Kosmos Energy Ltd. (NYSE:KOS) Q2 2020 Earnings Conference Call - Final Transcript

Aug 03, 2020 • 11:00 am ET

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Kosmos Energy Ltd. (NYSE:KOS) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, everyone. Welcome to Kosmos Energy's Second Quarter 2020 Conference Call. Just a reminder, today's call is being recorded.

At this time, let me turn the call over to Jamie Buckland, Vice President of Investor Relations at Kosmos Energy.

Executive
Jamie Buckland

Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our second 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 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 note in this presentation and in our U.K. 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.

Executive
Andrew G. Inglis

Thanks, Jamie, and good morning, and good afternoon to everyone. I'll start today's presentation with the highlights for the quarter before passing over to Neal, who will talk through the financials and the balance sheet. I'll then finish with a look forward to the second half of the year and into 2021.

Turning to Slide 2, the highlights for the quarter. Kosmos delivered strong operational performance in a challenging quarter for the sector, which saw record low oil prices and unprecedented volatility. We delivered production of around 60,000 barrels oil equivalent per day, which is in line with the guidance we gave at the first quarter and reflects the May shut ins in the Gulf of Mexico, which reduced overall company production by around 6,000 barrels oil equivalent per day in a quarter.

We remain on-track to deliver the cost reductions set out earlier in the year with reductions across opex per barrel and G&A of around 5% to 15% for the first quarter. We project an increased impact in the third and fourth quarters as additional opex and G&A reductions are reflected and capex reduces in line with a decrease in activity set. Importantly, these cost savings are not expected to have a long-term impact to the portfolio or our operations, and they will help position Kosmos as a leaner company that can perform strongly as the sector recovers over time.

In addition to the sustainable cost savings, we also took steps to ensure the balance sheet remains in a solid position. During the quarter, we increased our liquidity position through a prepayment agreement with Trafigura, which Neal will talk about in more detail shortly.

We ended June with around $600 million of liquidity.

Importantly, at current oil prices, we've reached a cash flow inflection point, meaning we expect to generate free cash flow through the second half of the year and into 2021, which we expect to use to reduce our year-end net debt and enhance liquidity.

As