Kosmos Energy(KOS) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a year-end 2024 2P reserves of 513 million barrels of oil equivalent, representing a reserves to production ratio of twenty-two years, with a reserve replacement ratio of 137% [13][15][18] - Total CapEx is expected to fall significantly from over $800 million in 2023 and 2024 to $400 million in 2025, a reduction of over fifty percent [10][28] - The company achieved first LNG production from the GTA project in early February 2025, with first cargo lifting expected shortly [34][36] Business Line Data and Key Metrics Changes - Production for the fourth quarter was lower than guidance, primarily due to lower Jubilee production and delays in ramp-up from infill wells [21][22] - Net production in Ghana for 2024 was just over 41,000 barrels of oil equivalent, below the operator's target, driven by issues with water injection reliability [42][44] - The Gulf of America saw a gradual quarterly ramp-up in production from Q2 onwards, with full year guidance of 17,000 barrels of oil equivalent per day, a 20% increase year over year [49] Market Data and Key Metrics Changes - The company has hedged around 60% of its first half oil production with downside protection of approximately $70 per barrel, providing solid protection for cash flow [26][27] - The GTA project is positioned to deliver growth in revenue with increasing margins as gas and LNG continue to grow in the global energy mix [7][8] Company Strategy and Development Direction - The company aims to focus on cash generation through maximizing revenue and rigorous cost management, with a clear goal of reducing annual overhead by around $25 million by the end of 2025 [11][12][28] - The strategy includes prioritizing cash for debt pay down until leverage goals of below 1.5 times at mid-cycle oil prices are achieved [13][29] - The company is focused on sustainable cash generation, with a diverse reserve base supporting production for many years to come [15][53] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in addressing production issues and emphasized the importance of power generation reliability for future performance [111][112] - The company is optimistic about the future potential of the GTA project and its ability to meet local market gas needs while driving low-cost expansions [36][38] - Management highlighted the importance of rigorous capital allocation and cost management to sustain free cash flow yield [64][70] Other Important Information - The company achieved zero lost time injuries or total recordable injuries in 2024, maintaining high safety performance [17] - The company raised a total of $900 million in new bonds at competitive rates, enhancing its financial position and extending weighted average maturities [20][25] Q&A Session Summary Question: Discussion on startup costs and their nature - Management indicated that startup and commissioning costs are expected to be one-time in nature, with costs trending lower over time as production ramps up [56][58] Question: CapEx guidance and potential for lower spending - Management confirmed a ceiling of $400 million for CapEx in 2025, emphasizing a focus on free cash flow and disciplined capital allocation [63][65] Question: Clarification on GTA phase one plus - Management explained that phase one plus involves fully utilizing existing infrastructure to increase capacity with minimal additional CapEx [75][78] Question: Assumptions behind Jubilee production guidance - Management highlighted the importance of achieving 100% voidage replacement and reliable power generation as key assumptions for Jubilee's production guidance [82][86] Question: Confidence in Jubilee's performance and future plans - Management expressed confidence in addressing past issues and emphasized a clear set of objectives for field management to ensure future performance [112][114] Question: Thoughts on terminated discussions with Tullow - Management stated that there are no plans to revisit discussions with Tullow, focusing instead on free cash flow generation and maintaining a strong portfolio [120][121] Question: Timeline for achieving leverage goals - Management anticipates reaching a leverage level of around 1.5 times by the back half of 2026, with a focus on debt pay down and growth in EBITDAX [127][128] Question: CapEx implications for Tortue project - Management indicated that future CapEx for the Tortue project will be minor, focusing on sustaining current well counts and maximizing revenue [102][135]