Kosmos Power (KOS) This autumn 2021 Earnings Name Transcript

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Kosmos Power ( KOS 8.00% )
This autumn 2021 Earnings Name
Feb 28, 2022, 11:00 a.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Individuals

Ready Remarks:

Operator

Good day, everybody, and welcome to Kosmos Power’s fourth quarter 2021 convention name. [Operator instructions] At the moment, let me flip the decision over to Jamie Buckland, vice chairman of investor relations at Kosmos Power. Thanks, sir. Chances are you’ll start.

Jamie Buckland — Vice President, Investor Relations

Thanks, operator, and due to everybody for becoming a member of us right now. This morning, we issued our fourth-quarter earnings launch. This launch and the slide presentation to accompany right now’s name can be found on the Buyers web page of our web site. Becoming a member of me on the decision right now to undergo the supplies are Andy Inglis, chairman and CEO; and Neal Shah, CFO.

Throughout right now’s presentation, we’ll make forward-looking statements that confer with our estimates, plans, and expectations. Precise outcomes and outcomes may differ materially resulting from components we be aware on this presentation and in our U.Okay. and SEC filings. Please confer with our annual report, inventory trade announcement, and SEC filings for extra particulars.

These paperwork can be found on our web site. At the moment, I’ll flip the decision over to Andy.

Andy Inglis — Chairman and Chief Government Officer

Thanks, Jamie, and good morning and afternoon to everybody. Thanks for becoming a member of us right now for our fourth-quarter outcomes name. I would like to start out right now’s presentation wanting on the firm’s technique and the defining traits which differentiate Kosmos and place us very nicely in a quickly altering oil and fuel sector. I am going to then speak in regards to the operational momentum we noticed in 2021 earlier than handing over to Neil, who will stroll you thru our financials.

I am going to then define our plans for 2022 and the important thing investments we’re making to ship important shareholder worth within the subsequent 12 to 24 months. We’ll then open the decision up for Q&A. Beginning on Slide 2. Wanting again, 2020 was a 12 months of survival for the sector, through which Kosmos took the chance to high-grade its funding choices to create a stronger firm for the longer term.

2021 was a 12 months of resuming operational supply and strengthening the stability sheet, each of which have been considerably enhanced by the Oxy Ghana and Tortue FPSO transactions. 2022 is the 12 months through which Kosmos can actually begin to thrive. We have now the correct portfolio for the longer term, and the containers on the left of the slide highlights the important thing traits that outline our portfolio. First, we’ve low-cost, high-quality property.

The corporate is underpinned by world-class fields which have a long life to ship sustainable, high-margin money circulation. That offers us the power to put money into our current property to materially develop manufacturing and free money circulation whereas concurrently lowering debt. The suitable-hand chart reveals the corporate’s manufacturing is forecast to develop by round 50% between 2022 and 2024 as we convey our deliberate developments on stream. Second, because the chart additionally reveals, we’re rising our publicity to fuel and LNG.

The Tortue part one comes on-line within the second half of subsequent 12 months. We even have a deep hopper of world-class fuel alternatives in Mauritania and Senegal that we anticipate will present additional progress nicely into the longer term. Third, we’ve a sturdy stability sheet, which we anticipate to strengthen additional in 2022 with a year-end leverage goal of round one and a half occasions at present costs. Fourth is deliberate capex and free money circulation grows, there may be potential for significant shareholder returns as soon as leveraged for sustainably beneath our goal.

And eventually, we’ve sturdy ESG credentials, pushed by a portfolio shift towards decrease carbon pure fuel and a dedication to our host nations in Africa to assist a simply vitality transition. Kosmos has emerged from the final two years with a robust crew, excited in regards to the future and hungry to ship the numerous worth we see within the portfolio for our traders. Turning to Slide 3. One of many key areas of differentiation for Kosmos is an extended reserve lifetime of our portfolio, which underpins the expansion we’re planning.

At year-end 2021, Kosmos 1P and 2P reserves have been each at report ranges. The highest chart on the slide reveals the oil fuel cut up of our 1P and 2P reserves. On a 1P foundation, oil makes up round 60% of our reserve base, whereas on a 2P foundation, fuel is over 55% of the portfolio, reflecting the longer-term course of the corporate, a bias for oil within the close to time period and fuel long run. The underside chart reveals the diversification of the portfolio on a 2P foundation.

Ghana, Mauritania, and Senegal every make up round 40% of the portfolio with Equatorial Guinea within the Gulf of Mexico, making up about 20% between them. This diversification is vital because it means we’re not depending on a single area or a single geography to ship our future plans. In 2021, our 1P reserves greater than doubled to roughly 300 million barrels of oil equal with the reserving of Tortue part one and the Oxy Ghana acquisition. Our 2P reserves are roughly 580 million barrels of oil equal, which provides us a 2P reserve to manufacturing ratio of over 20 years.

Even excluding the Oxy Ghana acquisition, our reserves substitute ratio was sturdy with 114% of the full of our 2P reserves reveal the underlying high quality of our asset base. Turning now to Slide 4. As you are nicely conscious, for the final 18 months, we have been centered on deleveraging and have made good progress. With a portfolio of extremely cash-generative property, we anticipate leverage to proceed to fall sharply this 12 months.

As guided, we ended 2021 at round two and a half occasions, a big year-on-year discount. We stay on observe to finish this 12 months beneath pre-COVID ranges. Our year-end goal for 2022 is round one and a half occasions at strip pricing. We anticipate to realize this deleveraging via a mixture of rising EBITDAX and absolute debt discount.

EBITDAX is predicted to extend materially 12 months on 12 months via a number of drivers together with greater manufacturing and stronger oil costs, which we have been in a position to hedge in a lot greater ranges than 2021. As well as, with higher manufacturing from Jubilee, we anticipate our unit price to lower as nicely. We additionally plan to scale back absolute debt by as much as $500 million this 12 months, which is able to additional drive the leverage a number of decrease. This absolute debt discount is pushed by the free money circulation we generate, however might be enhanced with the potential for contingent funds from Shell, the Oxy Ghana pre-emption proceeds and the NOC mortgage refinancing.

I am going to present an replace on the pre-emption course of shortly. On the NOC mortgage, we had initially aimed accomplished by year-end 2021 and acquired a number of time period sheets for the transaction. We proceed to progress these discussions. Nevertheless, we wish to guarantee any deal accomplished is in Kosmos’ greatest long-term curiosity and are taking the time to get it proper.

Our liquidity place is powerful and will get stronger with potential proceeds from Ghana pre-emption and the shale exploration bonus. Subsequently, we proceed to pursue the NOC mortgage refinancing, the timing is much less urgent. Turning to Slide 5. I talked in regards to the embedded progress we anticipate to see over the subsequent two years which is pushed by Tortue part one, Jubilee Southeast, and Winterfell, delivering an anticipated manufacturing improve of round 50%.

As these developments begin up, our capital commitments are anticipated to fall by greater than 30%. With manufacturing up and capex down, we anticipate free money circulation to greater than triple from the degrees we anticipate in 2022 at $75 Brent. This money technology is sustainable and underpinned by our 20-year 2P reserve life placing us ready to ship materials shareholder returns. Turning to Slide 6 and our dedication to sustainability.

As I’ve famous on the earlier slides, we’ve a long-dated portfolio of high-quality property. Our aim is to assist our host nations develop their hydrocarbons in a accountable means and increase entry to inexpensive, dependable vitality. By means of creating financial advantages, we assist to drive sustainable developments in our host nations. On setting, two years in the past, Kosmos set out a coverage to realize carbon neutrality for our scope one and two operated emissions by 2030, and we’re working to speed up that point line.

We’ll give additional updates on this 12 months’s sustainability report, which we’ll publish within the first half of this 12 months to offer traders entry to 2021 information sooner. We additionally plan to offer further disclosure on our fairness emissions. On social efficiency, we care deeply in regards to the individuals who work for Kosmos and those that work with Kosmos. In our host nations, we make use of 100% native nationals and our U.S.

places of work in Dallas and Houston are persistently named within the prime locations to work. In our host nations, we purpose to be a trusted companion and good company citizen. We work with a spread of stakeholders and our communities to facilitate sustainable growth. We labored on this method for almost 20 years going again to when the corporate was based.

Every year, we discover vital social funding applications in Ghana, Equatorial Guinea, Senegal, and Mauritania, which might be aimed toward creating financial alternative, advancing social progress, and enhancing normal residing. The success of the Kosmos Innovation Heart is a primary instance. This initiative in Ghana, Mauritania, and Senegal put money into younger entrepreneurs and small companies exterior the oil and fuel {industry}. We practice and empower younger folks to show their concepts into viable companies.

And we work alongside promising start-ups to assist them scale and attain their full potential. And eventually, governance. Governance has all the time been a key pillar of our enterprise and cascades now from our expertise and various Board of Administrators via the manager management crew to our workers. We have now all the time taken an industry-leading place on transparency, publishing all of our materials petroleum contracts on-line.

In abstract, our constant dedication to sustainability is a core worth and helps our capability to ship long-term worth to our shareholders and stakeholders. Turning to Slide 8, wanting again at 2021, a 12 months that noticed an acceleration of our strategic progress with operational momentum throughout all areas of the portfolio. On manufacturing, we hit our year-end manufacturing goal of 75,000 barrels of oil equal per day, boosting fourth-quarter money circulation and lowering leverage at 12 months finish to roughly two and a half occasions. Our LNG growth made important progress throughout the 12 months with Tortue part one round 70% full at 12 months finish.

We enhanced our reserve base and now have a 2P reserve lifetime of over 20 years with a rising fuel weighting. We executed a extremely accretive transaction in Ghana, buying a stake within the Jubilee and TEN fields from Oxy, which has helped to remodel the stability sheet and improve free money circulation technology. And eventually, we proceed to advance our ESG agenda, supporting a simply vitality transition in Africa. On the next slides, we’ll briefly take a look at the progress we have made in every of our core geographies.

Turning to Slide 9 and beginning Ghana. 2021 was a pivotal 12 months for Kosmos in Ghana, the place we bought again to drilling after a pause in 2020. Kosmos had internet manufacturing of round 39,000 barrels of oil per day throughout Jubilee and TEN within the fourth quarter. The elevated drilling exercise in 2021 was promising, significantly at Jubilee, the place the partnership drilled three wells and Kosmos has a a lot higher curiosity.

The problem reveals Jubilee manufacturing for midyear the place new wells began to come back on-line. And you’ll see manufacturing rising from round 70,000 barrels of oil per day in July to over 90,000 barrels a day by 12 months finish, which is the place the sphere is producing right now. On TEN, the partnership drilled one fuel injector, which helps to assist current producers. Nevertheless, this has not been sufficient to totally stem manufacturing decline.

Turning to Slide 10. In October, we introduced and accomplished the acquisition of further curiosity in Jubilee and TEN from Oxy for a complete money consideration of round $460 million. On the time, we talked in regards to the engaging economics of the deal in a $65 world, which is very accretive on all metrics and an anticipated payback of round three years. With the continued sturdy operational efficiency of the property and the latest power in oil costs, we consider payback will probably be lowered beneath two years with important future upside as we proceed the infill program.

As soon as once more, I would wish to thank our fairness and bondholders for his or her sturdy assist. I am happy to see the advantage of this transaction delivering so rapidly. On pre-emption, each companions train their pre-emption rights in November. The influence of pre-emption on Kosmos is a small discount in our Jubilee state from round 42% to round 38%.

In TEN, the discount is extra significant with our stake lowering from round 28% to round 20%. Assuming pre-emption is accomplished, we’d anticipate to obtain a bit greater than $100 million of closing which we used to pay down debt. The influence on Kosmos manufacturing will probably be about 5,000 barrels of oil per day. We’re working with the companions on the transaction and the pre-emption stays topic to the approval by the Authorities of Ghana.

Turning to Slide 11. In Equatorial Guinea, 4Q gross manufacturing was in keeping with the total 12 months at round 30,000 barrels of oil per day. Just like Ghana, we noticed elevated exercise in 2021 with the primary wells drilled on the property since 2015. The partnership drilled two jack-up wells, each of which got here on-line within the fourth quarter.

We have been happy with preliminary efficiency and the mixed influence on gross manufacturing may be seen on the chart with Ceiba and Okume collectively producing at ranges not seen for over 18 months. Within the Gulf of Mexico, turning to Slide 12, 4Q manufacturing was 21,000 barrels of oil equal per day, barely above full-year manufacturing of 20,000 barrels of oil equal per day. On drilling the profitable Twister dump flood boosted output within the second half of the 12 months because the chart reveals. The spotlight within the Gulf of Mexico final 12 months was the Winterfell discovery and the profitable appraisal nicely.

With round 100 million barrels of gross useful resource potential within the Central Winterfell space and proximity to a number of close by host platforms with OH, we’re excited in regards to the future potential of this asset. Turning to Slide 13. The Tortue challenge noticed a ramp-up in exercise in 2021 with all key work streams making important progress. At 12 months finish, part one of many challenge was round 70% full.

Taking a look at every of the work streams. On the FPSO, the ultimate 4 course of modules have been lifted onto the deck in December. Mechanical completion of the method subsystems is now underway. In photos of the FPSO on the slide present the excessive stage of completion.

On the hub terminal, we accomplished development of the twenty first and ultimate caisson and the piling set up for the jetty has commenced forward of the hub terminal amenities supply. However the subsea exercise is ramping up. The pipeline has just lately accomplished its nautical trials in North Sea and ought to be prepared for the offshore set up marketing campaign within the second quarter. And on the floating LNG vessel, the 4 combined refrigerant compressors have been lifted on board and the pipe rack set up operations have commenced.

So 2021 was a busy 12 months for us, and with the operational momentum we’ve constructed, we’re nicely positioned to take supply this 12 months. With that, I am going to hand over to Neal to take you thru the financials.

Neal Shah — Chief Monetary Officer

Thanks, Andy. I would like to start out on Slide 14 by speaking in regards to the monetary supply we noticed in 2021. We completed quite a bit to have positioned the corporate nicely to prosper over the approaching years. First, we efficiently refinanced the reserve-based lending facility, which now has a complete facility measurement of $1.25 billion, with $1 billion drawn at 12 months finish.

In August, we introduced the completion of the Tortue FPSO sale and leaseback transaction, which funds round $375 million of our capex on the challenge and with key elements of the financing path we specified by November 2020. Our producing property generated sturdy free money circulation of round $175 million throughout the 12 months, excluding working capital, in keeping with our steering. The mix of those, together with the bond transactions we executed have deferred all of our near-term debt maturities and helped improve our liquidity to over $750 million out there at 12 months finish. By means of sturdy operational efficiency within the Oxy Ghana transaction, we materially lowered leverage throughout the 12 months, ending at round two and a half occasions as deliberate.

And eventually, we’ve taken benefit of upper commodity costs to place in hedges at considerably greater flooring and ceilings than we had in 2021. Round 55% of our manufacturing is hedged with a mean ceiling of round $80 per barrel with the remainder uncovered to present costs. All in all, it was an excellent 12 months for Kosmos. Whereas there’s nonetheless extra work to do in 2022, we begin the 12 months in a robust place.

Turning to Slide 15, Kosmos delivered a report quarter in 4Q with our highest ever gross sales volumes and EBITDAX. Internet manufacturing of roughly 70,000 barrels of oil equal within the quarter was in keeping with our expectations. Gross sales volumes of 82,000 barrels of oil equal have been greater than steering on account of a further Jubilee cargo in Ghana, loading in late December. The realized value of round $65 per barrel, which incorporates the influence of hedging, was materially greater than the earlier quarter, a pattern we anticipate to proceed in 2022.

Within the first quarter of this 12 months, we anticipate a realized value internet of hedging of over $80 per barrel. Prices have been all in line or barely beneath earlier steering, which helped to drive right now’s constructive 4Q outcomes. Turning to Slide 16. As I discussed in my opening remarks, we made a variety of progress with the stability sheet in 2021.

And the chart on the left of this slide reveals that liquidity stays at a wholesome stage. This quarter, we anticipate to finish the refinancing of the RCF pushing that maturity to late 2024. The chart on the correct reveals that we anticipate to don’t have any materials debt maturities till late 2024 on the newest, though we do plan to make the most of our flexibility to prepay a few of our current debt nicely earlier than that. With that, I am going to hand again to Andy to take you thru the 12 months forward.

Andy Inglis — Chairman and Chief Government Officer

Thanks, Neil. Throughout our enterprise, this is a crucial 12 months for the corporate. We’re investing in our key property to drive the rise in manufacturing and money circulation that we mentioned earlier. Turning to Slide 18.

In Ghana, we’ve a world-class area in Jubilee that has the potential to provide at elevated ranges for the subsequent a number of years as we ship on our plans. In 2022, we’re investing capital in three infill wells, one producer, and two injectors that assist the bottom manufacturing. With these new wells, mixed with the advantages of the wells we drilled final 12 months, we anticipate to ship year-on-year progress at Jubilee of round 10%, which incorporates the influence of the two-week shutdown deliberate for the second quarter. Across the finish of the 12 months, the partnership plans to start out drilling the primary Jubilee South East wells.

Jubilee Southeast is an untapped space of the reservoir, the place we will probably be drilling decrease GOR wells. As soon as on-line, in mid-2023, these wells ought to publish gross manufacturing in Jubilee to round 100,000 barrels of oil per day. On TEN, because the operator guided beforehand, manufacturing is predicted to pattern decrease till we see the advantages of the wells which might be being drilled later this 12 months. The partnership plans to put money into two infill wells this 12 months, one producer and one injector, which ought to assist stem decline in 2022.

We’re additionally drilling two riser-based wells, that are focusing on an undeveloped extension of the NTM reservoir nearer to the FPSO, permitting us to make the most of current infrastructure. These riser-based wells are anticipated on-line in 2023 and will assist to extend manufacturing. Because the operator just lately communicated, the longer-term plan with TEN is to double present manufacturing ranges by rising the exercise at TEN with a second rig in Ghana. And eventually, we’re aligned with the operator and the Authorities of Ghana to remove routine flaring by 2025.

As a primary step, we plan to change the fuel dealing with system on the Jubilee FPSO throughout the shutdown within the second quarter of this 12 months, which is predicted to permit us to inject and export extra fuel volumes. Turning to Slide 19. In Equatorial Guinea, manufacturing 12 months to this point has continued to be sturdy on account of the wells drilled late final 12 months. In 2022, funding will probably be centered on facility upkeep, nicely work, and a second ESP program with the purpose of conserving manufacturing round these ranges via the 12 months.

There’s a variety of untapped upside at Equatorial Guinea and we’ve a number of high-grade ILX alternatives, significantly within the untested deep Albian. Within the Gulf of Mexico, we’re planning to sidetrack the Kodiak nicely within the first half of the 12 months, funded by insurance coverage proceeds with the nicely anticipated to contribute within the second half. That, along with some manufacturing optimization initiatives, ought to assist current manufacturing ranges. On Winterfell, we’re working with companions on a low-cost, decrease carbon growth, focusing on sanction for the preliminary two-well growth scheme in mid-2022.

First oil is predicted round 18 months from sanction. As well as, we proceed to mature a number of prospects for future ILX drilling in 2023 and past. Turning to Slide 20. As I mentioned, final 12 months, we proceed to make sturdy progress on Tortue part one, with all the key work streams superior as evidenced by the photographs on the slide.

In 2022, we anticipate to hit a number of vital milestones, forward of first fuel deliberate for the third quarter of subsequent 12 months. We plan to start drilling the preliminary 4 wells subsequent quarter with offshore set up of the subsea infrastructure anticipated to begin within the second quarter as nicely. On the hub terminal, we anticipate to begin amenities hookup within the third quarter this 12 months. On the FPSO, sail-away from the yard in China is due late within the third quarter with the vessel anticipated to reach on website across the finish of the 12 months.

And on the floating LNG vessel, GOLAR will probably be testing the steam generators later within the 12 months and so they’ve been commissioning of the vessel energy administration system with sale-away anticipated early in 2023. Turning to Slide 21. Past part one in every of Tortue, we even have a big quantity of low-cost fuel throughout our property in Mauritania and Senegal that we’re working to commercialize. Given the ever tightening provide demand backdrop of world LNG, we consider our found useful resource has important worth upside to Kosmos.

For the second part of Tortue, we’re working with BP within the NOCs to optimize the upstream amenities to ship one other 2.5 million tonnes of capability at an upstream price lower than $1 billion of gross capex we’ve beforehand communicated. We anticipate to make a growth resolution associated to the initiatives across the center of this 12 months. This may kick off the FID work to totally assist the detailed contracting costing required for formal FID. At BirAllah, we anticipate to finish the seismic reprocessing and reservoir modeling which ought to enable growth idea to be chosen.

And in Yakaar-Teranga, the partnership plans to advance pre-FEED research and the met-ocean and geophysical surveys whereas additionally progressing home fuel gross sales discussions. Turning to Slide 22, which appears to be like at our high-level steering and capital plan for 2022. There’s a extra detailed steering slide included within the appendix. We anticipate firm manufacturing for the 12 months to be within the vary of 67,000 to 71,000 barrels of oil equal per day, which is on the midpoint, could be a year-on-year improve of over 20%.

capex of round $700 million is damaged out within the chart on the underside proper. We plan to spend between $250 million to $300 million of upkeep capex on the manufacturing property which is growth drilling and integrity spend in Ghana, Equatorial Guinea and the Gulf of Mexico. We additionally plan to spend between $100 million to $150 million of progress capex on the bottom enterprise for manufacturing progress in 2023 and past. This consists of Jubilee Southeast, the TEN riser-based wells, Winterfell in addition to lengthy lead gadgets forward of our 2023 drilling program in Equatorial Guinea.

On Tortue part one, we anticipate to spend round $250 million throughout the 12 months, which displays the timing of accrued capex primarily based on the accredited price range from the operator. We additionally anticipate to spend an additional $50 million in Mauritania and Senegal on Tortue part two and improve the exercise on BirAllah, Yakaar-Teranga assist progress on these developments. At $75 Brent, we’d anticipate to generate round $200 million of free money circulation, which we plan to make use of to scale back debt. As I discussed within the opening slide of right now’s presentation, we may see absolute debt lowered by as much as $500 million this 12 months via a mixture of natural free money circulation, contingent funds from Shell as they’re profitable with their drilling marketing campaign this 12 months, Ghana pre-emption proceeds and the NOC mortgage refinancing.

So turning to Slide 23 to wrap up right now’s presentation. Kosmos has a differentiated portfolio and thrilling outlook. We have now low-cost, high-quality property with important embedded progress. We’re investing in world-class fuel initiatives that can assist facilitate the vitality transition to offer the corporate with long-term sustainable money circulation.

We have now a sturdy stability sheet that continues to get stronger as we delever this 12 months and past. As our leverage improves, we anticipate our efforts will generate important amount of money circulation which is able to allow significant shareholder returns, particularly at present commodity costs. And eventually, we’ve sturdy ESG credentials that give us a license to function in our host nations and a portfolio that’s match for the longer term. Thanks, and I would now like to show the decision over to the operator to open the session for questions.

Questions & Solutions:

Operator

[Operator instructions] Our first query comes from the road of Charles Meade with Johnson Rice. Chances are you’ll proceed along with your query.

Charles Meade — Johnson Rice — Analyst

Good morning, Andy and Neal, and to the remainder of the crew there. Andy, I wish to return to your ready feedback and particularly the time line that you just laid out for part two. Did I hear that you will have a front-end engineering course of someday round midyear that precedes FID? Or are you able to simply return to that and form of set the time line for us?

Andy Inglis — Chairman and Chief Government Officer

Sure. Charles, it is Andy. Sure, the time line is to get to the idea choose resolution by midyear. And we’re working exhausting with BP to make sure that we absolutely optimize that.

And as I mentioned within the remarks, I believe — we predict there’s actual alternative to decrease the price beneath the $1 billion progress for the upstream that we talked about. In order that’s the method going via to the center of the 12 months. After which the second level with the idea chosen and the best way ahead outlined, we’ll do the feed engineering to undergo the formal means of FID. For FID, clearly, the federal government approvals we want, the ultimate engineering prices and we want the contracts in place.

In order that’s type of the actual work will kick off in the course of the 12 months.

Charles Meade — Johnson Rice — Analyst

Obtained it. So FID could be someday within the again half of the 12 months on the earliest?

Andy Inglis — Chairman and Chief Government Officer

It is — and once more, it is actually vital, I believe, within the present setting, it could be high quality engineering accomplished to make sure that we’ve the correct foundation of the capital and the correct contracts in place. So I believe that we wish to make sure that the standard of it is a actually good challenge. And we’re fairly — we see a variety of alternative really to take away prices upfront. And we wish to be sure that we try this.

Charles Meade — Johnson Rice — Analyst

Obtained it. After which a fast query about Gulf of Mexico, the two-well Winterfell growth. Simply to get form of an order of magnitude right here, ought to we be fascinated by gross charges from that growth within the vary of 5,000 to 10,000 barrels a day?

Neal Shah — Chief Monetary Officer

Sure. I believe, Charles, gross charges for the two-well growth will probably be round 20,000 barrels a day or possibly little much less that, however that’s mainly circulation on constricted.

Charles Meade — Johnson Rice — Analyst

Obtained it. Thanks, Neal. Recognize it.

Neal Shah — Chief Monetary Officer

Alright. Thanks, Charles.

Operator

Our subsequent query comes from the road of Neil Mehta with Goldman Sachs. Chances are you’ll proceed along with your query.

Neil Mehta — Goldman Sachs — Analyst

Good morning. Andy, the primary query is simply round your advertising technique. Clearly, with the whole lot happening in Europe proper now, the worth of Tortue and the barrels continues to maneuver greater doubtlessly. As you concentrate on cargoes for both part one or part two, are you able to in the end market a few of these cargoes into Europe and speak about the way you see this asset becoming within the broader pure fuel macro?

Andy Inglis — Chairman and Chief Government Officer

Sure. Thanks, Neil. I believe that — for those who type of return and type of beginning the place we’re right now on part one, we’ve the two.5 million tonnes being marketed by BP. As you are conscious, it is a 9.5% low to Brent.

The actual upside, in fact, due to this fact, comes from part two, the place these cargoes should not offered right now. And we consider there’s a actual alternative for us to take higher profit, I believe, from strengthening costs for LNG globally. And I believe as you take a look at the world right now and clearly, one of many penalties of the unhappy state of affairs in Ukraine is that Europe wants to have a look at the way it can guarantee vitality safety and search for new sources of fuel. And I believe in Mauritania and Senegal, we’ve a useful resource, which is low price, the fuel is low carbon, it has no CO2 in it, and it is proximate to Europe.

So I believe we consider, and I consider deeply that this was an vital useful resource for the world. Our job is to assist the vitality transition as an organization, convey ahead the brand new sources of provide that assist assist vitality safety. I believe we will try this with the fuel suppliers from Mauritania and Senegal. I believe the part one will come on at an vital time.

And as we mentioned with Charles, we’re transferring ahead with part two, which I believe, once more, will come on at an vital time to proceed to assist a rising fuel demand and hopefully create one other supply of vitality safety for the world. Gasoline is part of the vitality transition. So I believe it is changing into extra widely known that it performs a job. And we consider that Mauritania and Senegal is due to this fact part of that.

So I believe while you take a look at the massive macro and quite a bit has modified really since we began the journey with Tortue. I believe there’s quite a bit to stay up for. And in Pacific, round your preliminary query round Tortue part two, I believe there’s a variety of optionality on the fuel pricing for that.

Neil Mehta — Goldman Sachs — Analyst

Thanks, Andy. And as a follow-up is simply round hedging technique. Clearly, ’21, there have been a variety of these barrels that have been offered at a reduction relative to identify value. As you roll into ’22, remind us what proportion unhedged you might be? And as you concentrate on that remaining unhedged portion, is the intention to go away it open to offer your self that type of publicity to potential stronger commodity value realizations?

Neal Shah — Chief Monetary Officer

Sure. Certain, Neil. I am going to take that. Sure.

So we’re about 55% hedged on ’22 oil volumes, which was the 45% unhedged. We plan to maintain that publicity via the remainder of this 12 months. And I believe the attention-grabbing half that we’re working via now could be on ’23. So we’re lower than 10% hedged right now with upside to $95 on these couple of million barrels that we’ve hedged.

And we’re constructions that give us extra draw back safety and extra entry to the upside. In order that’s the primary focus for us for the subsequent few quarters is absolutely get ’23 in a spot the place the draw back is protected nicely, and we have stored as a lot entry to the upside as attainable.

Neil Mehta — Goldman Sachs — Analyst

Thanks, Neal.

Operator

Our subsequent query comes from the road of Nick Stefanou with Renaissance Capital. Chances are you’ll proceed along with your query.

Nick Stefanou — Renaissance Capital — Analyst

Hello, guys. It is Nick from RenCap. Thanks for taking my questions. I’ve three to ask, please.

I’m going to ask two after which ask a follow-up. So Andy, up to now, the thought about Tortue part two have been was that this could be a funded growth from the money circulation that part one will generate. However whether it is sanctioned this 12 months, then it is a very form of like attainable situation for — for possibly six, 5 months going to should pay for each part one and part two capex. So are you able to give me form of like some remark round that, how you concentrate on? Or is that this one thing you would possibly form of like play again towards the enterprise of the challenge? After which the second is on the sensitivities.

I wish to look again to sensitivities as a result of it appears to be like like they lowered from final quarter to $50 million from $100 million to $5. I am unsure if that is — is that this purely due to the extra hedges you might have accomplished quarter over quarter as a result of it aren’t that many? If , are you able to reply that, after which I’ve bought a follow-up.

Andy Inglis — Chairman and Chief Government Officer

OK. Why do not — we let Neal take the second query first, after which I’ll come again to the Tortue part two timing.

Neal Shah — Chief Monetary Officer

Sure. Nick, so simply in your query, sure, most of it’s only a perform of the place we’re within the oil value now. So once more, I believe what we have mentioned for which remains to be correct on hedge base, it is a $5 transfer is round $100 million change in an annual type of free money circulation sense. And so what is the steering we gave is round type of $50 million for ’22.

Principally, 55% of our manufacturing, like I mentioned, is hedged. And due to this fact, that type of caps half of the upside. And once more, the common ceiling on our hedge is round 80%. So we’re proper round that pinpoint.

So it is possibly a bit of greater than that from 75% to 80% after which a bit of decrease than that from — simply given the staggering type of ceilings that we’ve via the hedge ebook.

Nick Stefanou — Renaissance Capital — Analyst

OK. Obtained it. So it is simply linear for the place we at the moment are by – with very a lot decrease costs should not anymore?

Neal Shah — Chief Monetary Officer

Right, sure. Sure.

Andy Inglis — Chairman and Chief Government Officer

After which on part two, Nick. It type of goes again to Charles’ level. I believe that we’ll begin to incorporate capex for part two from type of midyear, which would be the type of the charge spending that is included in our present price range. I would not anticipate any important spend on part two to begin till 2023.

And due to this fact, the overlap with part one is sort of precise, not fairly, however nearly precise, sure. I believe the second factor that, that I believe it is vital to acknowledge that we predict there’s actual alternative to drive down the upstream prices for the challenge considerably. And due to this fact, the online outlay to Kosmos is getting much less and fewer. So I believe I be ok with the power to truly self-fund it and having fun with, if any, may be very small.

So we’re nicely positioned right here. I believe we have a follow-on challenge, which is absolutely exemplary. It would absolutely make the most of all the built-in infrastructure we’ve from part one. Subsequently, the capital prices are coming down, and we’re discovering these financial savings as we converse.

So I believe the overlap between part one and part two goes to be comparatively small.

Nick Stefanou — Renaissance Capital — Analyst

OK. Honest sufficient. And my different query is on that G13 discovery you made in Equatorial Guinea a couple of years again. So final 12 months it was extra in regards to the fleet drilling of these wells which did ship outcomes.

So I used to be anticipating this 12 months to be form of like a recent emblem was going to be in EG. And it would not appear to be — there would not appear to be a lot exercise or should form of like speak about discovery anymore. So simply questioning how you concentrate on it? And what are the subsequent steps for EG?

Neal Shah — Chief Monetary Officer

Sure. Nick, I am completely happy to take that. I believe the place some type of our S5 sits is in the end continues to take a seat within the appraisal camp. We do have further plans for drilling in EG.

And the query for us is how can we maximize the worth of the present found useful resource that we’ve throughout the portfolio. So clearly, we’ve alternatives in Mauritania and Senegal. Ghana, EG, and the Gulf of Mexico that we’re transferring ahead. We will not transfer all of them collectively — on the similar time.

And so we’re spacing out the event initiatives. And if we will discover extra useful resource in EG, which we talked about doubtlessly a 23 further drilling marketing campaign, we may make a brand new growth extra engaging from a risk-reward foundation going ahead after which could be ready to allocate extra capital to it. So I believe that is form of — sure, it is there, we’ll proceed to maneuver it ahead, however we might wish to proceed to derisk it and make the economics higher.

Nick Stefanou — Renaissance Capital — Analyst

OK. Glorious. Thanks.

Operator

Our subsequent query comes from the road of Mark Wilson with Jefferies. Chances are you’ll proceed along with your query.

Mark Wilson — Jefferies — Analyst

Thanks. Good morning. Good afternoon, gents. First query is on the 100,000 barrel a day goal for 2024.

Simply to get a few of the greater transferring elements in that. I hope to say that expectation that TEN may double from right here. It feels like one in every of them and the opposite could be that Jubilee is over 100,000. Would these be these primary transferring elements? And likewise, would you anticipate each GoM and Equatorial Guinea to be greater than they’ve produced up to now 12 months?

Andy Inglis — Chairman and Chief Government Officer

Mark, it is Andy. I am going to take that. So if you concentrate on the buildup from the place we’re right now to 100,000 barrels a day. Clearly, in ’24, Tortue is on stream internet on a BOE equal.

That is about 18,000 barrels of oil equal per day. So — after which the subsequent increment is Jubilee. We’re speaking about rising that to 100,000 barrels a day with the — at our present working curiosity, that provides a further 8,000 barrels a day. After which Winterfell internet would add about 4,000.

So for those who type of do the short math on that, you type of get to the 100,000. Underlying that, you then bought further contribution from TEN. We have now a decrease working curiosity. And you’ve got the Gulf of Mexico.

And you’ve got Equatorial Guinea benefiting from an infill program in ’23. So I believe for those who take these contributions towards the underlying decline and you may see your solution to a wholesome 100,000 barrels a day. So the massive contributors is I’d say is Tortue. The expansion in Jubilee and TEN, Jubilee being essentially the most important half, the addition of Winterfell after which the underlying exercise units in Equatorial Guinea.

Mark Wilson — Jefferies — Analyst

Obtained it. OK. After which additionally, you gave steering towards the place the $700 million guided for this 12 months, how that tapers down towards ’24? However simply fascinated by subsequent 12 months with Jubilee Southeast with Winterfell, I suppose, theoretically, in there. However earlier than we get to Tortue part two and post-Tortue part one, we might anticipate to come back down into ’23 total?

Andy Inglis — Chairman and Chief Government Officer

Nicely, clearly I’m not giving any steering but, so it is a bit of early. However I believe you’ve got talked in regards to the transferring elements, OK? So there is a transferring half in Tortue part one, the place we’re transferring from the type of ’22 is an enormous 12 months of spend. We bought the fabrication actions happening. We are going to transfer to a distinct part in ’23.

So clearly quite a bit, we’ve that coming down, sure. We have now the sustaining spending in Jubilee Southeast. We have now a further spend in Winterfell. So I believe we’re type of — we’re on a glide path which type of once we’ve proven ’22 and ’24 is the prospect, however on a glide path of lowering capex, we’re on a glide path of accelerating manufacturing, which in the end will create incremental free money circulation progress in ’23 over ’22 after which a progress in ’24 over ’23.

So I believe I be ok with the form we’re constructing now going ahead. ’22 will probably be a full 12 months of supply adopted by ’23 and ’24. However we’re clear in regards to the issues that we have to do. And as Neal mentioned, we’re being very acutely aware in regards to the capital inputs.

Identical is about guaranteeing that we do not put capital into issues which we predict you are going to make a cloth distinction on the — we have to make certain that we’re placing the capital into the very best high quality alternatives. That was a transparent with Tortue part one and two with Winterfell and the Jubilee Southeast. So we’re very clear in regards to the exercise set. We’re clear in regards to the capital and the contribution that it’ll make in rising money circulation via ’23 and into ’24.

Mark Wilson — Jefferies — Analyst

Obtained it. OK. That is very useful. And only one final one, if I could.

The Shell exploration funds, what are the steps and certification hurdles to be accomplished from right here to get any cash in from that? What could be — what ought to we be on the lookout for?

Andy Inglis — Chairman and Chief Government Officer

Sure. Nicely, look, once more, Mark, what we perceive that Shell had a profitable preliminary nicely. I believe what’s attention-grabbing is that they determined to go and drill a nicely and again to again and have a second nicely ongoing as we converse. And I believe that we’d see that as a constructive signal.

By way of the steps ahead, the cost comes after they submit an appraisal plan. So the present nicely, I believe, will — was in all probability a few months away from a consequence appraisal plan after which we get to a cost. So these are the steps. I believe they clearly selected to not submit an appraisal plan at this stage as a result of it could have slowed down the power to maneuver forward to drill the subsequent nicely again to again.

Mark Wilson — Jefferies — Analyst

OK. Thanks. I’ll flip it over.

Andy Inglis — Chairman and Chief Government Officer

Nice. Thanks, Mark.

Operator

Our subsequent query comes from the road of Matthew Smith with Financial institution of America. Chances are you’ll now proceed along with your query.

Matthew Smith — Financial institution of America Merrill Lynch — Analyst

Sure. Hello there. Thanks very a lot. I simply needed to ask across the future alternatives in Mauritania and Senegal.

So I imply, fairly rightly, we’re nonetheless type of speaking in regards to the long-term potential of BirAllah and Yakaar-Teranga. I simply questioned whether or not equally, the optionality for a part three or an additional enlargement of the Tortue challenge remains to be on the playing cards because the potential subsequent step somewhat than going into one of many different two initiatives? After which linked to that, simply on BirAllah and Yakaar-Teranga, I simply needed to ask whether or not you thought there could be any potential or any urge for food so that you can down curiosity in these initiatives at this early stage? Or wouldn’t it be honest to imagine that, that worth crystallization level could be nearer to a growth idea?

Andy Inglis — Chairman and Chief Government Officer

Sure. Thanks, Matt. Sure, good questions. I believe that our deal with Tortue in the intervening time is to type of maximize the worth from the infrastructure that we have laid in.

And I believe as we have mentioned on prior calls, hitting the 5 million tonnes is type of absolutely makes use of all of the laid in infrastructure when it comes to the total capability of the FPSO, the pipeline situation, and so forth. So I believe the main focus is to — I believe the main focus is, due to this fact, to make sure that we get that, we get it underway. And I believe when that has been achieved and we’ve some manufacturing historical past from the reservoir — we’ll be in a greater place, I believe, to totally describe what part three would appear like, sure. So I believe that it is completely stays an goal to extend past the 5 million tonnes.

However I believe we’ve some work to do and a few manufacturing historical past to Ghana earlier than ready to make that subsequent step. And I believe being disciplined across the capital that we put into that’s essential. Then I believe it is about how can we progress the opposite given useful resource, which is critical. The BirAllah and Yakaar-Teranga developments are completely different.

However BirAllah, there is not as massive a necessity for home fuel in Mauritania. There is not even different as massive as there may be in Senegal, however that in the end could be an export challenge. We’re working exhausting now with BP to outline a growth idea. And once more, as we mentioned in one of many prior questions, it has to type of compete towards gaps from the U.S., however there’s a rising want for it in Europe and the way can we put collectively a part scheme that allows us to start out in the correct means.

So it is low-cost advantages of being low carbon CO2. So I believe that is the aim of Mauritania for BirAllah, to extend their publicity, I believe, to the European market. Really, it is good for consumers that you just’re shopping for it from a diversified supply. It is a completely different manufacturing facility.

Subsequently, it has a extra — it turns into a extra diversified supply of fuel, sure. So I believe there is a good rationale for that in parallel with or doubtlessly forward of a part three. Whenever you take a look at Yakaar-Teranga in a different way. Finally, Yakaar-Teranga will probably be a part of Senegal’s home fuel progress.

It’s about — ultimately they pursue their very own vitality transition targets transferring to a lower-carbon world, they will combine renewables with fuel. In order that product is pushed by that point line. So it has a distinct objective and due to this fact it could be a really — we’ve a really completely different objective in Senegal because it have been from the enlargement of Tortue. So I believe these — that is the best way to see it.

I believe there are completely different position that every of the initiatives can play. And we have to be very clear about guaranteeing that we allocate the capital in a really disciplined means once more these targets and transfer initiatives ahead on the proper tempo. However I believe that our goal in the intervening time is to make sure that we completely maximize returns from Tortue. After which I believe with confidence in that and the manufacturing historical past from that, sure, there will probably be one other part.

However I consider that the Yakaar-Teranga and BirAllah will serve in parallel a distinct funding alternative.

Matthew Smith — Financial institution of America Merrill Lynch — Analyst

Excellent. Thanks, Andy. After which one ultimate query, if I may, would simply be on the Shell type of continued consideration, clearly capped to $100 million. May I simply make clear the way you would possibly get to that $100 million in 2022? So presumably, we’re hoping for $50 million in possibly, If that is proper after which the place the chance would possibly come for the residual and to hit that cap?

Andy Inglis — Chairman and Chief Government Officer

Sure, there are — the drilling plans we consider for Shell will probably be when the rig finishes in midyear. We then transfer to Sao Tome the place it could drill the jack-up nicely, so that may be the subsequent nicely in this system. After which past that, there are the wells in Suriname. So I believe that Shell had been very clear about their intent to get on with their exploration program.

And so I believe we’ll see these wells being progressed after the second Namibia one.

Matthew Smith — Financial institution of America Merrill Lynch — Analyst

OK. Thanks very a lot.

Operator

Our subsequent query comes from the road of James Hosie with Barclays. Chances are you’ll proceed along with your query.

James Hosie — Barclays — Analyst

Hello. Thanks. I’ve a few questions. Simply firstly, does the 2024 manufacturing free money circulation outlook on Slide 5, does that incorporate the influence of the Ghana pre-emption course of that we presumably have accomplished by then? After which simply Mauritania and Senegal.

Simply questioning if the work program you’ve got now bought for BirAllah and Yakaar-Teranga is that supposed to get the property to a degree the place you might take a look at monetizing them? And what kind of market do you see for these property right now?

Andy Inglis — Chairman and Chief Government Officer

Neal will do the primary one, James, I am going to simply come again to the identical.

Neal Shah — Chief Monetary Officer

Sure. So simply all of the numbers within the presentation and all of our steering would not embody pre-emption. And like we mentioned, pre-emption has a few 5,000 barrel a day influence. Now clearly, we mentioned it is higher than 100,000 barrels a day.

So there’s some flexibility round that. However it does — the whole lot all through the presentation does embody the influence of pre-emption.

Andy Inglis — Chairman and Chief Government Officer

OK. After which simply on the identical query. Look, I believe the world is — the world of LNG continues to evolve. I believe as an organization, we have been sturdy on the underlying demand for LNG.

And I believe that image stays unchanged. I believe what’s type of altering is that the provision challenges for brand new initiatives to set ahead to satisfy that, that demand. I believe there are numerous forecasts on the market of brief hauls by the tip of this decade. So I believe there’s going to be actual alternative to maneuver initiatives ahead which have the correct traits, not similar to, I maintain repeating myself, however it needs to be low price, it needs to be low carbon fuel in order that it would not have the disbenefit of CO2 to with it.

And it has to deal with the market shortfalls in a geographic sense which might be rising. So I believe we — our technique type of stays unchanged. We see actual worth within the undeveloped useful resource in Mauritania and Senegal, the place we’re excited in regards to the optionality {that a} part two of Tortue brings as a result of not solely is it low price leveraging from the prior funding in part one however we consider we will get higher entry to the worth upside as a result of the fuel is uncontracted. And that is the place we’d wish to go as an example, with BirAllah the place we’d be bringing that fuel to market, and I believe we’ve the power to learn from the optionality that the market would convey.

So in the end, would that present a possibility to monetize? It could. However I believe what we’ve to do is reveal first the worth within the property. And I believe we’re doing that nicely. We’ll speak to you part one.

We’re doing it nicely with part two, and we have to do it with BirAllah. So I believe the work that we’ll undertake this 12 months will probably be an vital a part of that. And I believe that the backdrop — the macro backdrop LNG is just supporting the inherent worth of these property.

James Hosie — Barclays — Analyst

Nice. Thanks.

Andy Inglis — Chairman and Chief Government Officer

Nice. Thanks.

Operator

Our subsequent query comes from the road of James Carmichael with Berenberg. Chances are you’ll now proceed along with your query.

James Carmichael — Berenberg Financial institution — Analyst

Hello. Thanks, guys. Simply a few fast ones. I suppose simply urgent on Winterfell.

Within the launch, it says focusing on a decrease carbon growth that we develop. So simply type of questioning what that actually means decrease than what, I suppose? And the way are you going to look to realize that via the event? After which only a fast second one, apologies if I missed this earlier. And I respect it is tough to be exact, however is there something which you can or have mentioned on the timing of probably timing of pre-emption. Thanks.

Andy Inglis — Chairman and Chief Government Officer

Sure. I am going to do the pre-emption first, James. Step one within the course of was to agree all of the transaction paperwork we work very intently with them since they introduced that we’ll pre-empt. That documentation is now full and will probably be submitted shortly to GNPC and the Authorities of Ghana for his or her approval.

So the timing will due to this fact rely upon that course of. However when it comes to ourselves and Tullow, I believe we’re — we have made a variety of progress and the pipe work is completed and will probably be submitted shortly. On Winterfell, I believe the purpose we’re making is just the Gulf of Mexico, as , has a really low carbon depth for its oil manufacturing. Why? As a result of the reservoirs are usually pushed by pure aquifers, so they do not have an enormous quantity of water injection.

And secondly, fuel is pipe for positive. The third factor, in fact, is that you just’re utilizing the present facility. So your incremental use of vitality on these amenities to convey on board a tieback is low. So Winterfell will probably be a buyback.

We’ll begin with a two-well growth. There’s current infrastructure across the area. And due to this fact, the mixture of pure aquifer derived, no flaring, and using current amenities the place the incremental vitality demand, all of these meant for a decrease carbon oil challenge. And that is why one of many issues the place I consider is the Gulf of Mexico has a job to play is that it has the infrastructure in place that allows you to develop at a decrease carbon quotient.

In order that’s the outline of Winterfell and whereas we really feel it is an vital a part of our portfolio going ahead.

James Carmichael — Berenberg Financial institution — Analyst

Nice. Understood. Thanks.

Andy Inglis — Chairman and Chief Government Officer

Thanks, James.

Operator

[Operator signoff]

Period: 66 minutes

Name contributors:

Jamie Buckland — Vice President, Investor Relations

Andy Inglis — Chairman and Chief Government Officer

Neal Shah — Chief Monetary Officer

Charles Meade — Johnson Rice — Analyst

Neil Mehta — Goldman Sachs — Analyst

Nick Stefanou — Renaissance Capital — Analyst

Mark Wilson — Jefferies — Analyst

Matthew Smith — Financial institution of America Merrill Lynch — Analyst

James Hosie — Barclays — Analyst

James Carmichael — Berenberg Financial institution — Analyst

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