Kosmos Energy Ltd. (NYSE:KOS) Q2 2024 Earnings Call Transcript August 5, 2024 11:00 AM ET

Company Participants

Jamie Buckland - VP, IR
Andy Inglis - Chairman and CEO
Neal Shah - CFO

Conference Call Participants

David Round - Stifel
Charles Meade - Johnson Rice
Bob Brackett - Bernstein Research
Neil Mehta - Goldman Sachs
Mark Wilson - Jefferies

Operator

Good day, everyone. Welcome to the Kosmos Energy's Second Quarter 2024 Conference Call. As a reminder, today's call is being recorded. At this time, let me turn the call over to Jamie Buckland, Vice President, Investor Relations at Kosmos Energy.

Jamie Buckland

Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our second quarter 2024 earnings release. This release and the slide presentation to accompany today's call are available on the investors page of our website. Joining me on the call today to go through the materials are Andy Inglis, Chairman and CEO; and Neal Shah, CFO.

During today's presentation, we will make forward-looking statements that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to factors we note in this presentation and in our UK and SEC filings. Please refer to our annual report, stock exchange announcement and SEC filings for more details. These documents are available on our website.

And at this time, I'll turn the call over to Andy.

Andy Inglis

Thanks, Jamie, and good morning and afternoon to everyone. Thank you for joining us today for our second quarter results call. I'll start today's call by looking at the operational momentum we're seeing across all our business units and the solid progress we're making towards achieving our year-end goals. Neal will then walk you through the quarter's financial results before I look ahead to the multiple catalysts we expect to deliver over the second half of the year. We'll then open the call for Q&A.

Starting on Slide 3. Two years ago, we announced a target to grow production by around 50%, driven largely by the delivery of three important projects, Jubilee Southeast in Ghana, Winterfell in the Gulf of Mexico, and GTA in Mauritania and Senegal. We're around halfway to achieving that target with the successful startup of Jubilee Southeast and Winterfell alongside production enhancement projects in the Gulf of Mexico, which I'll talk about in more detail shortly. Through the end of the year, we expect the startup of the first phase of the GTA project and the infill drilling campaign in Equatorial Guinea to contribute towards our year-end production goal of around 90,000 barrels of oil equivalent per day. But we're not growing production for growth's sake. The growth is coming from high quality material projects with long reserve lives across both oil and gas. This rising production follows a multiyear investment cycle, with CapEx now expected to fall sharply as these projects are completed. The increased production and lower capital should drive a meaningful free cash flow inflection in the business with free cash flow of around $100 million to $150 million per quarter once everything is fully up and running. That cash flow will be used initially to pay down debt to further strengthen the financial resilience of the company. We will also selectively invest in future growth, but this will be focused on high-graded projects developed at a cadence to fit within our targeted capital budget. Once the debt level approaches our near-term leverage target of sub 1.5 times, we'll then look at shareholder returns alongside further debt paydown to achieve our longer-term target of closer to 1 times. It's an exciting time for Kosmos as we continue to deliver the strategy our shareholders have invested in over the last few years.