potential resource with approximately 200 million barrels of recoverable oil, we remain excited about this project. Within the quarter, acquired an additional interest, taking our overall interest in the project up to 25%. In addition, we are targeting further growth and drilling two high-graded opportunities in our ILX copper. We expect to drill the Tiberias well in the Gulf of Mexico mid-2023 and the Akeem Deep well in Extraordinary Guinea around a year later. Both projects are targeting over 100 million barrels of oil gross and would be high-return tieback projects if successful. Now that I've talked about our near-term upside in oil, I'd like to switch gear on slide eight, which looks at how we're growing the long-term value of our gas portfolios. So let's talk to you phase one, our LNG project in Mauritania and Senegal. All work streams continue to make good progress with the project approximately 85% complete at the end of the third quarter. The hub terminal is now largely complete with the living quarters platform installed and the commissioning activity now commenced. On drilling, four wells have been drilled with the total capacity of around 700 million standard cubic feet per day. We recently completed the first of the four wells and have floated back to the roof for a short cleanup period. Combined across the four wells, we now have significantly more capacity than the 400 million standard cubic feet per day required to supply the liquefaction volumes for phase one. On the floating LNG vessel, which has been constructed in Singapore, we remain on track for sail away in the first half of 2023, as communicated by GOLA in their most recent results. On the subsea, the shallow water gas export pipeline, the FPSO to the hub terminal, has been installed, and the deep water pipeline vessel has arrived in the region. Final testing has been conducted prior to mobilization in the coming weeks delaying the deep water pipeline and the infield flow line. On the FESO, the timing of the sea trials by the sail away was impacted by the typhoon which swept through the yard in mid-September and caused the vessels to drift away from the quayside. Around two weeks later, the vessel was returned to the quayside, and following the inspections carried out today, there continues to be no material damage reported. With the required inspections and additional work scope resulting from Typhoon, the impact on the FBSO schedule has been around a month. And as a result, we expect sail away of the vessel around the year end. Stepping back and looking at the project overall, the operator is working hard and making good progress to overcome the challenges from COVID, supply chain constraints, and more recently, Typhoon Muifah. We expect first gas around nine months from FPSO's sale away and continue to target first LNG around year-end 2023. On the cargo sales opportunity we talked about last quarter, a process of engagement has commenced with significant interest received to date, including majors, traders, and end users. We'll provide further updates as we progress the process and remain focused on crystallizing additional value for our shareholders from this opportunity. Elsewhere in Mauritania and Senegal, we continue to move the various projects forward. On Tortue Phase 2, we're in advanced discussions with our partners, BP, Petrosan, SMH, and the two governments, including their respective presidents, on the right concept to accelerate the second phase of the project. In light of the changed global market conditions following the invasion of Ukraine and the continuing volatility, our aim is to agree the best concept in the coming months, which will enable us to advance at pace for the right expansion. This is taking longer than initially envisaged, as we work to obtain the full agreement for both governments who are rightly considering the importance of their gas resource and the opportunity to build new government-to-government partnerships. Overall, I'm pleased with the level of alignment on the route forward. There's a sharp focus on building the right, low-cost solution, leveraging synergies with Phase 1, and accessing attractive pricing opportunities given the high-demand environment. On Boralla, we've now signed the PSE with the government of Mauritania as flags in last quarter's results. We're working with BP on a future development concept, and the PSE allows us up to 30 months to reach FID. So that sets the clock on that project. We expect this project to take a similar phased approach as TallTube to manage both cost and pay. In Senegal, we're continuing to progress the domestic gas scheme with the operator and the government. There is a large and growing need for domestic gas in Senegal, and the government intends to move this forward quickly. With that, I'll hand over to Neil to take you through the financials. Thanks, Andy. Turning to slide nine, the third quarter saw continued progress as we further enhanced our financial position.

We are taking advantage of higher oil prices to continue to strengthen our balance sheet with net debt down approximately $400 million year to date.