• 2P Reserves: 530 million barrels of oil equivalent, reserve replacement ratio of 137%.
• Capital Expenditure (CapEx): Expected to fall from over $800 million in 2023 and 2024 to $400 million in 2025, a reduction of over 50%.
• Debt Issuance: $900 million in new bonds issued, increasing average debt maturity to around four years.
• Production Guidance: Gross Jubilee production expected between 70,000 to 76,000 barrels of oil per day; gross TEN production between 15,000 to 16,000 barrels of oil per day.
• Free Cash Flow Yield: Focus on maximizing revenue and rigorous cost management to drive attractive free cash flow yield.
• Debt Maturity: Minimal near-term maturities with only $250 million due in 2026.
• Hedging Program: Approximately 60% of first half oil production hedged with downside protection of approximately $70 per barrel.
• Gulf of America Production Guidance: 17,000 to 20,000 barrels of oil equivalent per day net, an approximate 20% increase year over year.
• Equatorial Guinea Production Guidance: 9,000 to 11,000 barrels of oil per day net, an approximate 15% increase year over year.

• Warning! GuruFocus has detected 4 Warning Sign with KOS.

Release Date: February 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Kosmos Energy Ltd (NYSE:KOS) has a diverse portfolio with a growing 2P reserve life of more than 20 years, indicating long-term sustainability.
• The company achieved a 2P reserve replacement ratio of 137% in 2024, highlighting successful reserve replenishment.
• Kosmos Energy Ltd (NYSE:KOS) expects a significant reduction in capital expenditure, from over $800 million in previous years to $400 million in 2025, enhancing free cash flow.
• The company has successfully raised $900 million in new bonds, improving its financial position and extending debt maturities.
• Kosmos Energy Ltd (NYSE:KOS) achieved first oil at Winterfell and first gas production in the GTA project, marking significant operational milestones.

Negative Points

• Fourth-quarter production was lower than guidance due to issues at the Jubilee field and delays in production ramp-up from other wells.
• The company faces planned maintenance programs in the first quarter of 2025, which may impact production levels.
• Start-up and commissioning costs for new projects are expected to be higher in 2025, affecting short-term financial performance.
• There are ongoing challenges with power generation reliability at the Jubilee field, impacting production efficiency.
• Kosmos Energy Ltd (NYSE:KOS) has a high leverage ratio, with plans to reduce it to below 1.5 times by the back half of 2026, indicating current financial constraints.

Q & A Highlights

Q: Can you elaborate on the start-up and commissioning costs for the GTA project and how they will impact future expenses? A: Andrew Inglis, CEO: The start-up costs are primarily related to the FLNG toll, Upstream OpEx, and FPSO financing. This year is a transition year with higher costs due to commissioning work and ramp-up. We expect costs to trend lower over time as we reach the contracted volume of 2.45 million tonnes per annum and potentially higher. Neal Shah, CFO, added that normalized OpEx should be in the $4 to $5 per million range, with FPSO costs slightly over $1 per unit, leading to cost-competitive LNG production.

Q: Is there potential for CapEx to come in below the $400 million guidance for 2025, and what about future capital efficiency? A: Andrew Inglis, CEO: We are prioritizing free cash flow and targeting $400 million or lower for CapEx in 2025, focusing on sustaining the base with projects like Jubilee and Winterfell. Future capital allocation will balance growth and cash flow returns, with a sustainable base at $300 million to $350 million. We aim to maintain a free cash flow yield and manage growth projects efficiently.

Q: Can you explain the Phase 1+ expansion for the GTA project and its timeline? A: Andrew Inglis, CEO: Phase 1+ involves fully utilizing existing infrastructure to increase capacity at a low cost. The FPSO can handle up to 800 million standard cubic feet, doubling current production. The expansion will include increasing domestic gas take and is targeted for completion by 2030, ensuring local gas market needs are met.

Q: What are the assumptions behind the 70,000 to 76,000 barrels per day production guidance for Jubilee? A: Andrew Inglis, CEO: Key assumptions include achieving 100% voidage replacement, maintaining strong facilities uptime, and delivering two additional wells. The focus is on good reservoir management, particularly water injection, to sustain production. The guidance accounts for planned maintenance and new well contributions.

Q: With the termination of discussions with Tullow, what is Kosmos Energy's stance on M&A? A: Andrew Inglis, CEO: We focus on free cash flow generation and leverage reduction. M&A opportunities must offer clear value and free cash flow accretion. We are not planning to revisit discussions with Tullow, as our current priority is leveraging our strong portfolio and maintaining financial discipline.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.