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%, and 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][34] 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, with a target of 32-36 gross LNG cargos for 2026 [19][20] - The Gulf of Mexico performance was in line with expectations, with good performance from Odd Job and Kodiak, but lower performance from Winterfell [23] Market Data and Key Metrics Changes - The company achieved a strong 1P reserves replacement ratio of around 90%, or 120% when excluding the assets being sold in Equatorial Guinea [4][9] - The realized price was lower sequentially due to lower commodity prices, but an increase is expected in Q1 2026 [26] Company Strategy and Development Direction - The company aims to build a sustainable lower-cost business, focusing on production growth from core assets while reducing costs and debt [3][34] - There is a commitment to long-term investments in Ghana, with the Ghana licenses extended to 2040 [10][11] - The company is actively working to enhance its balance sheet, targeting a debt reduction of at least 10% in 2026 [31][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2025 was a challenging year but laid the groundwork for strong progress in 2026 [5][34] - The company is optimistic about production growth and cost reductions, with a target of 15% production growth year-on-year and a 20% reduction in total operating costs [34] - Management emphasized the importance of continued investment in the oil and gas sector for Ghana's economic growth and energy security [10][11] Other Important Information - The company has completed a $350 million bond issuance to enhance liquidity and pay down debt [30] - 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][28] Q&A Session Summary Question: Can you provide insight on net adds as new wells come online? - Management indicated that the impact varies by well, with some wells potentially having a net back out close to zero due to pressure relief [38][39] Question: Is there a turnaround baked into the annual cargo guidance for GTA? - Management clarified that the guidance is based on seasonal effects, with stronger performance expected in Q1 and Q4 [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 about half of the expected unit cost reduction comes from FPSO refinancing and the other half from operational efficiencies [81][82]