Greetings and welcome to the Kosmos Energy First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to Jamie Buckland, VP of Investor Relations. Thank you. Please begin.

Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our first quarter earnings release. This release and the slide presentation to accompany today's call are available on the Investors page of our website. Joining me on call today to go through that material 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 noted in this presentation and in our U.K. and SEC filings. Please refer to our annual report, stock exchange announcements, 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. As Jamie said, I'm joined on today's call by Neal, who officially steps into the role of CFO today. Given Neal's deep experience in Treasury, I could not have a better person by my side. I'd also like to thank Tom for his longstanding contribution to Kosmos as CFO. I'll start today's presentation with the highlights for the quarter and cover some of the key items which impacted the numbers in 1Q. Then I'll discuss our response to COVID-19, the steps we've taken to protect the business in 2020, our differentiated portfolio, and end on the work we're doing to position the business for the future. Turning to slide two, entitlement production of 66,300 barrels of oil equivalent a day in the first quarter was at the upper end of our expected range, driven by strong production in Ghana and the Gulf of Mexico. Sales volumes were 43,700 barrels of oil a day equivalent impacted by cargo timing which resulted in Kosmos being in a material underlift position of 1.7 million barrels oil equivalent at the end of the quarter. Overall, costs in the quarter were largely in line or below our original guidance. In response to the market volatility, we are lowering our total 2020 costs by around 30% or $250 million. However, those savings do not flow through into our 1Q results. OpEx, DD&A, and G&A were in line with our original guidance for the quarter and all three are expected to reduce over the year as our cost-cutting initiatives take effect. Exploration expense was slightly below expectations and is expected to significantly decrease as we pause our 2020 exploration activity. We've lowered our base business CapEx program by 40% this year, but most of that is back-end loaded as we reduce our ongoing activity set. There were several exceptional items which skewed the first quarter numbers which I wanted to give some color on. We took a non-cash impairment charge as a result of current oil prices which largely relates to two fields in the Gulf of Mexico. And we also had a restructuring charge in 1Q as a result of the 25% reduction in headcount in March. Together these charges total approximately $170 million. Partly offsetting that negative adjustment was a positive market-to-market gain on our hedges during the quarter. We also had a $72 million non-cash deferred tax expense related to valuation allowances against our U.S. deferred tax assets and the market-to-market gains on our hedging portfolio. So, in summary, a strong quarter operationally ending with a material underlift position and incorporating several exceptional non-cash items. Turning to slide three, I now want to focus on the coronavirus pandemic and the decisive actions the company is taking in response. COVID-19 has created unprecedented disruption across the world which has resulted in historically low and volatile prices. During this challenging period, the health and safety of our employees and contractors continues to be our primary concern, while ensuring the strength of our balance sheet is maintained. To date, none of our employees or production facilities have been directly affected, and we continue to monitor the situation on a daily basis. Despite the mitigation measures that have been imposed in large parts of the world, our employees remain committed to running the business safely and efficiently with the utmost professionalism in anticipation of the recovery ahead. I'll talk in more detail about individual assets on the following slide, but our overall portfolio remains advantaged, characterized by conventional low-cost, low-decline assets that are well-suited to withstand the current lower price environment. As a result, 2020 production guidance remains within our previous guidance range. Early in the year when faced with changing market conditions, we took decisive action to maintain the balance sheet and protect cash flow by cutting costs by around 30%, $250 million in total, and by restructuring our hedging program. During the quarter, in accordance with our normal banking requirements and against a challenging backdrop, we successfully completed the redetermination of the reserve-based lending facility. We have no near-term debt maturities, with the first RBL amortization payment not until the first half of 2022. With the liquidity available from our RBL, revolving credit facility, and cash on hand, we are well-positioned to withstand the current market volatility. Lastly, we continue to position Kosmos for the future. It remains our intention to deliver a self-funded gas business in Mauritania and Senegal and we continue to make progress towards that goal. Turning to slide 4. Our assets have performed well so far this year as we continue to focus on safe and reliable operations. First quarter entitlement production was slightly ahead of forecast. For the full year, we still expect production to be within our previous guidance range, despite the impacts of COVID-19, lower prices, and a significant reduction in capital expenditure. Prior guidance of 14.5 net cargoes in Ghana and Equatorial Guinea remains unchanged, although due to the timing of liftings, we only had sales of 1.5 cargoes in 1Q. As discussed on the opening slide, this impacted first-quarter revenue and profit and resulted in a 1Q underlift of 1.7 million barrels. In Ghana, the Jubilee and TEN fields are currently unaffected by COVID-19 and we have been encouraged by the operator's swift actions to protect our crew and facilities. These include amended crew scheduling, strict quarantine measures, and testing for all workers going offshore. Production at Jubilee and TEN was slightly ahead of expectations in the quarter with net production of around 26,000 barrels per day, which includes the impact of the planned downtime at Jubilee for the gas handling upgrade. Following the successful completion of this work in February, we've seen consistent production over 90,000 barrels per day. The operator has also recently successfully increased water injection capacity from two pumps to around 180,000 barrels per day, which provides the necessary pressure support for the reservoir while providing some redundancy with a third pump as needed. In addition, we've seen a consistent gas offtake in the range of 90 million to 100 million standard cubic feet per day at Jubilee, which should help maintain higher oil production in the future. On TEN, the field is currently producing over 50,000 barrels per day, slightly ahead of the operator's guidance. The Ntomme-09 well has been drilled successfully, and completion operations are now underway with the well scheduled to come online later this quarter. Full year net production for Ghana remains in the range of 27,000 to 29,000 barrels per day, which equates to prior guidance of 10 cargoes for the year. In Equatorial Guinea, first quarter production was around 12,000 barrels per day, which was in line with our expectations. Operations at Ceiba and Okume are currently unaffected by COVID-19 and the operator has put in place strict operating procedures in line with those mentioned in Ghana. That said, we are aware of the situation at the Exxon facility in Equatorial Guinea and the Ceiba/Okume operator has responded accordingly. There was a minor mechanical offloading issue late in the first quarter that affected one of the cargoes which was supposed to be loaded in late March. The issue was resolved within 48 hours and the lifting was completed in early April, which resulted in 0.5 cargo moving from the first quarter to the second quarter. Our full year production for EG remains unchanged at 11,000 to 13,000 barrels per day, which equates to prior guidance of 4.5 cargoes for the year. In the Gulf of Mexico, production in the first quarter was 28,000 barrels of oil equivalent per day at the top end of our guidance. We have seen no COVID-19 cases so far on the production facilities for our fields. As you're all aware, so far this year, we've seen an elevated level of price volatility which is causing a number of GoM producers to evaluate shutting in fields. Given our advantaged assets and low-cost model, around 75% of our Gulf of Mexico production has a positive operating margin at $10 per barrel HLS. Due to the expectation of lower realized prices in May, the operator of the Delta House host platform, which processes about half of our GoM production, has decided to shut in their operated wells and accelerate planned maintenance. This includes Kosmos' interest in Marmalard and Nearly Headless Nick. It also caused us to shut in the Odd Job field even though this field remains profitable at $10 per barrel HLS. We expect the Delta House shut-in to last the month of May; however, the timing will depend on future market conditions. As a result of the May shut-ins, we expect 2Q net production in the Gulf of Mexico to be around 7,000 barrels of oil equivalent per day lower. Fortunately, our Gulf of Mexico production is well set up for shut-ins and restart activity given the natural aquifer drive. Shutting in production pressurizes the reservoir. When the wells are opened up, it's common to see flush production as is often the case after hurricane shut-ins. Elsewhere in the GoM, drilling the Tornado waterflood well continues with the completion expected late in the year. Assuming the second quarter shut-ins last through May, full year production guidance for Gulf of Mexico is now expected to be at the bottom end of our 24,000 to 28,000 barrels of oil equivalent per day guidance range. Turning to slide 5. I've talked about the importance of having a portfolio that is able to withstand volatile commodity prices. On this slide, I'd like to focus on the specific characteristics that make the Kosmos portfolio resilient in a lower price environment. First, conventional deepwater assets typically have low decline rates and low maintenance CapEx to keep production planned. Over the last seven years, Kosmos has had over a 100% reserve replacement ratio across the portfolio, demonstrating the quality of the underlying reservoirs. 2020 production is expected to be broadly in line with 2019 with minimal decline in 2021, all with relatively modest maintenance CapEx. Second, the assets have low costs and therefore low breakevens. The top right chart on this slide from RSEG shows the half-cycle breakeven costs for the most well-known shale basins versus the deepwater Gulf of Mexico and the Kosmos portfolio. The average half-cycle breakeven for the shale basins is around $48 WTI compared to $25 for the deepwater GoM. Modeling Kosmos' infill wells in Ghana, EG, and the GoM using the same methodology, we get a comparative half-cycle breakeven of less than $25 per barrel WTI. The low Kosmos breakevens are largely due to well productivity, existing infrastructure, and low incremental development costs. Third, with a diverse production base, we have exposure to advantaged pricing with our Ghana and EG production priced off Brent and our GoM barrels priced off HLS. The structural advantage of Brent, which has traded at an average premium of $6 per barrel to WTI over the last three years, is its access to global markets. In the GoM, HLS has traded at a $4 per barrel premium to WTI on average over the last three years due to proximity to Gulf Coast refineries and not having the same infrastructure constraints as many onshore U.S. producers. There has been increased volatility in pricing here in 2Q. But on average, HLS continues to trade at a healthy premium to WTI. We believe that these structural pricing advantages are unlikely to change in the foreseeable future. And finally, while ESG is temporarily overshadowed by the oil price, we still believe it is of fundamental importance for companies to have a portfolio that is both low cost and low carbon. We talked about this at our 4Q results in February and believe those companies that are best suited for the energy transition will outperform over time. Moving now to slide 6, the balance sheet. Shortly after the COVID-19 pandemic was announced, Kosmos took decisive actions to protect the business. The financial actions can be split into two categories: lowering our cash flow breakeven and maintaining liquidity. This slide focuses on cash flow. We took quick steps to reduce costs and ultimately protect the company's cash flow for the year. As you can see from the chart on the right, we have reduced costs that is base business CapEx, OpEx, and G&A by over 30% for the year or approximately $250 million. We also took the difficult decision to suspend the dividend, totaling cash savings around $57 million in 2020. Combined, these changes have reduced our cash breakeven to the low 30s, including our hedges – excluding our hedges and working capital. We believe it's a sustainable cost structure to cover all of our cash costs and maintain production. We do expect 2Q cash to be relatively weaker given the dramatic slowdown in activity across our portfolio and the resulting reduction in working capital. We've also restructured our hedging portfolio to remove around 80% of price exposure across our three production hubs for the remainder of the year, that is May to December. Given our current hedges were fully valued, we converted them into fixed-price swaps, which provided downside protection for the majority of our production all the way down to zero. At $25 Brent and $20 WTI, 2Q forward, our hedges would generate over $200 million of proceeds this year; a $5 move in Brent results in only a $15 million change to free cash flow. Turning to slide 7, which focuses on liquidity. As we announced in early April, as part of our normal banking requirements, we successfully completed the redetermination of the reserve-based lending facility and have a borrowing capacity of around $1.5 billion, with $100 million currently undrawn. We have no near-term maturities and the first RBL amortization payment is not until March 2022. Our total liquidity at the beginning of the quarter was around $580 million post the RBL redetermination. Turning to slide 8, which gives an update on Mauritania and Senegal. Phase 1 of the Tortue project is now around one-third complete. As previously communicated, the LNG offtake SPA was signed in the first quarter, allowing Kosmos to book around 100 million barrels of 1P reserves. Due to COVID-19, operations in Mauritania and Senegal have been impacted by mitigation measures including border closures, travel bans, and social distancing restrictions. As a result, the concrete breakwater installation will now miss the 2020 summer weather window, with the work expected to take place during the same period in 2021. The Phase 1 project timeline is, therefore, being delayed by approximately 12 months, with first gas now expected in the first half of 2023. This delay has resulted in a significant reduction in activity and budgeted spending in 2020. The BP development carry is now expected to last through 2020, with remaining CapEx spread over 2021, 2022, and 2023. On the sell-down, our objective remains to deliver a self-funded gas business in Mauritania and Senegal, and we've been able to make progress with several interested parties despite the challenging working conditions we find ourselves in. The process remains ongoing and we're currently progressing remote management presentations supported by virtual data rooms. Turning to slide 9, the future. It's important during these challenging times not to lose sight of the future. When global energy demand returns to more normalized levels, Kosmos will be ready. We have a deep hopper of high-quality opportunities spread across our ILX and basin-opening portfolios, and we continue to progress these throughout 2020 to be ready to drill in 2021. For our ILX portfolio, we maintain the option to drill two to three wells from the prospects listed on the slide. As a reminder, these wells have low costs and attractive economics, and we can be quick to react when market conditions improve. In our basin-opening portfolio, we have several attractive opportunities across some of the most prolific basins in the world. As we prepare to drill these opportunities in 2021, we're working to finalize this year the partnerships and working interests to allow us to drill these opportunities on a carried basis. We have completed that process in São Tomé with Shell and plan to advance Suriname and Namibia this summer. That concludes today's presentation. So to summarize, we've taken quick decisive actions to protect our people and our assets. We remain focused on cash flow and liquidity and are taking the necessary steps to maintain our balance sheet in anticipation of oil price may continue to be volatile. And finally, we continue to progress the business to be ready when the sector does start to recover. Thank you, and I'd now like to turn the call over to the operator to open the session for questions.

Thank you. At this time, we will be conducting a question-and-answer session. Our first questions come from the line of David Round of BMO Capital Markets. Please proceed with your questions.

Hi, Andy. Thanks for the presentation and the useful chart on decline rates and maintenance CapEx. Could you elaborate on the type of activities anticipated for Ghana in 2021? Given the lower CapEx environment we're in, how are you approaching the medium-term production profile from both Jubilee and TEN in Ghana? Additionally, there was a stock exchange listing requirement announced a few weeks ago. Are you still considering moving away from the $1 cutoff, or are you comfortable with your current position?

Thanks, David. I will first address the portfolio and then return to the administrative question. The chart on slide 5 highlights a key feature of our portfolio. Jubilee and TEN are exceptional reservoirs. As mentioned earlier, we have achieved 100% reserve replacement over seven years. We have a substantial well stock in Jubilee, and the operators have made significant progress in the first quarter to enhance production from that well stock. It's crucial to ensure proper water injection, and in the first quarter, we achieved the capacity to move 180,000 barrels of water daily using just two pumps. We now have a third pump on standby for added reliability. We are collaborating closely with the Ghana government to secure gas offtake, currently ranging from 90 to 100 million standard cubic feet a day, which is boosting performance. Ultimately, we will need a limited number of additional wells. In 2021, we plan to continue the well program in Ghana, potentially adding another producer or injector at Jubilee. However, the most significant advantages will come from optimizing the reservoir concerning injection and gas offtake. Continued drilling will take place at Enyenra, and we are set to complete the Ntomme-09 well. Ntomme has performed exceptionally well in the first quarter, exceeding the operator's initial expectations. With Ntomme-09, we anticipate further improvements. Conventional assets typically require less maintenance capital expenditure. In 2020, we expect to be cash flow breakeven in the low $30 range, which we can sustain below $35 into 2021. These are sustainable measures rather than one-off actions that could cause issues due to the nature of the reservoirs. This addresses your portfolio question. Regarding administrative matters, we are currently exceeding the $1 requirement for the past 30 days, which concludes at the end of May, and we will make a decision then. The reverse split is an administrative consideration, but the stock price is improving, and we are currently above the $1 threshold, and we will continue this progress through May.

Okay. Thanks, Andy. That’s clear.

All right. Thanks.

Our next questions come from the line of Richard Tullis of Capital One Securities. Please proceed with your questions.

Hey, good morning Neal and Andy. Could you speak on current drilling cost trends with this downturn, Andy? Do you see costs to drill the deepwater exploration wells next year in Suriname comparable to what it would cost in the second half of 2019?

Yes, that's a great question, Richard. We are clearly observing an industry where there is likely going to be a high availability of rigs as we approach 2021. I believe there may be opportunities to perform better than the benchmarks set in the second half of 2019, though it's important to note that 2019 costs weren't particularly high. There is a threshold beyond which drilling contractors get close to their cash breakeven point. Therefore, I expect some potential for cost savings year-on-year, but I'm not convinced these will be significant. The primary way to achieve savings will be through optimal well design and efficient drilling practices. So while I anticipate some benefits, it's important to recognize that the industry can only reduce costs to a certain extent through the supply chain alone; it must also focus on creating lower costs by leveraging favorable assets and improving development processes.

Thank you for that. And just as a follow-up, a bit on the housekeeping side. Were there any shut-ins in the Gulf of Mexico in April? And what would the oil component be of the 7,000 a day for the second quarter? That's all for me. Thank you.

Yes, Richard, just as housekeeping, there were no shut-ins in April. The oil mix is about 80%.

Okay. Thank you.

Thanks.

Our next questions come from the line of Neil Mehta of Goldman Sachs. Please proceed with your questions.

Thank you guys for the time this morning. The first question is around Tortue. Recognizing it must be very difficult to execute any process in the coronavirus world, but just any thoughts on your ability to ultimately monetize the asset, thoughts around timeline and then the value of the resource?

Yes, Neil. We have made significant progress despite the challenges. I've been surprised at how well the company has adapted to remote work and the strong relationships we've maintained with our partners. We now have reliable virtual communication platforms, enabling us to conduct management presentations and share data effectively. As I mentioned in our fourth-quarter commentary, we've updated our virtual data room with the latest information on Orca, the appraisal of Tortue, and Yakaar-Teranga. We have a comprehensive data room now and can continue engaging with potential partners. That said, the business environment is indeed more challenging. However, Tortue stands out as a greenfield project in a time when companies are focusing on long-term strategies. Its breakeven FOB price is under $5 due to low gas supply costs, highly productive wells exceeding 200 million standard cubic feet per day, and an innovative low-cost midstream solution. This low-cost gas is crucial for attracting interest. The timing aligns well, with the first phase set to start up in 2023 and final investment decisions for phases 2 and 3 planned for post-2023, with gas production expected to ramp up later in the decade. From a strategic standpoint, I believe the project remains relevant. In terms of our price expectations, we aim to maintain a self-funded business, protect our balance sheet, and adjust the equity we sell to meet our objectives. Given these factors, we are making steady progress.

Thank you. And the follow-up, I appreciate the slide six and seven. That's very helpful around maintaining the balance sheet. But Andy and Neal, just if you could flesh it out in more detail, the way the equity has been trading and even the way that credit has traded until recently, would suggest that there's distress in the business. Obviously, what you're describing today is a scenario where you can make your way through the down cycle to participate in the upside. So from where you guys sit, as the leadership of the firm, can you talk about what gives you confidence about your ability to navigate the down cycle with some more detail?

Yes. I'll make a couple of comments and then hand it over to Neal. I believe slides six and seven are important. First, we entered the down cycle with significant liquidity, totaling $580 million. Additionally, we have no debt on our Gulf of Mexico assets, providing us another source of liquidity if needed. This means our liquidity is strong. Second, our cash flow breakeven price is low. For the second quarter and into 2021, our cash flow breakeven is in the low $30s, excluding hedges and working capital. This represents a very conservative outlook. I wanted to highlight the strength of our cash flow breakeven with those two slides. We are currently close to this situation. In preparation, we restructured the hedges to better manage challenging conditions. We have protection on Brent starting from $43 and on HLS from $30. These factors contribute to our overall position, which is what we aim to convey on pages 6 and 7.

Yes. The only thing I would add, Neil, is that we have good visibility on production given our asset base. As Andy mentioned, we're well hedged for the remainder of this year with fixed protection all the way down. We know what's coming into the business. We've taken the steps to reduce costs, which will get us to a very low-cost basis in the last half of the year. We have plenty of liquidity through the RBL and the RCF. Also, we have access to our unlevered sources in terms of the GoM and Mauritania, Senegal, as well as the asset sales that we're working through. If you put that picture together, we feel good about the cash flow generation of the business. Ultimately, we have flexibility, and that gives us comfort around pushing the business forward.

Great. Thanks, Neal.

Our next questions come from the line of Pavel Molchanov of Raymond James. Please proceed with your question.

Thanks for taking the question. Back in February, happier times, I suppose you made the point that as part of the ESG strategy, you will not be doing oil-focused exploration going forward if I remember correctly. I think for 2021 you have plans to explore in Namibia, São Tomé, and Suriname, all of which are oil basins. How should we reconcile those two?

Yes. What I said, Pavel, was that we weren't going to access new frontier positions. I did say in February that we were going to drill out our existing advantaged portfolios. Why? The issue with taking on a new frontier basin today is the cycle time to get it to be drill ready can be three, four, five years. While it’s not only a drain on capital from the business, you're entering a period where I believe you could see continuing demand destruction. We were, however, clear where you've accessed the acreage, shot the seismic, processed the seismic, built the partnerships, and you have drill-ready prospects to go; we're absolutely going to drill them, because you can bring those online if you're successful within a much shorter timeline. We see what we're doing in Suriname, Namibia, and São Tomé to be absolutely in line with that. And we've got the ILX portfolio in the Gulf of Mexico, which has an even shorter time to market. We're creating value for shareholders by ensuring that whatever we do, we've got the ability to seek a payback from the project in a short time.

Okay. Let me follow up with a question about Ghana. Of all the non-U.S. geographies you have assets in, I believe Ghana is the only one that had a full-fledged lockdown. I'm curious if there was any impact on your workforce or just kind of the business in terms of people being able to physically get the work done?

No, you're correct, Pavel. There was a full lockdown in Accra for about three weeks, but it has now been lifted. Fortunately, there was no impact on our operations. We were still able to get our crews in and out without issue. The operator has done an excellent job of managing personnel movements, including some specially chartered flights. Additionally, the two-week quarantine prior to going offshore ensures safety in terms of preventing any potential spread of coronavirus. Overall, it's a positive story of the country doing what was necessary while also maintaining strict measures to avoid contamination from foreign visitors.

Good to hear. Thank you very much.

Sure. All right.

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

Hi. Thank you. I'd like to talk a little about the sell-down process for Mauritania and Senegal. What I'm trying to get at is I realize that the objective function is a self-funded development that minimizes capital out of Kosmos' pocket upfront. In the way the first phase transaction was handled, it was a drilling carry. Would you be amenable to a royalty structure that guarantees a revenue stream in the out years but you’re effectively just a royalty owner on the structure? And would the counterparties be amenable to a structure like that?

Yes. I see, Bob. I think we are exploring all options. The problem with a royalty structure would be that you still need to put the capital in to deliver that outcome. So our preference is to ensure that we build it truly self-funded, which means that you wouldn't naturally gravitate to a royalty structure as a singular mechanism. It could be a mix, but not as a singular mechanism. You could retain some upside from a royalty structure. But clearly, it doesn't deliver the outcome that we're targeting, which is self-funding.

The follow-up to that would be, can you talk about the timing and how the conversations are evolving with the counterparties? Are there any clocks ticking in terms of relinquishing acreage under the PSA or moving toward a final investment decision that keeps you wanting to move this more quickly?

No. The good news is that we've captured the acreage through the development plans that have been submitted. So we're not under any clock from the government in terms of needing continued activity to maintain the discovered resource. We're continuing to be in good conversations with prospective buyers. Ultimately, it comes down to having something that has scale, low cost, and a production build that matches the market. So your second question about any threat from an FID for Phases 2 and 3 at the moment? No. They will come after we've got Phase 1 onstream. What's interesting about Phase 1 is there's actually a significant investment in the infrastructure for Phases 2 and 3. To get the first gas on Phase 1, it’s about $4 billion-ish; of that, $2 billion is on the breakwater and the FPSO. Over 50% of the money going into the first phase is pre-investment for Phases 2 and 3. All of that means that the subsequent phases that follow are very economic, and the timing is not in front of the current buyer. Those attributes make this quite a distinctive project.

Okay. Thank you for that.

Great. Thanks, Bob.

Our next question comes from the line of James Hosie of Barclays. Please proceed with your question.

Hi, Andy, Neal. Thanks for your time. Can I ask you about your final slide on preparing for the future? At this stage, how likely are you to resume exploration drilling in 2021, both in the Gulf and elsewhere? Are there any particular conditions you need to attach to when you could start? Also, when does restarting exploration rank in terms of capital allocation priority versus resuming the dividend?

Yes. Great questions, James. As we look at 2021, you can maintain the business with minimal decline in a sort of sub-$35 Brent world. First priority is to ensure that we maintain the balance sheet. So as we start to think about expenditure beyond that maintenance CapEx, we have to be confident that we can see a trajectory for gearing getting comfortably below two. If you can see that trajectory getting to that place, then you can enter a discussion of incremental spend. It has to be limited to high-quality opportunities, and I think it has to be a few. Our objective in the frontier program is to look for ways we can get that expenditure in 2021 carried. We're currently having a very good process to get the right equities to enable us to do that. In the Gulf of Mexico, the timing and equity levels will dictate how we can slot in the wells. So the big point is that first thing we want to do is strengthen the balance sheet. When we see ourselves comfortably below 2 on the trajectory, then we can begin to debate alternative forms of capital allocation and where we would put our own dollar, versus someone having an opportunity for a carry. We've already got carry on the São Tomé well from Shell for drilling in 2021. The objective is to find equivalent mechanisms for Namibia and Suriname.

And what about the dividend resumption?

I think for the dividend resumption, we've got to genuinely get the balance sheet back in the right place. From a shareholder perspective, the first thing they want to see is the dividend back in the right place. Then you can enter a debate of whether an incremental well in the GoM outweighs the dividend. We're not in that place today, and we need to get back to a position where that dividend is sustainable and we are not in that position today. That’s an important debate to come. We want to ensure we have the opportunity set ready to move forward, but it has to be with a fit and healthy balance sheet.

Okay. Thank you.

Great. Thanks.

Our next questions come from the line of Al Stanton of RBC. Please proceed with your question.

Yes, good evening, guys. I had two questions if I may. I think you've covered most of the ground. First of all on Tortue Phases, 2 and 3, you've left me with the impression that they are very much in series rather than in parallel, and there'll be no spending on Phase 2 ahead of first gas in Phase 1. Should we time them that way? And then the second question is on exploration. I'm curious whether you just want to reduce your expenditure or if you would rather diversify a little bit, and would you consider swapping out of acreage in Namibia with some of your neighbors? Is there a clock ticking to do your farm-out before or after the Venus well in Namibia?

All right, Al. Yes. I think you answered the first question yourself, and your answer was very good. I agree with everything you said on the phasing on Tortue. Phase 2 will follow Phase 1 when Phase 1 is up and running. Yes. So you're absolutely accurate. On the exploration portfolio, I think Namibia is very interesting. We see a lot of industry interest in it. As you point out, there is the Venus well. The Venus well is Cretaceous, but it's outboard of where we are, and we see it as an independent test. It’s got a different charge. So fundamentally, we don't see it as a dependency on our objectives for the Cretaceous in PEL 39, which are up-dip of the Venus well. There's no clock ticking to get that done. Given the current circumstances, I'm not sure what the timing of the Venus well is. But there’s no linkage on that, and no, we don't see it as being a swap. We actually like the acreage we have in Namibia and want to participate.

Fair enough. Thank you.

Yes, all right. Thanks, Al.

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

Hi. Just a quick one on the operating cost savings. Obviously not much of that came through during Q1. So just interested to understand, I think that implies a roughly 20% cost reduction on a unit basis for the rest of the year. Just interested to get a bit more color on where those savings are coming from. And also to understand how sustainable they are, whether we should expect them to start creeping back up as activity comes back into the portfolio?

Yes. Good job. You're dead right on the phasing of it. There are two elements going on: a piece which is fundamentally sustainable. It’s about restructuring contracts and changing the way we do business in both Ghana and Equatorial Guinea. In Equatorial Guinea, we've had the assets for a while. The aim initially was to put management systems in place and unlock the resource. We've progressed significantly and have a better understanding that will lead to more efficient operational costs moving forward. The next phase involves optimizing our operations. As a sustainable measure, we want to select the best locations as part of refining our ESPs, which will promote higher success rates. In Ghana, it’s about high-grading activity. What will sustain this into 2020 and beyond will be a fundamental change in some work practices. Overall, it's a mix of both where some activities have been deferred to create the savings in 2020. But there are sustainable changes which will keep operational efficiency moving forward. I believe we will be cash flow breakeven in the low 30s, with minimal production decline. This is an opportunity to drive efficiency into the business, making it not just a one-off, but a sustainable change.

Okay. Thanks a lot.

Okay. Thanks, James. Appreciate it.

Thank you. We have reached the end of the question-and-answer session. I will now turn the call back over to management for any closing remarks.

Thanks everyone for joining us today. If you'd like to get hold of us for any follow-up questions, please do over e-mail or on call. Thank you. Thanks very much.

This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.