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Text: Joining me on the call today to go through the materials are Andy Inglis, chairman and CEO; and Neal Shah, CFO.
These documents are available on our website.
I'll then talk about the operational momentum we saw in 2021 before handing over to Neil, who will walk you through our financials.
I'll then outline our plans for 2022 and the key investments we're making to deliver significant shareholder value in the next 12 to 24 months.
We'll then open the call up for Q&A.
Starting on Slide 2.
Looking back, 2020 was a year of survival for the sector, in which Kosmos took the opportunity to high-grade its investment options to create a stronger company for the future.
2021 was a year of resuming operational delivery and strengthening the balance sheet, both of which were significantly enhanced by the Oxy Ghana and Tortue FPSO transactions.
2022 is the year in which Kosmos can really start to thrive.
We have the right portfolio for the future, and the boxes on the left of the slide highlights the key characteristics that define our portfolio.
First, we have low-cost, high-quality assets.
The company is underpinned by world-class fields that have a longevity to deliver sustainable, high-margin cash flow.
That gives us the ability to invest in our existing assets to materially grow production and free cash flow while simultaneously reducing debt.
The right-hand chart shows the company's production is forecast to grow by around 50% between 2022 and 2024 as we bring our planned developments on stream.
Second, as the chart also shows, we are increasing our exposure to gas and LNG.
The Tortue phase one comes online in the second half of next year.
We also have a deep hopper of world-class gas opportunities in Mauritania and Senegal that we expect will provide further growth well into the future.
Third, we have a robust balance sheet, which we expect to strengthen further in 2022 with a year-end leverage target of around one and a half times at current prices.
Fourth is planned capex and free cash flow grows, there is potential for meaningful shareholder returns once leveraged for sustainably below our target.
And finally, we have strong ESG credentials, driven by a portfolio shift toward lower carbon natural gas and a commitment to our host countries in Africa to support a just energy transition.
Kosmos has emerged from the last two years with a strong team, excited about the future and hungry to deliver the significant value we see in the portfolio for our investors.
Turning to Slide 3.
One of the key areas of differentiation for Kosmos is a long reserve life of our portfolio, which underpins the growth we are planning.
At year-end 2021, Kosmos 1P and 2P reserves were both at record levels.
The top chart on the slide shows the oil gas split of our 1P and 2P reserves.
On a 1P basis, oil makes up around 60% of our reserve base, whereas on a 2P basis, gas is over 55% of the portfolio, reflecting the longer-term direction of the company, a bias for oil in the near term and gas longer term.
The bottom chart shows the diversification of the portfolio on a 2P basis.
Ghana, Mauritania, and Senegal each make up around 40% of the portfolio with Equatorial Guinea in the Gulf of Mexico, making up about 20% between them.
This diversification is important as it means we're not dependent on a single field or a single geography to deliver our future plans.
In 2021, our 1P reserves more than doubled to approximately 300 million barrels of oil equivalent with the booking of Tortue phase one and the Oxy Ghana acquisition.
Our 2P reserves are approximately 580 million barrels of oil equivalent, which gives us a 2P reserve to production ratio of over 20 years.
Even excluding the Oxy Ghana acquisition, our reserves replacement ratio was strong with 114% of the total of our 2P reserves demonstrate the underlying quality of our asset base.
Turning now to Slide 4.
As you're well aware, for the last 18 months, we've been focused on deleveraging and have made good progress.
With a portfolio of highly cash-generative assets, we expect leverage to continue to fall sharply this year.
As guided, we ended 2021 at around two and a half times, a significant year-on-year reduction.
We remain on track to end this year below pre-COVID levels.
Our year-end target for 2022 is around one and a half times at strip pricing.
We expect to achieve this deleveraging through a combination of rising EBITDAX and absolute debt reduction.
EBITDAX is expected to increase materially year on year through several drivers including higher production and stronger oil prices, which we've been able to hedge in much higher levels than 2021.
In addition, with greater production from Jubilee, we expect our unit cost to decrease as well.
We also plan to reduce absolute debt by up to $500 million this year, which will further drive the leverage multiple lower.
This absolute debt reduction is driven by the free cash flow we generate, but could be enhanced with the potential for contingent payments from Shell, the Oxy Ghana pre-emption proceeds and the NOC loan refinancing.
I'll provide an update on the pre-emption process shortly.
On the NOC loan, we had initially aimed done by year-end 2021 and received several term sheets for the transaction.
We continue to progress those discussions.
However, we want to ensure any deal done is in Kosmos' best long-term interest and are taking the time to get it right.
Our liquidity position is strong and could get stronger with potential proceeds from Ghana pre-emption and the shale exploration bonus.
Therefore, we continue to pursue the NOC loan refinancing, the timing is less pressing.
Turning to Slide 5.
I talked about the embedded growth we expect to see over the next two years which is driven by Tortue phase one, Jubilee Southeast, and Winterfell, delivering an expected production increase of around 50%.
As these developments start up, our capital commitments are expected to fall by more than 30%.
With production up and capex down, we expect free cash flow to more than triple from the levels we expect in 2022 at $75 Brent.
This cash generation is sustainable and underpinned by our 20-year 2P reserve life putting us in a position to deliver material shareholder returns.
Turning to Slide 6 and our commitment to sustainability.
As I've noted on the previous slides, we have a long-dated portfolio of high-quality assets.
Our goal is to help our host nations develop their hydrocarbons in a responsible way and expand access to affordable, reliable energy.
Through creating economic benefits, we help to drive sustainable developments in our host countries.
On environment, two years ago, Kosmos set out a policy to achieve carbon neutrality for our scope one and two operated emissions by 2030, and we're working to accelerate that time line.
We'll give further updates in this year's sustainability report, which we'll publish in the first half of this year to give investors access to 2021 data sooner.
We also plan to provide additional disclosure on our equity emissions.
On social performance, we care deeply about the people who work for Kosmos and those who work with Kosmos.
offices in Dallas and Houston are consistently named in the top places to work.
In our host countries, we aim to be a trusted partner and good corporate citizen.
We work with a range of stakeholders and our communities to facilitate sustainable development.
We worked in this manner for nearly 20 years going back to when the company was founded.
Each year, we find important social investment programs in Ghana, Equatorial Guinea, Senegal, and Mauritania, that are aimed at creating economic opportunity, advancing social progress, and improving standard living.
The success of the Kosmos Innovation Center is a prime example.
This initiative in Ghana, Mauritania, and Senegal invest in young entrepreneurs and small businesses outside the oil and gas industry.
We train and empower young people to turn their ideas into viable businesses.
And we work alongside promising start-ups to help them scale and reach their full potential.
Governance has always been a key pillar of our business and cascades now from our experience and diverse Board of Directors through the executive leadership team to our employees.
We have always taken an industry-leading position on transparency, publishing all of our material petroleum contracts online.
In summary, our consistent commitment to sustainability is a core value and supports our ability to deliver long-term value to our shareholders and stakeholders.
Turning to Slide 8, looking back at 2021, a year that saw an acceleration of our strategic progress with operational momentum across all areas of the portfolio.
On production, we hit our year-end production target of 75,000 barrels of oil equivalent per day, boosting fourth-quarter cash flow and reducing leverage at year end to approximately two and a half times.
Our LNG development made significant progress during the year with Tortue phase one around 70% complete at year end.
We enhanced our reserve base and now have a 2P reserve life of over 20 years with a growing gas weighting.
We executed a highly accretive transaction in Ghana, acquiring a stake in the Jubilee and TEN fields from Oxy, which has helped to transform the balance sheet and increase free cash flow generation.
And finally, we continue to advance our ESG agenda, supporting a just energy transition in Africa.
On the following slides, we'll briefly look at the progress we've made in each of our core geographies.
Turning to Slide 9 and starting Ghana.
2021 was a pivotal year for Kosmos in Ghana, where we got back to drilling after a pause in 2020.
Kosmos had net production of around 39,000 barrels of oil per day across Jubilee and TEN in the fourth quarter.
The increased drilling activity in 2021 was promising, particularly at Jubilee, where the partnership drilled three wells and Kosmos has a much greater interest.
The challenge shows Jubilee production for midyear where new wells started to come online.
And you can see production rising from around 70,000 barrels of oil per day in July to over 90,000 barrels a day by year end, which is where the field is producing today.
On TEN, the partnership drilled one gas injector, which is helping to support existing producers.
However, this has not been enough to fully stem production decline.
Turning to Slide 10.
In October, we announced and completed the acquisition of additional interest in Jubilee and TEN from Oxy for a total cash consideration of around $460 million.
At the time, we talked about the attractive economics of the deal in a $65 world, which is highly accretive on all metrics and an expected payback of around three years.
With the ongoing strong operational performance of the assets and the recent strength in oil prices, we believe payback will be reduced under two years with significant future upside as we continue the infill program.
I'm pleased to see the benefit of this transaction delivering so quickly.
On pre-emption, both partners exercise their pre-emption rights in November.
The impact of pre-emption on Kosmos is a small reduction in our Jubilee state from around 42% to around 38%.
In TEN, the reduction is more meaningful with our stake reducing from around 28% to around 20%.
Assuming pre-emption is completed, we would expect to receive a bit more than $100 million of closing which we used to pay down debt.
The impact on Kosmos production will be about 5,000 barrels of oil per day.
We are working with the partners on the transaction and the pre-emption remains subject to the approval by the Government of Ghana.
Turning to Slide 11.
In Equatorial Guinea, 4Q gross production was in line with the full year at around 30,000 barrels of oil per day.
Similar to Ghana, we saw increased activity in 2021 with the first wells drilled on the assets since 2015.
The partnership drilled two jack-up wells, both of which came online in the fourth quarter.
We've been pleased with initial performance and the combined impact on gross production can be seen on the chart with Ceiba and Okume collectively producing at levels not seen for over 18 months.
In the Gulf of Mexico, turning to Slide 12, 4Q production was 21,000 barrels of oil equivalent per day, slightly above full-year production of 20,000 barrels of oil equivalent per day.
On drilling the successful Tornado dump flood boosted output in the second half of the year as the chart shows.
The highlight in the Gulf of Mexico last year was the Winterfell discovery and the successful appraisal well.
With around 100 million barrels of gross resource potential in the Central Winterfell area and proximity to several nearby host platforms with OH, we're excited about the future potential of this asset.
Turning to Slide 13.
The Tortue project saw a ramp-up in activity in 2021 with all key work streams making significant progress.
At year end, phase one of the project was around 70% complete.
Looking at each of the work streams.
On the FPSO, the final four process modules were lifted onto the deck in December.
Mechanical completion of the process subsystems is now underway.
In images of the FPSO on the slide show the high level of completion.
On the hub terminal, we completed construction of the 21st and final caisson and the piling installation for the jetty has commenced ahead of the hub terminal facilities delivery.
But the subsea activity is ramping up.
The pipeline has recently completed its nautical trials in North Sea and should be ready for the offshore installation campaign in the second quarter.
And on the floating LNG vessel, the four mixed refrigerant compressors have been lifted on board and the pipe rack installation operations have commenced.
So 2021 was a busy year for us, and with the operational momentum we have built, we are well placed to take delivery this year.
With that, I'll hand over to Neal to take you through the financials.
I'd like to start on Slide 14 by talking about the financial delivery we saw in 2021.
We accomplished a lot to have positioned the company well to prosper over the coming years.
First, we successfully refinanced the reserve-based lending facility, which now has a total facility size of $1.25 billion, with $1 billion drawn at year end.
In August, we announced the completion of the Tortue FPSO sale and leaseback transaction, which funds around $375 million of our capex on the project and with key parts of the financing path we laid out in November 2020.
Our producing assets generated strong free cash flow of around $175 million during the year, excluding working capital, in line with our guidance.
The combination of these, along with the bond transactions we executed have deferred all of our near-term debt maturities and helped increase our liquidity to over $750 million available at year end.
Through strong operational performance in the Oxy Ghana transaction, we materially reduced leverage during the year, ending at around two and a half times as planned.
And finally, we have taken advantage of higher commodity prices to put in hedges at significantly higher floors and ceilings than we had in 2021.
Around 55% of our production is hedged with an average ceiling of around $80 per barrel with the rest exposed to current prices.
All in all, it was a good year for Kosmos.
While there's still more work to do in 2022, we start the year in a strong position.
Turning to Slide 15, Kosmos delivered a record quarter in 4Q with our highest ever sales volumes and EBITDAX.
Net production of approximately 70,000 barrels of oil equivalent in the quarter was in line with our expectations.
Sales volumes of 82,000 barrels of oil equivalent were higher than guidance as a result of an additional Jubilee cargo in Ghana, loading in late December.
The realized price of around $65 per barrel, which includes the impact of hedging, was materially higher than the previous quarter, a trend we expect to continue in 2022.
In the first quarter of this year, we anticipate a realized price net of hedging of over $80 per barrel.
Costs were all in line or slightly below previous guidance, which helped to drive today's positive 4Q results.
Turning to Slide 16.
And the chart on the left of this slide shows that liquidity remains at a healthy level.
This quarter, we expect to complete the refinancing of the RCF pushing that maturity to late 2024.
The chart on the right shows that we expect to have no material debt maturities until late 2024 at the latest, although we do plan to utilize our flexibility to prepay some of our existing debt well before that.
With that, I'll hand back to Andy to take you through the year ahead.
Across our business, this is an important year for the company.
We're investing in our key assets to drive the increase in production and cash flow that we discussed earlier.
Turning to Slide 18.
In Ghana, we have a world-class field in Jubilee that has the potential to produce at elevated levels for the next several years as we deliver on our plans.
In 2022, we're investing capital in three infill wells, one producer, and two injectors that support the base production.
With these new wells, combined with the benefits of the wells we drilled last year, we expect to deliver year-on-year growth at Jubilee of around 10%, which includes the impact of the two-week shutdown planned for the second quarter.
Around the end of the year, the partnership plans to start drilling the first Jubilee South East wells.
Jubilee Southeast is an untapped area of the reservoir, where we will be drilling lower GOR wells.
Once online, in mid-2023, these wells should post gross production in Jubilee to around 100,000 barrels of oil per day.
On TEN, as the operator guided previously, production is expected to trend lower until we see the benefits of the wells that are being drilled later this year.
The partnership plans to invest in two infill wells this year, one producer and one injector, which should help stem decline in 2022.
We're also drilling two riser-based wells, which are targeting an undeveloped extension of the NTM reservoir closer to the FPSO, allowing us to take advantage of existing infrastructure.
These riser-based wells are expected online in 2023 and should help to increase production.
As the operator recently communicated, the longer-term plan with TEN is to double current production levels by increasing the activity at TEN with a second rig in Ghana.
And finally, we're aligned with the operator and the Government of Ghana to eliminate routine flaring by 2025.
As a first step, we plan to modify the gas handling system on the Jubilee FPSO during the shutdown in the second quarter of this year, which is expected to allow us to inject and export more gas volumes.
Turning to Slide 19.
In Equatorial Guinea, production year to date has continued to be strong as a result of the wells drilled late last year.
In 2022, investment will be focused on facility maintenance, well work, and a second ESP program with the aim of keeping production around these levels through the year.
There's a lot of untapped upside at Equatorial Guinea and we have several high-grade ILX opportunities, particularly in the untested deep Albian.
In the Gulf of Mexico, we're planning to sidetrack the Kodiak well in the first half of the year, funded by insurance proceeds with the well expected to contribute in the second half.
That, in addition to some production optimization projects, should support existing production levels.
On Winterfell, we're working with partners on a low-cost, lower carbon development, targeting sanction for the initial two-well development scheme in mid-2022.
First oil is expected around 18 months from sanction.
In addition, we continue to mature multiple prospects for future ILX drilling in 2023 and beyond.
Turning to Slide 20.
As I said, last year, we continue to make strong progress on Tortue phase one, with all the major work streams advanced as evidenced by the images on the slide.
In 2022, we expect to hit several important milestones, ahead of first gas planned for the third quarter of next year.
We plan to begin drilling the initial four wells next quarter with offshore installation of the subsea infrastructure expected to commence in the second quarter as well.
On the hub terminal, we expect to commence facilities hookup in the third quarter this year.
On the FPSO, sail-away from the yard in China is due late in the third quarter with the vessel expected to arrive on site around the end of the year.
And on the floating LNG vessel, GOLAR will be testing the steam turbines later in the year and they've been commissioning of the vessel power management system with sale-away anticipated early in 2023.
Turning to Slide 21.
Beyond phase one of Tortue, we also have a significant amount of low-cost gas across our assets in Mauritania and Senegal that we are working to commercialize.
Given the ever tightening supply demand backdrop of global LNG, we believe our discovered resource has significant value upside to Kosmos.
For the second phase of Tortue, we're working with BP in the NOCs to optimize the upstream facilities to deliver another 2.5 million tonnes of capacity at an upstream cost less than $1 billion of gross capex we have previously communicated.
We expect to make a development decision related to the projects around the middle of this year.
This would kick off the FID work to fully support the detailed contracting costing required for formal FID.
At BirAllah, we expect to complete the seismic reprocessing and reservoir modeling which should allow development concept to be selected.
And in Yakaar-Teranga, the partnership plans to advance pre-FEED studies and the met-ocean and geophysical surveys while also progressing domestic gas sales discussions.
Turning to Slide 22, which looks at our high-level guidance and capital plan for 2022.
There is a more detailed guidance slide included in the appendix.
We expect company production for the year to be in the range of 67,000 to 71,000 barrels of oil equivalent per day, which is at the midpoint, would be a year-on-year increase of over 20%.
capex of around $700 million is broken out in the chart on the bottom right.
We plan to spend between $250 million to $300 million of maintenance capex on the producing assets which is development drilling and integrity spend in Ghana, Equatorial Guinea and the Gulf of Mexico.
We also plan to spend between $100 million to $150 million of growth capex on the base business for production growth in 2023 and beyond.
This includes Jubilee Southeast, the TEN riser-based wells, Winterfell as well as long lead items ahead of our 2023 drilling program in Equatorial Guinea.
On Tortue phase one, we expect to spend around $250 million during the year, which reflects the timing of accrued capex based on the approved budget from the operator.
We also expect to spend a further $50 million in Mauritania and Senegal on Tortue phase two and increase the activity on BirAllah, Yakaar-Teranga support progress on those developments.
At $75 Brent, we would expect to generate around $200 million of free cash flow, which we plan to use to reduce debt.
Kosmos has a differentiated portfolio and exciting outlook.
We have low-cost, high-quality assets with significant embedded growth.
We are investing in world-class gas projects that will help facilitate the energy transition to provide the company with long-term sustainable cash flow.
We have a robust balance sheet that continues to get stronger as we delever this year and beyond.
As our leverage improves, we anticipate our efforts will generate significant amount of cash flow which will enable meaningful shareholder returns, especially at current commodity prices.
And finally, we have strong ESG credentials that give us a license to operate in our host countries and a portfolio that is fit for the future.

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total net production in q4 of 2021 averaged approximately 70,000 boepd.
kosmos expects to spend approximately $700 million in capital expenditures in 2022.

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