Kosmos Energy(KOS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a challenging transitional year in 2025, with production growth slower than expected and net debt ending the year higher than planned [4][5] - CapEx for 2025 was $290 million, a year-on-year reduction of almost 70%, the lowest since 2017 [27] - The company is targeting a CapEx of around $350 million for 2026, including $40 million associated with the TEN FPSO purchase [29][30] Business Line Data and Key Metrics Changes - Jubilee production has grown to over 70,000 barrels of oil per day gross, with five more wells expected to come online in 2026 [6][12] - At GTA, production averaged 2.9 million tons per annum equivalent year to date in 2026, with a target of 32-36 gross LNG cargos for the year [19][20] - The Gulf of Mexico performance was in line with expectations, with good performance from Odd Job and Kodiak, but challenges at Winterfell led to an impairment on those assets [23] Market Data and Key Metrics Changes - The company has a strong reserve replacement ratio of around 90%, which could increase to 120% when adjusting for the recent disposal of assets in Equatorial Guinea [9] - The company expects to see a significant drop in operating costs per MMBtu due to higher production volumes and cost reductions [20][22] Company Strategy and Development Direction - The company aims to build a sustainable lower-cost business, focusing on production growth from core assets while reducing debt [3][4] - There is a commitment to long-term investments in Ghana, with the Ghana licenses extended to 2040, reinforcing the company's strategy in the region [10][11] - The company is actively working to enhance its balance sheet and reduce costs, targeting a debt reduction of at least 10% in 2026 [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational momentum built in early 2026, with strong progress across production costs and the balance sheet [5][34] - The company anticipates a 15% production growth year-on-year, primarily from Jubilee and GTA assets, alongside a 20% reduction in total operating costs [34] Other Important Information - The company has successfully completed a $350 million bond issuance to enhance liquidity and pay down debt [30][31] - The partnership signed a sale and purchase agreement to acquire the TEN FPSO, which is expected to reduce operating costs significantly from 2026 onwards [15] Q&A Session Summary Question: Can you provide insight on the net adds when bringing new wells online? - Management indicated that the net impact varies by well, with some wells potentially having a minimal backout effect due to pressure relief [38][39] Question: Is there a turnaround baked into the annual cargo guidance for GTA? - Management clarified that the guidance reflects seasonal effects, with stronger performance expected in the first and fourth quarters [48][49] Question: Can you elaborate on the amended debt cover ratio? - Management confirmed constructive conversations with banks, raising the leverage covenant to accommodate historical underperformance and lower oil prices [55][56] Question: How do you view the TEN FPSO purchase in relation to Jubilee? - Management noted that the FPSO purchase lowers the break-even cost and extends the economic life of the TEN field, with potential for future wells [63][64] Question: What is the expected cash OpEx per MMBtu at GTA? - Management indicated that the reduction in OpEx is driven by increased production and FPSO refinancing, with further reductions expected in 2027 [81][82]