Kosmos Energy Ltd. Common Shares (DE)

Good day, everyone, and welcome to Cosmos Energy's third quarter 2024 conference call. As a reminder, today's call is being recorded. At this time, let me turn the call over to Jamie Buckland, Vice President, Investor Relations at Cosmos Energy.

Thank you, Operator, and thanks to everyone for joining us today. This morning, we issued our third quarter 2024 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'll 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 start today's call by looking at the operational momentum and enhanced financial resilience we have built across the business during the quarter. I'll then hand over to Neil to look at the numbers in more detail, touching on some of the key financial objectives we've completed in the last few months. Neil will then look forward to 2025, where we'll discuss our CapEx plans for the year ahead before I wrap up. We'll then open the call for Q&A. Starting on slide three, Two years ago, we set a target to grow production by 50% from around 60,000 barrels of oil equivalent per day to around 90,000 barrels of oil equivalent per day. As this slide highlights, we're making good progress towards that goal. In the Gulf of Mexico in the third quarter, we achieved first production at Winterfell and completed two production enhancement projects at Kodiak and Oddjob, both of which are performing well. In actual Guinea, the drilling campaign is underway, with the first of two wells online in October, and the second one expected online later this month. We expect to spuddy clean deep ILX well imminently, with the result by year end. In Mauritania and Senegal, the partnership has made good progress over the last three months, with the project now nearing start-up. I'll talk more about that shortly. In Ghana, we finished the three-year drilling campaign mid-year and are now optimizing the activity schedule for 2025. On the finance side, we've done a lot this year to enhance the financial resilience of the company by extending maturities, enhancing liquidity, and simplifying the capital structure. Neil will go into more detail on these points later in the presentation. So in summary, we're making good progress towards achieving our year-end goals. As production rises, we will remain focused on disciplined capital allocation with a plan to significantly reduce growth capex year-on-year. As we look ahead to 2025, we plan to prioritize free cash flow to enhance the value of the company for our shareholders. Turning now to slide four, we look to the course in more detail. Gross tube lead production in the quarter was around 87,600 barrels of oil per day, with year-to-date production of just under 90,000 barrels of oil per day. FPSO uptime remained high at 99%, whilst volume replacement, or the water injected to replace produced fluids and maintain reservoir pressure, was approximately 90% below the 100% target. This was a result of lower than planned uptime of the generators supplying power to the water injection pumps. As I've discussed in previous quarters, to get maximum performance from the field, it's critical to sustain water injection at levels that achieve body replacement in excess of 100%. Water injection is now being restored to record levels of around 300,000 barrels of water per day, which should enhance body replacement going forward. Third quarter gross gas production averaged 12,700 barrels of oil equivalent per day, which was lower quarter on quarter, reflecting the planned downtime of the onshore gas processing plant we planned last quarter. During the quarter, the partnership contracted a new 4D seismic survey over the Jubilee field starting in early 2025. The survey will be the first 40 that the partnership has conducted in almost eight years, having missed the cycle during COVID. It will utilize the latest processing techniques and should generate a significantly improved image of the reservoir and fluid movements, further enhancing our understanding of this world-class field. The results of the survey should help to hydrate well locations for the next phases of drilling. On 10, the field is performing slightly ahead of expectations with gross oil production of 18,500 barrels of oil per day in the quarter and 18,800 for the year today. FPSO uptime remains high at around 99%. On extra-organic, gross production averaged around 23,000 barrels of oil per day. The infill-grilling campaign is underway with the first well online, increasing gross production to around 30,000 barrels of oil per day. The second infill well is expected online later this month. These two wells combined should add around 3,000 barrels of oil per day net to COSMOS by year-end. Following these two infill wells, we expect to spud the King Deep ILX well imminently with a result by year-end. In the U.S. Gulf of Mexico, production in the quarter was ahead of expectations at 17,000 barrels of water equivalent net to COSMOS, despite an active hurricane season. In early 3Q, we saw the start-up of the Winterfell project with two wells online in July, followed by the third in early October. We successfully confirmed the extension of the main Winterfell reservoir to the south. It also confirmed the 20,000 barrel of oil equivalent per day gross production capacity from the first phase of drilling. However, shortly at the start of the third well, production of the field was curtailed due to sand production from the third well, seen at the production facility. We're currently working with the operator to restart production from the first two wells, which collectively produce around 13,000 barrels of oil equivalent per day gross, and are evaluating options to remediate the third well. In the quarter, we also completed two important production enhancement projects, with a successful work over at Kodiak and start-up of the sub-sea pump projects, Dolphgel, both of which are operated by Cosmos and are performing ahead of expectations. Current production in the US Gulf of Mexico has increased to approximately 20,000 barrels of oil equivalent per day, in line with expectations, and around 50% higher than the first half of the year. On Tiberius, our next ILX project where Cosmos is operator, we've agreed with our 50-50 partner Oxy to defer sanctions to the second half of 2025 to prioritize cash generation in 2025. We continue to progress the farm down the field and have good levels of interest. Turning now to slide five, which provides an update on GTA. As the operator noted on their earnings call last week, good progress has been made across all the major work streams during the quarter. An LNG cargo has been brought in and the carrier is currently berthed alongside the hub terminal. LNG from the carrier is being introduced into the tank for the floating LNG vessel to accelerate the cool-down process and commence commissioning of the LNG trains. The image on this slide and on the front cover of the presentation show the carrier at the hub terminal. After successful mooring operations last quarter, the SPSO is expected to be ready for start-up shortly, with a handover from the contractor Technic Energies to BP Operations. The subsidy infrastructure is mechanically complete, which will enable first gas to flow from the field following SPSO start-up. First LNG is expected around the end of the quarter, which is when we start to recognize production. So in summary, significant progress over the last three months towards project startup, an important event for the GTA partnership and the people of Senegal and Mauritania. I'll now hand it over to Neil to take you through the financials.

Thanks, Andy. Now turning to slide six, which looks at the third quarter in more detail. Production for the quarter of 65,400 barrels of oil equivalent was up 5% versus the prior quarter, but towards the bottom end of our guidance range, reflecting the first infill well in Equatorial Guinea, coming online around two months later than initially planned and slightly lower Jubilee production. This was partially offset by the higher production in the Gulf of Mexico that Andy mentioned earlier. Sales volumes were as expected, with three cargos in Ghana and one in Equatorial Guinea. Costs were largely in line with guidance, with OPEX slightly better, helped by lower-than-anticipated costs in Ghana for the quarter. CapEx came in slightly above the guidance range, which was a result of higher-than-forecasted spend on the EG drilling campaign in 3Q. We now expect CapEx to be around $800 million for the year. This equates to around $100 million in 4Q, a significant reduction from previous quarters in 2024, and a good guide on where we expect quarterly CapEx to be in 2025. Finally, as we mentioned last quarter, the working capital benefit from the first half of the year reversed in the third quarter, reflecting completion payments associated with projects delivered across the portfolio. This working capital movement was largely responsible for the cash outflow in 3Q. Turning to slide 7, during the quarter, we made significant progress to enhance the financial resilience of the company as we head into 2025. In September, we successfully issued $500 million of new senior notes due 2031 at 8.75%. Alongside the new issue, we completed a series of tender offers to repurchase $500 million of our outstanding senior notes across multiple maturities, paying down the majority of our 2026 notes while also reducing the outstanding amounts of our notes due 2027 and 2028. The result of these transactions is that we have no maturities in 2025 and only a small stub in 2026, which we would anticipate paying with free cash flow from the business. Also during the quarter, we added two new banks to our RBL syndicate, increasing our total commitments to the facility size of $1.35 billion. Post-quarter end, we also canceled our undrawn revolving credit facility ahead of its year-end maturity, simplifying the capital structure. In addition, we continue to actively manage future price volatility through our rolling hedging program. We currently have around 45% of our first half of 2025 oil production hedged with downside protection of approximately $70 per barrel. We expect to continue this through end of the year, layering in more hedges for 2025 as our 2024 hedges roll off, providing solid protection to our cash flow from potentially volatile oil prices in 2025. Moving to slide eight. As mentioned previously, as products are delivered, we expect to see a material step down in capex with around 100 million expected in 4Q. This level of quarterly capex is a good representation of where we expect to be in 2025. As Andy talked about earlier, we plan to prioritize free cash flow next year and have therefore high graded our maintenance capital to focus on drilling at Jubilee and where Winterfell to mitigate decline in Ghana and the Gulf of Mexico. Equatorial Guinea will benefit from this year's infill drilling program, and we anticipate very low maintenance capital on GTA once the project is online. We will be disciplined in allocating capital to growth opportunities in 2025, ensuring we only spend what is needed to preserve our deep pipeline of growth options, which remains a key differentiator for our company. The growth options listed in the appendix consist of both high-quality oil and gas projects spread across our different business units. Importantly, many of these are Cosmos-operated, such as Tiberius, Yakarta Ranga, and the King Deep, which gives us much greater control over both pace and spend than we've had on projects in the past. With that, I'll hand it back to Andy to conclude today's presentation.

Thanks, Neil. Turning now to slide nine. We've achieved a lot so far in 2024, but started with new projects and more to come as we close out the year. Production is now ramping up towards our target of approximately 90,000 barrels of oil equivalent per day around the end of the year. As Neil said on the previous slide, we expect CapEx to fall sharply in the fourth quarter. They continue at this lower level through 2025. With this disciplined capital allocation we plan to prioritize free cash flow delivery in 2025, we should allow us to pay down debt and reduce leverage. And finally, our differentiated, operated growth projects portfolio provides significant optionality for the future, with high-quality oil and gas investment opportunities with a much greater degree of control. Thank you, and I'd now like to turn the call over to the operator to open the session for questions.

Thank you. We will now be conducting a question and answer session. 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 question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Charles Mead with Johnson Race. Please proceed.

Good morning, Andy, Neil, and to the whole Cosmos team there. Andy, I want to ask a question about the 2025 CapEx outlook and the changes there. I recognize that that 550 indication you had given was, I took it as more of a kind of a guideline. It wasn't necessarily a specific roster change. or perhaps it wasn't a specific roster of projects, but can you talk about the moving pieces, what maybe moved out of 25, and how much of that delta of 150 is related to Tiberius sliding to the back half of the year?

Yeah, hey, Charles. Yeah, look, you're right. The 550 was more of a guideline, and we characterized it as saying it's around 200 to 250 going forward in growth, on average, and around maybe 300 or 350 in the base going forward. So as we look towards 25, as we said in the remarks, our focus is on pre-cash flow delivery next year. And therefore, the CapEx 400 is ensuring that we put sufficient CapEx into the base. We have drilling projects in the Gulf of Mexico in Winterfell with two additional wells. and we have the restart of the Ghana infill program in Jubilee. In EG, there's not a lot of maintenance capital. We've had the drilling program in 24, and there's little maintenance capex in GTA because we've got more than sufficient well capacity. So that's where the base spend is going to maintain the base. And then we are thinning down the growth capex. The prime remover... is the one that you've identified, which is Tiberius. Essentially, that slides by about a year. The project's obviously still there. Under our operatorship, we're aligned with Oxy around the timing. So that's the primary delta. And then you've got a little bit of additional growth CapEx just keeping everything ticking over. So the other message, of course, from this is that in deferring that growth CapEx, We're not actually damaging any of the growth options. It's simply about a shift probably in about a year in terms of the time period's timing.

Got it. That's helpful detail. Thank you. And then on the 25 Jubilee drilling, I wonder if you could talk a little bit more about what the priorities are there. I mean, obviously, you're trying to get the FPSO up to capacity, but I imagine that whatever you learn from this, from your 4D seismic shooter, it's going to be not going to have enough time for that to inform your $25 trillion, but maybe confirm that and just talk about what the goals of the $25 trillion program are.

Yeah, we'll start at the next phase of drilling on Jubilee Charles. And as we've sort of remarked, I think that I believe the 40 is going to have a big impact on that. you know, and it's, the actual, you know, the acquisition techniques, it's a toad streamer, it's not, you know, haven't actually moved massively, but clearly the processing has, both in terms of the quality of want you get, and actually the timeliness of it. You get the product a lot earlier, yeah? So we have a sort of a challenge to manage. When we start, the earlier we start, the better. But how do we ensure that we're fully incorporating that learning? Now, there are a couple of wells where we know that the 4D is not going to have a big impact. So we have sort of a couple of wells that are secure from that perspective. And then you start to feather in the additional information that you get from the 4D seismic. So in a way, it's just getting the right balance of how do you ensure you're taking full advantage of the seismic but not waiting too long by where you're diminishing the impact of the infill program. So I think we've got the balance about right now. Great. Thank you. Great. Thanks, Charles.

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

Good morning. I had a question around A. King Deep and then one around Tiberius that are somewhat related. We'll know something around A. King Deep by year end, I think you guided to. What are the implications for success case on capital for 2025? And I'll follow up with Tiberius.

Yeah, no, you're right, Bob. Look, I think The King Deep well is an important well because it opens up a whole new play that enables us to, you know, use existing infrastructure. It's ILX, tie back the wells. I think when you look at 25 with success in the King Deep, we won't rush at it. I think what we want to do is make sure that we're high grading the right opportunities that exist across Equatorial Guinea. So, you know, we've had an infill program in Sabre and Akuma. There's more of those wells. With success at a King Deep, you have a deeper target that you can bring in. So I would see it actually impacting 26 forward when we're actually high-grading the capital that we planned for 26 in Exxon or Guinea. And actually, it would be about debating an info well and say Kume or Sabre versus a King Deep. Now, the good news is if you remember that we extended the leases earlier in the blocks to out beyond 2040, all right? So we're not in a big rush. So this is about ensuring that we get the right high grading of the opportunity set. I'm actually, you know, I'm excited because I think, you know, we've drilled, you know, we've finished the first well on Sabre. We've just finished the second well on the Kume. The rig is literally moving as we speak to go and drill a king deep. But I think that between, you know, the success of the Intel program, we're going to create quite a lot of optionality now. And, you know, with success, we will have some choices to make, I think, around the future infill program. So that's really going to impact 26, Bob, rather than 25.

Very clear. And that almost ties well into my question on Tiberius. Given the 2H25 FID, it gives you potentially more time to look at the farm down, And if there's less interest, then your desire to retain a greater working interest, which I know we've talked about in the past, does the farm down have to go forward? Or if the FID comes late, would you keep a greater working interest?

You know, you and I have debated this. We like it a lot. And nothing's changed. This is about, you know, prioritizing, I think, the pace at which we move forward on some of our growth options. So I think this is not about not liking it. I think we believe, you know, working interest, you know, around the 40% level, you know, it's probably right for us. I think Oxygen about the same place. So bringing in a partner is the right thing to do. And we're clearly going through that process now. So will that process run, Bob? I don't think it changes our intent. And ultimately... You know, we see, you know, it's a good prospect. You know, we want to ensure there's alignment, you know, on the development plan, which we can now create that alignment going forward. And so with ourselves, it's tied back to an Oxy-operated platform. It's a very clear project. So I think no change of plan, simply, you know, deferral and the farm-up process is working as we speak. Very clear. Thanks. All right. Thanks, Bob.

Our next question is from Matt Smith with Bank of America. Please proceed.

Hi there. Good morning, Andy. Good morning, Neil. A couple of questions from me. I'll just start with the first, perhaps, and that would be on torture, if I could. And really, just could you remind us around the commissioning process, the FLNG process? Is that sort of set in stone? I believe you referred to a six-month period of commissioning before, or is that an expectation? And then really just, can you remind us of the implications during that stage? What do you expect from production and cargoes, but also your exposures to the commercial arrangement that you have with BP? So I'll start there with the first question.

Okay, right. So in terms of the commissioning process of the FLNG vessel, we're accelerating that process by bringing in the carrier and starting the process with the gas coming from the LNG cargo. That allows us to cool down the tanks. It allows us to enable us to run the first compressors at the front end of the process and then actually spin the the key compressors in the FLNG trains themselves. So that's the process we're going through at the moment. And then that allows us, when we introduce gas from the FBSO, essentially very quickly to start making LNG. So that's the process. And that's when we actually recognize production. I think the six-month program that you're talking about is actually to do with the contractual arrangements associated with the finalization of the agreements that we have with GOLAR in terms of them meeting all of the criteria that they have to meet as part of their contract. So I think you have to sort of separate those out from the actual physical representation of the production and the revenue, which comes as soon as we start putting gas through the FLNG and start producing gas and then exporting it. So I think what I'm sort of explaining, therefore, is the process from the introduction of gas to the production of LNG and the revenue recognition is going to be a lot shorter than you described. In terms of the marketing arrangements with BP, sort of nothing changes. They will lift the gas and sell the gas.

Putno, thank you for the clarifications there. And I suppose just a follow-up was whether the commercial agreement that you have with BP, am I right in thinking that's tied to the six-month commercial commissioning process that you have with GOLA, i.e. you'll be free to sell your cargoes on the spot market during that time frame. Is that correct?

No, BP will lift the cargoes. So we wouldn't be selling anything on the spot market in that time period.

And there's essentially, Matt, go under the long-term pricing frame. There's a slightly different option where there's an MVP reference potentially, but as a base case, sort of it's off-rent on the same terms as the long-term contractor and commissioner.

Okay.

Yeah, Matt, if you want to get really precise about it, in that six-month period, Only in that six-month period, there's a price market versus NBP, and there's a price market versus Brent, okay? So that's the only sort of difference between that six-month period and then the long-term period.

Okay, understood. I think that's consistent with my understanding, then. That makes sense. Okay, well, thanks for clarifying all of that, and then hopefully the second... Don't. Understood.

Our next question is from Mark Wilson with Jefferies. Please proceed.

Thank you. First question, just a clarification point on the US Gulf of Mexico. You say the current production level is at 20,000 barrels of oil a day. That current level include those two winter shell wells you're looking to restart? That's the first question.

It's around $20,000 without those, Mark, yeah. So, you know, we've benefited really from the production on the odd job sub-seat pump being better than we thought and the Kodiak work over doing better than we thought. So we're slightly ahead of where, you know, we would have been. But, you know, in essence, it's around that $20,000 a day, Mark.

Okay, very good. And then, so those, provided that the sand thing is sorted, those wells four and five next year, you'd be expected to be able to maintain or even be slightly higher than these current levels through 2021?

Yeah, be slightly higher, Mark. Yeah, exactly. Yeah, we're building production there rather than it going down. And, you know, clearly, again, We've benefited from a couple of the production enhancement projects doing slightly better than we'd forecast, which is good. So the base, in a sense, is stronger, and then you're adding the wells from Wintersol.

Okay, thank you for that. So then into 25 with the lower capex, as you've spoken to already, and the focus on getting leverage down. Could I ask, is there a leverage point or a target you'd aim to get to where shareholder returns or a buyback could be something you'd look at?

I'll throw that over to Neil.

Thanks, Mark. I don't think our views change. We're very much focused on getting leverage down to less than one and a half times, and once we get beyond that one and a half times, then we'll look at shareholder returns, which is clearly an option that we're keeping on the table. But like I said, I think from our perspective, 25 will be around prioritizing free cash flow, using that cash flow to pay down debt and accelerate to that point. So I don't think it'll jump, but it's very much still on our minds and we're accelerating the pathway to get there.

Okay, very good. And then final question. So you've asked about the carrier and the FLNG vessel seems to accelerate the commissioning time of the FLNG vessel at Tour 2. Could you just speak to the final steps for the FPSO, that has crept into 4Q, first gas getting through that. What are the final steps that need to be taken to get that first gas, please?

Good point, Mark. I think the FPSO is an important part of the chain and we're close. I think to add a little bit of color, Technip Energies has a contract where they actually perform the commissioning of the vessel. So all the work that's ongoing at the moment is under Technip's watch, and they're commissioning the vessel. The next step is then it's handed over to BP Operations. So it goes from Technip Energies as the project to BP Ops, who then will undertake the operations. At that point, it sort of moves into the sort of the big ops world where it's under their control of work. Under their control of work, you can then energize the subsea system, which then allows you to introduce gas. I think, you know, as we go down that journey, maybe, you know, an important milestone was actually when the flotel that was supporting the work that Technique Energies were doing offshore, it's now departed. And I think that's an indication to you, I think, that we're very close in terms of the few remaining punch list items that need to be performed that allow that process of ready for startup to occur. And clearly that's the defining sort of criteria is technically, you know, have to finish all that work, which is those final punch list items, and then it gets handed over. Floatel is already gone, which signals the amount of work to be done is not very much. Excellent.

Thank you for that. Very clear. I shall hand it over now.

Great. Thanks, Mark. Appreciate it.

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

Thank you, Andy, team. So I guess the first question is just on the 90,000 barrels a day equivalent. When do you think you get there in 2021? as you think about the next couple of years targeting. And then in your Q4 volume guide, is there any assumption for volume contribution from GTA, from Tour 2 in there?

Yeah, so, you know, sort of two-part question, Neil. It's sort of You know, going forward, I think, if you start to think about the company, it's obviously invested heavily to sort of grow the production now. It's about a focus in 25 on sort of maintaining that level, as I discussed in a prior question. The maintenance capex is sort of low in GDA. You've built the wells. You know, there's very little... capex to go, so you get a sort of flat production curve from that. The production that goes into the Gulf of Mexico, you know, as Mark alluded to in his question, you sort of with GTA, with Winterfell 4 and 5, there's probably a small amount of growth there. you know, I think we'll sort of, you know, see Exel getting relatively flat and therefore, you know, and then back to drilling in Jubilee, which again is about sort of maintaining it flat and then starting to increase. So I think, you know, if you look through 24, 25, you know, with 24 capex, you know, aimed at the base, it's about maintaining. And then beyond, then you start back into the cycle in 26, of seeing the growth projects but you won't see the impact of Tiberius until 27 now. So I think relatively flat and then post you're seeing some growth in 27. So I think that's the way I'd think about it and clearly we're prioritizing the investment level in the base to ensure that we keep it robust. Yeah, and then look, in 20, the production guidance in 20, in the fourth quarter of 24, there's a very small amount of GTA in that, you know, we said around the end of the year, production is recognized when it goes, when actually we get gas flowing from the FPSO into the FLNG vessel, yeah? So we said, you know, that's around the end of the year, so you can assume there's a small amount of gas there, a small contribution.

Perfect. Okay, that's very helpful. And then, What is the assumption that you recommend for 2025 for your LOE per barrel as you think about the pro forma company for GTA in 2025? Just how do you think this project is going to change the consolidated cost structure?

Yeah, Neil, do you want to pick that up? Yes, and again, it's easier to think about it on a per BOE basis. But again, I don't see a meaningful change on the oil side of the business. We've been increasing the run rate on the LOE for the gas side of the business. We said sort of we expect this quarter to be sort of between $60 and $80 million for the quarter. There's a number of things going on there. But when you think about it in a normalized sense, I'd say on a per MCF basis for the gas business, the normalized recurring OPEX is around $4 per MCF on the gas side, and that includes the FLNG toll and then sort of the upstream cost. So plus or minus is around in that range. And then, again, I think, and we'll get into this in terms of guidance for 25 in February, but there's also, if you recall, in 2021, we sold the FPSO to BP, and we're working on a refinancing of that. So that's currently in OPEX as well. And so there's a little money associated with that. That'll come down as we get that piece refinanced next year.

Okay. Thanks, Neil. Appreciate it.

Sure.

As a reminder, this is Star 1 on your telephone keypad if you would like to ask a question. Our next question is from Stella Cridge with Barclays. Please proceed.

Hi there. Afternoon. If you don't mind, if I could just follow up on the previous question. In terms of this growth OPEX for Tortue, could you just talk about how much of this in Q4 is some of these one-off items, just in absolute dollar terms? and what the quarterly OPEX would be in dollar terms for 2025?

Yeah, let us get back to you sort of offhand. I don't remember exactly because there are some moving parts in that Q4 number. So it's all right. We'll get back to you on that in terms of the exact breakdown on that Q4 number.

Okay, that would be great.

What it says, Jella, is that the Q4 number includes the pre-commissioning cargo. So it includes the expense associated with bringing the carrier in and so on. So you've got a one-off item associated with that. And then you do have some pre-commissioning costs associated with the BP team as they go through the process now of the handover from Technique Energies. All of that occurs, obviously, ahead of the production going forward. So the two big items are those two items. Obviously, once production is running, and then it normalizes into basically the $2 per MCF number that Neil talked about. So that's probably the simplest way to look at it. We can come back and give you the exact breakdown, but the spend ahead of production is around those two items. Then as soon as you get into production, then you're around $2 in MCF for OpEx and about $2 for the release cost.

Okay, that's fantastic. Thanks. Could you just talk a little bit more about this refinancing of the leaseback that you talked about before? Just what do you mean by that exactly?

Yeah, Neil? Yeah, so we sold the FPSO to BP in 2021. So it's leased back to the partnership. It was always sort of envisioned post-first gas of the project. Then we'd look for, you know, put in a permanent financing contract or permanent solution around the FPSO. And so that's what we're working collaboratively with BP on at the moment. And so it's not, you know, it's starting to, you know, we are seeing the FPSO in the OPEX lease today, depending on either if we end up doing the refinancing, which we're working on, that amount in terms of what we see in the OPEX line will come down pretty substantially.

Okay, that's lovely. Thanks. And if you don't mind, if I just ask one final thing, In Senegal, is there any update on discussions that you've had with the authorities there regarding, you know, outlook for Jakarta Ranga, your business in the country, some of the, you know, mentions obviously we heard during the first elections about taxes? I mean, I'm aware there's obviously a second election coming up, so things might be in the air, but, you know, any comments on that side would be great.

You know, look, it's now over six months actually since the new administration has come in. You know, they're a new party in power. There's been a process of them, you know, putting people in the key positions within the administration. And that process has sort of been lengthened as a result of the decision to go to the election of the parliament, which is later this month. So I'd say in the first sort of six months of the journey, it hasn't really had, we haven't seen really any impact on our sort of daily operating business. You know, we've continued to progress GTA and we continue to work very closely with the Ministry of Energy and the NSC in terms of petro-cent. I would say it has slowed down Yakutanga a little. You know, and that's partly, you know, as you get into conversations there for around the growth capex, You can sort of see that sort of probably moving slightly later. And that's sort of natural. You know, a new government coming in, you know, they're picking it up. They've got new people within PEPC and they've got new people within the ministry that are handling those conversations. You know, my sense of all of that is going to clear in the sort of end of the year, beginning of the following, you know, following year. And ultimately, it's an important project for their national plan. It's about creating a low-cost gas that replaces fuel that's currently been consumed for power. It also is a source of export. And therefore, in combination, you're creating an important new revenue stream. in terms of development of that resource, but you're also creating an important domestic gas supply which creates energy security and it enables a lower cost of power to the country. So it's an important project. So the conversations are ongoing as we speak, but I just think things are going to take slightly longer just because of that transition of power and then further complicated by the decision, if you like, to go with a national election. But I think the message to take out of it, nothing's really impacted the important work on GTA, which is obviously our primary focus at the moment.

Superman, thanks.

Great, 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.