Q4 2023 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 (Pre-Reincorporation)
Neil Shah; Senior Vice President and Chief Financial Officer; Kosmos Energy Ltd
David Round; Analyst; Stifel Financial Corp.
Neil Mehta; Analyst; Goldman Sachs
Matt Smith; Analyst; Bank of America
Presentation
Operator
Good day, everyone. Welcome to Kosmos Energy's fourth quarter and full-year 2023 conference call. (Operator Instructions)
At this time, let me turn the call over to Jamie Buckland, Vice President of Investor Relations at Kosmos Energy.
Jamie Buckland
Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our fourth quarter and full-year 2023 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 that we note in this presentation and in our UK and SEC filings. Please refer to our annual report, stock exchange announcements, and SEC filings for more details. These documents are available on our website.
And at this time, I will 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 fourth quarter and full-year results call. I'd like to begin today's call talking about our purpose as a company, which defines our strategy and the characteristics that make Kosmos unique. We'll then provide an update on our operational and financial progress in 2023 before looking forward to a catalyst-rich year ahead.
Starting on slide 3. At Kosmos. Our purpose is clear. We are a leading deepwater independent E&P company focused on meeting the world's growing demand for cleaner energy with oil production from our low cost lower-carbon oil assets in Ghana, the US Gulf of Mexico and Equatorial Guinea. We are providing the world with the energy it needs today. At the same time, we're developing cleaner sources of energy for the future through world-scale gas projects, offshore Mauritania and Senegal.
And finally, as we deliver the energy the world needs, we strive to be a force for good in the countries we operate in accelerating economic and social progress across our host nations. We do this through growing production, which leads to increased revenues and royalties for the countries. We are also providing natural gas for domestic use in power generation, enhancing access to more affordable and more reliable electricity while also investing in important social programs in our countries of operation.
Turning to slide 4. Kosmos has a unique investment case with a world-class portfolio, differentiated growth in the right assets and strong free cash flow outlook. Taking those three into first, we have a diversified portfolio of world-class assets. This portfolio is comprised of advantaged oil assets today characterized by production with low cost and top-quartile carbon intensity. Alongside our all assets, we're building out our advantaged gas position, which will lower the overall intensity of the products we sell. Importantly, the portfolio has longevity with a 2P reserves to production ratio of over 20 years with a deep hopper of discovered resource that can further extend the reserve life.
Second, we have meaningful growth. We are targeting production rising to around 90,000 barrels of oil equivalent per day by the end of the year in line with our 50% growth target from the second half of 2022. As part of that targeted growth, gas is anticipated to increase from around 10% of our overall production to around 25% over that period. Beyond that, we have a hopper of value-accretive growth opportunities such as Tiberius, Yakaar-Teranga, and that support future growth, albeit at a more measured rate as we look to prioritize free cash flow and debt reduction.
And finally, we expect to see significant improvement in free cash flow as we move out of the current development phase with CapEx expected to fall with the startup of both wind cell and Tortue this year. With those projects online, we forecast quarterly free cash flow of around $100 million to $150 million at mid-cycle oil prices. We plan to prioritize the use of our future free cash flow towards debt paydown until we achieve our leverage target, after which we'll consider shareholder returns.
Turning to slide 5, which looks at the first of the three characteristics that make Kosmos unique the quality of our portfolio. We have a diverse portfolio of exploration, development and production assets across five countries in the Atlantic Basin, balanced between short-cycle oil and longer dated gas opportunities.
The chart on the top right of the slide breaks out our reserves base. Our 1P reserves of around 280 million barrels of oil equivalent provides a 1P reserves to production ratio of around 12 years weighted more towards oil. The quality of the portfolio is highlighted by the 1P reserve replacement ratio in 2023 of over 100%, which reflects the strong reserve additions at Jubilee as we drill for Jubilee Southeast on three on a 2P basis, we have reserves to production ratio of over 20 years, what is slightly more to gas and oil, demonstrating the direction of travel over the coming years with gas set to play a growing role in the outlook for the company.
The chart at the bottom right of the slide shows the importance of the diversity in the asset base with all business units playing an important role in the delivery of the company's future 2C resource base, which includes some contribution from Yakaar Teranga as well as upside in Jubilee and winter fell gives the company to see reserves to production ratio of over 30 years with additional discovered resource beyond that, such as type areas expected to extend the production line.
Turning to slide 6, which looks at our growth this year and beyond in more detail. The chart at the top shows the progress we're making towards our 50% production growth target. The Jubilee ramp-up is already contributing a meaningful startup following the Jubilee Southeast startup last summer. This ramp-up is planned to continue with five additional wells expected online at Jubilee in the first half of this year. First, order wins validate expected early next quarter, an important milestone for our Gulf of Mexico business. After that, we're looking forward to the startup of Tortue, which is expected to take company production to above 90,000 barrels of oil equivalent per day on the bottom half of the slide is our opportunity set. Beyond 2024. We have a balance of high quality short-cycle oil opportunities such as high barriers and longer-dated gas and LNG opportunities like the asset, Teranga and Tortue Phase two.
Turning to slide 7. As we deliver our current phase of development projects and then pursue selective investment opportunities. We expect more measured growth in our free cash flow profile to improve significantly with a targeted 50% increase in production by year end 2024, as measured against the first half of 2022, we expect our free cash flow to grow materially at mid-cycle oil prices as these projects deliver. CapEx is expected to fall sharply we've told you a windfall online. We expect annual CapEx to return to a more steady-state number in 2025 and beyond of around $550 million, including maintenance and some further growth. With growing production and falling CapEx, we're reaching an important inflection point with quarterly free cash flow expected to be in the $100 million to $150 million range once the current phase of developments is delivered.
Turning slide 8, supporting our strategic and operational progress is a continued focus on our ESG activities, supplying the energy the world needs today and meeting growing future demand must be done in a responsible way that not only provides affordable and reliable energy, but also provide sustainable growth and benefits to our host countries. I'm proud of our progress in 2023. Starting with environment, we continue to maintain carbon neutrality for our operated Scope one and two emissions in 2023, we announced a new term target to reduce by 25%. Our equity Scope one emissions in 2026 from a 2022 baseline and are making good progress towards that goal.
Turning our attention to social, we aim to be a trusted partner and good corporate citizen in our host countries. And here in the US, we continue to invest in our people and the communities we work in supporting a just energy transition that provides greater access to power.
In Africa, we continue to have 100% local employment in all of our overseas offices. And we're again named a top workplace in both Houston and Dallas in 2023, we care deeply about the people who work for and with Kosmos, and this is an important part of our success as a company.
And lastly, governance. Kosmos has a very experienced and diverse Board with a wide range of backgrounds. This was further enhanced in 2023 with the addition of three new board members that bring unique perspectives and new ideas that help continued support Kosmos as growth.
In summary, ESG credentials are a core part of our strategy. This commitment was once again recognized by MSCI. one of the leading ESG rating agencies, which ranked Kosmos triple-A, the highest possible rating, which puts us in the top 20% of companies in our sector for the 2nd year. Similarly, Newsweek and Statista named COSMOS one of America's Most Responsible Companies for the fourth consecutive year. Our ability to effectively execute our strategy relies and our commitment and focus on operating responsibly. That commitment starts at the top with our Board of Directors down through leadership and to all of our employees and supports our ability to deliver long-term value to all of our stakeholders.
Turning to slide 10, a recap of our achievements in 2023, 2023 was another year of continued delivery. We continue to operate safely with lost time injury rates and total recordable injury rates significantly below industry averages. A trend we have maintained for several years. As discussed earlier in the materials, production is growing with fourth quarter production of 66,000 barrels of oil equivalent per day, up 12% year on year. Our development projects are progressing. The Jubilee, Southeast online and ramping up. Winter fell due online shortly and Tortue Phase, while making good progress with startup expected later.
This year, we continue to build out our future growth opportunities with the discovery of the operative time, various ILX prospects and by increasing our working interest in Yakaar Teranga and assuming operatorship. And as discussed on the previous slide, our continued ESG focus was recognized by MSCI as we maintained our AAA rating.
I'll now let Neil run through the financial results for the quarter and the year.
Neil Shah
Thanks, Andy. Turning to slide 11. Production for the year was in line with the updated guidance we provided last quarter with 4Q production at the lower end of the range due to the water injection issues that Jubilee flagged earlier. These issues have now been resolved, and Andy will give an update on current operations in Ghana shortly.
Opex for the quarter was higher than anticipated due to higher workover costs for the initial rig activity in Equatorial Guinea before the operator terminated the rig contract for safety issues, which we'll also talk about in more detail shortly. Other costs, including DD&A, G&A and tax all came in below guidance helping to drive today's EPS beat versus consensus. We did record an impairment at 10, reducing the carrying value down to zero, reflecting an anticipated reduced activity set together with well performance, positive 1P reserve additions at Jubilee more than offset the downward revision to 10 1P reserves during the period. While we still see future potential value at 10, both in oil and gas, the realization of that value is contingent on the approval of the plan of development and the activity set has to compete for capital with other opportunities we have in the Kosmos portfolio.
CapEx for the quarter was higher than expected, largely due to the timing of inventory related to the EG. drilling program. Inventory arrived earlier than expected and therefore was recognized as CapEx in the fourth quarter.
I'll now hand it back to Andy to go through the outlook for the year ahead.
Andrew Inglis
Thanks, Neil. Let's turn to slide 13. 2023 was a pivotal year in Ghana with the start of the Jubilee Southeast with more to come in 2024. Full year guidance from the operator for Jubilee and 10 is around 116,500 barrels of oil per day gross, which equates to around 40,000 barrels of oil per day net to Kosmos, with a further 6,000 barrels of oil equivalent per day net of gas at Jubilee operated guidance is for 100,000 barrels of oil per day gross for the year, with production expected to grow through the year as new wells come online so far, one water injector and one producer had been brought online in 2020 for a second producer, well is expected online imminently, and that should take Jubilee production back above 100,000 barrels of oil per day gross with two additional wells due online thereafter.
In addition to the infill drilling program, our focus with the operator this year is our management of the production base targeting 100% voidage replacement. We've had a good start to the year, injecting record levels of water into the field and plan to continue optimize injection support this year as production rises, the reduction in OpEx per barrel we saw last year should be maintained as the partnership continues to drive through efficiencies and fixed costs are spread over more barrels on gas. The interim gas sales agreement for Jubilee has been extended through the end of May at around $3 per MMBTU. On 10 operated guidance is around 16,500 barrels of oil per day gross through 2024. On the 10 plan of development, we are awaiting government approval and therefore have not planned any major activity on the field this year.
Turning to slide 14. In the Gulf of Mexico, 2024 is expected to be another busy year. Full-year guidance is 15,500 to 17,000 barrels of oil equivalent per day net and includes our estimate of hurricane downtime in the second half of this year.
Starting with our production optimization activities, the our job subsea pump project is on track for start-up midyear with the Kodiak workover planned around the same time. Both of these are high return projects. We should accelerate future production on which found first off on the first phase of development is expected in early 2Q with two wells expected online in the second quarter and a third expected later in the year. The project is going well so far with the first two wells has in line with expectations, and we remain excited about the future potential of the greater winter power area.
On the side various discovery where Kosmos as operator, we have received the lab analysis of the rock and fluid samples, which supports the production potential of the development wells and is in line with analog wells in the Wilcox. We now progressing a phase development solution with a subsea tieback plan to the Lucius platform six miles away. Lucius is operated by Oxy, a partner in tight areas.
And finally, the Tiber is expected later this year with the development time line of 18 to 24 months, similar to winter fill on the map on the bottom right of the slide in lease sale, two six one, Kosmos and Oxy added the block to the west of tigers and two blocks to the Southeast, which contain the Logan discovery these adjacent and nearby blocks provide additional near-field upside beyond the time various discovery and can support the phased development of the greater tie Burress area. It's an exciting time for our Gulf of Mexico business with expected near term production increases from winter fell and our production optimization activity to be followed by an operating type various development, providing the next leg of growth.
Please turn to slide 15. In Equatorial G&A base production continues to be steady with full year production guidance of approximately 8,000 barrels of oil per day net.
This guidance does not contain any contribution from the planned infill drilling campaign, which has been deferred after the operator terminated the rig contract due to safety concerns. Kosmos fully supports the operational decision and will not compromise the safety of operations. The partnership is now evaluating alternative rig options that would allow for the infill drilling campaign to recommence later in the year, followed by linking the infrastructure exploration well, we'll update the market with news on replacement rig when appropriate, and it included potential CapEx, assuming the resumption of the EG. drilling program in the high end of our CapEx range.
Turning to slide 16, on Tortue Phase one, the key work streams continue to progress. The hub terminal is complete and has been handed over to operations of floating LNG vessels arrived on location. The mooring is now complete and connection to the hub terminal is now ongoing. Golar continues to work with the operator to advance commissioning subsea work scope is progressing in line with expectations, with completion expected by the end of the second quarter. And finally, the FPSOs currently in Tenerife for the planned inspection and repair of the failings. Following completion of this work, the vessel will then move to its location as a field early in this second quarter and begin final hookup and commissioning activities. The FPSO remains on the critical path to first gas, which is expected in the third quarter of 2024.
Elsewhere on Tortue, we expect to have a ruling on the arbitration regarding future cargo optimization around the middle of the year. In addition, BP on behalf of the part of the Group has served the previous subsea contractor with a claim notice and initiated the process under its agreement to recover the losses incurred. We estimate our net share of the potential recoverable damages to be up to $160 million to achieve progress towards first gas. As we look to bring in a partner on Yakaar Teranga industry interest in the assets has risen. This may provide an opportunity in the future to crystallize some value from our gas portfolio and accelerate our financial resilience.
With that, I'll hand back to Neil to take you through the financial outlook.
Neil Shah
Thanks, Andy. Turning to slide 17, as Andy mentioned, we remain focused on enhancing the financial resilience of the company as production rises over the coming months and CapEx falls in 2023. We repaid the Gulf of Mexico term loan, which means we have no debt maturities this year on the RBL represented by the dark blue blocks on the chart, the refinancing process with our bank group is going well with completion expected in the first half of the year.
The aim is to push out maturities by approximately three years, which would push the final maturity to almost 2030 on leverage. We exited 2023 at 1.9 times and have a long-term target of 1.5 times or below at mid-cycle oil prices with CapEx anticipated to be higher in the first half of this year. The cash generation we expect once production is ramped up should come through in the second half of 2024 and would be used for debt paydown. Leverage should then start to fall quickly towards our targets.
Turning to slide 18, our capital allocation priorities for the year. CapEx for full-year 2024 is expected to be $700 million to $750 million, just over a third of which is maintenance CapEx. Growth CapEx is anticipated to be around 60% to 65% of 2024 total, primarily related to completing winter fill in phase one of GTA, which does include some duplicative subsea costs incurred as a result of the switch in subsea contractors made last year. We hope to recoup this through the recovery of damages from the process mentioned earlier.
Looking beyond 2024, we expect normalized annual CapEx to be around $550 million with around $300 million to $350 million of maintenance CapEx and $200 million to $250 million of growth CapEx. As CapEx falls and free cash flow increases, we have three clear priorities. First, enhance our financial resilience. As noted on the previous slide, we want to get absolute debt and leverage down sharply. And this will be the first call on free cash flow generation.
Second, we want to invest selectively in compelling opportunities which support the continuing growth of the company, albeit at a lower rate than what we expect in 2023 and 2024. And third, when leverage is in the right place, we will look at shareholder returns.
I'll now hand back to Andy to conclude today's presentation.
Andrew Inglis
Thanks, Neil. Turning now to slide 19. 2023 was a year of continued delivery for Kosmos. We achieved a lot with production growing through the second half of the year as the first of our major development projects came online at Jubilee Southeast, and we remain on track to achieve our production growth target. By the end of this year, we made a time various discovery and we took over operatorship of Yakaar Teranga 2024 is a catalyst rich year for the Jubilee ramp-up and winter, they'll first. So both are expensed in the coming months later in the year. First, gas from Tortue will be a major milestone for both the company and the countries of Mauritania and Senegal, rising production and falling CapEx, drive strong cash generation through year end into 2025 with rapid deleveraging towards our target debt levels because my team is excited about the year ahead and energized to deliver on our strategic objectives. Thank you.
I'd now like to turn the call over to the operator to open the session for questions. Operator?
Question and Answer Session
Operator
Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) David Round, Stifel.
David Round
Great afternoon, guys. Thanks for the presentations and I've got a couple, please. The first one, Andy, you mentioned you made a comment there about potentially crystallizing value from the gas portfolio. Could you elaborate on what you meant by that plays and whether it's something you're actively looking at or whether that's just in relation to potentially incoming on Yakaar.
On the second question, we've obviously seen the pause in U.S. LNG export approvals recently. Has that changed any conversations you're having or at least impacted any of your assumptions going forward? Or is it too early? Thank you.
Yes.
Jamie Buckland
Thanks, David. And then we'll have the density time for Kosmos in Mauritania and Senegal as we progress our broader agenda, as I said on my my comments to achieve first gas is now in sight, and we're making real progress with efforts and on the concept for Yakaar, Teranga And I'm also pleased that we're making progress with the NOCs and the P on a concept to accelerate Phase two ahead of the BP's previous time line. So you put all that together, and we're building a material LNG business that is coming at the right time. It's coming at a time when the long-term value of gas is being recognized and its role in the energy transition. And as you say, the external context is changing. There is a pause in USLNG., and I think that is one of the drivers why source new sources of gas are being more highly valued. And you know, today, as you know, you've seen, I guess a step forward with its own announcement about building a larger business. So there's probably pluses and minuses on the supply side. But I think one thing that's clear is the supply the future supply is getting very concentrated and therefore, new sources of supply that had diversification for customers are going to be valued. So you put all of that together and we have no interest in Yakaar. Teranga is, as you mentioned as we said in our third quarter results, we're looking to bring in a partner with the right skills and balance sheet to help us progress. And that is our priority. But whilst it's apparent from the conversations on Yakaar Teranga, there are parties that are interested in potentially a larger stake than just YT. and in our other assets in Mauritania and Senegal. So that's something that we will consider as part of the sell-down process in Yakaar Teranga, why would we do that? Ultimately, it allows us to accelerate our strategic agenda. We can look forward to growth. And we've got a very rich hopper, but what's the right working interest for that? And can we find alternative ways to accelerate the delivery of a more resilient balance sheet that enables shareholder returns. So we see it as being a another point another way to access and accelerate that outcome. So it's sort of early days and the conversation is primarily around Yakaar Teranga, where we're going to finish the pre-FEED and then start that that process. But if there is an option of a larger deal involving Tortue then that is something we would consider for the reasons that I've laid out.
Kash, brilliant. That's very helpful. Thank you. I'll hand it back, Gregor.
Thanks, David.
Operator
Neil Mehta, Goldman Sachs.
Neil Mehta
Good morning, Antonio and team. Thanks for doing this. And the first question is just about the free cash flow inflection. You talk about 100 or 50 million a quarter once we get to run rate. But can you talk about what pricing that's under.
And just as you think about going into 2025, as you get to this major free cash flow inflection and what the priorities for cash are in terms of where we go from here.
Jamie Buckland
Yes, let me I'll have Neil take half of the question and just in terms of the on the metrics that drive it, but I think it's an important 24th, an important year where we're completing the two major projects, Wintershall and Tortue. And that enables us then to get to that free cash flow inflection point and the delivery of the project as an important point in the journey for the company, it allows us to strengthen the balance sheet, pay down the debt. And at that point then move forward to shareholder returns, but it also enables us to continue growth. But it's important. It's at a much more measured pace than we've obviously delivered over the past two years. So I think you know, as we go through 24, 25 is about that dual agenda, the prioritization of free cash flow to enable the debt paydown, but actually you know, it will there will be growth, but it's going to be at a much slower pace.
But Neil, that the fundamental network metrics behind the free cash flow.
Neil Mehta
Yes, I mean that's based on our sort of current estimates at sort of 70 TI. 75 ish, Brent.
David Round
Okay.
Neil Mehta
That's helpful, Neil. And then as we think about 2025 a couple of cost structure questions. One is, is it fair as a placeholder to be using something in the five 50 type of CapEx range, recognizing you'll put put some more meat on the bones here in the next couple of months.
And then and then I saw in the footnote, could you talk about operating costs 115, 230 million for Greater Tortue. Is that the right run rate CapEx once the project comes online and the like? Because I haven't finished yet, and I'm sorry if I cover your second question, first of all, just on the operating costs at.
Yes, I mean, I think it will be slightly higher, that sort of phased over time. And yes, as the development ramp ramps up and we get this year. There's a couple of moving parts in terms of, yes, the ramp up commissioning costs, et cetera, except it will be it will be a little higher than that on a regular basis. But the per metric barrel metrics per BCF metrics will look more attractive on that basis and on a 25 from regular run rate going forward? And then just so what was your first question again?
You know, it's just, Neil, what do you think of CapEx for 25, rough rough rough rule of thumb recognizing you're going?
David Round
Yes.
Neil Mehta
And again, I think as we said on the call, sort of 25 50 is what we're targeting for the next several years, including 25 beyond that. And I think it's a good sort of number to have penciled into your models.
Jamie Buckland
And that number basically underpins that maintenance CapEx about 350 over a long-term basis and then growth of so the 200 to 2 50, so much more measured growth ultimately at five 50 long-term CapEx, you can sustain that free cash flow of 100 to 150 per quarter.
David Round
Thanks.
Operator
Matt Smith, Bank of America.
Matt Smith
Hi there. Thanks, Andy.
Hi, that Neil. The first question on the on the capital allocation front, I could you know, thanks for laying out the detail in the presentation I think the inflection point is clearly an important one for Kosmos. I guess I just wanted to come back is that 550 million CapEx, an indication of sort of a steady state or is today a firm commitment from Kosmos? Because, you know, I think it's clear that you're very opportunity, Rich. I mean, it's great to see that sort of phase two of Tortue might be coming back onto the table sooner than previously anticipated.
And you're talking about Yakaar Teranga as well. I guess I just wanted to understand whether the side of slide 15 is an indication of really what does that say, commitment to shareholders that sort of whatever the plan, whatever the working interest, that's the sort of level of CapEx that you're going to be comfortable sort of spend it over the next few years? I just wanted to sort of understand what where the priority is really on that if that's okay. And then the second question would be on the FPSO in terms of Tortue. I mean, I think you had a really confirming the news that we've heard elsewhere in terms the delay first gas to the third quarter. Now I just wondered whether you'd be able to talk about confidence intervals that you have in terms of reaching that milestone this time round, please.
But I guess my two questions were if I sort of take the first one around capital allocation. You know, I'm 24 important year, we're delivering growth through the delivery of Jubilee, Southeast continuing growth, windfall and Tortue online. And as you look beyond that, you're right, we do have a rich hopper. And the important point, I think for shareholders is we're really selective about the projects that we do, and we have choices around the the timing, the phasing. And we have choices, as I indicated, to be around David's question around the level of participation in those projects. So it's a positive that we have the hopper. It's a positive that we have greater control through through operatorship, and we want to work within a framework where we can deliver that long-term growth. As I said in my remarks, it will be a much more measured pace than we've experienced over the last two years. But the Kosmos portfolio does have longevity and therefore does have have a terminal value. But we have to do that while delivering the free cash flow that shareholders want ultimately?
Yes, the first of the first priority for that will be debt paydown. And then once we reach our leverage targets, it will be around shareholder returns. So the framework we're using going forward is that time 50, and we're confident that we can sustain the base production, which is compensating the an important element, both in Ghana, Gulf of Mexico and actual G&A in our three hundreds, three 50, which enables that 200 to 2 50 to pursue those selective growth projects. So yes, that's the frame going forward and that all the free cash flow targets that we've talked about.
And on Tortue, and you ask specific question about the FPSO, maybe if I just sort of stand back because it is going to be a question that's going to come up. Where are you with the project and a lot's been achieved in the quarter? And, you know, prior to the quarter, obviously all drilling done hub terminal finished. But in the quarter, the begin vessel vessels arrived at the hub terminal. It's more and it's now being connected. That's the connection for the gas in and then for the connection to the offloading. So that work is progressing well.
On the subsea and real progress, I think all seats put out a notice to the to the market that they've completed, the installation, the deepwater pipelines, the tenant in the 16 inch. In fact, all of that work scope is now is now completed, which is a significant milestone what remains in the subsea now is installation of the type of jumpers that's aside from work scope, and that was targeted to be finished by the end of the second quarter. On the FPSO itself. There is work being done in Tenerife at a shipyard in Tenerife to repair the inspect and repair the fair leads, and that's essentially the mooring device for the vessel when it's on location and visited the yard myself about a month ago, that work is going well. We've inspected families now. So we know the level of repair and that will be modest. And so the FPSO's target to leave the beginning of next quarter be on location. And then we start the mooring and hook-up process. All of that will enable first gas in the third quarter, which then leads to LNG in the fourth quarter.
So, Matt, you know, in February the the critical path as you go through all that given the progress that's been made on the subsea remains on the on the FPSO. The operators obviously strongly focused on, but I think it is now as you bring a large project like this to completion. Each milestone you achieve is an important milestone because it de-risks the Ford program. And I think we believe we achieved quite a lot in the home in the last three months and look forward to those milestones be knocked off as we go forward through the year. But I think that they are part of my.
Andrew Inglis
Great.
Jamie Buckland
Thanks Matt.
Operator
Charles Meade, Johnson Rice. Please proceed with your questions.
Andrew Inglis
Give you more Nadia, Neil and the rest of the government's team there.
Jamie Buckland
Andy, I wonder if you could you could up this question by EG. as I believe I heard your prepared comments that the upper and are the operating guidance assumes that you do that you do get a rig back in there and you get some work done in 24. I wonder if you could speak to what the chances of that are and perhaps if that's if you have some there's any kind of special capability of the rig that you need to procure to do that work or whether it's a more of a vanilla thing that has a higher probability of happening?
Yes, I certainly think it's a little early to give you a lot of insight on that. We clearly just going out to the market as we speak. So look at available rigs, you know, in terms of the spec of the rig, it's now anything out with what a six gen Can 56 gen can do today. So it's the only issue is it has to be sort of completion ready because we're obviously on the infill wells we're drilling and completing and going deep well is drilling an exploration well. So a little early Charles to say exactly how that process is going to shake out. But I think we just wanted to make sure in our guidance, we were sort of clear and it covered the spectrum. And so we haven't included any contribution from the infill program in our production guidance. But we have included on the O a potential outcome of the rig being included in our activity set in 2024. So I think that, you know that that's an appropriate way to look at the situation today, and obviously, we'll update you as we make progress in the on the investigations with the market in terms of available rigs.
Got it. And then the follow-up question along the same lines, but in Ghana at a 10, can you give us a sense of you said you've submitted a new proposed work scope to the government. Can you give us a sense of the time line for whether we or when that might be approved and then acted upon in order of magnitude what it might what it might do to production at that field? Are that those fields?
Andrew Inglis
Yes.
Jamie Buckland
Look, good question, Charles. I think the you know, the write-down on 10 was fundamentally allowed a couple of issues in the first was the well performance of recent wells have been drilled that have delivered quite what we'd hoped and then confidence around the future work program, which would require approval from the government in terms of the plan of development. So as of today, we haven't included any significant future work scope in 10.
Some.
Yes, equally well, if there was a breakthrough on the POD that capital expenditure would have to compete for capital within the framework that we set out in our prepared comments. So yes, I'm comfortable with where we are today. I'm predicting when the POD could be approved, it's tough. There's clearly going to cause an election year in Ghana. I think that makes life a little tougher to come to be confident about when and if things might happen. But I think the most important thing from a Kosmos perspective is actually we did have, as we commented earlier, a very rich process. We've actually got a very rich set of opportunities in the base between our actual G&A, a Gulf of Mexico and actually Ghana in Jubilee. We actually grow the reserves replacement ratio of 104% this year was driven by the performance in of Jubilee are more than offsetting the downside in time. So there's a there's a there is a strong opportunity set there in Jubilee. Jubilee is a field backfill that's kind of get bigger and therefore, I can see us prioritizing capital there. So I'm with you have tenants sort of waiting. And I'm fine with that. I think you know for us, it's about ensuring that we're putting our our base capital to our best opportunities and certainly Jubilee would rank very highly.
David Round
Yes.
Andrew Inglis
Thanks for the detail.
Jamie Buckland
Great. Thanks, Joe.
Operator
Thank you. Our next questions come from the line of Bob Brackett with Bernstein Research. Please proceed with your question.
Jamie Buckland
Is Good morning. Returning back to the GTIPSO. and the issue around repair of care leads has that FPSOs have been turned over from the contractor to the Operator, is there some sort of recourse in the same way as they've turned issues Jubilee or even the size of pipelay vessel issues? Will you go back to that contractor and say you didn't deliver the FPSO on time and on scope have?
Thanks.
Adam. The detailed answer to your question is it has not been turned out.
Okay. So I think which ultimately answers your subsequent question, sale fare and an easy follow up, a contrast to the challenges around GTA with sort of the process of getting winter fill up and online in the Gulf of Mexico and talk to your relative conviction there?
Yes, that's a great question, Bob, is that these claim at different scale and you're doing something which is sort of establishing a first phase of a large project with GGA. It is a greenfield project. Some got both got bigger wells kind of outcome was going to LNG facility, and it's got an FPSO. So you have multiple asset worth segments of the project. Yes, winter fell much more simple sort of tiebacks. And it's in a basin that has the supply base in that access. So equipment easier and it's wells subsea tieback to an existing facility. So you get an ultimate in a different order of magnitude. And I think it's a great question because it sort of brings you back to the fundamentals of the company. We're investing in short cycle, fast payback, ILX. type opportunities on the oil side, you know, the deliberate very different in our economic outturn and actually our risk profile. But you create the longevity for the business in terms of building out a gas business. And you know, now we are having established Tortue Phase one. Phase two is a brownfield. It comes with a very different execution risk. So yes, it's hard to get started. And I think we clearly have struggled with what we told you to get it there. But with the with the end in sight in the next phase is a totally it's got a very different risk profile. So yes, relative competence, which is now starting out, yes, a little bit the beginning of the quarter flowback, they have both the wells have a company that was the third well follow. And actually, the interesting thing about winter sale is not just that first phase of development at subsequent phases. I think it will be ultimately be a much larger resource pool. So if 80, it's got not only a short cycle funded into it, but it has that development opportunity to follow it.
Very clear. Bye.
Operator
Thank you. Our next question is come from the line of Subash Chandra with Benchmark company. Please proceed with your questions.
Neil Shah
And thanks, everyone. Can you reiterate, I might have missed it at Tortue volumes. What if any are included in the 24 guide?
Jamie Buckland
Neil, if you want to cover and so on.
Neil Shah
We've got a few.
Yes, basically, we're assuming it's in line with the detailed guidance that sit within the presentation, which is there some entitlement volumes in 3Q and then closer to full rate in 4Q, which works out to call it?
Yes, 2 to 3,000 barrels a day of BOEs of net win the forecast. So there's not for your effort and the full year average. But again, it's getting close to full rate within the fourth quarter.
Got attention. And I was just curious, so should we is that OpEx included in the guide? I was just confused on the footnote versus the guide for the year. Is the OpEx. So it's not included in the per-barrel metrics of the per-barrel is basically on the base business with the OpEx just for the NS. portion.
Jamie Buckland
The reason we've done that is because in the as you go from the from the project to the operation there, there's quite a large commission element to them. So we know that the absolute number includes that transition. They're sort of the precursor to some of the commissioning costs and then the operating costs associated with the field as it comes online.
Neil Shah
Okay, guys, thank you. And final, I guess just apples to apples for the for CapEx last year versus the 24 guide, how much cap interest is included?
It's about $25 million a quarter so gosh, so we certainly we look at the guidance sort of we're only assuming it happens in the first half of the year and then goes away in the second half of the year. So you have interest and the 25 to sort of versus the full year, $150 million.
Right. And so last year was that I was at 100 million of cap interest.
Exactly a figure that's set yet annualized.
Okay, perfect.
Jamie Buckland
Thank you.
Operator
Thank you. Our next questions come from the line of Matt Cooper with Peel Hunt. Please proceed with your question.
Jamie Buckland
Thanks, and thanks for the presentation. So just firstly, I wonder if you could comment on the current Jubilee production rate on another two wells brought online in 1Q?
I'm performing per expectations.
Yes, Matt, some sort of step back on Jubilee. I think the key points to note are and our performance in the year will be dependent on two issues. The first is maintenance of the base, which is about body replacement. We struggled to do that really in the third quarter of last year, both from really from about sort of November time onwards, we've been injecting water at record levels and they've been at a 100% voidage replacement in the probably the prior three months so that it was as low as 40% when the water injection was down. So I feel good about the way that the base has been has been performing as we as we entered the year. And actually, oops, I've been through the first two months and then you sort of adding additional well. So we added a one one water injector and one producer. I think literally probably today we're adding the second producer, we'll start up. So once that second produces online will be up at around sort of the 100,000 barrel-a-day back up above 100,000. And yes, we're about under 1,000. So yes, that's an important milestone for us.
Then you've got two more wells to follow. So you've got an additional producer and an addition in injector. So as we look to the year and the performance in the you know, I think the wells have delivered on. We're actually when you look at the overall program, as the operator said, we'll probably deliver the wells we are six months ahead of time, which is why we're going to take a break and slightly earlier than we'd anticipated to allow us to rebuild that well still. But the fundamental thing to sort of where we're focusing on is the is it water injection and therefore, the voidage replacement that sustains base.
David Round
Okay.
Jamie Buckland
And just to confirm so that those first two wells and instead went in early 1Q, the injection and production that you're seeing from those is in line with expectations and then yes, it's in line with expectations that you know, you can.
Yes, they're in line with expectations of basis, probably doing a bit better than we thought, but fundamentally in line with expectations. So our number the second well, second, which is starting up now, the objective was to be above that 100,000 barrels a day, and that's what we anticipate to be. So it's the start of the year has been been solid.
Yes. And the other key thing, and I keep bashing on about it, but I'm getting the base properly supported is the key thing that we need to focus on.
A couple of things from financial and task on EG., I wondered how much stripping infill drilling out reduced 2020 for production. And just kind of thinking about how much upside there could be there if you do procure a rig this year and then kind of the flip side of that, how much risk is that the new rate will be at a higher cost?
Operator
Yes.
Jamie Buckland
So if I sort of didn't know, we'll come back to the production numbers yet Yanan contract was probably done at a more advantageous time in the market. So yes, I think you'll probably see a slightly higher grade. But again, below that. I know it tends to be a headline number you look at, but you got to remember that it's a relatively, you know, probably a third of the cost of the overall spread, right? So in the small and increment that gets diluted on on that basis and then you've got to figure out how you can deliver low NPT. So that ultimately the well costs and the absolute well cost and go out. So yes, we will see a slightly higher run rate costs, but that is not something that is ultimately going to interfere with the capital guidance or with the economics of the wells.
Neil Shah
And then just on the production will be had the guide we have for you is around 8,000 barrels a day net for the year, if we sort of drilled as planned, we were closer to sort of 11. So it's not a 3 million Boe a day impact and we can get. And again, I think some of that there is some upside if we do end up drilling this year, but that's not included in the base guidance.
Jamie Buckland
Okay. Well, thank you very much, everyone.
Operator
Thank you. Our next question is come from the line of Mark Wilson with Jefferies. Please proceed with your question.
Jamie Buckland
Yes, thank you. I'm very clear on the catalysts for this year and the CapEx once you get through to So still just giving an idea of the physical work within that five, $50 million?
We are in the maintenance split, are you expecting to be the we would have, for instance, an ILX well in the Gulf of Mexico each year from 2025, given the success you're seeing with winter Southern Tide de-risk as one part of that CapEx? And also, are you assuming a return or of a rig to Jubilee in 2025 and onwards?
That's the first question.
Andrew Inglis
Yes, no, good.
Jamie Buckland
Yes, good questions, Mike. 30 sort of conceptualize that.
Yes, when you look at the base and the maintenance of the base we're looking at you have three quarters of a rig in Jubilee. Now clearly, you know, as it were that way, you sort of rollover. So yes, the rig would return in 25 would not be drilling 26. And then Brian can so on.
Yes, you sort of figure it out. There's probably three quarters of the year that that makes sense, whereas actually this year will outstrip hopper gear and in Ghana. So yes, it does include that it includes a similar sort of from a drilling program in Equatorial Guinea going forward, sort of.
Yes, about once every 18 months about once every 18 months and maybe a package of sort of three wells?
Yes. And those are the primary base pieces then in the Gulf of Mexico, we are probably at a sort of a 30% working interest sort of one x one ILX.
Neil Shah
Well, Pierre, we sort of run that 20 or 30 million, if not would you be willing to grow because I've been asked to give growth versus the 3 to three 50 and maintenance, which really cover the Jubilee E G & K's nice and gum maintenance trial.
Jamie Buckland
Okay.
Neil Shah
Now that's very helpful.
Jamie Buckland
And then over to talk to I just want to confirm all the physical things for the start of have been discussed. Are there any commercial arrangements to be finalized before those first LNG and maybe tie into that, what are the outcomes for any kind of impact from that? You said the contractual and discussions should or debate should be readily resolved in the middle of the year. Does that what you would look at around that? Thank you.
Yes, hum. Yes, total cargo diversions, the timing of the arbitration is around midyear decision will be around midyear. And the arbitration itself will be held in second quarter. And typically you get a ruling a couple of months afterwards. So probably around around midyear.
Yes. And then in terms of so the and the middle of the ultimately the the contractual arrangements are going to slow down on the completion of the project. And so you're executing the physical work is the thing that is driving the time line.
Thanks. And there was a question on the call. Someone asked it about the Phase two potentially coming back into use? And is there any update was giving on a Tortue Phase two versus some the other projects in Senegal a longer term time line?
We are now looking at is, as we've said in the past, the Phase one is about building out the infrastructure. I think what I would say is there's no real push from the NOCs to find the right next concept for Phase two that fully utilizes the infrastructure that's been laid in and that come that is a new conversation that's occurring now with the with the NOCs. So partly on back of the work that we're doing on the anchor Teranga and both SNH and Patterson are interested in seeing how we can accelerate the time line for Phase two squarely in the country's interest and actually the interest of the partnership, you know, ahead of the day, the pre the BP had previously guided. So that's the conversation that's going on there now.
David Round
Got it. Okay.
Jamie Buckland
Thank you. And I have direct.
Thank you.
Operator
Thank you. 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 disconnect your lines at this time, and thank you for your participation.
