Kosmos Energy Ltd. (NYSE:KOS) Q3 2019 Earnings Conference Call - Final Transcript

Nov 04, 2019 • 11:00 am ET


Kosmos Energy Ltd. (NYSE:KOS) Q3 2019 Earnings Conference Call - Final Transcript


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Greetings. Welcome to Kosmos Energy Third Quarter 2019 Earnings Conference Call.

[Operator Instructions]

I will now turn the conference over to your host, Jamie Buckland Vice President, Investor Relations. Mr. Buckland, you may begin.

Jamie Buckland

Thank you, operator. And thanks to you all for joining us today. This morning, we issued our third quarter earnings release and the slide presentation to accompany today's call. Both materials are available on the Investors page of the kosmosenergy.com website, and we anticipate filing our 10-Q for the quarter with the SEC later today.

Joining me on the call today to go through that material are Andy Inglis, Chairman and Chief Executive Officer, and Tom Chambers, Chief Financial Officer. Before we get started, I'd like to mention that this conference call includes certain forward-looking statements based on our current expectations.

The risks associated with forward-looking statements have been outlined in the earnings release and in our SEC filings. We may also refer to certain non-GAAP financial measures in our discussion. Management believes such measures are important in looking at the company's historical and future performance. And these are commonly referred-to industry metrics. These measures are provided in addition to and should be read in conjunction with the information contained in our financial statements prepared in accordance with GAAP and included in our SEC filings.

At this time, I'll turn the call over to Andy.

Andrew G. Inglis

Thanks, Jamie. And good morning, everyone. I'd like to start the call by reinforcing the key characteristics that define Kosmos's is distinctive investment proposition. Kosmos generates cash. We have a portfolio rich in value-accretive catalysts and we have a strong balance sheet that underpins our strategy. These themes are consistent with those we set out at our Capital Markets Day in February, and I'd like to go through them in more detail.

First, Kosmos has a portfolio that delivers cash. In the third quarter, we generated approximately $70 million of free cash flow and we remain on track to deliver over $200 million in 2019 at current prices, our third year in a row of positive free cash flow. For context, in 2019, this represents a free cash flow yield around 10%, which continues to be very competitive compared with other E&P companies and indeed other sectors.

Second, infrastructure-led exploration, or ILX, program is working. Today we're pleased to announce our first success in Equatorial Guinea, alongside two ILX discoveries in the GoM since Kosmos acquired DGE last year. Both on production this year, we have now made three discoveries from four ILX wells in total. With our results this morning, we announced that the tests of the Moneypenny prospect was unsuccessful. The well, which was targeting net resources of around 9 million barrels of oil equivalent was designed as an inexpensive exploration tail of the Odd Job development well and cost around $3.5 million net to Kosmos. We have two more near-term ILX wells in the GoM. We are currently drilling Resolution and we'll spud Oldfield in December. These are the