Kosmos Energy Management Discusses Q4 2012 Results - Earnings Call Transcript
February 25, 2013 4:40 PM ET
Kosmos Energy (KOS)
Q4 2012 Earnings Call
February 25, 2013 11:00 am ET
Brad Whitmarsh - Vice President of Investor Relations
Brian F. Maxted - Founding Partner, Chief Executive Officer, Chief Exploration Officer, Director and Member of Health, Safety & Environmental Committee
W. Greg Dunlevy - Founding Partner, Chief Financial Officer and Executive Vice President
Darrell L. McKenna - Chief Operating Officer
Edward Westlake - Crédit Suisse AG, Research Division
Ryan Todd - Deutsche Bank AG, Research Division
John Malone - Global Hunter Securities, LLC, Research Division
Al Stanton - RBC Capital Markets, LLC, Research Division
Anish Kapadia - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division
Pavel Molchanov - Raymond James & Associates, Inc., Research Division
Robert S. Morris - Citigroup Inc, Research Division
Good day, everyone. Welcome to Kosmos Energy's Fourth Quarter and Full Year End 2012 Earnings Conference Call. Just a reminder, today's call is being recorded. At this time, let me turn the call over to Brad Whitmarsh, Vice President of Investor Relations at Kosmos Energy.
Thanks, operator, and thanks to all of you for joining us today. This morning, we issued our year-end earnings release, which is accessible on the Investors page of the kosmosenergy.com website. And later this morning, we anticipate filing our 2012 10-K with the SEC. [indiscernible] this morning are Brian Maxted, CEO; Greg Dunlevy, Executive Vice President and CFO; and Darrell McKenna, Chief Operating Officer. Following our brief comments, we'll have a question-and-answer session.
[Operator Instructions] If there are any questions that we aren't able to get to within our 1-hour timeframe, please feel free to call me later.
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. We believe such measures are important in looking at the company's historical and future performance, and these are commonly referred to metrics in the industry. These measures are provided in addition to and should be read in conjunction with the information in our financial statements, prepared in accordance with GAAP and included in our SEC filings.
At this time, I'd like to turn the call over to Brian.
Brian F. Maxted
Thanks, Brad. In today's call, I want to touch briefly on the 2012 and then focus on the present, in 2013, and our strong future. Greg will follow with the financial discussion before handing over to Darrell for an operations update.
Looking back, 2012 was a strong year for our company, and we ended in our best position ever, operationally, financially, as well as organizationally. As a result, we have an attractive long-term platform for growth. We are building and maturing a world-class exploration portfolio that provides transformational upside opportunities.
Our position offshore garners only the initial success for Kosmos, representing the foundation from which we will grow our business. In 2012, we significantly matured and de-risked these assets, growing production and cash flows to record levels, progressing our next-door development and furthering the appraisal of our early discoveries as well. At Jubilee, the early part of the year was focused on overcoming well productivity problems, which we resolved successfully and did so at much lower cost than earlier planned. We also began implementing the Phase 1A development program and exited the year with Jubilee production at approximately 110,000 barrels of oil per day, a record level for the field and up 70% from the beginning of the year.
In 2013, we'll be focused on maximizing production by identifying ways to de-bottleneck the FPSO and increase production even further. Jubilee is proving what we've known all along: It's one of the world best in oil discoveries over the past decade, and now it is one of the world's best producing fields as well.
We also progressed at 10 discoveries in 2012, extending the Enyenra oil channel and identifying a new oil leg in Ntomme before submitting a plan of development to the government later in the year. Along with our discoveries at Mahogany, Teak and Akasa, we have a superior track record of success offshore of Ghana and these discoveries are strategically important to our future. Over the next several years, our expected operating cash flows from Ghana, based on a conservative $85 per barrel Brent price, combined with existing liquidity, provides for substantial and well-defined production and cash flow growth to our business.
In addition, our programs internally fund the material exploration program with 12 to 15 exploration shots on goal over the course of the next 4 to 5 years. Given this exposure, we're north of 1 billion barrel potential. This is a real asset metric risk reward opportunity, particularly when we're trading just slightly above our 3P, P10 value, for only the Phase 1 and Phase 1A resources at Jubilee. Let me emphasize that this excludes the value of additional phases of development at Jubilee, the TEN development, MTA and the upside in our exploration portfolio.
Before moving onto our exploration assets, I want to make a quick comment on the recent secondary offering of Kosmos' stock. The $30 million share offering was recently completed and significantly enhances our public flow without dilution to our shareholders. Despite the near-term impact, we believe the benefit of nearly doubling our public flow will provide long-term gains to our new and existing shareholders. We made the number of key strategic decisions in 2012 regarding our exploration program, including adding a substantial new acreage position offshore Mauritania and expanding further acquisition offshore Morocco, which combined, make Kosmos Energy to be one of the largest acreage holders offshore of north West Africa today. We also executed sizable seismic programs in Morocco, as well as in Suriname. We brought in Chevron to join our exploration efforts there.
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