Q1 2024 Kosmos Energy Ltd Earnings Call

Participants

Jamie Buckland; Investor Relations; Kosmos Energy Ltd

Andrew Inglis; Chairman of the Board, Chief Executive Officer; Kosmos Energy Ltd

Nealesh Shah; Senior Vice President, Chief Financial Officer; Kosmos Energy Ltd

David Round; Analyst; Stifel Nicolaus Europe Limited

Charles Meade; Analyst; Johnson Rice & Company L.L.C.

Bob Brackett; Analyst; Bernstein Institutional Services LLC

Matthew Smith; Analyst; Bank of America N.A.

Mark Wilson; Analyst; Jefferies

Neil Mehta; Analyst; Goldman Sachs & Company, Inc.

Subash Chandra; Analyst; The Benchmark Company LLC

Presentation

Operator

Ladies and gentlemen, good morning and welcome to the Kosmos Energy First Quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Jamie Buckland, VP, Investor Relations. Please go ahead.

Jamie Buckland

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

Andrew Inglis

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 Cosmos, and I'll start today's presentation. Looking at the operational and financial momentum we've built in the first few months of the year. Neil 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, COSMOS 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 2020 for 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 of Windsor 12 is expected to begin shortly from the initial two wells. Our third well is due to come online later this year, increasing our 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 time, various to optimize the development time line 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. Neil 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 growth, almost 30% higher than the first quarter last year. This reflects the progress made from both the startup 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. Moody's 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 for 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 2Q guidance on 10 gross production at 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 Windsor file, 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 were online is expected to be around 20,000 barrels of oil equivalent per day. We estimate total gross resource across greater wind fell about 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 old job, subsea pump and Kodiak workover both expected to finish around the middle of the year.
The combined uplift from both of these projects is expected to contribute around 5,000 barrels of oil equivalent per day. Net Cosmos is year end exit rate. The tornado field is expected to be offline for most of the second quarter for scheduled routine maintenance of the HP. one floating production unit, which has been factored into our guidance for the quarter on type areas where Cosmos is, operator, we acquired part of Ecuador'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. This phased developments as subsea tieback to Oxy's nearby Lucius platform is progressing. Project sanction expected later in the year. Certain long-lead items have been secured to optimize the development time line and project costs around the time of project sanction. Cosmos 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. Cosmos lifted one cargo from actual Guinea during the quarter, in line with guidance in early February. As previously communicated, the operator pause, the Sabra and the two main 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 midyear. The rig is scheduled to drill and complete two infill wells in Block G before moving to drill the King deep ILX prospects in block hours new infill wells are expected to add around 3,000 barrels of oil per day net to Kosmos at year end exit rate. The result of the King deep well, which is targeting gross resource of around 180 million barrels is expected around the end of the year.
Turning to slide 7, the Greater Tortue acumen 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. Floating LNG vessel arrived in the first quarter as being more 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 a flowline installation complete and final connection work. Ongoing inspection and repair of the FDSO. fairly is now complete and the vessel has left Tenerife and his own route to the project site.
Good morning work to commence thereafter. Hookup and commissioning of the FPSO remains on the critical path. First gas, which is expected in the first quarter I'll now turn it over to Neil to take you through the financials.

Nealesh Shah

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 winter fell and on Tortue. As previously communicated, we expect the majority of this year's CapEx 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. First was the convertible bond issuance in March, which proactively replaces the liquidity from the $250 million undrawn RCF is 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 tightened, 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 second important step was the refinancing of our reserve-based lending facility with in terms of 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 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 1.5 times at mid-cycle oil prices with deleveraging expected minutes once revenues from Ford to start up later in the year.
With that, I'll hand it back to Andy to conclude today's presentation.

Andrew Inglis

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 into the second quarter with several milestones already achieved and more to come in the near future.
The graphic on this 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.
Net free cash flow inflection points 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 questions.

Question and Answer Session

Operator

Thank you, ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you'd like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Ladies and gentlemen, we will wait for a moment while poll for questions. Our first question is from the line of David Round with Stifel. Please go ahead.

David Round

Thanks. Thanks for the presentation, guys. Just two questions from me, please. Firstly, can I just ask about Senegal, please? And whether the following the recent elections that you've seen any impact at all to business activities in country, and there's been quite a lot in the press, so I'd appreciate any comments there, please.
Secondly, just some on Equatorial Guinea. Obviously good to see activity there again, that's obviously been a great asset from memory. That 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, an area of activity going forward once you see CapEx elsewhere? Drop off?

Andrew Inglis

Yes, David, yes, thanks to both of those are picked them up? I think, you know, turning to Senegal first, I think the starting point is really is that elections in our host countries and our new for Cosmos 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 its population and improve the improve economic environment. I think it's early days for the new administration.
There are many officials still to be appointed. But my team in Santiago have have met with the new energy and mining minister. And I'm pleased to say it was a very constructive dialogue. You know that the conversation centered around actually how can we accelerate the development of the gas resources to accelerate the the benefits to the country. So, you know, in terms of the day-to-day. I know our business center goes unchanged. We're working to bring Phase one online later this year. It moved forward with a capital efficient Phase two, the expansion of Phase one that will enhance the revenues to the states and the partners and then move forward with a domestic gas LNG export scheme and YT., all of which will bring economic and social benefits for the country. So I do think is 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 shape that agenda.
And on Equatorial Guinea, I think you're correct to say that there's actually a lot of undeveloped resource. And when we initially took over the asset, it was it was about enhancing the production from essentially sort of workover activities. If you remember, I think it was, you know, we talked about it being gas-lift constrained. So we actually move to ESPs, and we've seen the benefit of that activity. We're now moving, I think, into a different phase, which is about infill drilling, which is this the current campaign as you rightly say we're targeting an infill well in cyber and one in the queue May and then actually we're following it up with the King deal, which is a test a deeper test of the Albian. And clearly, if it if that comes in, we've got a significant amount of knowledge in the room in the facilities to bring that on and very short tieback distances. So I think we've got sort of, you know, two avenues and what we would see for per se. But it to me is a and an intermittent at the infill drilling campaign, we know 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 is in the forward forecast of maintenance of the base. And then, you know, with a king, do you 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 actual G&A through that infill drilling with, I think still some some sort of workover type activities growth coming. If you had success I Kingdee. So I think you know, it's been a really good acquisition. I think we worked really well too on now go through a very programmatic program to target the video, the quick wins, which were really around so the workover activities. And now we're moving into a more phased approach with the with infill. But there's plenty to go out here and clearly having the capacity in the facilities, it enables us to move it forward quickly.

David Round

Thanks, Andy.

Andrew Inglis

Thanks, David.

Operator

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

Charles Meade

I'm sure you're probably more excited than we are to see that, that FPSO underway. And so congratulations for that. But wondering if you can take us through just the highlights or what the next pieces or pieces of the puzzle or milestones are to get to first gas. I imagine that that's some pieces. It would be getting the getting the FPSO more broken up the risers, introducing the gas the FLG. and then go into 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

I love questions whether you've already answered the question, Joe, sorry about that. And I think you've got it. I think, Jim, clearly, I think we've had a lot of progress in the in this sort of first four months of the year. We've got the FLNG vessel now at the hub terminal. It's more than the and the connection work is ongoing. The last piece of equipment arrived to the FPSO, which you said it will be on location in the matter of few days.
The next step then is the is morning and while some borrowings, then we start to work on the top signs in terms of the commissioning work and the hookup of the rise is clearly the step that enables a gas to be introduced. And then it's a question of the gas. As you say, coming into the FLNG vessel, you start to cool down process and then you start to make FLNG first cargo, et cetera. So I think the as you look through that process, you described an arena really well, where are we with the subsea equipment, all the major pieces of that are now doing the final tie-ins and that work is proceeding as we envisage. So we're pleased with the progress there.
The FPSO work, the hookup and commissioning of the FPSO remains on the critical path, but clearly, getting the vessel on location has enabled us to start to liquidate that activity. So I think, you know, you were well on track to do what we said we were going to do and the milestones have been achieved so far this year. So getting the FPSO on location is clearly an important step. And then we'll update you next quarter as we now get that work behind us and hopefully, you know, with the completion of the riser hookup and then the I which will then allow us to start flowing gas.

Charles Meade

Got it. And then the follow-up, I wonder if you could you could add some some detail and context around the rollout exploration. I'm wondering if this is kind of along the lines of how Yakaar Teranga played out in that BP., maybe it didn't want to be involved, but you guys are still you guys still have some some plans and you just tell us what's going on and a good.

Andrew Inglis

Yes, good question, Charles. I think that you're going to be sort of step back. It was sort of some, you know, repeating the both YT. Ambarella will scale discovered gas resources, you know, sort of in-place numbers. I think a YG. 25 Tcf per outlet probably around 30 Tcf and we believe it is advantaged gas. It has negligible CO2 and it's close to your home. So with BP no longer on either license, we can now work independently with the NOCs of both countries on innovative cost efficient schemes that BP didn't propose, but we believe will lead to attractive returns for both the project partners and the government we've secured the license on YT. We've secured the extension to allow us to proceed with that work.
And then we're in discussions with the with the Mauritanian government around how we can help them progress the development brand that they're keen to move it forward. And we believe we have both the subsurface knowledge and the concept that will enable it to be an attractive project. So I think that's where we are. And there's been a lot of third-party interest in the assets as well. So we believe that actually working both with Patterson on YT. and SMH. umbrella. We're trying to create an equal partnership where they're properly represented, which we believe is actually a good thing. Clearly for both government and we're working with them to find ways to bring in a partner that will enable the development to move forward. So I think you characterized it correctly, and we're energized to work on that agenda.

Charles Meade

Great. Thanks for the detail.

Andrew Inglis

Great. Thanks, Charles.

Operator

And thank you. Our next question is from the line of Bob Brackett with Bernstein Research. Please go ahead.

Bob Brackett

Good morning, Charles de stole most of my thunder, so let me tried to it a lot. The Tortue FPSO, so that vessel's been expected by the operator by you all passed muster and so it is ready to go.

Andrew Inglis

Yes, you know, as with all things, Bob, you know, as it were because of having to do the work on the fairly it is a blessing that it does allow us to what we had additional sort of three months and generated close to three months in January to further progress the topsides work. So I think we understand the scope very well. And I think you're right to sort of push the question around FPSOs has sailed in the past with a lot of work to come to execute. So I think we've got a good understanding of what the work scope is clearly and therefore, clear plans on how to execute that work scope. So yes, I feel good about that and nothing's done until it's done. But clearly, we do have, I think, the advantages of having extra time to work on the on the topsides as a result of the time on the on the fairly it's very clear.

Bob Brackett

The follow-up. Good comes back to bear. All of the PSC had been extended for two years view and the government and BP had 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 it 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 fast track development there?

Andrew Inglis

Yes. No, yes. Interesting, Bob. I think that, you know, the government is actually trying to find a way of moving the project forward in a constructive way. And what do I mean by that? Actually they could go out to the market with bids, et cetera. Would you have clearly the the negative of that is that it creates an uncertain partnership. You know, you're on bringing potentially somebody new that doesn't have the subsurface knowledge that we have. We believe there is a genuine desire to trial and work with existing partners who have the knowledge and, you know, we've probably, you know, we bring the knowledge of and two wells in Barilla one, I'm assume one on Orca, we bring the knowledge of all the appraisal wells on GCA and the development wells on GTA and then the calibration of the seismic against against that dataset. So there's significant knowledge, I believe that we bring in terms of the development concept, it's really about how do you get cost efficient in terms of the subsea layout. And ultimately, that's where we've seen the big cost increases in the industry is in the is in the subsea.
So minimizing that architecture. You minimize that actually by putting the FLNG vessel directly out of the field that has the additional benefit of lowering the pressure drops, which gives you enhanced recovery. So those, you know, without going into engineering in too much detail, but those are the those are the ways in which you can change the cost basis of the development. And those are the concepts are working on and why TI and those are the concepts we're bringing to bear to bear our very clear. Thank you.

Bob Brackett

Great. Thank you.

Nealesh Shah

Thanks, Bob.

Operator

Thank you. Our next question is from Matthew Smith with Bank of America. Please go ahead.

Matthew Smith

Hey, good morning, guys. Thanks for taking my questions and a couple, please. And the first one was just And apologies if I missed some of the commentary around this at the start of the call. But any additional color you could give us on the performance of <unk> in Ghana, I guess at Jubilee, in particular in the quarter, just how that's fared versus your own expectations, what confidence that gives you in the full year outlook? Because you had an additional oil producer online in April? If you could sort of talk to that at all and sort of exit rates, what you've seen post the quarter, just to sort of frame how Ghana started the year off and the confidence that gives you for the rest of the year that that would be interesting to hear them yet. But perhaps I'll try and come back to the second.

Andrew Inglis

Okay. Yes, thanks, Emma. I think sort of updating you sort of if you look across March and April, I think we averaged around 95,000 barrels of oil per day. So as you say, we brought on the recently just brought on the the final producer, and we're optimizing its setup in the subsea to maximize the benefits from that.
And then finally, we've got the final water injection, which is currently being drilled and actually we're going to start the completion of that shortly. So I think the I think it's early days, you say as you look forward to the performance of the field over the remaining part of the year. I think those are the three fundamental things we're focusing on. You know, the first is the contribution of the recently added wells to the ramp up in rate on the second is we had really good reliability in the in the first quarter and that you're close to 99% on the Jubilee FPSO. Clearly we need to maintain that high level of reliability going forward.
And then I think the third one is really the most important point is around maintaining the high levels of bodies replacement on that was that was a challenge last year where we had downtime and didn't get to 100% now. We sort of were pretty good in the first quarter and we need to sort of maintain that going forward. We have had a GTG. down, I think, for a couple of weeks. So we probably have been slightly under 100 temps and in the last month. But that is you know that that's a critical factor. So I think it's, you know, if those are the things where we're focusing on and 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. You know, we've firm. We've really drilled in other the operators and the great job on the drilling performance and the wells and the timing of the wells has absolutely met. You know, our our expectations. And you know, when the final water injection is done, I think over this program we probably created probably close to six months a reduction in the overall program, which is pretty impressive.
And so that's sort of where we stand today, Matt, and that pivot.

Matthew Smith

Thanks, Andy. That's really helpful. And perhaps the second one and perhaps would be for Neil. 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. And once the growth projects through our online. I think if I if I remember rightly, you talk to that sort of being underpinned broadly speaking by a $70 WTI, $75 Brent, are there please correct me if I ever 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 an $80 or $85 Brent world.

Nealesh Shah

Yes, sure, Matt. And yes, that's about right. In terms of the $150 million of cash flow free cash per quarter post getting winter fell and toward to online at a quarterly pace in that sort of $75 Brent, 70 TI. sort of realm on. And yes, I think in terms of the price sensitivity you generally and it will stay roughly the same as about $100 million of free cash flow for the quarter for the year for every $5 change in the oil price and so $25 million plus or minus a quarter. If you move to $80 Brent and then $200 million for the year of $50 of $50 million a quarter $85, Brent said it is yes. And we currently have sort of full access to the upside, so we can fully payments.

Matthew Smith

It was very clear thanks for your time and happy to pass it on.

Andrew Inglis

Great. Thanks, Matt.

Operator

I hear our next question is from the line of Mark Wilson with Jefferies. Please go ahead.

Mark Wilson

Thank you. For that and gotten. And gentlemen, my questions regarding the main drivers of production increase into the second half. Would you reiterate your Group guidance 71, 72, and 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, that would be my first question.

Nealesh Shah

So market will record on an entitlement basis, similar to how we report. But on for just the quarterly production. But in terms of sales, it will be done similar to how we do in Ghana and EG, where it's driven by cargoes. And so overall, entitlement production will be driven by it basically LNG that goes into the FLNG vessel and condensate that goes into the FPSO as a sort of entitlement volumes. But for sales, volumes will ultimately be tied to cargoes the same way we are doing cargoes in Ghana in EG.

Mark Wilson

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

Andrew Inglis

Again, as I said, you know, Mark, we're doing what we said. We would do, which is to deliver that outcome, we need to see the incremental benefit of the infill wells for the final two to finish and then optimize the system for the new well configuration and that's ongoing. So that's the first sort of variable that we need to get right.
Second is clearly, you know, maintaining the reliability and a good start to the year and we need to continue it. And then I think the fundamental part then is really around bodies replacement and the distribution of that water, again, because we're changing the patterns of offtake because of the new wells coming in the optimization of that patent of the new sort of reservoir offtake partners is critical. So I think there's a lot to work on mark to deliver that outcome?
Yes. The first half is in all of that is to get the wells drilled and online, and we've got sort of one more to go so you know this it's you know, there's work to do clearly and then we'll keep you up to date on progress as we go through the quarter.

Mark Wilson

Okay. Thank you for that question for me. As my understanding on the Yakaar, Teranga is working towards getting the pre-feed out of the way and then that's when you'll be looking it to see what the where the market is that for farm-outs? Is that a fair representation?

Andrew Inglis

Yes, it is absolutely, Mark. So, you know, we sort of talk about the future, though, which is really what your question was about. I think that we've got a piece of work now where we're doing the we're completing the pre-FEED. Wondering the pre-FEED done by the middle of the year. And with the pre-FEED, we've got the technical validation of concept and then we've got a cost base to then discuss with the with the new administration. And clearly, this is about creating a new partnership for the actor, Ranga. Our objective is for the present them in a line partner around a third ourselves, a third new partner, the third. So we have to work with the new government to bring that partner in and they're clearly going to have to say in that. And we need to have a fiscal arrangement which enables us to create the economics that support a low-cost gas and LNG export scheme.
Now with those two pieces in place, you can then work on the financing. The intent is to have the FLNG vessel, a finance. So there's a series of steps here that this technical work done to be done, which is sort of the milestone in pre-FEED work to be done on alignment with the new administration around fiscals and new partner, and then there's work to be done there for on financing. You bring all those four together, then you can start work on the real world, which is on feed, but we won't be starting feed until we've got those those things done. So again, I think we've made a lot of progress so far on the pre-FEED and post the election. We can now start working on those next items.

Mark Wilson

And that's really appreciate. Then it did occur to me in that answer that maybe the differences between Yakaar Teranga and Verallia and the respective governments would be interested.
Interesting to comment on it did look like Marella was moving faster towards the development concept arguably when you last extended PSC and then Yakaar Teranga now has moved to this the set that you have now. So the respective differences, I would be interested to hear your comment on?

Andrew Inglis

Yes. Look, I don't think there's a difference. You know, both governments are anxious to enable the development of that gas resources to benefit the country. I think you know, I think the Mauritanian government has been equally clear about its objective to move forward with Perella 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.

Mark Wilson

Okay. Thank you very much and have a great, thanks.

Operator

Thank you. Our next question comes from the line of Neil Mehta with Goldman Sachs Asset Management. Please go ahead and Neil Mehta with Goldman Sachs Equity Research.

Neil Mehta

Today, there are a couple of questions I have here. The first is just your your perspective on deleveraging as you get into that free cash flow inflection that Neil referred to, and those are really big numbers now, how do you think about reducing debt on the balance sheet? What are the priorities and now and how what's the target level and how quickly can you?

Andrew Inglis

Yes. Thanks, there. One, I'll let the other Neil can answer that anyhow.

Nealesh Shah

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

Neil Mehta

Now when giving opportunity to talk about the the convertible bond issuance issuances that create a lot of volatility around the stock. I think a lot of it was just to manage near-term interest expense around floating rate debt. So just your perspective and why that why you thought that was the most cost effective approach to financing? How should we think about that over overall?

Nealesh Shah

And so again, we've had a number of discussions around the convertible on both debt and equity holders over the last couple of months since we executed that back in March. And again, I think for us is around where our current bonds are trading and how do we optimize access to the debt capital markets for that at a sort of?
Yes, the lowest cost available and 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 to our secondary levels on the bonds and therefore, a new issuance in the regular bond market would have been quite expensive just from a regular new-issue native new-issue market and therefore trying to get ahead of the liquidity and maturity wall on something that we've always tried to be proactive about. And so I thought that was the best instrument at the time to you to manage the maturity schedule. And as you can see in the presentation with that and the RBL, we've really cleared the runway for the next couple of years for us to execute and continue to pay down debt. And so it's really around taking the balance sheet off the agenda, focusing on the organic delivery of the business plan and using that sort of the most efficient tool at the time and tried to execute that. So yes, that was really the background.

Operator

Our next question is from the line of Subash Chandra with The Benchmark Company. Please go ahead.

Subash Chandra

Thank you, guys. Following up, I guess on Neil, couple of quick couple of other questions. With regards to free cash flow is sort of the organizing principle you know, beyond the next year to sort of be in that five, 600 mill maintenance CapEx number and then everything beyond that, obviously pay the RBL off and then payouts et cetera? Or are there some appetites that you might have deferred pending getting to TA on some either organic or acquisition oriented that might get us to a different spend level? Down the road?

Andrew Inglis

Yes, I think, Sebastian, we just take that. You know, I think when we talked about the five 50, we've talked about it from two dimensions. We've talked about a sort of base maintenance capital of 300 to 3 50, which so that covers the the infill drilling program in Ghana, the continuing development of Jubilee, it covers the infill program in Equatorial Guinea that I talked about earlier. And then you know what sort of post the startup of wind fell and then tie various looking longer-term, the additional wells that so I think we probably are allocating capital to that. And clearly, those are very high-return projects. And then we've talked on top of that about sort of 200 to 50 of spend that would be in growth included to the two projects that we're focused on today are Iberia's and and the extra Ranga with an expansion project at Tortue. And that capital on that 200 to 50 incorporates the spend on those projects sort of post financing bank financing of the i., the FPSO on online. So Yakaar Teranga.
So I think we're what we're clear about the forward projection of the Company where we believe we can not only can we can grow. It'll be more modest right than we have. We have done over the last two years. There is growth in high quality projects and it will be a mix of sort of a low-cost low-carbon oil, you know, EG. type, various low-cost, low-carbon gas, EG. and expansion of Phase one, you know, Yakaar Teranga, so you know, and it's sort of mid single digits, middle single digits sort of growth rates, but at the same time with our capital level of five 50. Now we believe we can and we have significant free cash flow, which as Neil says, we can direct to the paydown of debt. And then subsequently, when we get to the right leverage levels, we can look at shareholder distribution. And I think that yes, that's ultimately what differentiates Cosmos as a company. It has an organic on activity set, which you can sustain really, you know, through decade and beyond. We are we have an RP of over 20 on a 2P basis so the ability to it creates something now which can not only continue to grow but can actually return cash and with we think a really competitive free cash flow yield is something that's quite unique. So that's our objective now.
So we're clear about the frame. And I think that's a point that I absolutely want to emphasize on the call. The five 50 in that sense is clear and where we're clear about the capital frame and therefore how it's going to be allocated.

Subash Chandra

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

Andrew Inglis

Yes, I think what don't we know what we've been clear about ships, C-BASS is that on any inorganic has to be accretive from a cash flow basis that actually that accelerates that journey.
Yes. And I think that that's having set that out as the organic path of the Company to improve upon it, you have to accelerate it through an organic and inorganic. That actually is cash significantly cash flow accretive, which it 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, you know, and particularly on the gas side to lighten the portfolio, which again accelerates that to that objective so I think we were absolutely clear about the company we're building. And therefore, as it were how an inorganic opportunity would fit, what we don't have to do clearly is buying things to mitigate the decline. We do not have declined. And I think that's again what differentiates us from a from a from others.
So if something is accretive from a cash flow perspective, inorganically accelerates that quality assets. Then clearly those are the things we look for equally well, the reverse if we can accelerate the delivery of free cash flow for our shareholders and by lightening, let's turn on the gas assets, then we would do that.

Subash Chandra

Thank you for that.

Andrew Inglis

Great. All right. Thank you.

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.