Good day, everyone, and welcome to Kosmos Energy third quarter 2021 conference call. Just as a reminder, today's call is being recorded. At this time, let me turn the call over to Jamie Buckland, Vice President of Investor Relations at Kosmos Energy.
Thank you, operator, and thanks to everyone for joining us today. This morning, we issued our third quarter earnings release, and 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 material are Andy Inglis, Chairman and CEO, and Neal Shah, CFO. During today's presentation, we will make forward-looking statements that refer to our plans, estimates, and expectations. Actual results and outcomes could differ materially due to factors we note in this presentation and in our U.K. and SEC filings. Please refer to our annual report, stock exchange announcement, and SEC filings for the details. These documents are available on our website. At this time, I will turn the call over to Andy.
Thanks, Jamie, and good morning and afternoon to everyone. Thank you for joining us today for our third quarter results call. I'll run through the highlights for the quarter before handing over to Neal to take you through the financials. I'll then provide a few closing thoughts and summary before taking questions at the end. Starting on slide one. A lot has been achieved at Kosmos since our last quarterly call in August. We've delivered several transactions that have advanced the company strategy and significantly improved our financial position. We'll talk more about the Oxy Ghana acquisition shortly, but in summary, the acquisition is expected to materially increase our free cash flow from high-margin oil assets, which we plan to invest in our portfolio transition to LNG at a time of rising global natural gas demand while reducing debt.
The transaction is strategically consistent and financially compelling for Kosmos and is highly accretive across all financial metrics. In Mauritania and Senegal, we closed the FPSO transaction in mid-August, which materially reduces our capital expenditure to first gas. With increased production, including from the Oxy Ghana transaction and higher oil prices, we now expect to fund our remaining CapEx to first gas through organic cash flow. We expect the newly acquired assets in our base business to generate significant free cash flow from full Q1 2021 and are currently hedging our growing production at attractive levels. With EBITDAX growing and excess cash used to reduce absolute debt going forward, we expect to delever the balance sheet rapidly, and we are targeting a leverage ratio of less than 2x at year-end 2022 at $65 Brent.
Using current oil prices, that target would be around 1.5x . Finally, on this slide, the recent transactions continue to strengthen our ESG agenda. With growing investment in Africa across our portfolio, aligned with our objective of supporting a just energy transition. Turning to Slide two. The acquisition of additional interest in the Jubilee and TEN fields in Ghana accelerates Kosmos' strategic delivery across three key dimensions. First, the acquired assets generate significant free cash flow. At $65 Brent, we expect the assets to generate around $1 billion of incremental free cash flow between now and the end of 2026, over 2x our initial investment. At current prices, that figure could be materially higher.
While we manage our business to perform at much lower oil prices, the recent strength in Brent and WTI does highlight the considerable upside potential if OPEC+ continues to be disciplined on supply management over the coming years. Second, we expect the assets to materially enhance EBITDAX and cash flow, enabling us to grow the company organically while reducing our absolute debt. With rising EBITDAX and excess cash to further pay down debt, we expect the transaction to accelerate the pace of deleveraging to our target level of 1- 1.5x . Third, we plan to use some of our increased cash flow to fund our growing gas activities in Mauritania and Senegal, including our remaining CapEx to first gas on Tortue Phase one.
On the right-hand side of the slide, you'll see how the portfolio mix is expected to change as our LNG activities in Mauritania and Senegal ramp up. We plan to use low cost, lower carbon oil production to finance the transition to low cost, lower carbon natural gas, thereby shifting the balance of our portfolio over time and increasing our exposure to the fuel with the strongest long-term demand and a necessary part of the energy transition. In our 1Q results earlier this year, we detailed a five-year goal to get production up to around 100,000 bbl a day of oil equivalent by 2026, when phases 1 and 2 of Tortue are expected online. Clearly, this transaction accelerates that production goal by several years, while at the same time strengthening the balance sheet. Turning now to Slide three.
We announced the Oxy Ghana transaction on the 13th of October with our intention to fund the transaction through a mix of new equity and new senior notes. With the greenshoe, we issued around 43 million shares in total, raising approximately $140 million of equity in total. The shares were issued at a small premium to the previous night's closing price, with the transaction multiple times oversubscribed, with strong demand from new and existing investors in Europe and the U.S. We launched the senior notes offering in the following week, issuing $400 million of 5.5-year notes, non-call 2, which were priced at 7.75%. The issue was also heavily oversubscribed, with strong demand from both high yield and emerging market investors.
I'd like to thank our equity and bond investors for their support of both the deal itself and the subsequent financings, which have put the company and the balance sheet in great shape to execute our strategy. It's very much appreciated. At the bottom of the slide, you can see the impact of the transaction on our near-term metrics. Pro forma for the assets acquired, we expect our year-end exit production to be greater than 75,000 barrels of oil equivalent per day, with pro forma EBITDA of over $900 million for 2021, resulting in year-end pro forma leverage of around 2.5x. Turning to Slide four. Operationally, we continue to make good progress in each of our production hubs.
In Ghana, Jubilee is currently producing above 80,000 bbl of oil per day gross, with a J-56 producer coming online in July and the J-55 water injector online in September. The second Jubilee producer is currently being drilled and is expected to be online before year-end. This should result in Jubilee production exiting the year above 85,000 barrels per day. TEN gross production is currently around 30,000 bbl of oil per day. The gas injector came online last month and is expected to support current production levels. In Equatorial Guinea, gross production is currently around 30,000 barrels of oil per day. The partnership finished the Ceiba reliability projects in the third quarter, with completion of the Okume upgrade project expected this quarter. The first of three planned infill wells in the Okume complex was completed in August, with hookup currently in progress.
In the third quarter, the operator began drilling the second well, which is expected to be online in December. The third planned well is now expected to be the third, as the rig is being utilized to plug and abandon an existing well in Equatorial Guinea. It is required to mobilize for its next contract before it can complete the drilling of the last well. We do expect the output from the first two wells will largely compensate for any deferral of the third well, given reservoir data at the high end of expectations from the first two wells. In the Gulf of Mexico, as previously noted, production in the quarter was impacted by Hurricane Ida, which resulted in around 4,000 bbl of oil equivalent being shut in versus our previous guidance.
While none of Kosmos' infrastructure in the Gulf of Mexico was damaged in the storm, lengthy shut-ins arose from key pipelines and receiving terminals being offline, leading to basin-wide shutdowns in the aftermath of the hurricane. Production across our GOM assets was restored to pre-Ida levels by the end of September. We should allow for a strong rebound in the fourth quarter. We are currently in the process of drilling the Winterfell appraisal well, with the results expected later this quarter. Turning to Slide five, which looks at Tortue, our world-class gas development. As you've heard me say in the past, Tortue is the right project at the right time. The chart on the left is one you've seen before. It shows that Tortue is the right project because of where it sits on the cost curve.
With Phase one gas all sold to BP, the real upside potential is with Phase two, where we have a huge amount of optionality because the gas is currently uncontracted. We believe that Tortue Phase two can deliver gas into Japan at a break-even cost of just over $4 per MMBtu. It competes very favorably with other new LNG projects expected to start production in coming years. The chart on the right shows the project is due to come online at the right time, with global gas demand continuing to grow strongly as the world exits the restrictions of the pandemic. The chart shows the forward curves for JKM and TTF today versus the forward curves a year ago.
If we ignore the near- term elevated prices and look further out to December 2023, the chart shows a rerating of future price expectations with both JKM and TTF leveling out at around $10 per MMBtu, approximately double the same curve from a year ago. This is fundamentally about robust long-term demand for gas as it displaces more carbon-intensive alternatives and acts as a baseload partner to renewables in the energy transition. As demand grows, long-term gas prices are likely to be supported at a level necessary for the marginal cost of supply to meet that demand.
In a recent research note, Morgan Stanley predicted that LNG demand is set to rise twice as fast as supply through 2025, with prices expected to be 60% higher over the next five years versus the last five years on average. In this environment, the lowest cost gas project should come out on top. With Tortue making good progress and other significant gas discoveries we have in Mauritania, Senegal, we believe Kosmos is well-placed to take advantage of these strengthening market dynamics. We have contracted Phase one volumes of the slope around 10% to Brent, which means we'd be selling Phase one gas at around $8 per MMBtu at current oil prices. For Phase two, we are yet to sell the gas, which gives us greater flexibility on pricing, whether we choose long-term contracts, different indices, spot sales, or a combination.
Turning to Slide six, Tortue Phase one continues to make good operational and funding progress with the four key work streams all moving forward. On the floating LNG vessel, mechanical completion activities have commenced with instrument loop checks. Control system commissioning is expected to commence in the first quarter of next year. On the FPSO, topsides integration and hull and living quarters mechanical completion activities have commenced. Pre-commissioning activities are expected to commence later this quarter. On the breakwater, we've commenced fabrication of 20 of 21 caissons, with 12 now installed. Jetty piling is expected to commence later this quarter. Finally, on the subsea, the Nouakchott and Dakar marine supply bases are being established. This is expected to enable the offshore installation campaign to commence in the first quarter of next year.
As you can see in the top picture on the slide, the hub terminal and breakwater is now starting to take shape. The image shows the caissons in position, and you can see the impact on the sea state on the protected side of the breakwater. The bottom picture on the cover slide of today's presentation shows the topside modules being loaded onto the FPSO, another significant milestone for that key work stream. With regards to project funding, we've completed the FPSO transaction and now have a clear financing path to first gas on Tortue. The FPSO transaction materially reduces our outstanding CapEx on the project, with all 2021 cash calls now funded through year-end and the remaining benefit expected in 2022.
As mentioned earlier, we now expect to fund our outstanding CapEx to first gas with the free cash flow from our base business, which we are currently hedging at attractive levels. We're also working on the NOC loan refinancing, targeting completion around year-end. As BP flagged on its earnings call last week, the project partners and the governments of Mauritania and Senegal are working hard to advance Phase two of the project, and we expect a final investment decision in 2022. I'll now hand over to Neal to take you through the financials for the quarter.
Thanks, Andy. Turning to slide seven. Production of approximately 49,000 bbl of oil equivalent in the quarter was in line with expectations, taking into account the unplanned downtime in the Gulf of Mexico from Hurricane Ida that Andy talked about, which had an impact of around 4,000 bbl of oil equivalent per day in 3Q. As guided last quarter, sales volumes for 3Q were expected to be low due to the number of cargo liftings, which resulted in a significant underlift of around 1.5 million bbl at the end of the quarter. Low sales volumes, coupled with a working capital draw, partly related to the underlift and partly related to cash payments in Mauritania and Senegal prior to the FPSO transaction closing, led to a cash outflow within the quarter.
The lower realized price in 3Q reflects regular monthly settlement of hedges despite lower sales volumes in the quarter. With 5.5 cargos expected in Ghana and EG in the fourth quarter and Ghana production restored to pre-Hurricane Ida levels, we expect a significant cash inflow in the fourth quarter as we close out the year with more production selling at significantly higher realized prices. The rest of the line items were largely in line with prior guidance. Turning to Slide eight. You've heard both Andy and myself talking about our commitment to reducing leverage with a target of between 1 and 1.5x . The Oxy Ghana transaction helps to accelerate delivery of that goal.
The equity debt mix we put in place to execute the Ghana transaction meant the acquired assets had a leverage multiple of less than 2x using a trailing twelve months EBITDAX. This meant the transaction was deleveraging immediately. The chart on the sharp slide shows the pace of expected deleveraging through year-end 2021 and into 2022, as we benefit from growing production and higher oil prices, which we are able to lock in with new hedges. We have started to hedge the acquired barrels with two-way collars that have a floor of $70 per barrel and a ceiling of around $90 per barrel. This gives us EBITDAX and cash flow visibility, both of which should positively enhance leverage over the coming months.
By the end of next year, we are targeting leverage of around 1.5x at current oil prices, which would be below the level at which we exited 2019 and before any benefit from new production from Tortue in 2023. With that, I'll let Andy wrap up today's presentation.
Thanks, Neal. Turning to Slide nine. As I said in my opening remarks, it's a transformational time for Kosmos, and I'm proud of what the team has achieved within the last quarter. As I look back, 2020 was a year of survival for the sector, where Kosmos took the opportunity to reposition its portfolio to be fit for the future. 2021 has been a year of resuming operational activity and strengthening the balance sheet, which has been significantly enhanced by the two major transactions I've talked about in today's presentation. Looking ahead, 2022 is a year in which Kosmos can really start to thrive. We have the right portfolio for the future and a clear pathway to unlocking shareholder value. Looking at some of the important milestones we see through 4Q and into next year.
First, we expect our base business assets and the newly acquired assets from the Oxy Ghana transaction to generate significant free cash flow, which we plan to use to fund the Tortue project and to pay down debt. As we move through 2022, first gas at Tortue comes into view with the bulk of the capital funded. We also expect to take FID on Phase two during the year. Now, our 2021 hedges are now rolling off, and we are able to hedge our growing production base at significantly higher levels, giving us increased visibility to enhance future cash flows. Finally, building on Neal's comments from the previous slide, we're committed to deleveraging the company with 2022 year-end leverage of around 1.5x at current oil prices. Thank you.
I'd now like to turn the call over to the Operator to open the session for questions.
Our first question is from Charles Meade with Johnson Rice. Please proceed.
Good morning, Andy and Neal. My first question on the Phase two FID for Tortue. Are there any significant questions or unknowns you guys are still grappling with? Alternatively, is this just you know you have to follow the process, but this is a you know this is a fait accompli?
Okay, Charles. Yeah, I'll take that question. I think we're clear on the approach, which is we pre-invested in the infrastructure to enable both the Phase one and Phase two developments. The objective, therefore, is to ensure that we fully optimize the Phase two. To do that, we need to ensure that we've got the right approach for the subsea pipeline ashore and the LNG solution. I think the work on the offshore side of it is well described. We know exactly how we're gonna get the most out of what we've pre-invested in terms of the FPSO and pipeline. With a minimal incremental spend there. We're now working through the commercial negotiations to optimize the LNG solution.
You know, that's really the key activity to progress. With that in place, that then enables us to move forward. I would say that you know, we're certainly in a position where we can complete that work in a timely manner. Clearly, the external environment today is helping, you know, all parties, you know, the partners, ourselves, BP, and the NOCs.
Got it. Thank you for that, Andy. A follow-up question on your activity levels or your CapEx levels. From the outside looking in, it looks to me like your activity levels across your portfolio in 2022 are gonna be about the level that we're seeing for Q4. I guess the question is that a fair read? Is Q4 activity and spending a reasonable baseline to use for 2022 levels?
Yes. Let me take that, Andy, or Charles. Yes, I'd say the piece that 4Q doesn't reflect in terms of the implications for 2022 are really around in sort of Mauritania, Senegal. I think from a Ghana business, you know, the activity level would be the same. EG spend is sort of moves around by quarter, but, you know, broadly will be similar to sort of the levels we spent this year as well as within the Gulf of Mexico. Yeah, we will be spending a bit more in Mauritania, Senegal to get sort of the Phase one to first gas. When we've talked about that around having $300 million left to go post the FPSO transaction in the 2022, 2023 timeframe.
Thanks for that added detail, Neal.
Yeah, sure.
Our next question is from Neil Mehta with Goldman Sachs. Please proceed.
Hi. Hi, Dave. Can you hear me okay?
Yeah, we hear you well, Neil.
Thanks, Andy. You know, first question is just around Tortue and how you're thinking about Phase two, and specifically the economics of Phase two relative to Phase one. I think the Brent slope on Phase one is lower than maybe some would have desired, although the economics will be better if we sustain an $80 Brent type of environment. Phase two, it feels like there could be some outsized economics. Talk about where we are in terms of the gating process to getting to Phase two and just how you think about the contracting environment, especially with global LNG prices having firmed up so much.
Yeah. Thanks, Neil. I think, as I said to Charles, I think we're clear on the basis for the expansion of Phase two. You know, the minimum amount of CapEx to put into the expansion and using the capital that we've invested in Phase one. That enables some very low break-even costs, which is what we showed in the presentation. As you look around the world for brownfield expansions, you know, we believe it is one of the most cost-competitive projects around. Hence, you know, the desire of the partnership to move forward. You know, its advantage from that perspective.
I think from a Kosmos perspective, it's advantage because we have flexibility now on how we price the back gas. You know, we have flexibility because we have the cash flows clearly from Phase one. You know, the funding for Phase two is considerably lower than Phase one. You know, we've talked as a partnership of the number gross being less than $1 billion. From a funding perspective, there are no sort of financing requirements that cause us to not optimize the pricing. I think you'll see us going forward now look at how we capture the current market conditions in the best way.
You know, as I said in my remarks, I think, you know, we have opportunities now to look at different indexation. We have the ability to look at some gas being contracted longer term, some proportion of the gas being spot. You know, we see it as a significant opportunity now to capture what I believe will be a strong LNG market, you know, going through the rest of this decade. You know, firmly believe in an engineering sense, it's the right project at the right time because it has, you know, a very low cost of supply, and it's the right project at the right time because it's entering the market when there are very few competing projects, and therefore, it can benefit from a very good price environment.
You know, I think, you know, all of that is to come, Neil, and as you sort of sense is, you know, we see it as a major upside.
Are there a lot of moving pieces with the business? Certainly, you know, Tortue is in flight. The Oxy Ghana transaction is in motion as well, and obviously the oil price. But is there any way you guys can help us understand what the mid-cycle free cash flow power of this business looks like in a more constructive commodity price environment? Or at a minimum, at the curve once you have Phase one on, and layered in the Ghana assets as well.
Yes. Neil, I guess the way I'd answer that was, you know, we've sort of given guidance around sort of Phase one and Phase two, free cash flow of around sort of $150-$200 million of free cash flow per year. The way to think about it is, you know, we've got the spend to get it online, then Phase one really sort of funds Phase two. Then, you know, once Phase one and Phase two are online, then you get sort of that sort of $150-$200 million number out of that for sort of 20-ish years out of that business. I think the oil prices, the oil business should be pretty easy to model at this point.
We are, you know, all of the businesses between Ghana, Egypt, and the Gulf of Mexico are broadly similar in terms of, you know, operating costs in sort of the $10-$15 range. Additional sort of maintenance CapEx to keep sort of production at sort of that now sort of 75,000 barrel a day level, and then some cash taxes, particularly on the front end in Ghana and Egypt. We will start paying cash taxes at some point within sort of 3-4 years or after 3-4 years in the Gulf of Mexico.
There's a number of moving parts on that piece, but all of them solidly produce, you know, free cash flow down to sort of a $40-$50 oil price environment. Then you bolt on sort of the free cash from the gas business in 2026+.
Neal, just remind us again the oil price sensitivity.
Yeah. It's around $100 million unhedged every year for a $5 change.
$5 change
... in the oil. $5 change in the oil price, yeah.
Okay, great. Thank you.
Our next question is from Bob Brackett with Bernstein Research. Please proceed.
Good morning. I've got a short-term question, then a longer term question. On the short- term, can you talk about the path to the refinancing of the NOC loans by year-end? Anything we should watch for or worry about?
Yes. Bob, it's sort of a live discussion that we're in with a number of banks and financial institutions to get that across. There won't be really any milestones between now and then. It's really been a function of being able to have the conversations. You know, we needed to get the FPSO transaction done before we could have the conversations on the NOC. And then clearly the last few weeks or months we've been working on the financing related to the Oxy Ghana transaction. But yes, I wouldn't. There's no other sort of milestones expected outside of, you know, once we have a deal and done.
Great. The bit of the longer term question. If I think about Winterfell going to appraisal, are you maintaining the ability to convert that appraisal well into a development well, or is that something you shy away from?
No, we're maintaining that optionality, Bob. Yeah. As you rightly said, we have the first discovery well. We're now drilling the second fault block. We're currently, you know, operations are underway. You know, once we have the results of that, we could then have the opportunity of an early production scheme that brought those wells back online.
Great. Thanks for that.
Our next question is from Nick Stefano with Renaissance Capital. Please proceed.
Hi, guys. It's Nick . Thank you for taking my questions. I've got three to ask, if I may. Andy, I think the first one is for you. If I go back, you know, a year ago when BP announced to reduce the scope of Tortue, you know, make it a smaller project, but clearly like at a lower cost. At that time, it made a lot of sense. You know, I mean, gas markets moved up quite a bit since then. Just wondering, do you think that decision, you know, still made sense? Then I kind of like as a follow-up to that question, how should I be thinking about, you know, future phases of Tortue?
You know, I mean, the optionality to do like a brownfield development after Phase two. I don't think it'll be that anymore. What would the other phases look like? Then, my third question is for Neal. I think we've got maybe less than a week left for either partners or Ghana to exercise their preemption rights. Can we kind of like, you know, take it as a given that they're not gonna exercise it at this point? Thanks.
Yeah, Nick. Good questions. I think, you know, fundamentally, every dollar we put into Kosmos has to earn the highest possible return. Our objective on the next phase of Tortue was to absolutely deliver the most capitally efficient scheme. The scheme we've described of expansion to 5 million tons, essentially sort of utilizing fully the infrastructure we have in place is, I believe, absolutely the right decision. You know, we're driven by ensuring that we create the highest possible returns and generate the most value, and this scheme is the one that actually does that. I think it's absolutely the right objective, irrespective of the price environment.
Clearly, in a higher price world, we'll make a much stronger margin, and that's great for any day of the week. I think when you then look beyond that, I think we would then look, I think, for the next phase, as it were, Phase three, to sort of fully optimize the resource base, which can support around 10 million tons per annum. I think that's where you then make the next step up. You fully sort of utilize the existing offshore infrastructure in terms of the FPSO and the pipeline. You know, how do you then increment to 10 million tons? It will require additional facilities offshore. It'll require additional pipeline. How do you then integrate that into the existing hub terminal?
I think that to me is a very logical process, yeah. You enabled the project through the first phase. Phase two is the logical brownfield development to fully utilize the invested capital and delivers the highest return. The third phase should then be about the long-term expansion to fully utilize all of the resource. You know, that was the objective. I think we've stuck to that plan in a really rigorous way. I believe through that, the rigor of that approach, we've optimized the capital efficiency and therefore the value creation. Neal?
Yeah. Just on the preemption, Nick. Yes, you're right. I mean, they have, there's about a week left within that option. Again, we're not gonna opine in terms of what the partners do. I think if you sort of step back, you know, the transaction for us was around sort of gaining access to a materially larger stake in Ghana, particularly in the Jubilee field, where we've gone up from 24% to 42%. You know, while preemption is possible, you know, the good thing from our perspective is, you know, we retain a much larger stake in Jubilee, which is where, you know, we see the largest sort of near-term upside.
You know, the impact would largely be on a reduction in the TEN asset. It's still outstanding and we'll know when the time's gone through.
Okay, cool. Then Neal, that sensitivity you gave just a few minutes ago, I think that was the pre-Oxy deal one, right? Shouldn't that be a bit higher now with the increased stake in Ghana?
Yeah. No, I mean, the number hasn't, you know, materially changed in terms of maybe there's another $15-$20 million per $5. But again, it's just sort of not a huge overall change.
Okay.
Yeah.
All right. Gotcha. All right. Thank you so much.
Our next question is from James Hosie with Barclays. Please proceed.
Yeah. Hi. Thank you. It's a couple of questions from me. Just first off, how should we think about shareholder returns now? Is that something that can come when leverage falls below 1.5x EBITDA, or are there other considerations or metrics we need to think of a trigger for that catalyst? Just on Tortue, I was wondering what the carbon intensity of that production, what you expect it to be, and if there's scope for you to look at marketing carbon neutral cargos from that project.
Yeah. You know, I'll, you know, talk about shareholder returns and Neal chime in. You know, we talked about getting to a leverage range of 1-1.5x . You know, clearly when we're in that range, I think it is a valid conversation to have. I think the only commentary I'd add on top of that is it needs to be sort of sustainable. How do we get to a world where we can see a sustainable leverage of 1-1.5x ? You know, when we're in that world, we'll then have that debate.
You know, clearly our objective is to get there as fast as we can, and I think we're pretty clear today on how we're doing that, you know, while supporting the transition of the business from purely a low carbon, low-cost oil business to a balanced portfolio.
Yeah. The only thing I'd add on that, Andy, is, you know, to Neal's question earlier, you know, the business generates a lot of free cash flow in oil prices where we are right now. As we do get leverage to that point within that range by the end of next year, we've gotten the capital from Tortue largely behind us at that point, and then additional production on the come. I think, yeah, that's the appropriate time to have that conversation. And again, I think, you know, we'll be very sort of well-positioned to do it at that timeframe. So there's still more work to be done on our end, but again, we got a pretty clear line of sight to the delivery of that in a reasonably short timeframe.
Yeah. When you look at how Tortue benchmarks from a carbon intensity perspective, it's pretty good. You know, when you look across the range of both existing projects and new projects that are being brought on, it's got a significantly better than average carbon intensity. We feel good about it from that perspective. Looking forward to the marketing of carbon neutral cargos, yes, it is something that we're looking into. Clearly, we're a little ways from that point in terms of having those cargos on the water. It would be another opportunity, I think, for us to get a differential price for the cargos. That's ultimately what it is.
Initially, the cargos are obviously being sold to BP. In that sense, that's their world. I think, you know, the opportunity comes when we start to think about Phase two and cargos that we may market, you know, through different mechanisms. I think that's where you can start to see some way to differentiate the cargos and see a potentially more attractive price. I think that's where we would focus that effort on, James, is the sort of longer-term view of Tortue, and particularly the unmarketed Phase two cargos.
Okay. Thank you very much.
As a reminder, just Star one on your telephone keypad if you would like to ask a question. Our next question is from Mark Wilson with Jefferies. Please proceed.
Hi. Good afternoon, gentlemen. I'd like to ask about Ghana first. There was some discussion around the time of the deal of the potential implications for operatorship of Jubilee. Is there any reason to think that could change post this deal? Could you remind us on the timing of a second rig into Ghana and whether that might be accelerated? Lastly, Andy, you mentioned about 10 gas injectors supporting current levels. Is 30,000 level what we should be looking at through 2022, let's say, unless there's further drilling? That's on the Ghana side. Lastly, if there's any commentary regarding the Greater Tortue acreage now, BirAllah, Yakaar, whether there's any change to what you think about monetization of those assets. Thank you.
Great. Thanks, Mark. Yeah, going through Ghana in terms of the sort of three areas you mentioned. I think, you know, I've been very clear on operatorship. You know, we have a very good working relationship with Tullow. We've seen as a result, I think, of a strong partnership, significant progress being made in terms of the operational delivery, both, you know, in terms of reliability, in terms of the water injection, gas offtake, and actually drilling performance. You know, that's what we're focused on now is to ensure that that partnership continues. It's great for GNPC to have a large stake as well as part of the transaction.
You know, we have the same partnership as it were going forward now, and our objective is to ensure that we continue to leverage that partnership to create, you know, more value through, you know, higher production, good cost management and delivery of the targets. In terms of the second rig, we're clearly in a debate at the moment with our partners on the drilling program. You know, I think the timing is probably around year-end. You know, why? It allows us then to fully utilize, you know, a rig string on Jubilee itself, where we're starting the drilling at Jubilee South East.
You know, there are other opportunities that we want to pursue, in particular, I think across the existing areas that are under development in Jubilee and on TEN. I think you'll see us, you know, make that decision towards the end of the year and then being able to sort of open up those work fronts. I think, you know, what we need to stay focused on at the moment is to ensure that, you know, we deliver, continue to deliver really good drilling performance. That comes by having a very clear program that's well described. The targets are delivering what they said they would do.
You're absolutely right, longer term, and I, you know, we see more opportunity in Jubilee, more opportunity in TEN, in particular in Jubilee, on Jubilee South East. Then, in terms of TEN, you're absolutely right. You know, we've completed the gas injection on Ntomme. That's about supporting the Ntomme production going forward. You know, improvements in rate from TEN will come from additional wells. So it is that balance of, you know, a one rig program. What do we drill on Jubilee? What do we drill on TEN? And how do we optimize that program, in particular as we look forward to 2023, where, you know, we will then start to want to focus on Jubilee South East. How do we bring the same focus to TEN?
I think you're gonna see, you know, a more rapid increase in production in Jubilee, sort of a longer term ramp up in TEN. In terms of 2022 will depend on the ultimate optimization of that rig program. Turning to Mauritania and Senegal. You know, you're right. Obviously, our initial focus, you know, our focus at the moment is on Phase one, getting Phase one onto production on time and ensure that we have a Phase two that is moving forward in parallel, and I feel good about both of those pieces. We've clearly got significant gas resource in the north, in BirAllah, in Mauritania and then the south in Senegal. In Senegal, Yakaar-Teranga is ultimately about a domestic gas scheme first.
It's a scheme where there's real synergy with the country's agenda, you know, replacing diesel burning with gas. This is a gas resource that's close to the Dakar Peninsula. The work that BP and ourselves are pursuing is doing the front-end engineering around describing that scheme. Then it's ultimately a conversation with the government around the commercial basis for that moving forward. In Mauritania, BirAllah, you know, a very significant resource. Our objective there is to find the right way to advance, you know, that project. It's probably more of an export project, yeah. You know, much lower population in Mauritania, lower energy demand. There will be gas for domestic consumption coming from Tortue.
Therefore, it is about how do we have a follow-on project in BirAllah which leverages the technologies and approaches that we've established for Tortue. You know, again, in a world where I see sustained long-term demand for gas and few areas of the world that have world-class low carbon gas, you know, gas in Mauritania and Senegal, you have very, you know, de minimis amount of CO2. This is very LNG-friendly gas. You know, how do we facilitate its development? You know, that's the two, those are the two areas where we're working on now with both of those projects. You know, I'm optimistic with both. I think we've got a huge resource to develop there.
The timing is sort of coming into the frame because of the need for that gas longer term.
Okay, thank you very much. I'll hand it over.
Our final question is from Matthew Smith with Bank of America. Please proceed.
Yeah. Hi there, Andy and Neal. Thanks for taking the question. Just one to finish off, and that was just whether you were looking into revenue sharing at all on your cargoes in Ghana in particular, because it does seem as though the market sometimes struggles to assess the underlying sort of free cash flow or earnings potential of the company just due to the quarter-over-quarter volatility. I sometimes feel the sort of share price reaction is almost a bit inevitable based upon the nature of the quarter. I think we've had a few questions on this call around the underlying sort of free cash flow potential of the business. Just wondering if a revenue sharing agreement is something you're considering at this stage.
Yeah. Thanks, Matt. No, that's a good question. It's something obviously we're cognizant of and actually has been almost exacerbated as production levels in Ghana, you know, decreased in the early part of this year. Increasing the production actually will help even out that issue. It should be less of a concern. You know, to your point, we are planning to sort of co-lift our own barrels. In terms of the acquired barrels plus our existing barrels, if we lift them together, we will also get rid of the sort of timing issues. We'll have much more regular volume going forward.
It is something that we're attentive to because I agree, I think it does create a bit of a distraction around some of the quarterly numbers. It will, you know, as we look to 2022, it does naturally become less of an issue as we're both growing production and actually co-lift our barrels. The ones that we acquired plus our existing barrels helps smooth that out to where we don't have as much variation in 4Q and beyond.
Sure. Understood. Thanks.
Thanks, Matt.