KOS - NYSE

Ladies and gentlemen, good morning, and welcome to the Kosmos Energy First Quarter 2024 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jamie Buckland, VP Investor Relations.

Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our first quarter 2024 earnings release. This release and the slide presentation to accompany today's call are available on the Investors page of our website. Joining me on the call today to go through the materials are Andy Inglis, Chairman and CEO; and Neal Shah, CFO. During today's presentation, we will make forward-looking statements that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to factors we note in the presentation and in our U.K. and SEC filings. Please refer to our annual report, property exchange announcement and SEC filings for more details. These documents are available on our website. And at this time, I'll turn the call over to Andy.

Thanks, Jamie, and good morning and afternoon to everyone. Thank you for joining us today for our first quarter results call. It's been an active start to the year for Kosmos, and I'll start today's presentation looking at the operational and financial momentum we built in the first few months of the year. Neal will then walk you through this quarter's financial results before I look ahead to the catalysts for the remainder of the year. We'll then open up the call for Q&A. Starting on Slide 3 with the delivery of our major projects. Kosmos had a strong first quarter with significant progress towards our goal of growing production by around 50% from the second half of 2022 to the end of 2024. In Ghana, all the planned 2024 Jubilee production wells are online with 1 water injection well expected online later this quarter. Following completion of this well, the planned drilling campaign will conclude approximately 6 months ahead of schedule as a result of efficiencies in the drilling operations. In the Gulf of Mexico, oil production at Winterfell is expected to begin shortly from the initial 2 wells. The third well is due to come online later this year, increasing expected gross production to around 20,000 barrels of oil per day. In Mauritania and Senegal, the Tortue project continues to move towards first gas with several key milestones achieved already this year. I'll talk more about our progress on these projects later in the presentation. Looking further ahead, we continue to advance our next phase of growth projects. Long lead items are being secured for Tiberius to optimize the development time line and project costs. We have also secured a 2-year license extension for Yakaar Teranga. While we see continued growth as an important part of the company's future, as I said last quarter, it will be selective and more measured in the coming years, consistent with sustained annual CapEx of around $550 million per year that is targeted from 2025 onwards. On the financial side of the business, we enhanced the company's financial resilience with the convertible bond issuance and the RBL refinancing. Neal will talk about these in more detail shortly. The transactions improved liquidity and extended our near-term maturities. The free cash flow inflection point we've been anticipating of around $100 million to $150 million per quarter once our development projects come online is now only a few months away. I'll now talk through the operational progress across our different business units, starting in Ghana on Slide 4. Jubilee production in the first quarter was around 93,000 barrels of oil per day gross, almost 30% higher than the first quarter last year. This reflects the progress made from both the start-up of the Jubilee Southeast project and the ongoing infill drilling program. Jubilee FPSO reliability continues to remain high at approximately 99% uptime for the first quarter. Fortis replacement was also strong in the quarter, around 110% as a result of high levels of water and gas injection. Gross Jubilee gas sales for the quarter was around 16,500 barrels of oil equivalent per day. Recently, the partnership agreed an 18-month extension to the Jubilee gas sales agreement at approximately $3 per MMBtu. In the second quarter, there is some planned maintenance of the onshore plant, which receives the Jubilee gas, and this is reflected in the 2Q guidance. On TEN, gross production of 18,600 barrels of oil per day was in line with expectations with high FPSO uptime of around 99%, similar to Jubilee. Turning to Slide 5. Production in the Gulf of Mexico for the quarter was approximately 14,500 barrels of oil equivalent per day net in line with guidance. At Winter fall, where Kosmos has a 25% working interest. First oil from the 2 initial wells is expected shortly with another well expected online in the second half of the year. Gross production when all 3 wells are online is expected to be around 20,000 barrels of oil equivalent per day. We estimate total gross resource across greater interval of up to 200 million barrels of oil equivalent, providing significant future follow-on potential. To enhance existing production, we continue to invest selectively in high-return projects like the job subsea pump and Cody workover, both expected to finish around the middle of the year. The combined uplift from both these projects is expected to contribute around 5,000 barrels of oil equivalent per day net to Kosmos year-end exit rate. The tornado field is expected to be offline for most of the second quarter for scheduled routine maintenance of the HP1 floating production unit, which has been factored into our guidance for the quarter. On Tiberius, where Kosmos is operator, we acquired part of Equinor's interest during the first quarter to maintain an aligned partnership. We now hold a 50% interest in the project, which is already included in our 2024 capital guidance. Despite development as subsea tieback to Oxy's nearby Lucius platform is progressing the project sanction expected later in the year. Certain long lead items are being secured to optimize the development time line and project costs. Around the time of project sanction, Kosmos plans to farm down to optimize our working interest to fit within our targeted capital program for 2025 and beyond. Please turn to Slide 6. Production in Equatorial Guinea averaged approximately 24,400 barrels of oil per day gross and 8,400 net in the first quarter. Kosmos lifted one cargo for actual Guinea during the quarter, in line with guidance. In early February, as previously communicated, the operator paused the Sabre and the cume drilling campaign as a result of safety issues with the previous rig. The partnership has now secured the Noble Venture to resume the drilling campaign with a rig expected on location mid-year. The rig is scheduled to drill and complete 2 infill wells in Block G before moving through the King Deep ILX prospect in Block Hess. The new infill wells are expected to add around 3,000 barrels of oil per day net to Kosmos year-end exit rate. The result of the King Deep well, which is targeting gross resource of around 118 million barrels is expected around the end of the year. Turning to Slide 7. The Greater Tortue Acme project continues to move towards first gas with significant progress across all work streams so far this year with first gas expected in the third quarter and first LNG expected in the fourth quarter. The floating LNG as arrived in the first quarter has been more to the hub terminal. The partnership is now working with the vessel operator to accelerate commissioning. The subsea work is progressing in line with expectations with the flowline installation complete and final connection work ongoing. Inspection and repair of the FPSO failed is now complete and the vessel has left tenereef in his own roots to the project site with marring work to commence thereafter. Book of a commissioning of the FPSO remains on the critical path to first gas, which is expected in the first quarter. I'll now turn it over to Neal to take you through the financials.

Thanks, Andy. Turning to Slide 8, which looks at the first quarter. Production in the quarter of approximately 66,700 barrels of oil equivalent per day net was an increase of around 13% compared to the same quarter last year. Costs for the quarter were within or slightly better than guidance, leading to the earnings beat against consensus. CapEx for the first quarter was $286 million, which was in line with guidance and is largely made up of the Ghana drilling campaign and the progress made on both Winterfell and on Tortue. As previously communicated, we expect the majority of this year's CapEx to be in the first half of this year, with the free cash flow inflection that Andy talked about in his opening slide, expected as the development projects complete and production ramps up throughout the end of the year. Turning to Slide 9, which looks at our debt maturities. We took 2 important steps this year to further enhance the financial resilience of the company. The first was the convertible bond issuance in March, which proactively replaces the liquidity from the $250 million undrawn RCF is due to expire at the end of this year. The convertible also lowered our overall interest expense as we paid down a portion of our RBL with the available proceeds, which is our highest cost debt. We've also seen the yields on our high-yield bonds tighten, which should help pricing when we come to think about potentially refinancing those in the future. To limit future equity dilution, we purchased a capped call, which means there will be no dilution until the shares get to almost $11 per share. We also took the option to cash settle the principal amount raised, which also reduces any future dilution. The second important step was the refinancing of our reserve-based lending facility with the terms broadly in line with the previous facility. The overall facility size increased to $1.35 billion from $1.25 billion with current commitments of around $1.2 billion. Through the refinancing, we have extended the final maturity by approximately 3 years. At the same time, we have had some of our banks transfer their commitment to the RBL from the RCF, which as I mentioned, expires at the end of this year. I'd like to thank our banks for their continued support as we continue to grow the company. The chart on the right shows the impact of both the convertible bond issuance and the RBL refinancing on the maturity schedule. We now have no near-term debt and the staggered maturity schedule from 2026 onwards. As we reach the expected free cash flow inflection point, we plan to continue to prioritize paying down the RBL, reducing the amounts in the dark blue on the chart on the right. We continue to target leverage below 1.5x at mid-cycle oil prices with deleveraging expected to commence once revenues from Tortue start up later in the year. With that, I'll hand it back to Andy to conclude today's presentation.

Turning now to Slide 10, as I said in my opening remarks, it was a busy first quarter, and we have achieved a lot in just 3 months. The operational financial momentum we built has rolled in the same quarter with several milestones already achieved and more to come in the near future. The graphic on the slide shows a rich portfolio of catalysts throughout the year across all our business units. They contribute towards our goal for year-end exit rate of 90,000 barrels of oil equivalent per day and a free cash flow inflection point. Combined, we believe these will create significant value for our shareholders. Thank you. And I'd now like to turn the call over to the operator to open the session for questions.

Ladies and gentlemen, we will now be conducting a question-and-answer session.[Operator Instructions] Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from the line of David Round with Stifel.

Two questions from me, please. Firstly, can I just ask about Senegal, please? And whether the following the recent elections there, you've seen any impact at all to business activities in country. There's been quite a lot in the press. So I'd appreciate any comments there, please. Secondly, just on Equatorial Guinea, obviously, good to see activity there again. That's obviously been a great asset. From memory, there was quite a big in-place number there with a relatively modest recovery factor so far. I'm just wondering, could that become a bigger area of activity going forward once you see CapEx elsewhere drop off?

Yes, David. Yes, thanks for both of those. I'll pick them up. I think turning to Senegal first. I think the starting point is really is that all actions in our host countries are not new for Kosmos, and ethos is to align with the countries and their needs, irrespective of changes of government. I think in Senegal, our approach is no different where we're enabling the development of low-cost gas to sustainably grow the Senegalese economy and drive social progress for the country. So there's a high degree of alignment between what we're doing and the new government's objectives, which are clear, they want to lower the cost of living for this population and improve the economic environment. I think it's early days for the new administration. There are many officials still to be appointed. But my team and Senegal have met with the new Energy and Mining Minister. And I'm pleased to say it was a very constructive dialogue. The conversation is centered around actually how can we accelerate the development of the gas resources to accelerate the benefits to the country. So in terms of the day to day, our business Senegal is unchanged. We're working to bring Phase 1 online later this year, move forward with a capital-efficient Phase II, the expansion of Phase 1 that will enhance the revenues to the states and the partners and then move forward with a domestic gas LNG export scheme at YT all of which will bring economic and social benefits for the country. So I do think there's a real basis for a win-win. And I'm pleased to say that we're actually in a constructive dialogue as to how we shape that agenda. On Equitorial Guinea, I think you're correct to say that there's actually a lot of undeveloped resource. And -- when we initially took over the asset, it was about enhancing the production from essentially sort of workover activities. If you remember, I think it was -- we talked about it being gas lift constrained. So we actually moved to ESPs, and we've seen the benefit of that activity. We're now moving, I think, into a different phase, which is about infill drilling, which is this -- the current campaign, as you rightly say, we're targeting an infill well in Sabre and one in a cume. And then actually, we're following it up with the King Deep, which is a deeper test of the Albian. And clearly, if that comes in, we've got a significant amount of knowledge in the in the facilities to bring that on and then the very short tieback distances. So I think we've got sort of 2 avenues. And what we would see for SEBRA and cume is an intermittent infill drilling campaign, 2 or 3 wells every sort of 18 months, something like that, where I think you can certainly sustain the production profile. All of that CapEx is in the forward forecast of maintenance of the base. And then with a king deep, I think you've got the ability to actually grow the profile. So I think we've got a clear plan about sustaining the profile in Equitorial Guinea through that infill drilling with, I think, still some sort of workover-type activities, growth coming if you have success at a King deep. So I think it's been a really good acquisition. I think we've worked really well to go through a very programmatic program to target the quick wins, which were really around sort of the work over activities. And now we're moving into a more phased approach with infill. But there's plenty to go out here and clearly having the capacity in the facilities enables us to move it forward quickly.

Our next question is from the line of Charles Meade with Johnson Rice.

Good morning, Andy and Neal and to the rest of the Kosmos team there. Andy, I'm sure you're probably more excited than we are to see that FPSO underway. And so congratulations for that. But I wonder if you can take us through just the highlights or what the next pie pieces of the puzzle or milestones are to get to first gas. I imagine that some pieces would be giving the FPSO more hooking with the risers, introducing the gas to FLNG and then going through the whole FLNG cool down, but maybe you can elaborate that or add pieces to it that we should be on the lookout for?

I love questions whether you've already answered the question.

Sorry about that.

It's -- no, I think you've got it, I think. Clearly, I think we've had a lot of progress in the -- in this sort of first 4 months of the -- we've got the FLNG vessel now at the hub terminal, it's more than the -- and the connection work is ongoing. The last piece of equipment or it with FPSO, as you said, it will be on location in a matter of a few days. The next step then is the -- is mooring. And while some morning is done, we start to work on the top signs in terms of the commissioning work. The hook up of the risers is clearly the step that enables gas to be introduced. And then it's a question of the gas, as you say, coming into the FLNG vessel, you start the Kogan process, and then you start to make FLNG, first cargo, et cetera. So I think the -- if you look through that process, you described it really well. Where are we? With the subsea equipment, all the major pieces are there. They're now doing the final tie-ins and that work is proceeding as we envisage. So we're pleased with the progress there. The FPSO work, the hookup and commissioning of the FPSO remains on the critical path. But clearly, getting the vessel on location has enabled us to start to liquidate that activity. So I think we're on track to do what we said we were going to do, and the milestones have been achieved so far this year. So getting the FPSO on location is clearly an important step and we'll update you the next quarter as we get that work behind us. And hopefully, with the completion of the riser hookup and then the -- which will then allow us to start flowing gas.

Got it. And then the follow-up, I wonder if you could add some detailed context around the BirAllah exploration. And I'm wondering if this is kind of along the lines of how Yakaar Teranga played out in that BP maybe didn't want to be involved, but you guys are still -- you guys still have some plans. I mean you just tell us what's going...

No, good question, Charles. And I think that again, if you sort of step back, it's worth sort of repeating that both YT and BirAllah will scale discover gas resources, sort of in-place numbers, I think of it, 25 Tcf, BirAllah probably around 30 Tcf. And we believe it is advantaged gas. It has negligible CO2, and it's close to Europe. So with BP no longer on either license, we can now work independently with the NOCs of both countries on innovative cost-efficient schemes that BP didn't propose, but we believe will lead to attractive returns for both the project partners and the governments. We've secured the license on Y2. We've secured the extension to allow us to proceed with that work. And we're in discussions with the Mauritanian government around how we can help them progress the development of BirAllah. They're keen to move it forward. And we believe we have both the subsurface knowledge and the concepts that will enable it to be an attractive project. So I think that's where we are, and there's been a lot of third-party interest in the assets as well. So we believe that actually working both with PETROSEN and YT, SMH and BirAllah. We're trying to create an equal partnership where they're properly represented, which we believe is actually a good thing clearly for both governments -- and we're working with them to find ways to bring in a partner that will enable the development to move forward. So I think you characterized it correctly, and we're energized to work on that agenda.

Our next question is from the line of Bob Brackett with Bernstein Research.

Charles stole most of my thunder. So let me try to follow up. The Tortue FPSO, so that vessel has been expected by the operator by you all pass muster. And so it is ready to go.

Yes. As with all things, Bob, I think we're the curse of having to do the work on the fair leads is a blessing that it does allow us to -- we had additional sort of 3 months in 10 close to 3 months in January to further progress the top size work. So I think we understand the scope very well. And I think you're right to sort of push the question around FPSOs a sale in the past with a lot of work to execute. So I think we've got a good understanding of what the work scope is clearly and therefore, clear plans on how to execute that work scope. So I feel good about that. Nothing's done until it's done. But clearly, we do have, I think, the advantage of having extra time to work on the top side as a result of the time on the fair leads.

The follow-up comes back to BirAllah. The PSC had been extended for 2 years. You and the government and BP have been working in good faith to kind of push that project along. The clock ran out. How do we think about whether you are the natural owner of a partnership that brings that asset to market? Or does this go to a competitive bid where you're in line with one of many? And I'm intrigued by what you think the concept could be for a fast track development there.

Yes. No. Yes. Interesting, Bob. I think that the government is actually trying to find a way of moving the project forward in a constructive way. And what do I mean by that Yes, clearly, they could go out to the open market with bids, et cetera. Clearly, the the negative of that is that it creates an uncertain partnership. You're bringing potentially somebody new that doesn't have the subsurface knowledge that we have. We believe that there is a genuine desire to try and work with existing partners who have the knowledge. We've probably -- we bring the knowledge of 2 wells in BirAllah. -- one of Mastodon on Orca. We bring the knowledge of all the appraisal wells on GCA and the development wells on GTA and then the calibration of the seismic against that data set. So the significant knowledge, I believe, that we bring. In terms of the development concept, it's really about how do you get cost efficient in terms of the subsea layout. And ultimately, that's where we've seen the big cost increases in the industry is in the subsea. So minimizing that architecture, you minimize it actually by putting the FLNG vessel directly over the field. That has the additional benefit of lowering the pressure drops, which gives you enhanced recovery. So those -- without going into the engineering in too much detail, Bob, those are the ways in which you can change the cost basis of the development. And those are the concepts are working on in YT, and those are the concepts we're bringing to BirAllah.

Our next question is from Matthew Smith with Bank of America.

A couple, please. The first one was just -- and apologies if I missed some of the commentary around this at the start of the call, but any additional color you could give us on the performance of in Ghana, I guess, at Jubilee in particular, in the quarter? Just how that fared versus your own expectations, what confidence that gives you in the full year outlook? I suppose you had an additional oil producer online in April, if you could sort of talk to that at all and sort of exit rates what you've seen post the quarter? Just to sort of frame how Ghana started the year off and the confidence that gives you for the rest of the year, that would be interesting to hear. Yes, perhaps I'll leave there and come back to the second.

I think sort of updating you. So if you look across March and April, I think we averaged around 95,000 barrels of oil per day. So as you say, we brought on the -- recently just brought on the final producer, and we're optimizing its setup in the subsea to maximize the benefits from that. And then finally, we've got the final water injection, which is currently being drilled. And then actually, we're going to start the completion of that shortly. So I think it's early days. So as you look forward to the performance of the field over the remaining part of the year, I think there were sort of 3 fundamental things we're focusing on. The first is the contribution of the recently added wells to the ramp-up in rate. The second is we have really good reliability in the first quarter, I think close to 99% on the Jubilee FPS. So clearly, we need to maintain that high level of reliability going forward. And then I think the third one is really the most important point is around maintaining the high levels of voidage replacement. That was a challenge last year where we had downtime and didn't get to 100%. Now we sort of worked pretty good in the first quarter. We need to sort of maintain that going forward. We have had a GTG down, I think, for a couple of weeks. So we've probably been slightly under the 110% in the last month. But that's a critical factor. So I think it's -- those are the things we're focusing on. And therefore, those are the things that are going to influence the outcome across the rest of the year. All that said, the drilling has actually gone well. We've really drilled -- the operators done a great job on the drilling performance and the wells and the timing of the wells has absolutely met our expectations. And when the final water injection is done, I think, over this program, we probably created probably close to 6 months of reduction in the overall program, which is pretty impressive. So that's sort of where we stand today, Matt.

And perhaps a second one, perhaps would be for Neal. I imagine just coming back to the free cash flow sort of indication that you've given us $100 million to $150 million per quarter once the growth projects are online. I think if I remember rightly, you talked to that sort of being underpinned broadly speaking, by a $70 WTI 75 Brent, please correct me if I'm mistaken there. But I just wondered if you could speak to sort of sensitivities and upside to those free cash flow numbers if we're in 80 or 85 Brent world.

Yes, sure, Matt. And yes, that's about right. In terms of the $100 million to $150 million of cash flow -- free cash per quarter post getting Winterfell and Tortue online at a quarterly pace. -- in that sort of $75 Brent, $70 TI sort of realm. And yes, I think in terms of the price sensitivity, generally, it will stay roughly the same. It's about $100 million of free cash flow for the year for every $5 change in the oil price. And so $25 million plus or minus a quarter, if you move to $80 Brent and the $200 million for the year, $50-$50 million a quarter, $85 million rent. So it is -- yes, and we currently have sort of full access to the upside. So we can fully participate in that. It. Well, that's very clear.

Our next question is from the line of Mark Wilson with Jefferies.

My question is regarding the main drivers of production increase into the second half with your reiterated group guidance $71.72 we know that Tortue comes on first LNG in the fourth quarter. Can I just check if that is how you then start to report the gas from Tortue? Or is it in the third quarter as it comes across the FPSO? That would be my first question.

Yes. So Mark, we quote on an entitlement basis similar to how we report for just the quarterly production. But in terms of sales, it will be done similar to how we do it in Ghana and EG where it's driven by cargoes. And so overall entitlement production will be driven by basically LNG that goes into the FLNG vessel and condensate that goes into the FPSO as a sort of entitlement volumes. But for sales volumes will ultimately be tied to cargoes the same way we are -- do use cargoes in Ghana in EG.

Got it. Okay. I understand that. Okay. So FPSO for in 3Q and then entitlement in 4Q. And my second question, I guess, another big driver for production would be Jubilee and you just spoke to it there, Andy, to some degree. So taking all those various points into account, do you still expect that field can average 100 for the rest of the year or even higher?

Yes, as I said, Mark, we're doing what we said we would do, which is to deliver that outcome. We need to see the incremental benefit of the infill wells. We've got the final 2 to finish and then optimize the system for the new well configuration and that's ongoing. So that's the first sort of variable that we need to get right. The second is clearly maintaining the reliability and a good start to the year, and we need to continue it. And then I think the fundamental part then is really around bodies replacement and the distribution of that water. Again, because we're changing the patterns of offtake because of the new wells coming in, the optimization of that pattern of the new sort of reservoir offtake pattern is critical. So I think there's lots to work on, Mark, to deliver that outcome. The first step is, in all of that is to get the wells drilled and online, and we've got sort of one more to go. So the it's -- there's work to do, clearly, and we'll keep you up-to-date on progress as we go through the quarter.

And last question for me. My understanding on the Yakaar Teranga is that working towards getting the pre-FEED out of the way and then that's when you'll be looking to see what -- where the market is for farm-outs. Is that a fair representation?

It is absolutely, Mark. So we've -- if you sort of talk about the future there, which is really what your question was about, I think that we've got a piece of work now where we're doing the -- we're completing the pre-FEED the pre-FEED done by the middle of the year. With the pre-FEED, we've got the technical validation of the concept. And then we've got a cost base to then discuss with the new administration. Clearly, this is about creating a new partnership for Yakaar Teranga. Our objective is for the Petrosen to being a line partner around 1/3, ourselves a third new partner, a third. So we have to work with the new government to bring that partner in. They're clearly going to have to stay in there. And we need to have a fiscal arrangement, which enables us to create the economics that support a low-cost gas and an LNG export scheme. Now with those 2 pieces in place, you can then work on the financing, the intent is to have the FLNG vessel finance. So there's a series of steps here. There's technical work to do to be done, which is sort of there's a milestone in pre-FEED. There's work to be done on alignment with the new administration around fiscals a new partner and then there's work to be done there for on financing. You bring all those 4 together, then you can start work on the real work, which is on feed, but we won't be starting feed until we've got those things done. So again, I think we've made a lot of progress so far on the pre-FEED -- and post the election, we can now start working on those next items.

That's really appreciated. Then it did occur to me in that answer that maybe the differences between Yakaar Teranga and BirAllah the respective governments would be interesting to comment on. It did look like BirAllah was moving faster towards a development concept arguably, when you last extended the PSC. And then Yakaar Teranga now has moved to this -- the set that you have now. So the respective differences would be interested to hear a comment on.

Yes. Look, I actually don't think there's a difference. Both governments are anxious to enable the development of their gas resources to benefit the country. And I think the Mauritanian government has been equally clear about its objective to move forward with BirAllah post the exit of BP. So I don't think there's any fundamental differences there, Mark. And therefore, it's about how can we participate to help them on those agendas and come up with compelling investment opportunities.

Our next question comes from the line of Neil Mehta with Goldman Sachs Asset Management.

There a couple of questions I have here. The first is just your perspective on deleveraging. As you get into that free cash flow inflection that Neal referred to and those are really big numbers. How do you think about reducing the debt on the balance sheet? What are the priorities? And how -- what's the target level? And how quickly can you get there?

I'll let the other Neal answer that.

Yes, I think our objective on leveraging hasn't changed. We want to get to less than 1.5x on a sustainable basis through the cycle. And so the free cash flow that we generate once the products are online are going to be allocated towards that and probably initially preferentially towards the RBL, just given its floating rate and sort of our highest cost interest piece at the moment. And so we've got some work to do on debt reduction, and that's been a clear priority for the free cash flow. And again, I think from our perspective, you'd see sort of the front end of that free cash flow clearly directed towards the RBL. And then once we get to less that 1.5x in a normalized oil price environment, then it comes around sort of the competing priorities in terms of some allocation towards debt repayment versus capital returns. So that's a discussion to have in the future. But as of today, we'll continue to focus on just getting to that less than 1.5x the normalized price first.

That makes sense, Neal. And then I want give you an opportunity to talk about the convertible bond issuance because it created a lot of volatility around the stock. But I think a lot of it was just to manage near-term interest expenses around floating rate debt. So just your perspective on why that -- why you thought that was the most cost-effective approach to financing? And how should we think about that over the long term?

Yes. And so again, we've had a number of discussions around the convertible on both debt and equity holders over the last couple of months since we executed that back in March. And again, I think for us, it's around where our current bonds are trading and how do we optimize access to the debt capital markets without -- at a sort of the lowest cost available. And the issue that we've had for the past 18 months when you look back into '22 and '23 is really where Ghana has traded and therefore, the impact to our secondary levels on the bonds, and therefore, a new issuance and the regular bond market would have been quite expensive just from a regular new issue market and therefore, trying to get ahead of the liquidity and the maturity wall, something that we've always tried to be proactive about. And so I thought that was the best interestent at the time to manage the maturity schedule and as you can see in the presentation, with that in the RBL, we've really cleared the runway for the next couple of years for us to execute and continue to pay down debt. And so it's really around taking the balance sheet off of the agenda, focusing on the organic delivery of the business plan and using sort of the most efficient tool at the time to try to execute that. So that was really the background there.

Our next question is from the line of Subhasish Chandra with the Benchmark Company.

Yes, following up, I guess, on Neal a couple of other questions with regards to free cash flow. In sort of the organising principle beyond the next year to sort of be in that $500, $600 million maintenance CapEx number. And then everything beyond that, obviously, pay the RBL off and then payouts, et cetera? Or are there some appetite that you might have deferred pending getting GTA on either organic or acquisition oriented, that might get us to a different spend level down the road?

Let me just take that. No, I think we -- when we talked about the $550 million, we've talked about it with from 2 dimensions. We've talked about a sort of base maintenance capital of $300 million to $350 million, which sort of covers the infill drilling program in Ghana, the continuing development of Jubilee. It covers the infill program in Equitorial Guinea that I talked about earlier. And then what was sort of post the start-up of winter fell and then Tiberius looking longer term, the additional wells there. So I think we're properly allocating capital to that. And clearly, those are very high return projects. And then we've talked on top of that about sort of $200 million to $250 million of spend that would be in growth. In clearly, the 2 projects that we're focused on today are Tiberius and the Yakaar Teranga with an expansion project at Tortue. And that capital, that $200 million to $250 million incorporates the spend on those projects sort of posting financing of the FPSO on that, say, Yakaar Teranga. So I think we're clear about the forward projection of the company where we believe we can not only we can grow, it will be a more modest rate than we obviously have done over the last 2 years, but there is growth in high-quality projects, and it will be a mix of sort of low-cost, low-carbon oil, EG Tiberius, low cost, low carbon gas, EG and expansion of Phase 1 or Yakaar Teranga. So -- and it's sort of single digits, middle single digits sort of growth rates. But at the same time, with a capital level of $550, we believe we can -- we have significant free cash flow, which, as Neal says, we can direct to the pay down of debt and then subsequently, when we get to the right leverage level, we can look at shareholder distribution. And I think that's ultimately what differentiates Kosmos as a company. It has an organic activity set, which it could sustain really through a decade and beyond, we have an RTP of over 20% on a 2P basis. So the ability to create something now which can not only continue to grow but can actually return cash and with -- we think a really competitive free cash flow yield is something that's quite unique. So that's our objective now. So -- but we're clear about the frame. And I think that's a point that I absolutely want to emphasize on the call that the $550 in that cents is clear, and we're clear about the capital frame and therefore, how it's going to be allocated.

Got it. Okay. So I hear you loud and clear, so no real interest in external opportunities. I mean given what seems like a greater churn in sort of the assets, whether they're stranded gas or in the Gulf of Mexico, et cetera, you're going to stick with the footprint you have?

Yes. And I think what we've been clear about, Subhasish, is that any inorganic has to be accretive from a cash flow basis that actually, therefore, accelerates that journey, yes. And I think that, that's -- having set that out as the organic path of the company to improve upon that, you have to accelerate it through an organic and inorganic that actually is cash significantly cash flow accretive, which has been the case for the 3 acquisitions that we've actually done as we've grown the company. Equally well, there may be opportunity, and particularly on the gas side, to lighten the portfolio, which again accelerates that objective. So I think we're absolutely clear about the company we're building. And therefore, as it were, how an inorganic opportunity would fit. What we don't have to do clearly is buy things to mitigate decline. We do not have declines. And I think that's, again, what differentiates us from others. So if something is accretive from a cash flow perspective, it organically accelerates that quality assets then clearly, those are the things we look for equally well, the reverse if we can accelerate the delivery of free cash flow for our shareholders by lightening let's on the gas assets, then we would do that.