Kosmos Energy - Q3 2023

Transcript

Operator (participant)

Good day, everyone. Welcome to Kosmos Energy's third quarter 2023 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 of Investor Relations at Kosmos Energy. Thank you. You may begin.

Jamie Buckland (VP of Investor Relations)

Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our third quarter 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 U.K. and SEC filings. Please refer to our annual report, stock exchange announcement, and SEC filings for more details. These documents are available on the website. At this time, I will turn the call over to Andy.

Andy Inglis (Chairman and CEO)

Thanks, Jamie, and good morning and afternoon to everyone. Thank you for joining us today for our third quarter results call. Since our last call, we've continued to make good progress in our strategic objectives with several important recent developments. I'll talk about these in more detail in today's material, as well as giving an update on the quarter. I'll then hand over the call to Neal to take you through the financials before wrapping up the presentation and opening the call for Q&A. Turning to slide three. At Kosmos, we're pursuing a clear and consistent strategy to provide the world with the energy it needs today, while working hard to bring down the carbon intensity of our portfolio and providing the world with the cleaner energy it needs for the future.

To achieve this, we're executing a differentiated set of projects that are focused on advantaged, low-cost, lower carbon oil and advantaged, low-cost, lower carbon gas. This slide shows the progress we are making. First, on production growth, we set a target to grow our production in the second half of 2022 by around 50% through the second half of 2024 from three core development projects: Jubilee Southeast, Tortue Phase One, and Winterfell. In the third quarter, we brought the first of these development projects, Jubilee Southeast, online, which increased Jubilee gross production to around 100,000 bbl of oil a day, up almost 50% from the production levels seen in the first half of the year. I'll talk more about Jubilee in the following slides, but we're pleased with the progress being made, with more expected in the coming months.

Second, our two remaining developments continue to progress. On Winterfell, the partnership recently completed the first production well, an important milestone for the project. At Tortue, the hub terminal was completed and handed over to operations, and we have recontracted the subsea work scope, which was previously on the critical path. Third, in recent weeks, we have deepened our portfolio of high-quality advantage oil and gas investment opportunities. In October, we announced a discovery with the Tiberius well in the Gulf of Mexico, and today we announced that we had assumed operatorship and increased our working interest in the world-scale Yakaar-Teranga fields in Senegal, subject to customary government approvals. We're excited by both these projects, as we expect them to create the next leg of value growth for Kosmos beyond 2024. More on both of these later in the presentation.

The chart on the right of the slide is one we've shown before, which has been updated for these recent developments. It shows the progress we're making against our longer-term strategic objectives. The first meaningful step-up in production was in 3Q, with production rising 17% from the second quarter, with further upside potential from Jubilee, and then the planned start-up of Tortue Phase One and Winterfell in 2024. We expect this growth to drive a material step-up in free cash flow as these projects are delivered, enabling the company to further delever and ultimately to fund shareholder returns when leverage falls below our target level. Looking beyond that, we have a deep offer of high-quality operated and non-operated growth options across both short-cycle oil and long-dated gas that will continue to differentiate Kosmos from our peers over the coming years.

We plan to balance the pace and working interest of these future projects to ensure we can manage our growth and generate material free cash flow. Turning to slide four, which looks at the quarter's operational highlights in more detail. Net production of around 68,000 bbl of oil equivalent per day was in line with guidance and an increase of approximately 17% versus the previous quarter due to the Jubilee Southeast starter. Jubilee produced an average of around 96,000 bbl of oil per day gross during the quarter, an increase of over 30% versus the previous quarter, with three producer wells coming online across Jubilee Southeast and the main field.

While we've been successful in delivering the production wells, there were some delays in providing the necessary water injection, which has had a knock-on impact to near-term production, which I'll talk about in more detail on the following slide. On TEN production in the quarter, around 15,000 bbl of oil per day, was in line with expectations and lower than the previous quarter due to a planned two-week shutdown. While working on the maintenance of the FPSO, we modified the gas train, and the rerouted gas is now being reinjected in Ntomme Field to support reservoir pressure and maintain production levels. This has resulted in around a 75% reduction in flaring, a major step towards our goal to eliminate routine flaring by 2026. The amended TEN Plan of Development and combined TEN and Jubilee gas sales agreement has been submitted to the Ministry of Energy for approval.

In the interim, we've extended the Jubilee gas sales agreement through the end of November at a price of $2.90 per MMBtu. Next, Guinea gross production averaged around 25,400 bbl per day during the quarter, in line with expectations. The infill drilling campaign is expected to start this quarter with the rig now in country. Ahead of the three planned infill wells, the rig is planning to carry out two workovers on the Ceiba Field, which sakhould boost the year-end production rate before the new wells start coming online around the end of the first quarter. The operator expects the workover and infill campaign to add around 10,000 bbl of oil a day to gross production. Post our infill campaign, the Akeng Deep infrastructure-led exploration well is on track to spud early in the second quarter of 2024.

In the Gulf of Mexico, net production was approximately 15,700 bbl of oil equivalent per day, ahead of guidance due to lower than anticipated storm activity. At Odd Jump, the subsea pump project continues to make good progress and is expected online in mid-2024 as planned. Kodiak production continues to perform in line with expectations and will be supported by the workover scheduled for mid-2024. On Winterfell, the partnership continues to make good progress. The rig arrived in the third quarter, and we have successfully completed the first of the three wells, an important milestone for the project. First oil is on track for the end of the first quarter 2024. Post-quarter end, we announced the discovery of the Tiberius well in Keathley Canyon, which I'll talk about in more detail later in the presentation. Turning to slide five.

The start-up of the Jubilee Southeast development has driven a material uplift in production at Jubilee. Three producers were brought online during the quarter, taking gross field production up to around 100,000 bbl of oil per day, a level not seen for several years. As I mentioned earlier, water injection rates in 3Q were lower than planned. This is partly due to lower uptime on the water injection pumps and partly due to the delay in bringing two water injection wells online, which we originally planned to start in 3Q. Post-quarter end, we did bring these two water injection wells online and are now ramping up water injections to support the elevated levels of production. The partnership had previously assumed we would farm out the drilling rig in Ghana in the fourth quarter.

This was to allow time to assess our initial three wells in Jubilee and high-grade the next set of wells. However, given the success in our well selection and drilling execution, we are now planning to accelerate an additional producer and water injector into the fourth quarter from 2024. This should allow for continued Jubilee production growth into 2024, with both wells expected online early in the new year. The acceleration of this activity results in an increase in 2023 CapEx of around $30 million net to Kosmos. However, the expected returns are very high with quick payback. As a result of the lower water injection rates, the operator is now forecasting that Jubilee will produce around 85,000 bbl of oil per day gross for 2023, down from its previous estimate of 90,000.

This decrease is driving our lower production guidance for the year and is expected to result in one less 2023 cargo from Jubilee than previously forecast. It is just a timing issue, and our view of 2024 production is unchanged, with a shortfall in 2023 expected to be made up in 2024. While there are always challenges in bringing a new project online and optimizing overall field performance, we're excited about the future potential of Jubilee and are continuing to work well with the operator to maximize cash flow from the field. Turning to slide six. This is a slide we've used over the years to provide a status update on the key work streams on the Tortue LNG project. On the hub terminal, construction is finished and handover to operations has been completed.

Within the quarter, we also made important progress on the subsea work scope, which was previously on the critical path to first gas. Following the performance issues with the previous pipe lay vessel, the subsea work has been recontracted. Allseas and Saipem have now been brought in to finish the deepwater pipe lay and the infill flow lines, with work expected to start in early December and finish in the first quarter of 2024. On the FLNG, sail away of the vessel is expected later this quarter, with arrival expected early next year. The partnership is currently working with Golar to identify ways to advance commissioning of the vessel. The critical path to first gas on phase one of the Tortue project is now through the arrival, hookup, and commissioning of the FPSO.

The delivery of first gas in the first quarter of 2024, as signaled by BP, the operator, in its third quarter results last week, depends on the execution of this work stream, which has the potential to slip into the second quarter of 2024. Turning to slide seven. Beyond these key projects, we have been focused on defining the next set of growth projects for the company, targeting high-quality advantaged oil and gas investment opportunities with operating control. Today, Kosmos announced that it increased its interest and assumed operatorship of the Yakaar-Teranga field in Senegal, subject to customary government approvals. Yakaar-Teranga is a world-scale gas resource with approximately 25 trillion cu ft of gas in place, and was the largest discovery in the world in 2017. It is advantaged gas with negative CO2, located approximately 75 km from the Dakar Peninsula, enabling a low-cost development.

Kosmos' working interest in Yakaar-Teranga will increase to 90%, with Petrosen holding the remaining 10%. Our aim is for Petrosen to participate as an equal partner in the full value chain with a greater working interest. Kosmos is working with Petrosen and the government of Senegal on an innovative development solution, prioritizing cost-competitive gas to Senegal's rapidly growing domestic market, combined with a floating LNG facility targeting exports into international markets. Petrosen's Director General stated in today's press release that Yakaar-Teranga is a strategic project and supports the Plan Sénégal Émergent, which aims to provide affordable, abundant, and cleaner energy for the country. Kosmos and Petrosen plan to evaluate partnership strategies with the objective of creating an aligned partnership possessing the necessary upstream and midstream expertise, coupled with access to cost-effective financing and access to international LNG markets. Turning to slide eight.

Last month, Kosmos announced a successful discovery of the Tiberius infrastructure-led exploration well in the Gulf of Mexico, where Kosmos is operator and has a 33.34% interest alongside Oxy and Equinor. Tiberius is a four-way structural trap in the outboard Wilcox trend, which was drilled using the partnership's ocean bottom node seismic. This modern seismic technology generates an enhanced image of the prospect, which helped refine the location of the exploration well and de-risk the future development program. The image on the slide shows the Tiberius exploration well, which was drilled on the crest of the structure in the central fault block, with additional upside potential in the neighboring fault blocks. Technology improvements like OBN seismic are a game changer for the industry and allow us to have a much better understanding of the subsurface pre-drill.

The well discovered a net oil column around 250 ft, and we were able to conduct an extensive logging program, recovering multiple fluid samples and sidewall cores. Initial analysis suggests a fluid quality similar to other nearby discoveries in the Wilcox trend. The fluid samples and cores have been sent to the lab for analysis that will enable us to better understand permeability and viscosity, which are key to confirming well flow rates in a future development. We are now working with our partners on the planning of a phased development scheme, which targets first production in around two years. The preferred host platform would be the Oxy-operated Lucius facility, located 6 mi to the northwest of the discovery, with key commercial terms of the production handling agreement agreed pre-drill.

Success at Tiberius validates our proven base and infrastructure-led exploration strategy, targeting low cost, lower carbon, short cycle oil opportunities to complement our deep hopper of long-dated, lower carbon gas opportunities in West Africa. I'll now hand over to Neal to take you through the financials.

Neal Shah (CFO)

Thanks, Andy. Turning to slide nine. Production for the quarter was in line with guidance. Gulf of Mexico was slightly ahead of expectations, offsetting the lower-than-anticipated production from Jubilee that Andy talked about earlier. OpEx was in line with guidance and higher quarter-on-quarter as a result of the TEN cargo that we have in the year, falling in the third quarter. As a reminder, TEN OpEx, which is higher than the rest of the assets in the portfolio, is recognized when we have the lifting. The guidance slide in the appendix shows OpEx falling down to normalized levels in the fourth quarter. CapEx was at the higher end of our range. It did include the extensive success case evaluation program associated with Tiberius that Andy mentioned on the previous slide. Turning to slide 10.

During the third quarter, we saw a continued improvement in our financial position, with leverage lower as a result of both increased EBITDAX and reduced net debt. We repaid the Gulf of Mexico loan within the quarter, an important step towards simplifying the capital structure. Following the paydown of the GOM term loan and the RBL amendment in October, Kosmos has no scheduled debt maturities until 2025. We've talked about reaching a cash flow inflection point as production rises and capital falls, as our growth projects are delivered. Our near-term priority with any cash generated is debt paydown to bring leverage towards our long-term target of less than 1.5x at mid-cycle oil price. With our floating debt now more expensive than our fixed debt, we are prioritizing the RBL, which allows us to maintain and grow available liquidity over time.

We anticipate that we still have a couple of quarters of higher CapEx ahead of us, completing Tortue and Winterfell, after which we expect debt reduction to accelerate as free cash flow ramps up meaningfully in the second half of next year. We continue to make good progress on our hedging targets for next year. In line with previous practice, we are looking to hedge around 50% of the following year's production, which allows us to fund the capital plan for the year. Using collar structures, we currently have around one-third of next year's production hedged at an average floor of $69 per bbl, with an average ceiling of around $94 per bbl. Looking forward at our Q4 guidance, which is included in the appendix, there are a few points I wanted to flag.

Full year 2023 production guidance is now expected to be approximately 63,000 bbl of oil equivalent per day due to the delayed startup of Jubilee Southeast and reduced water injection levels. We raised full year GOM production guidance due to the lack of storms. However, Q4 GOM production is lower than the third quarter due to both planned and unplanned downtime, which is expected to be largely complete this month. We also now expect total CapEx for the year to be around $800 million, reflecting the accelerated drilling in Jubilee in the fourth quarter and the increased activity at Tiberius following the successful well result. We still expect to step down in CapEx into 2024, particularly in the second half, as we finish our capital spend of our three key projects. With that, I'll now hand it back to Andy to close today's presentation.

Andy Inglis (Chairman and CEO)

Thanks, Neal. Turning to slide 11 to conclude today's presentation. I started today's presentation talking about the importance of having a clear and consistent strategy. So far in 2023, Kosmos has achieved multiple important milestones in the delivery of that strategy, which sets us up well for further delivery in 2024. While I don't intend to dwell on all of the bullets on the slide, I want to focus on some key themes. Kosmos has a differentiated growth story, which we've started to deliver with the startup of the Jubilee Southeast project in Ghana, with more growth expected to come in 2024. We continue to progress our other development projects at Tortue and Winterfell, which are expected to drive another material production uplift in 2024, with Tortue providing further portfolio diversification, both geographically and by adding a new multi-decade LNG revenue stream once online.

We are also expanding our medium to long-term growth hopper with high-quality operated investment opportunities across both advantaged oil and gas through Tiberius and Yakaar-Teranga. And finally, as we deliver increased free cash flow, we will prioritize debt paydown until we reach our target leverage level, which is when we plan to look at shareholder returns. The Kosmos management team is excited by the future opportunity set in front of us and energized with the growth in value for our shareholders. Thank you. I'd now like to turn the call over to the operator to open the session for questions.

Operator (participant)

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Our first question comes from Matthew Smith with Bank of America. Please proceed with your question.

Matthew Smith (VP of Data, Reporting and Analytics Manager)

Hi there, guys. Thanks very much. A few questions from me, if I could. The first one would be on Tortue CapEx. I think at the last earnings call, you noted that there was an element of uncertainty over the phasing and also, I guess, the amount of additional CapEx to be incurred from the new subsea contractor. I think if I heard correctly, you didn't sort of note that as a reason for the increased 2023 guidance. So should I take it that there might be some deferred CapEx from this change on Tortue into 2024? That'd be the first question. And the second one, if I could, on Tiberius.

I appreciate there's further analysis to be done here, but you able to just remind us of the pre-drill resource estimate that you had there and where you feel, like you may have come out versus that, if you're willing to comment. And then lastly, squeeze a 1/3 on, if that's okay, and that's just whether you can add anything on Tortue Phase Two at this point. And I suppose the question that some investors would ask is, is there anything that we should read across from BP, and their exit from Senegal, in terms of their enthusiasm on the expansion at Tortue, please? Thanks very much.

Andy Inglis (Chairman and CEO)

Yeah, thanks, Matt. Why don't we split up the three questions? I'll let Neal talk about the Tortue CapEx. I'll pick up Tiberius and then talk about phase, Tortue Phase Two.

Neal Shah (CFO)

Yeah, so Matt, just on the Tortue CapEx, yeah, we mentioned last quarter there'd be a rephasing due to the subsea. Our overall view for 2023 hasn't changed. You know, some of the CapEx basically related to the subsea that was supposed to be in sort of the second quarter and third quarter was rephased to the fourth quarter, and then ultimately some of that slipped into to 2024. And so 2023 is roughly the same. There is an additional amount of capital, you know, versus what we originally planned, probably, you know, in the order of around $100 million net for Tortue in the 2024 time period.

Andy Inglis (Chairman and CEO)

Okay, yeah, on Tiberius, Matt, you know, we're really encouraged by the initial exploration well. As we talked about in the material, we targeted the central fault block, and we believe that we probably, in that central fault block, de-risked around about 1/3 of the potential that we had pre-drill. You know, in terms of its development, you know, we've did a pretty extensive logging program, you know, which was part of the additional CapEx that we spent in 2023. So I think we've got really good set of sidewall cores, fluid samples, which give us, gives us encouragement around being able to move ahead quickly with the development. We've obviously got to get all that analysis back from the labs.

But in the interim, we've already kicked off, actually, the planning of a tieback to Lucius. I think within a week, actually, after the discovery was announced, the team had already put out the bid documents to build the subsea layout. So I'm actually quite pleased around the pace at which we're moving and the fact that we have, with that initial fault block, a significant increment to production for Kosmos, and we'd anticipate, you know, that coming on within a couple of years. So again, you know, sort of good progress. And, you know, and I think the subsea architects will be laid out.

There'll be a single flow line initially, but with the addition of maybe two, maybe three additional wells from the additional fault blocks that we showed in the material. On Tortue Phase Two, I think sort of step back and actually sort of think about how it links into Yakaar-Teranga. I'm sure there'll be more questions around Yakaar-Teranga, but, you know, we have a very distinctive growth portfolio in Kosmos of advantaged low-cost gas adjacent to Europe, and our objective now is to phase the development of that in a way where we can not only grow, but return capital to our shareholders. The first step of that is the completion of Tortue Phase One, and obviously, we've given you the forward timeline for that.

With control now of Yakaar-Teranga, I think we can then position that as the next building block in that sequence. And I would imagine that Tortue Phase Two could sit behind that. So we have a phase set of developments now where you're building out around, I know, 2.5 million tons of LNG, but doing it in a way where there's control now with an operated project, and doing it in a way where you're limiting the capital outlay so that you have a credible and manageable capital profile. So we're pleased at, you know, what the future looks like now, and we believe this is an important source of value growth for shareholders. All right. Well, thanks so much. Pass it on. Great. Thanks, Matt.

Operator (participant)

Our next question comes from Charles Meade with Johnson Rice. Please proceed with your question.

Charles Meade (Research Analyst)

Yes, good morning, Andy and Neal and the rest of the Kosmos team there. Andy, I wonder if I could just. Can pick up maybe just about where you left off. You said you're sure there'd be more questions about Yakaar-Teranga, and that's what I'd like to ask about. I guess there's two parts to this. One, can you just give us the bigger context of where Yakaar-Teranga, you know, how you chose to develop Tortue over Yakaar-Teranga first, and where Yakaar-Teranga kind of sits in the, I guess, in your mind as far as the, you know, is it number two after Tortue?

And then also, as part of that, you know, and I recognize different companies have different priorities and, and have different viewpoints, but, but how would you make the case for the value of Yakaar-Teranga to Kosmos, for people looking at BP and saying, "Well, if BP just walked away from this, you know, why is it valuable?

Andy Inglis (Chairman and CEO)

Yeah. Thanks, Charles. You know, as you say, all good questions, and maybe I start at the end and sort of work back. You know, Yakaar-Teranga is a distinctive gas resource. It has low CO2 content. It is close to shore, 75 km off the Dakar Peninsula. And from both, yeah, a domestic and an LNG perspective, it has strong market pull. There's a need to replace heavy fuel oil as a source of power in Senegal. And clearly, you know, Senegal is one of the closest new sources of LNG to Europe. So you then sort of say, well, okay, how does that fit with various company strategies?

I think, to me, we're at a point now in the life cycle of the energy transition, where different companies are placing different bets. I suppose nothing was clearer on that than the two big announcements, you know, over the last couple of weeks here in the U.S. I think that strategic context actually influences the way that people look at various investment opportunities. You know, as I said, I think Kosmos believes that this gas is distinctive and is well described. Well described, what do I mean by that? I mean that in Tortue, we drilled four exploration and appraisal wells and a DST, that enabled us to calibrate the seismic that led to four successful development wells.

It's a huge amount of subsurface data that directly correlates to Yakaar-Teranga, where we have three exploration and appraisal wells. So we believe we have a well-described subsurface and are confident in its ability to deliver a very commercial project. We also believe there's a low-cost solution to development, given the geographic situation close to the Dakar Peninsula. Now, you know, I would say that BP doesn't have the same view, and I think it's not ultimately heavily influenced. It is ultimately heavily influenced by, you know, the strategic context of where they are allocating capital and their ability to envisage a commercial development. So, you know, I think this is a great opportunity for the company. You know, we've inherited their share. We start at 90%.

Our objective is for Petrosen to build their share so that they are an equal partner with ourselves and whoever comes in. We'd anticipate therefore, you know, 25% to maybe 33% shares. We've got work to do now on fully describing the concept that we laid out in the material. And you know, we've got work to do to bring in a partner and underpin the financing. But with all of that done, this is an incredibly commercial opportunity, but it has to be done in a low-cost way that fully leverages all of the subsurface knowledge. So, you know, that's the essence of maybe the difference, but I see it as a huge opportunity for the company.

And look, as you know, it's not without precedent. You know, you're very familiar with the Gulf of Mexico. You go back to something like Shenandoah. You know, I think two large companies gave it up. A smaller company now has it and is now executing a very competitive scale project now. So those things, you know, many precedents in the industry of that. And I think the energy transition has simply made those differences more acute, and therefore, the opportunity is greater.

Charles Meade (Research Analyst)

That is, that's a helpful elaboration, Andy. Thank you. And, if I could go back to your prepared comments, you talked about the two additional wells you're gonna drill at Jubilee and Jubilee Southeast. I just wanna make sure I understood. So you guys were going to farm out the rig, but then you decided you've got these two wells. One's in Jubilee. If I understand right, one's in Jubilee, one's Jubilee Southeast. What does this lead to a higher plateau, or is this just gonna more reduce the volatility around that plateau in case you have some more of these water injection? Can you kinda frame it up for us? What the-

Andy Inglis (Chairman and CEO)

Yeah.

Charles Meade (Research Analyst)

What can be different now?

Andy Inglis (Chairman and CEO)

Yeah, it's simply really around accelerate activity out of 2024 into 2023, which allows us to actually build towards the facility limit, you know, faster. So, you know, that additional water injection well is important because it allows us to address some of the water injection issues that we've been experiencing. And then the second well is a producer, which would come on in 2024. Then we have an ongoing drilling program on Jubilee that would build, you know, with additional producers. So ultimately now it's about building to the facilities limit in terms of well capacity, probably building slightly beyond the facilities limit. So we have a degree of well capacity in reserve, and then holding the field at that level.

We've accelerated some capital out of 2024 into 2023 to allow us to build towards that facility limit faster.

Charles Meade (Research Analyst)

Got it. Thanks for the clarification.

Andy Inglis (Chairman and CEO)

Great. Thanks, Charles.

Operator (participant)

Our next question is from Bob Brackett with Bernstein Research. Please proceed with your question.

Bob Brackett (Senior VP and Senior Research Analyst)

Good morning. Acknowledging that you don't yet have the ground truth of the sidewall core data for Tiberius, are the wireline porosities in line with what you expected pre-drill? And the follow-up related is, how do I think about the capital cost of developing Tiberius, given that the host is a sunk cost and given that potentially the wellbore is a sunk cost?

Andy Inglis (Chairman and CEO)

Yeah. Hi, Bob. Yeah, as always, good questions. The porosity was absolutely in line with expectations. Yeah. So as you're well aware, the next step then is to do the lab work to actually confirm permeability rather than it be a read-across from porosity, and then to finalize the fluid data with viscosity. Armed with all of that, we can then optimize the completion design. So yeah, everything's in line with what we expected. It's in line with analogs that are from adjacent field. So, you know, sort of so far, so good. And you know, as I said to Matt, we, you know, we're moving ahead with a really cost-effective development plan with the tieback to Lucius.

Neal Shah (CFO)

Yeah.

Andy Inglis (Chairman and CEO)

But Neil, just picks up on the capital of that.

Neal Shah (CFO)

Yeah, just, Bob, I think, yeah, you're right in terms of, yeah, there's minimal infrastructure to be laid, and therefore, you know, it should be very cost-effective tieback program. And we'd envision we developed it similar to how we've done Winterfell and other projects in terms of a staged phase development to where we have a single well EPS, to where, you know, we, we install a full line to this facility, and then grow the development over time with more information from the well and the reservoir over time. So, you know, I think, you know, we've talked about the cost of sort of F&D in sort of $10-$15 range generically. Yeah, I think that's this would squarely fall in that, in that range.

Bob Brackett (Senior VP and Senior Research Analyst)

Very clear. Thanks.

Andy Inglis (Chairman and CEO)

Great. Thanks, Bob.

Operator (participant)

Our next question is from Neil Mehta with Goldman Sachs. Please proceed with your question.

Neil Mehta (Managing Director and the Head of North American Natural Resources Equity Research)

Good morning, team. Thanks for the update today. The first question I had was just around capital spending. Can you bridge us from your previous CapEx guide to the current one, and how much of that was project-related versus inflation? And as you think about 2024, recognizing you don't have the full numbers, but how should we think about the fairway that we're to the extent you're able to provide that?

Andy Inglis (Chairman and CEO)

Yeah, great. Well, I'll have Neal pick that up. Neal?

Neal Shah (CFO)

Yeah. Okay, hey, Neil. So, yeah, on 2023, I think, yeah, the two biggest pieces were really around, you know, the Tortue acceleration that Andy talked about, with that being $30 million, and about $20 million of it was sort of the additional drilling-

Andy Inglis (Chairman and CEO)

It was Ghana acceleration.

Neal Shah (CFO)

Sorry, the sort of additional two wells or 1.5 wells in Ghana, Jubilee. There's $30 million on that, and then the $20 million was really additional drilling at Tiberius post the success and the extensive sort of logging campaign. So that sort of took us from sort of, you know, we were trending towards the high end of the range, and that basically moved us from $750 million to $100 million. So that's kind of, you know, the acceleration of that sort of, you know, what we call value-adding activity into 2023.

If I look sort of going forward, I think, you know, we've talked about sort of a normalized CapEx, right, post our three big projects of, call it, you know, $300 million-$350 million of maintenance and $200 million-$250 million of growth, which sort of gets you around $550 million of, steady state, CapEx for the company. 2024, you know, is a bit of a transition year because we still have the completion of Tortue and Winterfell, the residual CapEx related to those as well as sort of the steady state CapEx. So again, we haven't given any 2024 guidance yet. We'll do that in February.

I'd expect, yeah, that, you know, 2024 will fall in between the two, where we are sort of this year and then sort of the steady state level as we finish those two key projects.

Neil Mehta (Managing Director and the Head of North American Natural Resources Equity Research)

Thank you, Neal. Thanks, Andy. The follow-up is just around phase one. Maybe you can get us a little bit more clarity around the work stream that you highlighted, which has the potential to slip into the second quarter, but as of now, it's still on track for first gas in the first quarter of 2024. Can you get us into the field and give us more granularity so we understand what specifically you're talking about?

Andy Inglis (Chairman and CEO)

Yeah, no, sure, Neil. Yeah, if you sort of go through the key work streams, you know, we've talked about the hub terminal sort of being finished, handed over to operations. That was a big milestone in the quarter. You then look at the FLNG vessel, which will obviously be moored in the hub terminal. You know, that leaves Singapore around this quarter, and it will get to site at the beginning of next year. So sort of not sitting on the critical path. The big breakthrough in the quarter was around getting all of the subsea architecture finished, you know, recontracting with Allseas and Saipem.

That work starts early next month, and with, you know, a clear program to complete in the first quarter. So feel good about that. You know, the piece that we - you know, the issue we're wrestling with at the moment is just around the FPSO. It's actually an issue that's sort of external to the vessel. The vessel has fairleads on it. The fairleads are used in the permanent anchoring of the vessel on location. They have a sea fastening, and in the voyage across to the east coast of Africa, those sea fastenings were damaged. The boats are currently sitting offshore at Durban at the moment. We're looking to get access to the port in Durban, so that work to address the issue with the fairleads can be conducted.

So that's the thing where there's a little bit of, you know, that sort of uncertainty in the timing. So not a big issue, but it's sort of, it is a very, you know, singular issue that we're working. You know, all that said is, you know, there's work ongoing on the FPSO itself and all the topsides, so we can get on with work to do with the pre-commissioning. So when it does arrive on site, you know, that work stream is shortened. Yeah. So look, you know, like with all big projects, it is about the integration of the pieces. We're clearly getting closer, and I actually felt good about the progress we made in 3Q.

We've got, you know, significant milestones now to hit in the remainder of this quarter and into the first quarter of next year. The one that we're obviously intensely focused on with the operator, with BP, is to make sure that we get the FPSO on location so that we can deliver first gas. So that's the color, as it were, behind the update.

Neil Mehta (Managing Director and the Head of North American Natural Resources Equity Research)

That's great. Thanks, guys.

Andy Inglis (Chairman and CEO)

Great. Thanks.

Operator (participant)

Our next question is from Mark Wilson with Jefferies. Please proceed with your question.

Mark Wilson (Managing Director)

Okay, thanks, gents. And thanks for the color on the FPSO there. I was gonna ask about that journey, so that's clear. So yeah, let's go to Yakaar-Teranga. You've actually outlined a very specific development concept in the press release today, 550 million cu ft a day, with piped gas, domestic and export via FLNG. And I think, Andy, you mentioned an FLNG vessel of a similar size to Tortue. That's what I wanna check, is what would be the split of that gas? How much does Senegal require domestically, and therefore, how much would be left to export? And you mentioned bringing in a partner, so I guess that is a definitive requirement to move forward.

What sort of final percentage stake would you envisage taking in such a development? Thank you.

Andy Inglis (Chairman and CEO)

Okay, yeah, right. All good questions, Mark. Yeah, so I think I did sort of cover it earlier, but just sort of I think that, yeah, it is a well-described development scheme. And, you know, I think hoped you get a sense from that, that we've been obviously working closely with Petrosen in the development of that, and a scheme that clearly is competitive, commercially attractive, but meets the country's own development goals, which are around a domestic gas supply and the ability then to create additional revenue through LNG export. If you look at the split, it is around 150 million standard cu ft a day into the domestic gas.

And, you know, and as it were, that, you know, initially, you know, probably, there won't be the full power capacity to take that, but that will grow, through time. At, again, a steady state, we would be looking at an LNG scheme, which is about 2.5 million tons-3 million tons, yeah? Which sort of, you know, takes you to a gas supply of 400 million standard cu ft-500 million standard cu ft. Yeah. So that gives you an idea of the scheme and therefore the number of wells that would be required. The well potential is very similar to GTA. And I think, you know, and sort of therefore, sort of linking back to the question, you know, sort of why, you know, why is BP not involved?

You know, this is a scheme that we developed in collaboration with Petrosen. And then ultimately, the decision by BP not to participate has allowed us to move forward with that. So they stepped back. They're gonna focus on getting phase one of GTA finished, and that creates us the opportunity to work this. So I think, you know, the scheme is sort of clear. You know, in terms of working percentages, you know, we typically have 25%-33% in our current projects. I'd envisage the same. You know, the objective is for Petrosen to step up to an equivalent share to other parties that would come in. If it's two, it's maybe, you know, we're at 25%, they're at 25%.

If it's just one party coming, maybe we're 1/3, 1/3, 1/3. So it's that sort of shape. And, you know, to get there, we've got work to do now to bring in the partnership. That, you know, that is a gating item for both ourselves and Petrosen and secure the necessary financing to enable, you know, Petrosen to move forward. So, you know, lots to do on it, but it is a project which I believe has, you know, the full support of the government, has a very clear development concept and a very cost-competitive proposal. You know, now there's work to do to bring all of that to fruition.

Mark Wilson (Managing Director)

Okay, thank you for that. And on that development concept, can we just push it a little bit harder on it? So Tortue, for instance, there's a very large breakwater being built, and a lot of the phase one was sized with a view to a follow-on phase two, FLNG being added. Could you explain what's different in terms of Yakaar-Teranga, maybe in terms of its location offshore, that might make it an easier or quicker-

Andy Inglis (Chairman and CEO)

Yeah

Mark Wilson (Managing Director)

development in its initial phase?

Andy Inglis (Chairman and CEO)

Yeah, no, again, good, good piece of color, Mark. Yeah. Yeah, we, you know, I suppose the way to describe it is we don't envisage building a breakwater. We believe that there is a design to enable an FLNG vessel to be located on location there, different metocean conditions, so that you don't have the significant cost of building a breakwater. So I think that it is about being innovative around the development solution that we've talked about, and we believe that we've done significant work, you know, we have done significant work to enable us to be able to progress that concept.

Mark Wilson (Managing Director)

Okay, that's great. And I – just, sorry, I've just got one more. I just want to confirm, so bring in Jubilee now, additional producer injector pair before year-end, but it's still the plan for that rig to continue in 2024 with a three to four well annual program? I think that's been talked about before by the operator.

Andy Inglis (Chairman and CEO)

Yeah. No, no, you're right, Mark, in concept, that's the proposal. So we've got about half a rig year, I would say, on Jubilee in 2024. And again, I think it was Charles's question around, you know, the objective is to build the well capacity so that we've got the sort of reserve capacity beyond the facilities limit. And, you know, together with reliable water injection, you then have the ability to sort of hold the plateau at that level. And then, you know, clearly, you'd follow, you know, you then follow up with additional wells as that well capacity becomes tested.

But so we're on a good track now to sort of continue to move forward with good Jubilee as we add those wells and, you know, fundamentally underpin the new wells with reliable water injection. So, you know, the increase in Jubilee is well described in, you know, in terms of the forward activity set.

Mark Wilson (Managing Director)

Great. Okay, appreciate it. I'll hand it over.

Andy Inglis (Chairman and CEO)

Great. Thanks.

Operator (participant)

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment while we pull for questions. Our next question comes from Stella Cridge with Barclays. Please proceed with your question.

Stella Cridge (Director and Head of EEMEA Corporate Credit Research)

Hi there, afternoon, all. Many thanks for all the updates. I want to ask on three things, please. The first, just a tidying up question on Yakaar-Teranga. Do you actually have to pay any consideration to BP for the additional stake? That would be the first one. The second, on the TEN Gas development, I did see a figure in the press about the potential cost of this. I just wondered if you would be able to comment directly about what CapEx you see there and how you would fund the Kosmos share. And then finally, do you have any updates on the Ghana tax situation? That would be great, thanks.

Andy Inglis (Chairman and CEO)

All right. I'll sort of go back those in reverse order. As regards to Kosmos, we have no ongoing dialogue with the GRA, which is the Ghanaian Tax Authority, regarding any tax issues. On TEN, I think the newspaper article talked about a $1.3 billion development, which would cover the full development of the next phase of the TEN POD. You know, we would—our share would be 20% of that, and including that spend would be forward spend through potentially 2024, 2025, et cetera. So, but we're still waiting for progress with the Government of Ghana in terms of that spend. So we don't yet have any firm timing for that.

And then on Yakaar-Teranga, there was no consideration paid to BP.

Stella Cridge (Director and Head of EEMEA Corporate Credit Research)

That's great, thanks.

Andy Inglis (Chairman and CEO)

Great, thanks.

Stella Cridge (Director and Head of EEMEA Corporate Credit Research)

So you mentioned you don't have any ongoing dialogue with the government. Do you mean there is no tax claim anymore, or the tax claim is still there, but there's just been no discussion about it?

Andy Inglis (Chairman and CEO)

We have no tax claim.

Stella Cridge (Director and Head of EEMEA Corporate Credit Research)

Right. Okay, thanks for the clarification on that.

Andy Inglis (Chairman and CEO)

Right.

Stella Cridge (Director and Head of EEMEA Corporate Credit Research)

Was there any particular reason that was dropped, or?

Andy Inglis (Chairman and CEO)

I don't think we. There's no, with regard to ourselves versus other parties, there was never a tax claim against-

Neal Shah (CFO)

Never a dispute.

Andy Inglis (Chairman and CEO)

Never a dispute.

Neal Shah (CFO)

Yeah.

Stella Cridge (Director and Head of EEMEA Corporate Credit Research)

Okay.

Neal Shah (CFO)

Yeah, every partnership is-

Andy Inglis (Chairman and CEO)

Is different.

Neal Shah (CFO)

Different.

Andy Inglis (Chairman and CEO)

Yeah.

Neal Shah (CFO)

We've never had any formal dispute with the GRA. We obviously have an ongoing discussion with them, but we don't have any claims that we're working through them on.

Stella Cridge (Director and Head of EEMEA Corporate Credit Research)

Okay. All right. Many thanks for that.

Andy Inglis (Chairman and CEO)

Great. Thank you.

Operator (participant)

If there are no further questions at this time, I'd like to bring the call to a close. Thanks to everyone joining today. You may disconnect your lines at this time, and thank you for your participation.