Earnings Call Transcript - KOS Q1 2024

Operator, Operator

Good morning, everyone, and thank you for joining the Kosmos Energy First Quarter 2024 Earnings Conference Call. Please note that this conference is being recorded. I am pleased to introduce your host, Jamie Buckland, Vice President of Investor Relations.

Jamie Buckland, VP Investor Relations

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

Andrew Inglis, Chairman and CEO

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

Neal Shah, CFO

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

Andrew Inglis, Chairman and CEO

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

Operator, Operator

Ladies and gentlemen, we will now be conducting a question-and-answer session. We will wait for a moment while we poll for questions. Our first question is from David Round with Stifel.

David Round, Analyst

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

Andrew Inglis, Chairman and CEO

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

Operator, Operator

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

Charles Meade, Analyst

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

Andrew Inglis, Chairman and CEO

I love questions where you've already answered the question. I think we've made significant progress over the past four months. The FLNG vessel is now at the hub terminal, and the connection work is in progress. The last equipment related to the FPSO will arrive on location in just a few days. The next step will be mooring; while some mooring has been completed, we will begin working on the topsides for commissioning. The hookup of the risers is crucial for introducing gas. Once gas enters the FLNG vessel, we can start the production process leading to our first cargo. All major subsea equipment is in place, and the final tie-ins are progressing as planned. We're pleased with the progress. The FPSO hookup and commissioning remain critical. Having the vessel on location has allowed us to begin this process. I believe we're on track to meet our commitments and have achieved our milestones so far this year. Getting the FPSO on location is a significant step, and we'll provide updates next quarter as we move past this stage, particularly with the riser hookup allowing us to start gas flow.

Charles Meade, Analyst

Got it. I would like to know if you could provide more details about the BirAllah exploration. I'm curious if this situation is similar to how Yakaar Teranga developed, where BP may have opted out, yet you still have plans in place. Can you share what the current status is?

Andrew Inglis, Chairman and CEO

No, good question, Charles. If you take a step back, it's important to highlight that both Yakaar Teranga and BirAllah are set to scale discoverable gas resources, with in-place numbers estimated at around 25 Tcf for Yakaar Teranga and approximately 30 Tcf for BirAllah. We consider this gas advantageous due to its negligible CO2 emissions and proximity to Europe. With BP no longer associated with either license, we can now collaborate independently with the national oil companies of both countries on innovative and cost-efficient schemes that were not proposed by BP but are likely to yield attractive returns for both the project partners and the governments. We have secured the license for Y2 and obtained the extension needed to advance this work. We're currently in discussions with the Mauritanian government regarding how we can assist in the development of BirAllah, which they are eager to push forward. We believe we possess both the subsurface knowledge and the concepts necessary to make this an appealing project. There has also been significant interest from third parties in these assets. Our aim is to work with PETROSEN and YT, SMH, and BirAllah to create an equitable partnership that ensures proper representation, which we see as beneficial for both governments. We're actively seeking a partner that can help facilitate the project's development. You've captured our situation well, and we are motivated to pursue that agenda.

Operator, Operator

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

Bob Brackett, Analyst

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

Andrew Inglis, Chairman and CEO

Yes. I believe that while dealing with the fair leads can be challenging, it has ultimately provided us with the opportunity to spend an additional three months in January advancing the work on the topsides. I feel we have a solid understanding of the project's scope. You're correct to raise the question regarding the FPSO, as there's still a significant amount of work ahead. However, we are clear about the work involved and have established plans to carry it out effectively. I am confident about our progress. While nothing is finalized until it is complete, the extra time we've gained for the topside work is certainly beneficial.

Bob Brackett, Analyst

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

Andrew Inglis, Chairman and CEO

I believe the government is actively seeking a way to advance the project constructively. While they could issue bids in the open market, this approach introduces uncertainty regarding partnerships. It risks engaging a new partner who may not possess the subsurface knowledge we have. There seems to be a real intent to collaborate with current partners who understand the field. Our expertise includes insights from two wells in BirAllah—Mastodon on Orca—as well as knowledge from all appraisal wells on GCA and the development wells on GTA, including the calibration of seismic data against that knowledge. We contribute substantial expertise. Regarding development, it's essential to find cost-efficient subsea layouts, as this is where we've observed significant cost increases within the industry. By placing the FLNG vessel directly over the field, we can streamline the architecture and, in turn, reduce pressure drops, leading to better recovery rates. Without delving too deeply into engineering details, those are the strategies we are exploring in YT and the concepts we plan to bring to BirAllah.

Operator, Operator

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

Matthew Smith, Analyst

I have a couple of questions. The first is about Ghana, specifically the Jubilee field, and how it performed in the quarter. Can you provide any insights on how it fared compared to your expectations and what that indicates for your full year outlook? Additionally, you mentioned bringing an extra oil producer online in April; could you share details on that and what exit rates have looked like since the quarter ended? It would be helpful to understand how Ghana began the year and what confidence that gives you for the remainder of the year. I'll leave it at that for now and return with my second question later.

Andrew Inglis, Chairman and CEO

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

Matthew Smith, Analyst

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

Neal Shah, CFO

Yes, that's correct, Matt. The projected cash flow is between $100 million and $150 million per quarter once Winterfell and Tortue are operational at a quarterly rate. This is based on oil prices around $75 for Brent and $70 for WTI. Generally, the price sensitivity should remain about the same. For every $5 change in oil prices, we expect around $100 million of free cash flow for the year. Therefore, at $80 Brent, there would be a variance of about $25 million each quarter, leading to a total of $200 million for the year and approximately $50 million per quarter at $85 Brent. We currently have full access to the upside, allowing us to fully benefit from these price changes.

Operator, Operator

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

Mark Wilson, Analyst

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

Neal Shah, CFO

Yes. We quote on an entitlement basis similar to our quarterly production reporting. However, sales will be managed in a manner akin to our operations in Ghana and EG, driven by cargoes. Overall entitlement production will depend on the LNG going into the FLNG vessel and the condensate entering the FPSO as entitlement volumes. Sales volumes will ultimately be linked to cargoes, just as we do with cargoes in Ghana and EG.

Mark Wilson, Analyst

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

Andrew Inglis, Chairman and CEO

Yes, as I mentioned, we are on track to achieve our goals, specifically delivering the expected outcomes. We need to assess the additional benefits from the infill wells. We are in the process of completing and optimizing the system for the new well configuration. This is a crucial aspect that we need to get right. The second important factor is maintaining reliability and ensuring a strong start to the year, which we need to sustain. The main focus is on voidage replacement and managing the distribution of water. Since we are adjusting the offtake patterns with the introduction of new wells, optimizing these patterns is essential. We have a lot of work ahead to achieve our objectives. The initial step is to get the remaining well drilled and operational, and we have one more to complete. There is clearly work to be done, and we will keep you updated on our progress throughout the quarter.

Mark Wilson, Analyst

That’s my last question. I understand that for Yakaar Teranga, you're focused on completing the pre-FEED before exploring the market for farm-outs. Is that an accurate summary?

Andrew Inglis, Chairman and CEO

It is absolutely, Mark. If we discuss the future, which is what your question was about, we are currently completing the pre-FEED, expected to be finished by the middle of the year. With the pre-FEED, we will validate the technical concept, and we will have a cost base to discuss with the new administration. This is about establishing a new partnership for Yakaar Teranga. Our goal is for Petrosen to be a one-third partner, ourselves as a third, and a new partner as the remaining third. We need to collaborate with the new government to bring that partner onboard, as they will have a significant role. Additionally, we need a fiscal arrangement that supports the economics necessary for a low-cost gas and an LNG export scheme. Once those two components are in place, we can then focus on financing. The aim is to finance the FLNG vessel. There are multiple steps involved: we need to complete technical work related to the pre-FEED milestone, align with the new administration on fiscal matters and the new partner, and then tackle financing. Once all four elements are aligned, we can begin the real work on feed, but we will not start feed until those prerequisites are met. I believe we've made significant progress on the pre-FEED, and after the election, we can start addressing the next steps.

Mark Wilson, Analyst

That's really appreciated. It occurred to me that the differences between Yakaar Teranga and BirAllah would be interesting to comment on. It seemed that BirAllah was progressing more quickly towards a development concept when you last extended the PSC. Now, Yakaar Teranga has moved to its current status. I would like to hear your comments on these respective differences.

Andrew Inglis, Chairman and CEO

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

Operator, Operator

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

Neil Mehta, Analyst

I have a couple of questions. First, I would like your thoughts on deleveraging. As you approach the free cash flow inflection that Neal mentioned, which involves significant figures, how do you plan to reduce the debt on your balance sheet? What are your priorities and target levels, and how quickly can you achieve those?

Andrew Inglis, Chairman and CEO

I'll let the other Neal answer that.

Neal Shah, CFO

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

Neil Mehta, Analyst

That makes sense, Neal. I would like to give you a chance to discuss the convertible bond issuance since it caused significant volatility in the stock. A lot of this seemed aimed at managing short-term interest expenses related to floating rate debt. Could you share your thoughts on why you believed this was the most cost-effective financing strategy? Additionally, how should we consider this in the long term?

Neal Shah, CFO

Yes. We've had several discussions around the convertible on both debt and equity holders over the last couple of months since we executed that back in March. For us, it's around where our current bonds are trading and how do we optimize access to the debt capital markets at the lowest cost available. The issue that we've had for the past 18 months when you look back into '22 and '23 is really where Ghana has traded and therefore, the impact on our secondary levels on the bonds. A new issuance in the regular bond market would have been quite expensive just from a regular new issue market, and therefore, trying to get ahead of the liquidity and the maturity wall is something that we've always tried to be proactive about. I thought that was the best interest at the time to manage the maturity schedule, and as you can see in the presentation, with that in the RBL, we've really cleared the runway for the next couple of years for us to execute and continue to pay down debt. It's really around taking the balance sheet off of the agenda, focusing on the organic delivery of the business plan, and using the most efficient tool at the time to try to execute that. So that was really the background there.

Operator, Operator

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

Subhasish Chandra, Analyst

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

Andrew Inglis, Chairman and CEO

Let me address that. When we discussed the $550 million, we considered it from two perspectives. We talked about a base maintenance capital of $300 million to $350 million, which supports the infill drilling program in Ghana and the ongoing development of Jubilee, as well as the infill program in Equatorial Guinea. Additionally, we looked at long-term projects post the start-up of Winterfell and Tiberius, with plans for additional wells. We are appropriately allocating our capital to these high-return projects. On top of that, we mentioned an estimated $200 million to $250 million for growth initiatives. Our primary focuses today are Tiberius and the Yakaar Teranga, along with an expansion project at Tortue. This capital for the $200 million to $250 million includes expenses related to those projects following financing of the FPSO for Yakaar Teranga. We believe we can achieve a more moderate growth rate than in the past two years, but we will continue to grow with high-quality projects that include low-cost, low-carbon oil and gas, as well as the expansion of Phase 1 for Yakaar Teranga. We anticipate single-digit to mid-single-digit growth rates. With a capital investment of $550 million, we expect to generate significant free cash flow, which we can use to pay down debt and, once we reach the appropriate leverage level, consider distributing to shareholders. This is what sets Kosmos apart as a company. We have a sustainable organic activity set that can last for a decade or more, and we enjoy an RTP of over 20% on a 2P basis. Our goal now is to create something that continues to grow while also generating cash, aiming for a very competitive free cash flow yield. We're clear about our framework, and it's crucial to emphasize on the call that the $550 million figure is clearly defined, along with our capital allocation strategy.

Subhasish Chandra, Analyst

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

Andrew Inglis, Chairman and CEO

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

Operator, Operator

Ladies and gentlemen, 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 now disconnect your lines, and thank you for your participation.