Kosmos Energy Ltd. Q3 FY2023 Earnings Call

Good day, everyone. Welcome to Kosmos Energy's Third Quarter 2023 Conference Call. As a reminder, today's call is being recorded. At this time, let me turn the call over to Jamie Buckland, Vice President of Investor Relations at Kosmos Energy. Thank you. You may begin.

Thank you, operator, and thanks to everyone for joining us today. This morning we issued our third quarter earnings release. This release and the slide presentation to accompany today's call are available on the investors page of our website. Joining me on the call today to go through the 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 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. Thank you for joining us today for our third quarter results call. Since our last call, we continue to make good progress on our strategic objectives with several important recent developments. I'll talk about these in more detail in today's material, as well as giving an update on the quarter. I'll then hand over the call to Neal to take you through the financials before wrapping up the presentation and opening the call for Q&A. Turning to slide three, at Kosmos, we're pursuing a clear and consistent strategy to provide the world with the energy it needs today, while working hard to bring down the carbon intensity of our portfolio and providing the world with the cleaner energy it needs for the future. To achieve this, we're executing a differentiated set of projects that are focused on advantaged, low-cost, lower-carbon oil and advantaged, low-cost, lower-carbon gas. This slide shows the progress we are making. First, on production growth, we set a target to grow our production in the second half of 2022 by around 50% to the second half of 2024 from three core development projects, Jubilee Southeast, Tortue Phase 1, and Winterfell. In the third quarter, we brought the first of the development projects, Jubilee Southeast, online, which increased Jubilee gross production to around 100,000 barrels of oil a day, up almost 50% from the production levels seen in the first half of the year. I'll talk more about Jubilee in the following slides, but we're pleased with the progress being made. We have more expected in the coming months. Second, our two remaining developments continue to progress. On Winterfell, the partnership recently completed the first production well, an important milestone for the project. At Tortue, the hub terminal was completed and handed over to operations, and we have re-contracted the subsea work scope, which was previously on the critical path. Third, in recent weeks, we have deepened our portfolio of high-quality, advantaged, oil and gas investment opportunities. In October, we announced a discovery with the Tiberius well in the Gulf of Mexico, and today we announced that we had assumed operatorship and increased our working interest in the world-scale, Yakaar Teranga Fields in Senegal, subject to customary government approvals. We're excited about both these projects, as we expect them to create the next leg of value growth for Kosmos beyond 2024. More on both of these later in the presentation. The chart on the right of the slide is one we've shown before, which has been updated for these developments. It shows the progress we're making against our longer-term strategic objectives. The first meaningful step up in production was in Q3, with production rising 17% from the second quarter, with further upside potential from Jubilee, and then the planned start-up of Tortue Phase 1 and Winterfell in 2024. We expect this growth to drive a material step-up in pre-cash flow as these projects are delivered, enabling the Company to further de-lever and ultimately to fund shareholder returns when leverage falls below our target level. Looking beyond that, we have a deep hopper of high-quality operated and non-operated growth options across both short-cycle oil and long-dated gas that will continue to differentiate Kosmos from our peers over the coming years. We plan to balance the pace and working interests of these future projects to ensure we can manage our growth and generate material pre-cash flow. Turning to slide 4, which looks at the quarter's operational highlights in more detail. Net production around 68,000 barrels of oil equivalent per day was in line with guidance, and an increase of approximately 17% versus the previous quarter due to the Jubilee Southeast startup. Jubilee produced an average of around 96,000 barrels of oil per day gross during the quarter, an increase of over 30% versus the previous quarter, with three producer wells coming online across Jubilee Southeast and the main field. While we've been successful in production wells, there were some delays in providing the necessary water injection, which has had a knock-on impact on near-term production, which I'll talk about in more detail. On TEN, production in the quarter of around 15,000 barrels of oil per day was in line with expectations and lower than the previous quarter due to a planned two-week shutdown. While working on the maintenance of the FPSO, we modified the gas train, and the rerouted gas is now being re-injected into the Entome field to support reservoir pressure and maintain production levels. This has resulted in around a 75% reduction in flaring, a major step towards our goal to eliminate routine flaring by 2026. The amended TEN plan of development and combined TEN and Jubilee gas sales agreement has been submitted to the Ministry of Energy for approval. In the interim, we've extended the Jubilee gas sales agreement through the end of November at a price of $2.90 per MMBtu. Next to all Guinea, gross production averaged around 25,400 barrels per day during the quarter, in line with expectations. The infill drain campaign is expected to start this quarter with a rig now in country. Ahead of the three planned infill wells, the rig is planning to carry out two workovers on the Sabre field, which should boost the year-end production rate before the new wells start coming online around the end of the first quarter. The operator expects the workover and infill campaign to add around 10,000 barrels of oil a day to gross production. Post our infill campaign, the Akeng Deep infrastructure-led exploration well is on track to spud early in the second quarter of 2024. In the Gulf of Mexico, net production was approximately 15,700 barrels of oil equivalent per day, ahead of guidance due to lower-than-anticipated storm activity. At all jobs, the subsea pump project continues to make good progress and is expected online in 2024. Kodiak production continues to perform in line with expectations and will be supported by the workover scheduled for mid-2024. On Winterfell, the partnership continues to make good progress. The rig arrived in the third quarter and we have successfully completed the first of the three wells, an important milestone for the project. First oil is on track for the end of the first quarter of 2024. Post-quarter end, we announced the discovery of the Tiberius well in Keighley Canyon, which I'll talk about in more detail later in the presentation. Turning to slide five, the start-up of the Jubilee Southeast development has driven a material uplift in production at Jubilee. Three producers were brought online during the quarter, taking gross production up to around 100,000 barrels of oil per day, a level not seen for several years. As I mentioned earlier, water injection rates in Q3 were lower than planned. This is partly due to lower uptime on the water injection pumps and partly due to the delay in bringing two water injection wells online, which were originally planned to start in Q3. Post-quarter end, we did bring these two water injection wells online and are now ramping up water injections to support the elevated levels of production. The partnership had previously assumed we would farm out the drilling rig in Ghana in the fourth quarter. This was to allow time to assess our initial three wells in Jubilee and high-grade the next set of wells. However, given the success in our well selection and drilling execution, we are now planning to accelerate an additional producer and water injector into the fourth quarter from 2024. This should allow for continued Jubilee production growth into 2024, with both wells expected online early in the new year. The acceleration of this activity results in an increase in 2023 CapEx of around $30 million net to Kosmos. However, the expected returns are very high with quick payback. As a result of the lower water injection rates, the operator is now forecasting that Jubilee will produce around 85,000 barrels of oil per day gross for 2023, down from its previous estimate of 90,000. This decrease is driving our lower production guidance for the year and is expected to result in one less 2023 cargo from Jubilee than previously forecast. It is just a timing issue, and our view of 2024 production is unchanged, with a shortfall in 2023 expected to be made up in 2024. While there are always challenges in bringing a new project online and optimizing overall field performance, we are excited about the future potential of Jubilee and are continuing to work well with the operator to maximize cash flow from the field. Turning to slide 6, this is a slide we have used over the years to provide a status update on the key work streams on the Tortue LNG project. On the hub terminal, construction is finished and handover to operations has been completed. Within the quarter, we also made important progress on the subsea work scope, which was previously on the critical path to first gas. Following the performance issues with the previous pipeline vessel, the subsea work has been re-contracted. All Seas and Saipem have now been brought in to finish the deepwater pipeline and the infill flow lines, with work expected to start in early December and finish in the first quarter of 2024. On the FLNG, sail away of the vessel is expected later this quarter, with arrival expected early next year. The partnership is currently working with Golar to identify ways to advance commissioning of the vessel. The critical path to first gas on phase 1 of the Tortue project is now through the arrival, hook-up and commissioning of the FPSO. The delivery of gas in the first quarter of 2024, as signaled by BP, the operator, in its third quarter results last week, depends on the execution of this work stream, which has the potential to slip into the second quarter of 2024. Turning to Slide 7, beyond these key projects, we have been focused on defining the next set of growth projects for the Company, targeting high-quality, advantaged oil and gas investment opportunities with operating control. Today, Kosmos announced that it increased its interest in assumed operatorship of the Yakaar Teranga field in Senegal, subject to customary government approvals. Yakaar Teranga is a world-scale gas resource, with approximately 25 trillion cubic feet of gas in place, and was the largest discovery in the world in 2017. It is advantaged gas with negative CO2, located approximately 75 kilometers from the Dakar Peninsula, enabling a low-cost development. Kosmos's working interest in Yakaar Teranga will increase to 90%, with Petrosen holding the remaining 10%. Our aim is for Petrosen to participate as an equal partner in the full value chain with a greater working interest. Kosmos is working with Petrosen and the Government of Senegal on an innovative development solution, prioritizing cost-competitive gas to Senegal's rapidly growing domestic market, combined with a floating LNG facility, targeting exports into international markets. Petrosen's Director-General stated in today's press release that Yakaar Teranga is a strategic project and supports the Plan Senegal et Merchant, which aims to provide affordable, abundant and cleaner energy for the country. Kosmos and Petrosen plan to evaluate partnership strategies with the objective of creating an aligned partnership, possessing the necessary upstream and midstream expertise, coupled with access to cost-effective financing and access to international LNG markets. Turning to slide 8, last month Kosmos announced a successful discovery of the Tiberius infrastructure-led exploration well in the Gulf of Mexico, where Kosmos is operator and has a 33.34% interest alongside Oxy and Equinor. Tiberius is a four-way structural trap in the outboard Wilcox trend, which was drilled using the partnership's ocean bottom node seismic. This modern seismic technology generates an enhanced image of the prospect, which helps refine the location of the exploration well and de-risk the future development program. The image on the slide shows the Tiberius exploration well, which was drilled on the crest of the structure in the central fog block, with additional upside potential in the neighboring fog blocks. Technology improvements like OBN seismic are a game changer for the industry and allow us to have a much better understanding of the subsurface pre-drill. The well discovered a net oil column of around 250 feet; we were able to conduct an extensive logging program, recovering multiple fluid samples and sidewall cores. Initial analysis suggests a fluid quality similar to other nearby discoveries in the Wilcox trend. The fluid samples and cores have been sent to the lab for analysis that will enable us to better understand permeability and viscosity, which are key to confirming well flow rates in a future development. We are now working with our partners on the planning of a phased development scheme, which targets first production in around two years. The preferred host platform would be the Oxy-operated Lucius facility, located six miles to the northwest of the discovery, with key commercial terms of the production handling agreement agreed pre-drill. Success at Tiberius validates our proven base and infrastructure-led exploration strategy, targeting low-cost, lower-carbon, short-cycle oil opportunities to complement our deep hopper of long-dated, lower-carbon gas opportunities in West Africa. I'll now hand over to Neal to take you through the financials.

Thanks, Andy. Turning to Slide 9, production for the quarter was in line with guidance. Gulf of Mexico was slightly ahead of expectations, offsetting the lower-than-anticipated production from Jubilee that Andy talked about earlier. OpEx was in line with guidance and higher quarter-on-quarter as a result of the 110 cargo that we have in the year falling in the third quarter. As a reminder, TEN OpEx, which is higher than the rest of the assets in the portfolio, is recognized when we have the listing. The guidance slide in the appendix shows OpEx falling down to normalized levels in the fourth quarter. CapEx is at the higher end of our range that did include the extensive success case evaluation program associated with Tiberius that Andy mentioned on the previous slide. Turning to Slide 10, during the third quarter, we saw a continued improvement in our financial position with leverage lower as a result of both increased EBITDAX and reduced net debt. We repaid the Gulf of Mexico loan within the quarter, an important step towards simplifying the capital structure. Following the pay-down of the GoM term loan and the RBL amendment in October, Kosmos has no scheduled debt maturities until 2025. We've talked about reaching a cash flow inflection point as production rises and capital falls as our growth products are delivered. Our near-term priority with any cash generated is debt pay-down to bring leverage towards our long-term target of less than 1.5 times at mid-cycle oil price. With our floating debt now more expensive than our fixed debt, we are prioritizing the RBL, which allows us to maintain and grow available liquidity over time. We anticipate that we still have a couple of quarters of higher CapEx ahead of us completing Tortue and Winterfell, after which, we expect debt reduction to accelerate as free cash flow ramps up meaningfully in the second half of next year. We continue to make good progress on our hedging targets for next year. In line with previous practice, we are looking to hedge around 50% of the following year's production, which allows us to fund the capital plan for the year. Using collar structures, we currently have around one-third of next year's production hedged at an average floor of $69 per barrel with an average ceiling of around $94 per barrel. Looking forward at our 4Q guidance, which is included in the appendix, there are a few points I wanted to flag. Full year 2023 production guidance is now expected to be approximately 63,000 barrels of oil equivalent per day due to the delayed start-up of Jubilee Southeast and reduced water injection levels. We raised full year GoM production guidance due to the back of storms, however, Q4 GoM production is lower than the third quarter due to both planned and unplanned downtime, which is expected to be largely complete this month. We also now expect total CapEx for the year to be around $800 million, reflecting the accelerated drilling in Jubilee in the fourth quarter and the increased activity at Tiberius following the successful well result. We still expect a step down in CapEx into 2024, particularly in the second half as we finish our capital spend on our three key projects. With that, I'll now hand it back to Andy to close today's presentation.

Thanks, Neal. Turning to Slide 11 to conclude today's presentation. I started today's presentation talking about the importance of having a clear and consistent strategy. So far in 2023, Kosmos has achieved multiple important milestones in the delivery of that strategy, which centers up well for further delivery in 2024. While I don't intend to dwell on all of the bullets on the slide, I want to focus on some key themes. Kosmos has a differentiated growth story, which we've started to deliver with the start-up of the Jubilee Southeast project in Ghana with more growth expected to come in 2024. We continue to progress our other development projects at Tortue and Winterfell, which are expected to drive another material production uplift in 2024 with Tortue providing further portfolio diversification both geographically and by adding a new multi-decade LNG revenue stream once online. We are also expanding our medium- to long-term growth hopper with high-quality operated investment opportunities across both advantaged oil and gas through Tiberius and Yakaar Teranga. And finally, as we deliver increased free cash flow, we will prioritize debt pay-down until we reach our target leverage level, which is when we plan to look at shareholder returns. The Kosmos management team is excited by the future opportunity set in front of us and energized to leverage growth in value for our shareholders. Thank you. I'd now like to turn the call over to the operator to open the session for questions.

Thank you. Our first question comes from Matthew Smith with Bank of America. Please proceed with your question.

Hi there, guys. Thanks very much. A few questions from me, if I could. The first one would be on Tortue CapEx. I think at the last earnings call, we noted that there is an element of uncertainty over the phasing and also I guess, the amount of additional CapEx to be incurred from the new subsea contractor. I think if I heard correctly, you didn't sort of note that as a reason for the increased 2023 guidance. So should I take it that there might be some deferred CapEx from this change to 2024? That would be the first question. And the second one, if I could, on Tiberius, I appreciate there's further analysis to be done here, but you're able to just remind us of the pre-drill resource estimate that you had there, and where you feel like may have come out versus that, if you're willing to comment. And then lastly, squeeze a third on, if that's okay, that's just whether you can add anything on Tortue Phase two at this point. And I suppose the question that some investors would ask is, is there anything that we should read across from BP and their exit from Senegal in terms of their enthusiasm on the expansion at Tortue? Please.

Yes. Thanks, Matt. Why don't we split-up with three questions. I'll let Neal talk about the Tortue CapEx. I'll pick up Tiberius and then talk about Phase Tortue.

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

Okay. On Tiberius, Matt, we're really encouraged by the initial exploration well. As we talked about in the material, we targeted the central fault block, and we believe that we probably in that central fold block de-risked around about a third of the potential that we had pre-drill. In terms of its development, we've done a pretty extensive logging program, which was part of the additional CapEx that we spent in 2023. So I think we've got a really good set of sidewall cores and fluid samples, which gives us encouragement around being able to move ahead quickly with the development. We've obviously got all that analysis back from the labs. In the interim, we've already kicked off actually the planning of the tieback to Lucius. I think within a week actually after the discovery was announced, the team had already put out the bid documents to build the subsea layout. So I'm actually quite pleased about the pace at which we're moving and the fact that we have with that initial fault block a significant increment to production for Kosmos. And we'd anticipate that coming on within a couple of years. So again, sort of good progress. And I think the subsea architecture will be laid out. There will be a single flow line initially. But with the addition of maybe two, maybe three additional wells from the additional fault blocks that we showed in the material. On Tortue Phase 2, I think sort of step back and actually sort of think about how it links into Yakaar Teranga; I'm sure there'll be more questions around Yakaar Teranga. But we have a very distinctive growth portfolio at Kosmos of advantaged low-cost gas adjacent to Europe. Our objective now is to phase the development of that in a way where we can not only grow but return capital to our shareholders. The first step of that is the completion of Tortue Phase 1; obviously, we've given you the forward timeline for that. With control now of Yakaar Teranga, I think we can then position that as the next building block in that sequence. And I would imagine that Tortue Phase 2 could sit behind that. So we have a phased set of developments now where you're building out around, I don't know, 2.5 million tonnes of LNG, but doing it in a way where there's control now with an operated project and doing it in a way where you're limiting the capital outlay so that you have a credible and manageable capital profile. So we're pleased with what the future looks like now, and we believe this is an important source of value growth for shareholders.

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

Good morning, Andy and Neal and the rest of the Kosmos team there. Andy, I wonder if I could just pick up maybe just about where you left off. You said you're sure there'd be more questions about Yakaar Teranga, and that's what I'd like to ask about. I guess there's two parts to this. One, can you just give us the bigger context of where Yakaar Teranga sits in your strategy? How you chose to develop Tortue over Yakaar Teranga first? And where Yakaar Teranga kind of sits in your mind as far as the priority in your overall portfolio? And also, as part of that, I recognize that different companies have different priorities and viewpoints. But how would you make the case for the value of Yakaar Teranga to Kosmos for people looking at BP and saying, well, if BP just walked away from this, why is it valuable?

Yes. Thanks, Charles. As you say, all good questions. And maybe I'll start at the end and sort of work back. Yakaar Teranga is a distinctive gas resource. It has low CO2 content. It is close to shore, 75 kilometers of the Dakar Peninsula. And from both a domestic and an LNG perspective, it has a strong market pull. There's a need to replace heavy fuel oil as a source of power in Senegal. And clearly, Senegal is one of the closest new sources of LNG to Europe. You then sort of say, well, okay, how does that fit with various companies' strategies? And I think to me, we're at a point now in the life cycle of the energy transition where different companies are placing different bets. And I suppose nothing was clearer on that than the two big announcements over the last couple of weeks here in the U.S. And I think that strategic context actually influences the way that people look at various investment opportunities. As I said, I think Kosmos believes that this gas is distinctive and is well described. Well described, what do I mean by that? I mean that in Tortue, we drilled four exploration and appraisal wells and a DST that enabled us to calibrate the seismic that led to four successful development wells. It's a huge amount of subsurface data that directly correlates to Yakaar Teranga, where we have three exploration and appraisal wells. So we believe we have a well-described subsurface and are confident in its ability to deliver a very commercial project. We also believe that's a low-cost solution to development, given the geographic situation close to the Dakar Peninsula. Now, I would say that BP doesn't have the same view. And I think it’s not ultimately; I think it's been influenced by the strategic context of where they are allocating capital and their ability to envisage a commercial development. So I think this is a great opportunity for the company. We've inherited our share. We started at 90%. Our objective is for Petrosen to build their share so that they are an equal partner with ourselves and whoever comes in. We'd anticipate, therefore, 25% to maybe 33% shares. We've got work to do now on fully describing the concept that we laid out in the material, and we've got work to do to bring in a partner and underpin the financing. But with all of that done, this is an incredibly commercial opportunity, but it has to be done in a low-cost way that fully leverages all of the subsurface knowledge. So that's the essence of the difference. But I see it as a huge opportunity for the company. And look, as you know, it's not without precedent. So you're very familiar with the Gulf of Mexico. You go back to something like Shenandoah. I think two large companies gave it up. A smaller company now has it and is now executing a very competitive scale project now. So those things have many precedents in the industry. I think the energy transition has simply made those differences more acute, and therefore, the opportunity is greater.

That's helpful elaboration, Andy. If I could revisit your prepared comments, you mentioned the two additional wells you plan to drill at Jubilee and Jubilee Southeast. I want to confirm my understanding. You were initially going to farm out the rig, but then decided to drill these two wells. One is at Jubilee and the other is at Jubilee Southeast. Does this initiative lead to a higher plateau, or are these wells primarily aimed at reducing volatility around that plateau in anticipation of any future water injection? Could you clarify this for us?

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

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

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

Yes. Bob, always good questions. The porosity was absolutely in line with expectations, yes. So is, as you're well aware, the next step then is to do the labor to actually confirm permeability rather than it be a read-across in porosity and then to finalize the fluid data with viscosity and all of that, we can then optimize the completion design. So yes, everything is in line with what we expected. It's in line with analogs that are from adjacent fields. So sort of so far so good. And as I said, we're moving ahead with a really cost-effective development plan with the tieback to Lucius. Neal, do you want to pick up on the capital of that?

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

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

Good morning, team. Thank you for the update today. My first question is about capital spending. Can you explain the transition from your previous capital expenditure guidance to the current one? How much of that is related to projects versus inflation? As you consider 2024, even though you don't have all the figures, how should we approach this fairly, to the extent you can provide that?

Yes. Great. I'll have Neal pick that up. Neal?

So yes, on 2023, I think the two biggest pieces were really around the Tortue acceleration that Andy talked about with that being $30 million and about $20 million of it was sort of the additional drilling, sort of additional two wells or 1.5 wells in Ghana at Jubilee. There's $30 million on that and then the $20 million was really additional drilling at Tiberius post the success and the extensive sort of logging campaigns. So that sort of took us from sort of we were trending towards the high end of the range, and that basically moved us from $750 to $800. So that's kind of the acceleration of that sort of what we call value-adding activity into '23. If I look sort of going forward, I think we've talked about sort of a normalized CapEx, right, post our three big projects of, call it, $300 to $350 of maintenance and $200 to $250 of growth, which sort of gets you around $550 of steady-state CapEx for the company. 2024 is a bit of a transition year because we still have the completion of Tortue and Winterfell and the residual CapEx related to those as well as the sort of steady-state CapEx. So again, we haven't given 2024 guidance yet. We'll do that in February. But I expect that 2024 will fall in between the two, where we are sort of this year and then sort of the steady-state level as we finish those two key projects.

The follow-up is just around Phase I and maybe you can get us a little bit more clarity around the work stream that you highlighted, which has the potential to slip into the second quarter. But as of now, you're still on track for first gas in the first quarter can you get us into the field and give us more granularity, so we understand what specifically you're talking about?

Yes, if you review the key work streams, we have completed the hub terminals and handed them over to operations, which was a major milestone this quarter. The FLNG vessel will be arriving at the hub terminal shortly, leaving Singapore this quarter and arriving at the site at the beginning of next year, so it’s not on the critical path. A significant achievement this quarter was finalizing the subsea architecture and re-contracting with dual-seas and Saipem. That work will start early next month, with a clear plan to complete by the first quarter, and I'm feeling positive about that. Currently, we are facing an issue with the FPSO, which is external to the vessel. The vessel has fair leads used for permanent anchoring on location, which suffered damage during the voyage to the East Coast of Africa. The vessels are presently offshore at Durban, and we are working to gain access to the port to fix the fair leads. This situation introduces some uncertainty regarding timing but is not a major issue. Nevertheless, there is ongoing work on the FPSO and all the topside elements, allowing us to proceed with pre-commissioning efforts. This will help expedite the process when the FPSO arrives on site. As with any large projects, it’s about integrating different components, and I feel we made good progress in Q3. We have important milestones to achieve in the remaining part of this quarter and into the first quarter of next year. Our primary focus, in collaboration with the operator, is to ensure the FPSO is in position to deliver first gas. That summarizes our current update.

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

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

Thank you for the questions, Mark. I believe I touched on this earlier, but I want to emphasize that we have a well-defined development plan in place. We've been collaborating closely with Petrosen on this initiative, which is not only commercially viable but also aligns with the country's development goals concerning domestic gas supply and potential revenue from LNG exports. The plan includes approximately 130 million standard cubic feet per day dedicated to domestic gas. Initially, the power capacity may not fully utilize that amount, but it is expected to increase over time. In a steady state, we anticipate an LNG project producing about 2.5 to 3 million tonnes, translating to a gas supply of around 400 to 500 million standard cubic feet. This gives you an overview of the project and the number of wells needed, which have a potential similar to GTA. Regarding the question about why BP is not involved, this project was developed with Petrosen. BP’s decision to step back allows us to proceed. They will focus on completing Phase 1 of GTA, creating opportunities for us. The project structure typically sees us holding 25% to 33% in our current projects, and I expect this to be similar. The aim is for Petrosen to achieve an equivalent stake with any new partners. If two parties are involved, it could be 25% each, while a single party could lead to a third for each. We have work ahead to establish partnerships, which is crucial for us and Petrosen, and to secure funding necessary for progress. There is much to be done, but I believe this project enjoys strong government support and offers a well-outlined development plan that is competitive in terms of cost. We need to work towards realizing all these aspects.

Okay. And on that development concept, can we just push a little bit harder on it? So Tortue, for instance, there's a very large breakwater being built and a lot of the Phase I was sized with a view to a follow-on Phase 2 FLNG being added. Could you explain what's different in terms of Yakaar Teranga, maybe in terms of its location offshore that might make it an easier or quicker international phase?

Yes, thank you for that insight, Mark. To clarify, we do not foresee the need to construct a breakwater. We are confident that there is a design that allows an FLNG vessel to be positioned at that site, considering various metocean conditions, which would help avoid the high costs associated with building a breakwater. Our focus is on being innovative regarding the demand solution we've discussed, and we believe we have undertaken considerable work to enable us to advance our concept.

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

Yes. No, no, you're right, Mark, in concept, that's the proposal. About half a rig year, I would say, on Jubilee in '24. And again, I think it was Charles' question around the objective is to build the well capacity so that we've got the sort of reserve capacity beyond the facilities limit. And together with reliable water injection, you then have the ability to sort of hold the plateau at that level. And then clearly, you then follow up with additional wells as that well capacity becomes tested. But so we're on a good track now to sort of continue to move forward with Jubilee as we add those wells and fundamentally underpin the new wells with reliable water injection. So the increase in Jubilee is well described in terms of the forward activity set.

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