Financial Data and Key Metrics Changes - For Q4 2024, net cash provided by operating activities before changes in working capital totaled approximately $185 million, more than triple the capital expenditures for the quarter [23] - Adjusted EBITDA for the quarter was reported at $203 million, with adjusted free cash flow of $125 million, marking the best quarter of 2024 from a free cash flow perspective [24] - Cash operating costs for Q4 totaled $1.19 per million cubic feet equivalent, better than analyst expectations and within the full year 2024 guidance range [25] Business Line Data and Key Metrics Changes - The company drilled 21 gross wells in 2024, primarily focused in the Utica, and completed 19 gross wells, including three SCOOP wells and twelve Utica dry gas wells [16] - The 2025 development program is expected to maintain flat total production while growing liquids production by 30% year over year [9][13] - The company anticipates total equivalent production to be relatively flat compared to full year 2024, with an increasing production profile as the year progresses [14] Market Data and Key Metrics Changes - The all-in realized price for Q4 was $3.36 per Mcfe, a $0.57 premium to NYMEX Henry Hub index prices, driven by a differentiated hedge position and diverse marketing portfolio [28] - The company has downside protection covering roughly 50% of 2025 natural gas production at an average floor price of $3.62 per MMBtu [29] Company Strategy and Development Direction - The 2025 development program reflects significant efficiency gains and capital allocation optimizations, allowing for a focus on liquids-rich production while maintaining a low decline production base [9][12] - The company plans to return substantially all 2025 adjusted free cash flow, excluding discretionary acreage acquisitions, through common stock repurchases [10][32] - The company is focused on operational improvements and optimizing asset development to maximize free cash flow generation and value for investors [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to generate significant free cash flow in 2025, potentially more than double compared to 2024, driven by rising natural gas prices and operational efficiencies [31] - The company remains constructive on gas prices in 2025 and 2026, with a strategic hedge position allowing for participation in prices above $4.00 per MMBtu [29] Other Important Information - The company repurchased approximately 7% of its common shares outstanding in 2024, returning 96% of available adjusted free cash flow to shareholders [15] - The proved reserve base increased by approximately 6% when excluding the impact of pricing revisions, reflecting high-quality inventory additions and operational improvements [33][34] Q&A Session Summary Question: Liquids volume sustainability and bolt-on opportunities - Management confirmed that the 30% liquids growth is sustainable and that they have flexibility to allocate towards liquids or gas depending on market conditions [41][43] - The company prefers sizable undeveloped assets for bolt-on opportunities rather than PDP-heavy assets [45][46] Question: Capital efficiency and future capital allocation - Management indicated that front-loaded capital programs are conducive to driving capital efficiencies and that this approach is expected to continue [54] - The company continuously assesses free cash flow allocation options, balancing share repurchases and inventory additions [58][60] Question: Development strategy and inventory allocation - Management clarified that the Marcellus development will be paced responsibly, with a focus on corporate inventory life rather than specific area allocations [72][74] Question: Production cadence and capital efficiency - Management noted that production is expected to increase throughout the year, with a focus on optimizing the timing of well turn-ins [82][84] - Continuous improvement in operational efficiency is anticipated, although future gains may be more moderate compared to past improvements [86] Question: NGL realizations and market conditions - Management highlighted strong NGL realizations due to favorable contracts and market conditions, particularly in Appalachia [97][98]

Financial Data and Key Metrics Changes - In Q4 2024, net cash provided by operating activities before changes in working capital totaled approximately $185 million, more than triple the capital expenditures for the quarter [16] - Adjusted EBITDA for the quarter was $203 million, with adjusted free cash flow of $125 million, driven by robust natural gas pricing and strong liquids production [16][18] - The company repurchased approximately 491,000 shares of common stock for about $80 million during Q4 2024, representing a significant return of capital to shareholders [21] Business Line Data and Key Metrics Changes - The 2025 development program is expected to maintain flat total production while growing liquids production by 30% year over year [6][9] - In 2024, the company drilled 21 gross wells, primarily in the Utica, and completed 19 gross wells, including three SCOOP wells and 12 Utica dry gas wells [10] - The company anticipates that approximately 50% of total production will be liquids-rich in 2025, with liquids production expected to increase to between 18,000 and 20,500 barrels per day [9] Market Data and Key Metrics Changes - The all-in realized price for Q4 2024 was $3.36 per Mcfe, a 0.57 premium to NYMEX Henry Hub index prices [18] - The company has downside protection covering roughly 50% of 2025 natural gas production at an average floor price of $3.62 per MMBtu [19] - The liquidity as of December 31, 2024, totaled $900 million, providing sufficient funds for future development needs [21] Company Strategy and Development Direction - The company is focused on enhancing hydrocarbon diversification by targeting lean condensate in the Utica and low-cost Marcellus condensate windows [7] - The 2025 capital expenditure is projected to be flat, in the range of $370 million to $395 million, with a focus on operational efficiencies and cost reductions [8] - The company plans to return substantially all 2025 adjusted free cash flow to shareholders through common stock repurchases, excluding discretionary acreage acquisitions [7][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the natural gas pricing environment in 2025 and 2026, indicating a belief in improving macro conditions [20] - The company expects 2025 to be a transformative year for cash flow generation, with adjusted free cash flow potentially more than doubling compared to 2024 [21][24] - Management highlighted the importance of continuous operational improvements and optimizing asset development to maximize free cash flow generation [15][24] Other Important Information - The company achieved a 20% reduction in annual operated drilling and completion capital on a per foot basis compared to 2024, driven by operational efficiencies and service cost improvements [8] - The proved reserve base increased by approximately 6% when excluding the impact of pricing revisions, reflecting successful leasing efforts and operational efficiencies [22][23] Q&A Session Summary Question: Can you discuss the sustainability of the liquids growth and its impact on potential acquisitions? - Management confirmed that the 30% liquids growth is sustainable and highlighted the flexibility to allocate resources between gas and liquids as needed [27][28][30] Question: How does the front-loaded CapEx program affect capital efficiencies? - Management indicated that a front-loaded capital program is conducive to driving capital efficiencies and maximizing cash flows throughout the year [36][37] Question: What is the outlook for future capital allocation given the potential for significant free cash flow? - Management stated that the framework for capital allocation has been effective, focusing on share repurchases and inventory additions while continuously assessing opportunities [38][40] Question: How does the Lake Seven pad inform future Utica development? - Management noted that the results from the Lake Seven pad will influence future development strategies, allowing for adjustments in production rates based on observed performance [44][45] Question: Can you clarify the cadence of capital allocation across different operational areas? - Management explained that capital allocation varies by area and emphasized the importance of developing assets responsibly while maintaining a corporate inventory perspective [48][50]

Kosmos Energy Ltd. (NYSE:KOS) Q4 2024 Earnings Conference Call February 24, 2025 11:00 AM ET Company Participants Jamie Buckland - VP, IR Andy Inglis - Chairman and CEO Neal Shah - CFO Conference Call Participants Neil Mehta - Goldman Sachs Charles Meade - Johnson Rice Matthew Smith - Bank of America David Round - Stifel Nicolaus Mark Wilson - Jefferies Operator Good day, everyone. Welcome to Kosmos Energy Ltd.'s fourth quarter and full year 2024 conference call. As a reminder, today's call is being recorde ...