Good day, everyone. Welcome to Kosmos Energy's Fourth Quarter 2020 Conference Call. Just a reminder, today's call is being recorded. At this time, let me turn the call over to Jamie Buckland, Vice President of Investor Relations at Kosmos Energy..

Good day, and thanks to everyone for joining us today. This morning, we issued our fourth quarter earnings release. And this release and the slide presentation to accompany today's call are available on the Investors page of our website. Joining me on the call today to go through the materials are Andy Inglis, Chairman and CEO; and Neal Shah, CFO.

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

These documents are available on our website. At this time, I will turn the call over to Andy..

Thanks, Jamie, and good morning and afternoon to everyone.I'll start today's presentation with a reminder of our strategy and the characteristics that differentiate Kosmos.

I'll then look back at 2020 and the strategic steps we made during the year, despite the COVID-related challenges, before Neal walks through the quarterly numbers and the financial progress we made in 2020. I'll then wrap up the presentation with a look forward into 2021 and the increased momentum we expect to an active year ahead.

Turning to Slide 2, which looks at our portfolio and unique characteristics that define the company, Kosmos has a high-quality portfolio, world-class, conventional oil and gas assets with strong ESG credentials. Our focus on offshore exploration development production along the Atlantic Margin has not changed.

We have three oil production hubs in Ghana, the Gulf of Mexico and Equatorial Guinea, as well as the world-scale LNG development in Mauritania and Senegal. These advantaged assets have low decline rates, brents or HLS price benchmarks and an overall carbon intensity that is significantly lower than the industry average.

As our recent Climate Risk and Resilience Report showed, we are making portfolio decisions and capital choices to deliver shareholder value consistent with a lower carbon world. Safety and sustainability are two core values that are critical to the delivery of our strategy. And I'll talk about both subjects in more detail later in the presentation.

Alongside the producing assets and our LNG development, we continue to hydrate our exploration portfolio with a focus on returns. This means prioritizing proven basins where we have a deep technical understanding, a large resource portfolio and can leverage existing infrastructure.

Our acquisitions in Equatorial Guinea and the Gulf of Mexico targeted opportunities that created value through optimizing the existing production base and through infrastructure-led exploration, or ILX, and we’ve built a diverse hopper of ILX opportunities across the three basins.

Given their low cost and low decline rates, these assets produce significant free cash flow, even at low oil prices.

Through the 2020 cost reduction initiatives, Neal will talk about later, we have materially lowered our corporate free cash flow break-even and we expect our base business to generate a healthy level of free cash flow at current oil prices this quarter.

On the gas side, the phase development of Tortue is expected to generate a long-term free cash flow stream to complement the cash-generative oil assets in the portfolio today. First gas at Tortue Phase 1 is expected in the first-half of 2023. And finally, the business is underpinned by a solid balance sheet that enables us to execute our plans.

We came through 2020 with ample liquidity, a staggered debt maturity schedule with nothing maturing this year, and the business that is expected to generate cash and reduce leverage. Turning to Slide 3, where I'd like to focus on our strategic progress last year.

The environment for most of 2020 was extremely challenging for the sector and for society as a whole. However, against that backdrop, Kosmos delivered on its key strategic priorities. Our production assets delivered robust performance in 2020, producing around 61,000 barrels of oil equivalent per day.

This is only an 8% decline year-on-year, despite a reduction in CapEx around 40% over the same period. Tortue Phase 1 was around 50% completed year-end with a project back on track despite COVID-related impacts.

We published our first-ever TCFD-aligned Climate Risk and Resilience Report during the year, followed this with our Sustainability Report, and set a goal to be carbon-neutral for Scope 1 and Scope 2 emissions by 2030 or sooner.This climate risk analysis supported our decision to monetize a portfolio of exploration assets, bringing in around $100 million of proceeds in the fourth quarter, with further upside potential on future success with no more capital exposed.

Following that transaction, we now have an exploration portfolio focused on high-return, fast payback opportunities in the proven basins we know well, where we restarted drilling in 4Q with a successful Winterfell ILX well.

On cash, we reached a cash flow inflection point in the second-half of the year, with positive free cash flow in 4Q, driven by higher prices, as well as significant and sustainable cost reductions, which have lowered our corporate break-even.

And we established a financing path for Tortue Phase 1, which should enable us to fund our current interest through to first gas. Working closely with BPV operator, we have also optimized Phase 2, significantly lowering CapEx, which we expect to enhance future returns and cash flow.

And finally, on the balance sheet, we diversified our available sources of capital with the Gulf of Mexico term loan and we maintained healthy liquidity through the year with around $570 million available at year-end.

Turning to Slide 4, which looks at our reserves, a sustainably E&P business requires low-cost, lower-carbon assets and a strong reserve base. Kosmos has both. We total 2P reserves around 480 million barrels of oil equivalent, a 2P reserves to production ratio over 20 years.

As you can see on the top chart on this slide, our 2P reserves is split evenly between the oil-producing assets in Ghana, EquatorialGuinea and the Gulf of Mexico and the Tortue gas assets, which we expect to come online in 2023.

Year-on-year changes to 2P reserves largely reflect 2020 production and the optimized second phase of the Tortue development, which should increase project capacity to 5 million tonnes per annum.

Our 1P SEC reserve base of 140 million barrels largely reflects the impact from 2020 production and the lower SEC price deck, that is around $20 per barrel lower than 2019 prices, which impacted the economic limit for some assets later in life. At current prices, we would expect those price-related reserve changes to reverse in 2021.

Looking forward, we have significant additional discovered resources that should increase our reserves when booked. On 1P,future adds are expected to come primarily from Tortue Phase 1, which would add an additional 100 million barrels oil equivalent at current prices, while Asam and Winterfell are expected to further increase our 2P reserve base.

Turning to Slide 5. As I said in my opening remarks, safety is a core value at Kosmos and nothing is more important than the safety of our employees and contractors. The slide shows our safety metrics over the last five years benchmarked against the industry.

Our One Team, One Goal initiative to deliver HSE excellence has recently become even more important in the wake of a tragic incident in the Gulf of Mexico this January, in which a subcontractor working on a Kosmos contracted drill ship was fatally injured.

The incident is a stark and tragic reminder of the journey to zero incidents and accidents is more than a set of HSE metrics. As a company, we’re determined to learn and prevent anything like this happening again.

The incident is still being investigated and we have already begun to share the initial learnings with our peer companies engaging with more than 20 operators in the Gulf of Mexico. Looking at the right-hand side of the slide, our commitment to health and safety extends beyond our direct operations, and informs how we engage with our communities.

In each of our countries, our teams were quick to support the COVID-19 response effort, with critical medical equipment, testing kits and other supplies. We also set up a hunger relief program to address food and security that has been made worse by the pandemic.

I'm proud of the way our people rose to challenge supporting each other and our communities through the year. Slide 6, the operational performance for the quarter, in Ghana, cargos and sales are in line with our guidance, while entitlement production was sequentially lower due to the lack of drilling activity in the second-half of the year.

Uptime and reliability numbers were strong in the quarter as they have been through 2020 and we continue to work closely with the operator to ensure this performance is sustained. In Equatorial Guinea, performance was in-line with expectations, and we look forward to our first drilling campaign starting later this year.

In the Gulf of Mexico production was in line with guidance. The production number on the slide does include the benefit of contractual royalty relief, which we received is lower realized oil prices in 2020. In December, we spuddedthe successful WinterfellILX well, which I'll talk about later.

In Mauritania/Senegal, Phase 1 of the Tortue project ended the year around 50% complete with a first Mauritania/Senegal [ph] are resolved in October finalizing the 11-month delay. Overall, most of 2020 saw a slowdown in operational activity across the company due to the pandemic and ability to safely execute.

However, in the fourth quarter activity started to return and we expect momentum to continue building as we move through 2021. More on that in a few minutes. Now I'd like to hand over to Neal to take you through the financials..

Thanks, Andy. Good morning and good afternoon to everyone on the call. Just as Andy talked about the strategic progress Kosmos made in 2020, I'd like to start off with the financial progress we made during the year. Specifically, the decisive actions we took to reduce costs early in 2020, which have materially lowered the company's cash breakeven.

As you can see on the charts on Page 7, we made significant reductions to operating expenses, cashG&A, exploration expense, and based business CapEx, resulting in Kosmos being a much leaner and fitter business today.

We expect most of these cost savings to be sustainable as we move forward with fewer people working on a more concentrated set of high-graded objectives, which we believe positions the company to create the most shareholder value. In a higher price environment, this lower cost base should significantly enhanced future returns and cash generation.

However, one point to note is that due to the pandemic, we under invested in our base production assets compared to our typical maintenance CapEx levels. In 2020, we are planning to normalize our spend, which should allow production to grow back to 2020 levels by the year end with further upside potential in 2022.

Turning now to Slide 8, this is a slide many of you will have seen before and looked at the key line items for the quarter. I don't plan to spend time on each item other than to say the results for the quarter were consistent with our expectations with significant progress both sequentially and against the same period last year.

While production and realized price were lower, we were successful on our cost initiatives I noted on the previous slide. We made progress on OpEx in 2020. However, we didn't deliver everything we wanted to and therefore per barrel metrics are a bit higher than expected in the fourth quarter.

This scenario we will continue to work with our respective operators through 2021. Turning now to Slide 9, which looks at the balance sheet and our liquidity position. Despite the volatility in record low oil prices in 2020,Kosmos maintaineda solid balance sheet with healthy liquidity levels through the year as can be seen on the chart.

In the fourth quarter, we closed the Shell transaction, receiving around $100 million of proceeds. It’s also up to $100 million of additional continuous consideration, payable on future drilling success.

We maintained tight control of CapEx during the year with around $147 million of total CapEx, which takes into account the Shell proceeds and is in line with company guidance. Hedging remains an important part of our financial strategy. And we've hedged around 60% of this year's production and have started to hedge our 2022 production.

With that, I'll hand it back to Andy..

Thanks, Neal. I mentioned earlier in the presentation that operational momentum slowed in 2020 has reduced activity and focused on protecting our people and operations across the portfolio. The end of 4Q and into the start of this year, activity levels have picked up in all areas.

As the slide shows,infill drilling activity on our base business was curtailed in 2020. In 2021, we expect to triple the amount of activity this year, with a total of nine wells spread across Ghana, Equatorial Guinea and the Gulf of Mexico.

This increase activity is expected to reverse declines and drive-up production, with year-end exit rates materially higher than those seen at the start of the year. AtTortue we are already seeing significant momentum after last year's pause and expect Phase 1 to be around 80% complete by year end.

We're also returning to exploration with two or three wells planned this year. We have already seen success with Winterfell in January, and we aim to drill Zora in the second-half of the year. Success of Zora would open additional opportunities that we would evaluate later in 2021. Turning to Slide 11, to look at that activity set in more detail.

In Ghana, we've seen a successful installation of the CALM buoy,with a first offloading earlier this month. The start of the CALM buoy removes the need for shuttle tankers to move oil from the FPSOto the tanker, so it should result in lower operating costs for the partnership going forward.

As the operators communicated to the market, the drilling rig has been contracted is expected to arrive in the second quarter. We plan to drill two producer wells and one injector on Jubilee in 2021, as well as the gas injector well in TEN.

The rig is a contract length of up to four years, given the amounts of high-quality infill targets available in Ghana. And the partnership is also evaluating having a second rig to accelerate that production growth. We also continue to work with the operator on optimizing projects that can deliver incremental production.

We plan to start the developments at Jubilee South East this year with drilling activity targeted for 2022 and 2023. In Equatorial Guinea Phase 2 of our ESP program began this month and we've started an infrastructure enhancement campaign to increase operational uptime on the assets.

In the second and third quarters, we expect to drill three infill wells with the aim of keeping production growing through 2021. In the Gulf of Mexico, the Kodiak completion is underway and is expected online next month. We also plan to drill the Tornado-5 well mid-year, which is expected online in the third quarter.

With this increase in activity, we expect production to grow with a year and exit rate around 60,000 barrels of oil equivalent per day with further momentum into 2022. Turning to Slide 12. 2021 is a year of significant delivery for Tortue. Phase 1 was around 50% complete at the end of last year, and we expect to be around 80% complete at year end 2021.

The two images on the slides show the areas where we expect the most progress, namely the subsea and the concrete breakwater. The top image shows one of the subsea marine structures being fabricated in the yard in Indonesia.

The fabrication of the subsea equipment is expected to be complete by year end with the manifolds and flow lines installed by early 2022. The bottom image shows one of the concrete caissons forming the breakwater for the hub terminal. The concrete pour for two of the 21 caissons is now complete with a production line ramping up.

The floating dock arrived in Dakar in mid-January, and it started preparations for caisson offloading in early summer. There's a great video online from Eiffage cupped [ph] in the footnotes on the slide showing the forward steps to complete the breakwater.

As we outlined at our 3Q results in November, our funding path has been established with the sale and lease back of the FPSO making good progress. Earlier this month, we signed an MOU with BP outlining the terms and conditions around the sale.

As previously communicated, the FPSO will be sold for back cost to an SPV controlled by BP and lease back to the partnership. The joint venture will utilize the FPSO proceeds upon group cash cost. We expect the net proceeds to cover $250 million of our capital requirements in 2021 and our targeting close within the second quarter.

We expect the further savings will be rolled over into 2022, reducing our overall future capital obligations by $320 million in total. While advancing Phase 1 financing, we've also moved Phase 2 forward where we're still targeting FID around the end of 2022.

We anticipate the capital requirements for the optimized Phase 2 to be largely funded on Phase 1 cash flows. We see this as a very important value driver for the company, which gives us greater flexibility around future gas sales and pricing with significant value potential in LNG markets that are already showing signs of tightness.

Turning to Slide 13 which shows the recent signals of that tightening market. 2020s were the lowest LNG supply growth since 2014 with only 5 million tonnes of new supply entering the market. In addition, that was only one new project FID.

Gains that tightening supply picture LNG demand continue to rise up 3% in 2020 versus 2019, despite the impact of COVID-19 on global energy demand.

We believe that there's strong demand for LNG set to continue the top chart is a Wood Mac analysis we showed in November, the core forecasters significant supply demand gap opening up in the middle of the decade.

Even incorporating the recently FID North Field expansion project N'gata, Wood Mackenzie still forecast the supply gap around 50 million tonnes to the end of the decade and around 175 million tonnes for 2035. The bottom chart on this slide shows a significant increase in gas prices we've seen in the last few months.

The dash line is the JKM future stripped from May this year with a solid blue line the future strip today, which reflects a strong rally we've seen as the market is timed. Average NBP and JKM futures for the next three years, both average above $6 a MMBtu.

Tortue Phase 1 is contracted at an oil in slope, which is current prices should generate significant cash flow. The Phase 2 would not contract to the gas. So, we retain the option of pricing it against oil, gas, or a combination of both with both looking like attractive options today’s prices.

Given its low breakeven, we expect significant value creation from this phase of the project. Turning to Slide 14. I talked about our ramp up in infill drilling in 2021. Now, I'd like to look at our exploration activities for the year. Kosmos has a diverse and deep inventory of ILX and play extension opportunities across three proven basins.

And we expect to increase our activity in 2021. In January, we had early success with Winterfell. We discovered and de-risked around 100 million barrels of gross resource across Kosmos’ acreage. The partners are now working on the appraisal and development plans and we'll update the market as we have more information.

Winterfell is a great example of why Kosmos made the DGE acquisition in late 2018. Accessing low-cost hydrocarbons which can be tied into existing infrastructure with quick payback and high returns.

What’s more, the development solution expected to have a carbon intensity significantly below sector averages because of the natural advantage of the deepwater Gulf of Mexico more on that shortly.

We anticipate the next ILX well will be Zora, but in the second-half of the year like Winterfell, this has the potential to be meaningful hub scale developments in the case of success. One advantage of our diverse exploration portfolio is the flexibility to invest our capital across multiple basins.

If drilling plans are drifted in the Gulf of Mexico, we look to invest equally high return opportunities in Equatorial Guinea or Ghana. I'll now hand back to Neal to talk about guidance for the year..

Thanks, Andy. On Slide 15, we've included our usual detailed guidance for the year – including our detailed guidance for the year and the appendix. On this slide, I'd like to focus on the key outcomes. As Andy outlined earlier in 2021, we are resetting the dial with production expected to rise through the year as activity increases.

Our guidance of 53,000 to 57,000 barrels of oil equivalent per day reflects today's production of around 53,000, rising to an exit right of around 60,000 barrels equivalent per day at year end. We expect to spend around $225 to $275 million in 2021 on the base business with an 80:20 split between sustaining and growth CapEx.

The capital being directed to the infill drilling and ILX opportunities with the highest returns. At $55 Brent, we expect that base business, excluding Mauritania and Senegal to generate around $100 million to $200 million of free cash flow, which we plan to use to delever the balance sheet.

In Mauritania and Senegal, CapEx for the year is expected to be around $350 million. As previously communicated, we expect this to be funded primarily through the sale of the FPSO and the refinancing of the National Oil Company loans in 2021, a $100 million benefit to Kosmos.

As Andy mentioned, we are planning to close the FPSO sale within the second quarter. At which point we expect the benefit to be $250 million net to Kosmos in 2021 with the residual proceeds from the FPSO sale benefiting 2022. I'll now hand back to Andy..

Turning to Slide 16, Kosmos plans on deploying this capital towards the most compelling opportunities that our portfolio both in terms of returns and fitness for the future. As I mentioned on the earlier ILX slide, the deepwater Gulf of Mexico has one of the lowest carbon intensities of any oil basin in the world.

This is due to the natural aquifer drive in the Gulf of Mexico pipeline network that limits flaring and the ability to utilize existing infrastructure. This was highlighted in the recent Wood Mac report which can be seen on Slide 16, which shows the deepwater Gulf of Mexico to have the second lowest emission intensity of the major U.S.

crude oil suppliers. Once more on the analysis of the players in the Gulf of Mexico, Kosmos has the assets with the lowest carbon intensity. This can be seen on the second chart on the slide. It is for these reasons that we believe Kosmos can play its role in the energy transition. Kosmos support the Paris agreement and we welcome the U.S.

is returned to it. We've tested the resilience of the company against the Paris agreement scenarios, adjusted our portfolio accordingly and believe we are well positioned. The U.S. administration's recent executive orders have not affected our Gulf of Mexico production operations.

And we have a deep inventory of more than 20 high-grade ILX prospects on existing acreage. Like other companies in the sector, we're watching the developments carefully to understand how new policies will be implemented on a practical basis. As the new U.S.

administration that shapes these policies, we are both ready to engage and open to working with policy makers to develop creative solutions to deliver the energy the world needs with fewer carbon emissions.

With its abundant infrastructure, the deepwater Gulf of Mexico is an important source of supply in the world, delivering advantage oil that is both low costs and lower carbon intensity. Turning now to Slide 17. Sustainability is a core value for Kosmos.

And we are a company with strong ESG credentials across all the categories, managing through the pandemic our focus on sustainability has not changed. Looking at the three categories on the environment, Kosmos perform detailed scenario analysis found the value of our assets would fare in various climate scenarios.

We published the results in our Climate Risk and Resilience Report. The conclusion of this analysis within a transition to a Paris 2-degree world, the value of long cycle exploration was most at risk because of the long-time frames needed to enter a new country, drill, discover a price, and develop.

The risk to invest the capital over that period increases significantly. For that reason, we decided in early 2020, not to pursue long cycle frontier exploration opportunities in new basis. Following that decision, we monetize a portfolio of frontier exploration assets to focus on our shorter cycle infrastructure led opportunities improve in basis.

Earlier this year, we set a target to become carbon neutral scope one and scope two emissions by 2030 or sooner. And we're making progress to measure, reduce and mitigate emissions across the business in line with that target.

One of our flagship social investments is a Kosmos innovation center and award-winning program in West Africa that invest in young entrepreneurs and small businesses. We empower our entrepreneurs turn their ideas into viable self-sustaining businesses. We work alongside promising small businesses to help them scale up and reach their full potential.

This program started in Ghana in 2016 and subsequently expanded into Mauritania and Senegal. On governance, Kosmos has an industry leading position on transparency. We believe we remain the only U.S. oil and gas company that publishes all of its contracts with post governments on its website, a clear differentiator from the rest of the industry.

We continue to challenge ourselves to be better in all of these areas. We strive to be a leader in the industry both in terms of financial performance and our ESG credentials.

Kosmos was recognized this year one of America's Most Responsible Companies by Newsweek and Statista, and we retain AA rating in our ESG ranking from MSCI, which puts us in the top quartile amongst our peers. With turning finally to Slide 18 to wrap up today's presentation.

In conclusion, I want to reiterate the characteristics that make Kosmos unique before opening up to Q&A. We have a portfolio of world-class advantage assets with strong ESG credentials. We have a diverse proven based and exploration portfolio of high graded ILX opportunities as focused on short paybacks and high returns.

Our assets generate cash and with last year's cost-cutting initiatives, we are a leaner company with a lower cost base in a much more constructive commodity price environment. And we have a solid balance sheet and healthy liquidity that will support the operational momentum we expect to build through 2021 and into the future. Thank you.

And I’d now like to hand the call over to the operator to open the session for questions..

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Charles Meade with Johnson Rice. Please proceed with your question..

Good morning, Andy and Neal. Appreciate all your comments this morning. I wonder if you could give a little bit of sense on the FPSO sale leaseback. You guys say that it's – I guess there's two parts to the question. It's targeted for a 2Q close.

Can you talk about what, to the extent you can, what are the steps between now and closing? And I guess the second piece, Neal, I wanted to make sure I understood the - will the CapEx be on your ledger up until the close and then after that it's going to be gone?So, it'll essentially be kind of a first-half CapEx?.

Yes. Hi, Charles. It’s Andy. Well, I'll take the first part of the question and then Neal can follow-up with the detail on the CapEx. Yes. As we talked about in November, we laid out a funding path to first gas. I think, we're absolutely executing on that plan and we made a lot of progress in the first part of this quarter.

And that obviously involved the signing of the MOU with BP, which contained all the key terms for the sale and leaseback. Yes, the structure – the same structure we articulated in November, we have an SPV purchasing the FPSO from the Tortue JV. The SPV will be a BP-controlled entity that raises the debt and it has a BP guarantee associated with it.

So actually, the most important point is that this is a very straightforward process, involves BP and Kosmos. And clearly, we've gone through the work to set up the structure and the terms. So, in terms of steps forward, we've got to take the MOU and convert that into the detailed agreements, and we're working hard on that.

Then it's a question then of going out and raising the external debt. So, we're well on track to get all of that done by the second quarter..

And then to your second question, Charles, yes. So from a CapEx perspective, the $350 million for the year is spread pretty readably through the year. And so, we are currently funding sort of the cash calls and we'll recognize CapEx related to that.

But as you noted sort of post the FPSO sale, you would net the proceeds essentially against the CapEx for the project thereby sort of offsetting each other via post close..

Got it. That's helpful detail. I appreciate it. And then a second question on the EG assets, I noticed that you're going to have three infill wells. And - but on your slide, I think it’s 14, where you show some exploration targets. It doesn't look like any of those ILX wells are going to have an exploration tail or exploration element to them.

Is that the right read?.

Yes, I think the right – I think the first thing, Charles, to sort of step back, there's a lot of opportunity in the acreage. When we went into EG, it was all about looking at both the production enhancement opportunities that we could see in Ceiba and Okume. They haven't been the focus for the prior owner and we're continuing to work through those.

So, we've obviously had a campaign for increasing lift. ESPs, we're continuing with our second campaign of ESPs that's underway, as we speak. We did the work to enhance the seismic imaging in the existing fields in Ceiba and Okume, have to identify the infill targets and we're getting on with those.

And then the next phase of activity is going to be the exploration targets. So, we're drilling the infill targets first, because those are the things that we believe have the shortest payback and we'll then come to the ILX program with drilling targets for 2022.

But I think, what's interesting about it is that the opportunity sets rich and the most important part of it is to ensure that we execute effectively, efficiently deploy the capital in the right way to bring forward that opportunity set. And we're doing okay. We clearly had an interregnum in the back end of last year with COVID.

But we're back with the activity ramping up now, both in terms of the production optimization, ESP program and then the rig, which will start next quarter..

Got it. That's helpful detail. Thank you, Andy..

Great. Thanks, Charles..

Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question..

Good morning, guys, and thank you for all this great detail here today. The first question is around leverage levels, net debt around $2 billion.

Is there a level, Andy or Neal, that you want to target in absolute levels either debt or net debt that you want to be – you want to aim towards and just talk about the path to getting there?.

Yes. Why don’t I - Neal pick that up.

Neal?.

Hey, good morning, Neil. Yes, in terms of - we were on a path to sort of deleveraging pre-COVID. And post COVID, we still remain on the same path. We've stated sort of our target is to get to 1 to 1.5 times net leverage that net debt about $500 or $1 billion less than what we have today, combined with sort of rising EBITDAX.

And so, yes, the good thing about sort of our exposure is, we are – we have high-margin oil. And therefore, as prices are in a sort of $60-plus range, the leverage comes down relatively quickly. And so, we need to – the EBITDAX will naturally rise as both production and price improve some sort of COVID levels.

And at the same time, we will redirect sort of the free cash flow out of the business to continue that pay down. So that's a long-winded way of answering the question, but we're on that same path. And we can - especially given sort of the constructive commodity price environment, we can get there pretty quickly..

Yes. That's helpful. And then the second question is just around Gulf of Mexico. And there has been a lot of investor feedback and questions about your exposure there. If the counterpoint would be as Tortue comes on, this becomes a smaller part of the portfolio.

Just how do you - how are you sizing risk in the Gulf of Mexico? Help us walk through the difference between bans on federal leasing versus your ability to drill, and how do you see this asset fitting into the long-term story for Kosmos?.

Yes, Neil, I'll pick that up. As I said in my remarks, actually, we – Kosmos has supported the Paris agreement and we're pleased that the U.S. is back in. We see the Gulf of Mexico as being an important contributor long-term to the world's oil supply. It’s naturally advantaged and is lower carbon.

I think we, therefore, look forward to working with the new administration on the right practical steps forward to enable that resource to be appropriately developed. So, I think, the long-term as you were, if you look at it and actually the medium-term, it remains an advantage basin sort of, I believe nothing has changed in that regard.

So how does it practically unfold? From a leasing perspective, I think, Kosmos is relatively not impacted. We've got deep hopper of opportunities on existing acreage we hold. We've got around 20 high graded prospects today that are ready to drill. So, if there were a longer-term fact from no leasing that won't affect our business.

And then I think, we just have to wait and see, what's going to happen when it comes to drilling permits. But again, I'm hopeful that actually the practical steps that will enable that to move forward. I don't think that the intent of the administration. So, we remain very constructive both from where it sits in our portfolio today.

I think it remains a very competitive just because of the natural advantages it has. And I think it was just interesting to share with you actually, the Wood Mac analysis of that and where our portfolio sits. So, I think it's naturally advantaged is therefore has a place.

We are robust to a slowdown in leasing because of the work that we did over the last couple of years to build the portfolio. And yes, there will be some practical things that need to be done from a drilling perspective, but we're confident that that's going to move forward.

So, I remained actually very positive about the base and then about the conversations that we'll have with the administration as a result..

Great guys, thank you..

Our next question comes from the line of Bob Brackett with Bernstein Research. Please proceed with your question..

Good morning. Thank you. I had a question on the sustaining CapEx program.

I think you're guiding to around $200 million, and that holds you say around 60,000-barrel oil equivalent a day, at what sort of the internal decline rate?.

Yes. Bob, I think if you're looking at the sustaining campaigns, you're right. It's in that sort of 200, maybe a little more, 200, 225 levels. So, we're sort of ramping up in 2021 that gets you to that level. But that sort of range, you can hold production flat. Yes.

So that's the level of CapEx to sustain production across Ghana, Gulf of Mexico, and Equatorial Guinea..

Against what sort of decline rate?.

Underlying decline rate. It's probably, you've got to split it out between infill drilling and the production optimization that we do. So, there are some activities, Bob, the ESPs for instance are – will be expensive as opposed to capitalize.

But if you look at the overall decline rates, probably around 10%, and then you're offsetting that with the production optimization and then the infill drilling..

Great, thanks.

Quick follow-up on the Tortue Phase 2 FID, so the front running concept is this lean sort of concept that you've laid out before, are you bringing a single concept to FID or are you carrying several concepts that could potentially be FID?.

Yes, well, clearly the point of optimizing the concept. So yes. Work is being done to optimize the detail. But the fundamental concept in terms of maximizing the use of the existing infrastructure is the way forward that we've agreed with BP.

So, what does that mean? It means that you're fully utilizing the subsidy infrastructure, you're fully utilizing the available gas processing capacity on the FPSO. You're fully utilizing the pipeline from the FPSO to the near shore. Yes. So that that remains unchanged.

And then ultimately, there are some opportunities around the number of additional wells that you can fit into those subsidy manifolds. You can do some additional sort of extensions, et cetera.

But ultimately what you're trying to do is say what's the best configuration for the reservoir subsidy that fully optimizes the facilities infrastructure that we have in place. Yes. So, the concept is sort of not changed the issue with how do you get the most out of it..

Yes. That's clear. So, there's no stalking horse concept of say a 4 million tonne per annum concept..

No, No. There's no stalking horse. No. And in fact, it's almost the reverse Bob, it's sort of saying, let's make sure we've absolutely optimized this to get the most through. Yes. It's quite the reverse. Yes..

Yes. That's clear. Thank you..

All right, thanks..

Our next question comes from the line of James Carmichael with Berenberg. Please proceed with your question..

All right. Afternoon guys. Just a couple, firstly on Equatorial Guinea, I guess I'm just looking at the transaction there recently and the incoming partner sort of outlined an ambition to get to 55,000 barrels a day.

I think of the next two or three years, just wondering if that's in line with your ambitions there as well, or your sort of understanding of the upside potential.

And then maybe if you could just remind us around the options of the $300 million direct investments to get you to first gas at Tortue and I guess sort of expectations around timing and your preference for how that's structured. Thanks..

Yes. Hi James. I'll take the first question. And then Neal can handle the second one. Yes, it's great to have new partner and actually it's great to have a partner that sees the potential in the asset. They've clearly invested in to EG on that basis. So, I think the fundamental potential that we both see is very similar.

We as I said earlier, in the comments Charles, that the EG assets have a layer cake of opportunities, there's a layer cake from production optimization, which we've done very successfully on the second round of that.

There's a layer cake now that we're building in from the infill drilling, and then there's a layer cake from the ILX opportunities that sit around the asset. So, I think we see a very similar view of the opportunity set, and it's good to have a part there that wants to invest alongside us. So, I don't think we have a different view.

I'm not going to comment ultimately about the production, because that's for them to talk about. And clearly, we're not giving guidance today that far out. But I think the most important part of the story actually is the scale of the opportunity set.

And that sense, this is a third-party verification as a story that we talked about when we first went into Equatorial Guinea, we talked about exactly those layers and play last year was a bit of a challenge in terms of having to hold back on the pace at which we pursued that. But we're back in action now.

And there remains a lot of oil to be produced from Ceiba and Okume and the surrounding ILX opportunities. And this sounds a long-term role in our portfolio..

And then James, just to answer your question on the direct investment in Mauritania and Senegal. Yes.

It is the last piece of the financing puzzle that that we'll put in place that we clearly focused on putting the FPSO in place within the second quarter and then the NSE, financing, and then as for the direct investment, we're looking at a number of options as we sort of refer to in November to fill that last 300 million those alternatives, a couple of them, including, the partial sale of our non-Tortue gas assets as part of the funding solution.

We have the ability to put it within the RBL. And then lastly, we have the ability to defend it from excess cash sort of higher oil prices. And so yes, there's a number of different solutions and I think we're keeping the optionality, which is the best ultimate solution. But we'll do that last within the sequence of Mauritania and Senegal financing..

Alright, thanks. Just another one if I actually can,just onthe emission zero targetis that sort of – does that include your non-op assets as well? And can you just give us a sort of sense of how the West African portfolio stacks up against the Ghana on those intensity metrics that you outlined? Thanks..

Yes. A good question, marked. Scope 1 and Scope 2, the definition is around your growth operated. Yes. So, the play that's in the Gulf of Mexico, and we've got about sort of 50,000 barrels, a day of gross operated production in the Ghana. Yes.

So clearly, with that scope one and scope two target, we would be focusing on the things that we can control and therefore that covers that operated activity. And of course, it benefits from being having a lower carbon intensity. It's at around, as we showed on that slide, it's sort of around 10 kilograms per tonne.

So, you look around the world all basins, that is differentiated here. As you start to look more broadly at the non-operated activities that are probably closest to sort of the industry average, it's around 20. Yes.That said, the assets in Ghana, for instance, are advantage because you do have the ability to export gas, yes.

So, we are connected to the gas grid, the gas goes to power. And actually, the need for gas is increasing through time. We've probably doubled the amount of gas export over the last couple of years from around sort of 60 to close as probably toaveraging 100 to 120 currently. So, the demand for the gas is there.

So, the ability to drive down the carbon intensity of theGhanaassets, I think, is high. So, there's a start, I think, from a higher starting point, but the operator is – we've got clear plans, and we're fully supported, moving the Ghanaassets, down the carbon intensity route.

So,Scope 1, Scope 2 is about things you operate, and that's the Gulf of Mexico for us. We’ve gotsignificant growth operated footprint there. And we're targeting thedelivery of that alongside our other ESG commitments, through that 2030 timeframe..

Great, thanks..

Great, thanks..

Our next question comes from line of Mark Wilson with Jefferies please proceed with your question..

Hi, good afternoon. I'd like to ask about the bigger picture for Mauritania and Senegal. I think it's – this presentation last year, had a last slide on the Greater Tortue resource base 100 TCF gas in place across the three hubs,Tortue,Yakaar and BirAllah, and 10 million tonnesper annum potentially across each one of those.

Obviously Tortueis now, five million tonnes proposed for the two drains. Could you give us a view on the bigger picture across all those assets? And also, what are your current marketing plans for a potential sell down there Neal just mentioned possible sale of non-Tortue gas assets regarding the direct investment. Thank you..

Yes Mark, I think, the same gas space and actually, different character of assets. I think the instinct for Tortue itself Phase 2 get to five million tonnesper annum, that fully utilizes available infrastructure, it’s the most capital-efficient project therefore, it's the right thing as the next building block.

Beyond that, there is significant resource that would support a 10 million tonne per annum scheme that would require additional infrastructure so that is remaining upside for the future. I think,Yakaar-Terangais interesting, because it's actually closer to theDakar peninsula.

Andthe concept work that BP is pursuing at the moment would have a domestic gas scheme first followed by an LNG export scheme. So that is an important component actually of the energy plans for Senegal to be able to replace diesel burning power with gas and therefore, enable a lower carbon future for Senegal with that gas powered generation.

So, I think, significant population of Senegal, the desire to grow their power generating capacity, but obviously to do that in a carbon-friendly way. So, the concepts are only for Terangato how you stage the right infrastructure that enables that domestic scheme to be the bedrock of the development. And then actuallysupplement it with gas exports.

And again, the infrastructure is different because it's more adjacent actually to the major urban areas in Senegal. And thenBirAllahis againdifferent, a smallpopulation in Mauritania, but still a need full gas. Yes. But not the scale of gas that would actually enable full development of BirAllah.

So, in terms of the thinking, I think, around thedevelopment concepts is the area where there's probably, more work to be done to come up with the optimized development scheme for BirAllah.

But in terms of its cost point, as you look at it across the world today, it's as competitive as Tortue, very similar reservoir density, very similar, there for economics and cost of supply. So, I think, the resource is significant.

As you rightly say, Mark, I think, our focus has been on getting the cash flow from the first project optimizing it with Phase 2. And then I think it's about conversations with both countries, which are around how is the resource optimally developed, that fits their plans and the and the resource description..

Do you see yourself going back to the active sort of sales process you had compared a year ago on those assets?.

On that, I think, this is about – it's one of the options that Neal has discussed. I think it's about finding the right fit for the project. Yes. So, we're clear about what the concept is. And as you look to the energy transition, there are more companies looking to find a gas resource to be able to be a long-term source for their own portfolios.

And that's what we have in Mauritania and Senegal. So, when we're having those conversations with interested parties, the conversation is not about formal sort ofbid process, but it's actually bringing on board the right people that can support the long-term vision for both the development concept and with the government..

Okay, a lot, very clear. Thankyou..

All right, thanks..

Our next question comes from line of Nick Stefanou with Renaissance Capital. Please proceed with your question..

Hi guys, thank you for taking my question. It’s Nick from Ren Capital. On the bottom Asam discovery you made a couple of years ago in EG, you spoke about infill drilling and oil export opportunities, but what is the latest from that, is this signal being considered as a step up to the target to the [indiscernible]? That's the first question.

And the second one is this for Neal. Are you looking to refine RBL in the first-half of the year? How was your experience in that? It should be around bottom along this time. There was no mention of it. So yes, that's the question..

Okay, yes, thanks Nick. Asam was an important sort of discovery for us, we are now doing the work to properly appraise the opportunity and actually figuring out the best way to integrate it into the infrastructure.

So, there's more work to be done this year to position that for a development plan that fully optimizes all those Ceiba and Okume infrastructure. I think for usit was just a demonstration of the additional resource there is there.

We need to ensure that we've got a development plan which properly optimizes the reservoir, in particular the reservoir development of our Asam for the future. And so, for 2021, we're focusing on the infill opportunities. They are platform drilled opportunities therefore, they are easy to tie back and get into production.

So, the time between, completing the well in production is very short. Asam, will require some subsea infrastructure to be put in place. And therefore, as we look at it, we need to make sure we have optimized that correctly..

Yes. And then, Nick, just on your question on the RBL, we do have a redetermination planned, at the end of the first quarter, and we've just started discussions with those banks, and they're going wellso far. As you had the last redetermination was done in a much lower oil price environment.

And so, having sort of more constructive oil prices, will help that process. And as you rightly mentioned, as part of that process, we will speak to the banks around less of a refinancing, but more of an extension of the existing facility.

And that unlocks additional borrowing capacity, as well, as we've done in the past.And so, the banks have been very supportive, and we plan to continue sort of our regular process. And as part of that, we will continue to extend the maturities and increase the capacity on available capacity on the RBL..

Okay, got it. And the quicker flub [ph] the free cash flow range, it's $100 to $200, that's quite large.

Is it other deltas solely due to the upper and lower end of the production guidance,are there other partners behind those – behind the delta, basically?.

Yes, I mean, a large piece of that is production. And then it's just the timing of some of the expenses. But I think, because one cargo even in at $55 world is $55 million, right? So, it is sensitive to that work, which is why we've sort of left the range intentionally pretty vague..

Okay, fair enough. That’s it, thanks so much. .

Okay, thanks Nick..

Our next question comes from line of Richard Tullis with Capital One Securities. Please proceed with your question..

Thanks. So good morning, Andy andNeal. Two quickones.

Sorry, if I missed this, what's the rough break out of the 60,000 a day 2020 exit rate by major area?.

So just off the top of my head, Richard, it will be pretty close to historic knowns with sort of Ghana is 40% to 45%, EG is around 20%? And then the GOM is around 30% to 35%..

Okay.

And then a follow-up, looking at the Gulf of Mexicoguidance for the first quarter that 20,000 to 25,000– excuse me, 20,000 to 22,000 a day, when you compare that to where it was a year ago, somewhere in the neighborhood of 28,000 a day, what are the main drivers of the reduced production there? Is it mainly the lack of drilling in 2020 due to the pricing, or any other contributing factors, maybe, planned downtime issues bringing production back on from the storm season, et cetera?.

Yes, Richard no, you' are right. So, if youlook at it, we only had one in four, well, actually in 2020, which was the Tornado injector, yes. And of course, thatthrough time actually starts to build reservoir pressure, which leads to an increase in production.

So, though there was natural decline, which iswhere we're seeing the current raise, and therefore, with the additional what we know the Kodiak well, which we're completing, at the moment, same Kodiak well, and then the Tornado-5well plan forthe middle of the year, that will help us sort of bring production up.

The only factwhen you look at it on a quarterly basis, okay, the first quarter has been weak. We had an unplanned downtimeissue on the Kodiak-1 well, which came offstream around December. And we're finishing that repair and the wellwill be back onby the end of the month. So that's affected the quarter oneuniquely.

So, I think, if you look at the numbers overall, and youlook it at on a yearly basis, the lowering of 2021 versus the sort of underlying rating in 2020 is simply around the decline rate. If you look at pacifically at quarter one, the unplanned downtime on the Kodiak-1 well has had a differential impact..

Okay. Well, thanks very much..

Okay. Thanks, Richard..

Our next question comes from line of Al Stanton with RBC Capital Markets. Please proceed with your question..

Yes. Good evening. Just two very simple questions if I may. Just with respect to Tortue and the sale of the FPSO, should we just assume that the later that sale happens, the more money you get, so we might as well just think, in the $250 million, and worry about the quarterly breakdown when we put out quarterly numbers.

And I suppose the other question is about hedging. Neal, rather, unfortunately, the forward curve isn't probably the shape you want.

What are you doing about your hedging policy given, the forward curve is much lower than spot price? So, are you just checking that up, or are you taking a change in strategy?.

Yes, so just on the on the first question, from a timing perspective, yes, I mean, we're basically expecting sort of – or forecasting that $250 million benefit. The longer it sort of takes there's a larger sort of working capital impact before you get that back.

But in terms of the overall transaction, you still save the $320 million net to us, in any case. So, there is this sort of shift around depending on when it closes, in terms of how that pushes forward. But that will just be a timing effect around the transaction, and doesn't change sort of the overall benefits from the transaction..

Yes. .

And your second point, just on hedging, I mean, so it is in backwardation, which is a little more difficult to hedge into. But, again, I think, from a general perspective, the business does great in a $60 world and so what we're trying to do, and even in a $50 world.

And so, as we're continuing to layer in hedges on a pretty regular basis into 2022, the goal is put in downside protection that lets us fund the business. And so, we're putting in floors around that 50-ish dollar level, and trying to keep as much upside as possible.

So, in the last few trades, we've been able to get upside up to call it $70 per barrel. And we will layer those in across the year. So, the good thing is, is sort of as you go out in time, the curves continue to move up. And so, it'll continue to help us layer in more attractive hedges.

But it is something we're going to consistently do, as we've done in the past, and that will guarantee our ability to fund future expenses..

Should we expect you to move away from swaps and three-way collars, or we'll just see how it goes?.

Yes, I mean, I think, in terms of overall program design, we're not going to massively change the way we've done it. We've done it pretty consistently. And so there will be a combination of instruments depending on what's most attractive at the time.

But ultimately, again, what we're trying to do is forecast or put in hedges that ultimately allow us to fund the plan. And within that context, keep as much upside as possible. And so, as the prices move around different instruments will look different – look attractive at different points in time.

And so, we started with wider colors that give us that downside and as much upside today. And as sort of things normalize, we can shift into some of those other structures, but the objective overall stay the same. .

Okay. Thank you..

All right, thanks Al..

Thank you. Since there are no further questions at this time, I would like to bring the call to a close. Thanks to everyone joining today. You may disconnect your lines at this time. And thank you for your participation..