Greetings, and welcome to the Kosmos Energy third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question- and answer- session will follow the formal presentations. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Jamie Buckland , Vice President of Investor Relations. Thank you. You may begin.
Thank you operator, and thanks to everyone for joining us today. This morning, we issued our third quarter earnings release. This release and the slide presentation to accompany today's call are available on the investor's 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 estimates, plans, and expectations. Actual results and outcomes could differ materially due to factors we note in this presentation and in our U.K. and SEC filings. Please refer to our annual report, stock exchange announcement, and SEC filings for more details. These documents are available on our website. At this time, I will turn the call over to Andy.
Thanks, Jamie, and good morning and afternoon to everyone. Thank you for joining us today for our third quarter results call. I'd like to start today's presentation with a few comments on the macro environment and the role Kosmos can play in addressing the energy challenges the world is facing. I'll then give an update on the quarter and a progress report on the oil and gas development projects we have across the portfolio. I'll then hand over to Neal to talk through the financials before I wrap up today's presentation, and we open the call for Q and A. Turning to slide three. The world's grappling with a need for affordable, secure, and cleaner energy with a balanced approach required to address the three dimensions. Kosmos has the right strategy and portfolio at the right time to be part of the solution.
We have a strong oil-weighted portfolio that can supply more of the energy the world needs today. We're investing in growing oil supply in each of our core production hubs with an emphasis on high-graded projects that yield low cost, lower carbon barrels that are highly cash generative. At the same time, we're working with our partners to bring new sources of natural gas into production. These projects address affordability and increase energy security by supplying more gas to global energy markets, as well as into domestic markets in Africa. This should benefit our host countries in two ways. First, the revenues from the export of LNG can be invested in critical infrastructure to promote economic development. Second, providing baseload domestic gas supply will help expand access to electricity, a key goal in each of the countries where we work in Africa.
Over the next two years, we expect to increase oil and gas production by about 50% as we optimize current production and bring new projects online. For Kosmos, the cash flow from our current and planned activities enable selective reinvestment into the most compelling opportunities in our deep natural gas portfolio, which can help meet demand and support the energy transition for decades to come. Longer term, we plan to continue shifting the balance of our portfolio from oil to natural gas and LNG to help meet the world's energy needs as cleaner natural gas displaces coal, heavy fuel oil, and biomass as a primary source of energy in both developed and emerging economies. The world's demand for energy continues to grow, particularly in Africa, and few E&P companies are investing to meet this demand.
Given the quality of our asset base and the wealth of opportunities within our differentiated portfolio, we believe Kosmos has an important role to play in responding to these global energy challenges. The next slide highlights the characteristics that differentiate Kosmos. On the left side of the slide, we identify the distinctive features of our portfolio. First, we have a high quality and long-dated asset base with 2P reserves to production life of over 20 years. Second, our low cost, high margin assets are highly cash generative, particularly at current commodity prices. Third, we forecast around 50% growth in production from now into 2024 from three development projects which are progressing well.
The largest portion of that growth is expected to be driven by Tortue, which increases the gas content of our portfolio materially just from phase one, with a larger transition anticipated as we deliver subsequent phases and our other gas projects in Mauritania and Senegal. On the right are the embedded values and qualities of the company that underpin our strategy. We have strong focus on capital discipline, only pursuing the most compelling value additive projects in the portfolio while making sure the balance sheet remains robust. We continue to reduce absolute debt and drive down leverage. Neal will talk about the progress we've made this year. We have a highly experienced management team who have the energy to deliver our strategy and respond to the challenges we see across the industry today.
Finally, we have a strong track record across the ESG spectrum, from near-term emission reduction target to contract transparency to funding social programs in our host countries. MSCI, one of the leading ESG rating agencies, recognizes this commitment and the progress we are making and has recently upgraded Kosmos to triple A, its highest possible rating. The combination of these qualities makes Kosmos unique and supports our ability to create substantial shareholder value over the short, medium, and long term. To summarize, I strongly believe Kosmos is well-positioned for the future with a clear, compelling strategy, and we continue to deliver progress on our strategic priorities each quarter. Turning to slide five. Lo oking at 3Q, it was another quarter of solid execution for Kosmos, as highlighted by the boxes on this slide.
Our production assets are performing as expected, with production for the quarter in line with guidance. We continue to grow the value of our oil portfolio with progress at the Jubilee South East Project and Winterfell development. We have high-graded our ILX offer for next year's drilling activity. We are also growing the value of our gas portfolio with the continued execution of the Tortue project and at BirAllah, where we've signed a new PSC with the government of Mauritania. The balance sheet continues to improve as the portfolio generates cash, which drives down leverage with our year-end target leverage of 1.5x achieved with further progress expected. We'll dig into each of these themes in today's presentation. Turning to slide six, which focuses on the performance of our production assets during the quarter.
In Ghana, the Jubilee field continues to deliver with gross production for the quarter around 89,000 barrels of oil per day. Following the excellent drilling performance year to date, which has seen wells drilled safely and quicker than planned, we have now started to drill the first of the three Jubilee South East wells ahead of schedule. We have completed the handover of the Jubilee FPSO operations and maintenance from MODEC at the beginning of the third quarter, and the results so far have been encouraging, with multiple opportunities identified to drive further efficiencies and reduce costs. Since transition, the operating performance has been strong, with no reportable safety incidents and facility uptime of over 98%. On costs, we've identified potential savings with direct contracting, focused work scopes, and competitive retendering. At TEN, gross production around 22,000 barrels of oil per day for the quarter was in line with expectation.
The EN-21 well was brought online in late September and has since been choked back, awaiting pressure support from the injector pair, which we expect to see soon. The partnership also drilled the second Ntomme riser-based well during the quarter, which encountered approximately five meters of net oil pay, but with poorer quality reservoir than expected. The data from the two riser-based wells will be incorporated into the expansion plans for TEN, which will now be focused on proved accumulations in areas where we have existing well control. In Equatorial Guinea, gross production has been consistent and stable, with around 30,000 barrels of oil per day for the quarter, again in line with expectation. In late August, the partnership entered into a rig contract for next year's drilling campaign.
Activity is scheduled to begin in the second half of 2023, when the partnership expects to drill several infill wells in Block G, followed by an ILX well. The Gulf of Mexico net production of 40,700 barrels of oil equivalent per day was slightly below expectations due to an extended Delta House turnaround and Loop Current impacting production at Tornado after the planned dry dock of the production vessel concluded. At Delta House, there was an unplanned shutdown for around two weeks last month due to an outage of the gas compressor. The issue has been resolved and factored into our full-year guidance for the Gulf of Mexico in the appendix slide at the back of the material. On Kodiak, the number three well came online in mid-September. Well results and initial production were in line with expectations.
However, as one of our partners flagged in their results last week, well productivity has declined and workover plans are being developed. There have been a few issues with unplanned downtime over the past couple of months, but we're now back at around 18,000 barrels of oil equivalent per day net and focused on growing our GOM production. Work also began on the Odd Job Subsea pump project during the quarter following sanction in 2Q, which is an important step in sustaining the long-term performance of the field. Turning now to slide seven. As we move our development projects forward, we continue to grow the value of the portfolio. This slide looks at the recent progress we've made growing the value of our oil portfolio. On Jubilee South East, the project is now over 50% complete, with the drilling of the first well now underway.
Initial production is expected in mid-2023, and the partnership is targeting a ramp-up in gross Jubilee production to around 100,000 barrels of oil per day. At Winterfell, all partners signed the field development plan in September, and the operator has signed a recommitment letter to drill and complete three wells starting mid-2023. Both facility production handling agreement and midstream export agreements are also expected to be completed within the next several months, supporting our target of first oil at the end of first quarter in 2024. Given the scale of the potential resource with approximately 200 million barrels of recoverable oil, we remain excited about this project. Within the quarter acquired an additional interest, taking our overall interest in the project up to 25%. In addition, we are targeting further growth from drilling two high-graded opportunities in our ILX offshore.
We expect to drill the Tiberius well in the Gulf of Mexico mid-2023 and the Akeng Deep well in Equatorial Guinea around a year later. Both projects are targeting over 100 million barrels of oil growth and would be high return tieback projects if successful. Now that I've talked about our near-term upside in oil, I'd like to switch gears on slide eight, which looks at how we're growing the long-term value of our gas portfolio. Let's talk to phase one, our LNG project in Mauritania, Senegal. All work streams continue to make good progress with the project approximately 85% complete at the end of the third quarter. The hub terminal is now largely complete with the living quarters platform installed and the commissioning activity now commenced.
On drilling, four wells have been drilled with a total capacity of around 700 million standard cubic feet per day. We recently completed the first of the four wells and have floated back to the rig for a short cleanup period. Combined across the four wells, we now have significantly more capacity than the 400 million standard cubic feet per day required to supply the liquefaction volumes for phase one. On the floating LNG vessel, which is being constructed in Singapore, we remain on track for sail away in the first half of 2023, as communicated by Golar LNG in their most recent results. On the subsea, the shallow water gas export pipeline from the FPSO to the hub terminal has been installed, and the deep water pipe lay vessel has arrived in the region.
Final testing is being conducted prior to mobilization in the coming weeks to lay the deep water pipeline and the infill flow line. On the FPSO, the timing of the sea trials by the sail away was impacted by the typhoon which swept through the yard in mid-September and caused the vessel to drift away from the quayside. Around two weeks later, the vessel was returned to the quayside, and following the inspections carried out to date, there continues to be no material damage reported. With the required inspections and additional work scope resulting from the typhoon, the impact on the FPSO schedule has been around a month. As a result, we expect sail away of the vessel around year-end.
Stepping back and looking at the project overall, the operator is working hard and making good progress to overcome the challenges from COVID, supply chain constraints, and more recently, Typhoon Muifa. We expect first gas around nine months from FPSO sail away and continue to target first LNG around year-end 2023. On the cargo sales opportunity we talked about last quarter, a process of engagement has commenced with significant interest received to date, including majors, traders, and end users. We'll provide further updates as we progress the process, and we remain focused on crystallizing additional value for our shareholders from this opportunity. Elsewhere in Mauritania and Senegal, we continue to move the various projects forward. On Tortue Phase 2 , we're in advanced discussions with our partners, BP, Petrosen, SMH, and the two governments, including their respective presidents, on the right concept to accelerate the second phase of the project.
In light of the changed global market conditions following the invasion of Ukraine and the continuing volatility, our aim is to agree the best concept in the coming months, which will enable us to advance apace for the right expansion. This is taking longer than initially envisaged as we work to obtain the full agreement of both governments, who are rightly considering the importance of their gas resource and the opportunity to build new government-to-government partnerships. Overall, I'm pleased with the level of alignment on the route forward. There's a sharp focus on building the right low cost solution, leveraging synergies with phase one and accessing attractive pricing opportunities given the high demand environment. On BirAllah, we've now signed the PSC with the government of Mauritania as flagged in last quarter's results.
We're working with BP on a future development concept, and the PSC allows us up to 13 months to reach FID, so that sets the clock on that project. We expect this project to take a similar phased approach to Tortue to manage both cost and pace. In Senegal, we're continuing to progress the domestic gas scheme with the operator and the government. There is a large and growing need for domestic gas in Senegal, and the government intends to move this forward quickly. With that, I'll hand over to Neal to take you through the financials.
Thanks, Andy. Turning to slide nine. The third quarter saw continued progress as we further enhanced our financial position. We are taking advantage of higher oil prices to continue to strengthen our balance sheet with net debt down approximately $400 million year-to-date. EBITDA in 3Q was around $301 million, up almost four times compared to the third quarter of 2021 on higher production and higher realized prices. This was despite a significant underlift in the quarter, which we expect to reverse in the fourth quarter of this year. We generated around $30 million of free cash flow in the quarter, which takes us up to around $320 million for the year-to-date.
Strong EBITDA performance helped to drive leverage to the 1.5 times target we'd set out to achieve by year-end, with further progress on this expected. The chart on the right shows the quarterly progress we are making on both EBITDA and leverage. As our production has grown on a year-on-year basis, we now expect around $1.5 billion of EBITDA for 2022 at an average oil price of around $100 per barrel. Liquidity has grown consistently over the last year and remains over $1 billion. Looking forward, with expectations that the business continues to generate strong levels of free cash at current commodity prices, we plan to continue to prioritize debt pay down in the near term. Turning to slide ten.
I've talked about the financial highlights on the previous slide and plan to just cover the key items on this slide. As Andy mentioned, net production of around 61,000 barrels of oil equivalent per day was in line with guidance, helped in particular by strong performance at Jubilee and offset by some weakness in the Gulf of Mexico. With the continued higher unplanned downtime in the Gulf of Mexico in September and October, full year production guidance has been tightened to 63,000-65,000 barrels of oil equivalent per day. We realized a price of approximately $81 per barrel of oil equivalent, including the impact of hedging. Excluding hedging, the realized price was around $97 per barrel of oil equivalent. Costs generally came in line with guidance. However, OpEx was lower than forecast due to lower Ghana operating expenses and some delayed projects in Equatorial Guinea.
Looking forward, we expect an increase on our floating debt cost as interest rates rise. However, this is anticipated to be offset by reducing the amount of our floating rate debt. As a result, overall interest costs should remain largely flat into next year. On capital, we expect Q4 to be broadly in line with the third quarter, which includes some slightly higher CapEx on Winterfell, reflecting the costs associated with the acquisition of our additional working interest. On the Greater Tortue project, there's also some uncertainty on the timing of accruals around the end of the year, which could either accelerate or defer capital between 2022 and 2023. To conclude the financial section of today's presentation, it was another good quarter of progress. We continued to fund our differentiated growth and deliver excess cash, which helps further reduce debt and improve our balance sheet.
We expect more of the same in the fourth quarter. I'll now hand it back to Andy to close today's presentation.
Thanks, Neal. Turning to slide 11 to wrap up today's presentation. Kosmos has had another solid quarter of strategic and operational delivery. Our production assets continue to perform well. We are growing the value of our oil business through advancing developments in Ghana and the Gulf of Mexico, with additional potential from high-graded ILX opportunities that we plan to start drilling next year. We're also growing value across our gas portfolio with further progress at Tortue, the signing of the BirAllah PSC in Mauritania. Our financial position continues to improve with another quarter of free cash generation. This has put leverage of multi-year lows with further progress planned. Finally, we have the right low-cost, lower carbon portfolio at the right time, providing the energy the world needs today and supporting a just transition that addresses the trilemma of energy security, energy affordability, and climate change. Thank you.
I'd now like to turn the call over to the operator to open the session for questions. Operator?
Thank you. We will now be conducting a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would 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. One moment please while we poll for your questions. Our first question has come from the line of Neil Mehta with Goldman Sachs. Please proceed with your questions.
Yeah. Good morning, Andy and team. Thanks for taking the time. The first question is really around the sale date for the FPSO. Obviously, there was a weather impact there. It sounds like you guys have been able to work through it quite effectively. Any more detail that you can provide? Based on the test that you've done on the asset, any structural damage or no real impact? Thank you.
Yeah. Hi, Neil. Yeah, thanks for the question. Yeah, you know, we obviously suffered the impact of the typhoon going through the yard. The mooring line's compromised. Vessel, you know, moved 200 meters away. It's now been back at quayside now. As I said on my remarks, you know, all of the inspections to date have not revealed any significant damage. You know, no structural damage. You know, we've really suffered about a month's delay from that work. The additional inspections that were required and the work that was required to address the minor damage that occurred. The operator's targeting sail away, you know, around the end of the year.
You know, with that, and we can talk more broadly if you want around the overall schedule, but that still puts us in the place where by year-end 2023, we can be delivering the first LNG. As with all big projects, you know, it's a question of dealing with the sometimes the challenges that are put your way. Clearly, you know, BP's been being challenged with the COVID shutdowns and with the Typhoon, but they've done a really good job at overcoming those and making progress. The project's made a lot of progress in the quarter. We're now at 85% complete, you know, with progress across all dimensions.
Clearly, you know, overcoming the latest issues with the FPSO has been an important piece of delivery in the quarter.
Yeah, I think that's gonna be an important catalyst for the story. That's the follow-up, which is as the investment community as we track where you are right now to ultimate completion, what are the milestones we should be watching between now and year-end 2023 to determine if everything's on track?
Yeah, no, thanks, Neil. Yeah, you know, again, it's good to be able to talk about it. If you sort of go through the five work streams in the project, and obviously the integration of those five work streams is important. You start with the wells. You know, we've drilled four wells. We've just done the first completion, flow the well back, you know, with a good cleanup. So, you know, one completion done, three more to do, and that's the wells finished, and we expect to get all that done by the end of the first quarter. You then sort of move. I'll get, you know, to the hub terminal. Essentially complete, very high level of completion.
Actually, the pack that we distributed this morning has a picture of the current state of the hub terminal. You can see from that picture the level of completion that's there. You know, we expect to be fully commissioned and ready for the FLNG vessel by the end of the first quarter of next year. FLNG vessel, as Golar have declared in their own disclosures, you know, should depart Singapore in the first half, and it's a 60- to 90-day transit. So it should be scheduled to, you know, arrive and then hook up, you know, through the third quarter. Then finally, you've got the sort of the subsea.
As I said on my remarks that the shallow water line has been done. The deep water pipelay vessel is in the vicinity and expects to start work later this quarter. They've finished all the deep water pipelay and flow lines by the second quarter. Then, you know, the critical path through the FPSO sails around year-end, expected to arrive 90 days later. We do the hookup of the FPSO, the connection of the subsea when all the equipment is laid, which is sort of the end of the third, around the third quarter. Therefore, you know, you start, you know, to introduce gas around that timeline, which leads you to, you know, first LNG by the end of the year.
You know, all the component pieces are there. You know, when we continue to deliver on those milestones as we go. As with all big projects, there will be challenges around the integration of all of that. There is a clear way forward and a lot of energy now in the delivery of that timeline.
Okay.
Okay, thanks, Neal.
Thank you.
Yeah. Great. Thanks. Right. We'll go to the next question now.
Thank you. Our next question has come from the line of Bob Brackett with Bernstein Research. Please proceed with your questions.
Yeah, good morning. I'm curious about 2023 CapEx, but I'll leave that question for somebody else and instead focus on GTA phase 2. I hear your language around government to government, and I recollect high-level visits between the president of Germany and Senegal. Could you provide some color on that to the extent that governments get involved? Does it change the scope of the project, the timing, or perhaps the assurance of counterparties? How do I think about that?
Yeah, good question, Bob. The answer is sort of all of the above. We've gone through a process of sort of revisiting the right concept for phase 2 . We've done that with full engagement of all the partners, obviously with BP leading that piece of work. You know, the ministry's involved, and actually both presidents involved. For them, it's about ensuring that they've got the right project, which enables them to position their gas as an important trade relationship with Europe. You mentioned the visits of Scholz to Senegal.
You know, that's part of actually the whole issue of energy security and Africa being an important new source of LNG. The right project, right scale, right timing as the governments think about their government-to-government relationships has factored into this piece of work. It's more than just the engineering. It's actually about them, you know, having to rethink their approach really as a result of everything that's happened in the last sort of six months. I think, you know, it's been appropriate for them to do that. Of course, it's slightly more complicated, Bob, because you've got two governments involved, and that's always been the challenge with GTA. That said, we have an important piece of delivery here.
We have a project which is truly low cost, which has low carbon gas. There's no CO2, and therefore is an important piece of new supply for Europe. I think, you know, as a result of those conversations, I think we made real progress. I think I'm optimistic that the operator will put forward a proposal actually this month that incorporates all of that feedback, which will enable us to agree the concept, which enables us to do the work to optimize that concept and then move the project forward into around that concept into FEED and ultimately construction. I think we are making real progress.
I think, you know, the challenge has been around, you know, a changing world and actually ensuring that we create alignment around, you know, both government positions.
Very clear. If you had your choice, if you controlled the path, would you prefer a smaller but quicker phase 2, as had been recently envisioned, versus what potentially could be larger, but and maybe not any slower scale project?
Yeah, Bob. You know, and I think, you know, I'm only one voice in this, so I need to be careful about what my view, singular view is. It's not about what I want to do in this or what Kosmos wants to do. It's what's best for the partnership. I think the partnership really understands that we have an opportunity to deliver truly low cost project by leveraging fully the infrastructure that we've invested in phase 1 . I think there's clear alignment around that. Therefore, really the debate has been around what's the best liquefaction solution that fully utilizes the infrastructure that we've laid in? Therefore, how do you build out that liquefaction that gives you the best opportunities you think about the, you know, the larger scale, but at the best timing, right?
That's really where's the edge of that. That's been the debate. I think there's, you know, really good alignment around the fact that we have essentially a brownfield expansion now and how do we optimize fully the investments that we've made in phase 1 .
Very clear. Thanks for that.
Thanks, Bob.
Thank you. Our next question has come from the line of Charles Meade with Johnson Rice & Company. Please proceed with your questions.
Good morning, Andy, to you and your team there. Wanted to ask just a follow-up about phase two, but perhaps from the financial perspective. I think when you have spoken about phase two in the past, the idea would be that the cash flows from phase one would essentially make your pathway to, you know, through building phase two, cash neutral. I have to imagine that as you guys have gone back and you know, re-examined your contracting strategy for phase one, that you're shifting more to a free cash flow positive position in Mauritania Senegal, even as you know, even once you begin phase two. Is that the right sense?
Maybe you use any more detail you can offer around that?
Yeah, no. You know, I'll share the answer with Neal. Yeah, I think overall, Charles, I think you're right. When we talked about it and about the phasing of the projects, it was always about ensuring that we had a really capital efficient phase 2 by fully leveraging the phase 1. We talked about a very sort of, you know, modest upstream investment that's sort of less than $1 billion. I think that absolutely holds true, and I think we have the opportunity to do better than that. Therefore, ultimately, the question is how do you deal with the CapEx on the midstream. You know, and within that, you know, we will have sort of financing or leasing options. I don't think anything sort of changed on that.
I think you're correct, I think in saying that I think probably from a cash flow perspective, there could be an opportunity to be slightly more positive as a result of that.
Yeah. I mean, I think the environment for you know, gas prices and oil prices will clearly be positive versus the long-term deck that we put out in terms of creating that wedge, Charles. There's some upside there. Clearly around the cargo sales opportunity, there's additional upside that would give us some more cash in that near-term period. Yeah, I think it's definitely moving in a positive direction versus just the neutral position.
That's helpful detail. Thank you, Neal. If I could ask the question about this Tiberius prospect in the Gulf of Mexico. I guess I've been operating under the impression there aren't a lot of untested four-ways still out there in the Gulf of Mexico. But perhaps that's not correct. I mean, can you give us a little bit of the provenance of this prospect and a timeline for testing it?
Yeah, no, you're right, Sir Charles. There aren't many four-ways left in the outer Wilcox. You never say the last, but this is one of the remaining few I think there are there. We really like the prospect because as you know, that genre of prospects that are four-ways in the outer Wilcox have been, you know, highly successful. We like the prospect and we're targeting on drilling it around mid-year. Actually, we're securing a rig as we speak. It's a high quality prospect, you know, I think from a geologic perspective.
It's got scale, you know, over 100 million barrels of resource, and it is a tieback. It absolutely fits our strategy. As you rightly, you know, I think implicit in your question is this idea about quality. How do you get to the very best? I think as we look at the prospects that remain in this play, this is one of the very best.
That's helpful detail. Thank you, Andy.
Great. Thanks, Charles.
Thank you. Our next question comes from the line of Alex Smith with Investec. Please proceed with your questions.
Hi, guys. Thanks for the call. Just a quick question on the results of the two TEN strategic wells. Both have been fairly disappointing from the maybe expectations. Can you comment on the short- to medium-term impact this will have at TEN? What the next plan of action is? Is it the case of reanalyzing the data and reassessing the interim plans? Or you mentioned targeting proven accumulations. Could you provide just some detail of those areas that you'll be targeting as opposed to the Ntomme prospect?
Yeah. No, thanks, Alex. You know, look, the purpose of the two wells were they were appraisal wells. It was to, you know, test the greater Ntomme area and allow us to, you know, calibrate the seismic to ensure that we have a solid development plan going forward. Just remember, this is new resource that we're bringing to TEN. You know, this is sort of new resource that obviously when developed becomes new reserves. This is about bringing more rather than what we have today. I think, you know, we've. The appraisal wells have allowed us to, I think, to get a better understanding now of the quality of that greater Ntomme area.
I think as we look, we can see the potential to bring new resource across that area. We will be targeting accumulations where we have well control and therefore is lower risk. That's the process we're in now with the operator to sort of bring a plan together that has that characteristic. You know, it will be a mix of sort of oil and gas, associated gas and non-associated gas. There is new resource to be brought. The appraisal wells have served the purpose in terms of properly defining the opportunity set so that we can bring something forward that is of the right risk profile and competes for capital within our overall allocation.
You know, so it has done what we want it to do, and we're now sort of, you know, fully integrating the results of those wells into the plan. This is something that we will be, you know, debating with the operator over the turn of the year.
Great. Very clear. Maybe just another quick one. You've hit the gearing target that you had planned for year-end. Does the question of potential dividends or buybacks now enter the realm and maybe when should we hear an update on that?
Yeah. Great. Why don't I pass it over to Neal, and he'll give you our thoughts on that.
Yeah. Hey, Alex. You know, where are we? You know, we've made, you know, good progress in terms of, debt reduction, which we've been clear that, you know, that has been our, key focus. You know, we've brought net debt down from $2.5 billion at the beginning of this year to $2.1 billion. Leverage has come down from 2.5 to 1.5 times. You know, we've been consistent in saying, you know, our near-term objective is to get leverage down to 1.5 times in the sort of sustainable oil price. That'll require us to continue to push, you know, debt down further than where we are today.
You know, the good thing is we continue to get closer to that point, and so it's an issue of you know, timing and you know, oil price is a big driver within that outcome. You know, if oil prices sort of stay where they are, I think you know, we can get to the right place you know, in the back half of next year to start having that discussion around shareholder returns. You know, based on the discussions we've had with our shareholders in the past, you know, I think you know, we're continuing to lean on the side of buybacks versus dividends.
We're in a good place to continue to move the path forward on the continued debt reduction and then, you know, when we get to the right time, push on the shareholder returns.
Great. Thank you.
Thank you. Our next question comes from the line of James Hosie with Barclays. Please proceed with your questions.
Hi there. I've just got a question on Ghana there. You've talked a bit about monetizing gas resources. Can you give us an update on where the partnership is in Ghana with securing new offtake agreements for the associated gas? And does Ghanaian gas play any part in your 50% production growth by 2024?
Yeah. Thanks, James. Yeah. No, it's, you know, a great question. And, you know, clearly today we're producing around, you know, 100 million scf of gas from Jubilee. We're coming to the end of the foundation volumes, and so therefore, you know, we're starting a conversation with the government about a gas sales contract for that gas. Integrated with that is the development of TEN, which I talked about on a prior question, which will be an integrated gas and oil development with gas. There's both associated gas from the oil and non-associated accumulations and putting in the infrastructure that enables us to optimize that.
I think, you know, with the way you should think about it really is that gas will be a part of that growth in TEN. The approval of that plan by the government will then give the government an important source of domestic gas, you know, at a price which is competitive with our current cost of gas. As you start to think about the growth target, you know, I think, you know, the big chunks of it are clearly Tortue, which is the biggest chunk. You then have the growth in Jubilee South East , then Winterfell and then, you know, there is some growth. You know, there's some growth in TEN, and it's gonna be a mix of oil and gas.
A piece of it, you know, is gonna be TEN gas. But it's, you know, overall, it's a minor part of the contribution to the 50% growth.
That's great. Thank you very much.
All right. Thanks, James.
Thank you. Our next question comes from the line of James Carmichael with Berenberg. Please proceed with your questions.
Hi, guys. Just a quick one on Jubilee. You mentioned in the release some options for potential cost reductions there. Just wondering if you could provide a bit more color on that. I guess nobody else has sort of picked up on Bob's 2023 CapEx question. It's probably a bit early, but if there's anything you can say on that.
Yeah, sure.
That'd be great.
Yeah. You know, good. Thanks, James. Yeah. I think, you know, clearly what's caused created the opportunity is the transfer of the responsibility for the operations and maintenance from MODEC. It's given us a really direct line of sight to that. I think that we're seeing opportunities coming from really optimizing the work scope, and because you're coming in with a different mindset, I think, from somebody who is a sort of third party operator to one that is now 100% focused on that task. An opportunity from work scope optimization. I think there is, you know, some work to do with the contracting strategies, and how we can get, you know, better value from those.
I think the combination of those two things are the things that will allow us to make reductions in terms of the cost base. Now, clearly, there is a more inflationary environment out there, but I think we have real opportunity to mitigate that. You saw a piece of that come through in 3Q. You know, the 3Q production costs were, I think, you know, below where we'd guided primarily because we had a shift in the operational activity in Equatorial Guinea from 3Q to 4Q. There was an underlying piece of self-help from Ghana in particular in Jubilee, and we expect more of the same going forward.
You know, it is just all about getting to, you know, top quartile performance, both in terms of reliability of the facility, which has been excellent, the operating costs, where we have, I think, greater access to those opportunities. Again, I think I do wanna, you know, comment on how good the drilling performance has been. You know, that has all enabled us to accelerate the Jubilee South East wells. You know, good performance to today, you know, in Jubilee. I think, you know, on the cost side, you know, there's probably a little more to go.
Yeah. James, I'll just take the second part of your question around 2023. I think, you know, you are right. It is still a bit early 'cause we're still finalizing the activity within the various partnerships that we have. I think, you know, generally, you know, we're looking to stay broadly flat into 2023 being sort of the last big capital year for us as we finish up the development projects. You know, we're being able to manage sort of the inflationary pressure through, you know, as Andy mentioned, even on the work scope side. Making sure we're efficient around every dollar we spend across the capital end as well as the operating end of the business.
That lets us keep things in a generally sort of flat area.
Great. Maybe if I can, just a quick follow-up on where you're seeing the most inflationary pressure at the moment.
Yeah. You know, it's interesting. You know, again, deepwater is different from the, from the Lower48 in terms of the timing of the contracts. You know, we've got some good contracts, I think, in place in Ghana, and we've benefited from those. You know, if you look out to sort of where the areas of capital spend, you know, we are seeing it in our deepwater rig contracts. You know, the operator, I think, did a really good job on Winterfell in getting in sort of ahead of the market, in getting that rig at a very good price. You know, we're following with the rig on Tiberius. I think, you know, we're getting fairly high utilization rates for quality equipment.
I think, you know, we are seeing inflation in those rig rates. I think that's probably for us, the biggest variable. Other things, you know, we're well locked in. You know, there's clearly, you know, still stuff to finish on Tortue and, you know, the edges of contracts, which have to be finalized, access to some of the workboats. As we get into the installation campaign, that will be an issue for us. You know, we've talked about, you know, Jubilee South East, the rig is contracted, equipment as it was on long-term orders. We don't see a lot of inflationary pressure there. Then finally on Winterfell, I talked about really what the operator has been doing to get ahead of it.
For us, the next sort of, you know, big capital item, actually that we're focused on is securing the rig for Tiberius.
Great. Thanks, man.
Great. Thanks, James.
Thank you. Our next question has come from the line of Mark Wilson with Jefferies. Please proceed with your questions.
Hi. Good morning, everyone. You've taken a lot of questions. I'm gonna focus on the gas, and you've given good clarity on the Tortue side of things. Maybe looking beyond that to BirAllah and Yakaar-Teranga. You've got the 30-month extension-
Yeah.
For BirAllah there. My question, Andy, is should we consider Kosmos sustaining in those two projects through to development, or do you see them more as monetization options? And also, would those two require further drilling ahead of a development decision? Thanks.
Yeah, no. Good. Yeah, great questions. I think, you know, if you start off, you know, from the biggest of the strategic level. They're different projects, I think, as we look at BirAllah and Yakaar-Teranga. Look at BirAllah. I think this is about another, you know. It's a new source of gas in particular for Europe. It has the attributes of being lower carbon. BirAllah is the same as GTA gas, essentially no CO₂ in it. And it is about coming forward with a development scheme that is low cost. I think it will be phased. Then can we get, you know, a cost competitive gas into Europe where we see the, you know, an enduring market need. The work is ongoing at the moment.
As you say, there's a 30-month clock to get to FID. In fact, Kosmos is doing the concept work on that, and it will be about a low cost, you know, phased development targeting, you know, a market in Europe where we're geographically advantaged. You know, I'm optimistic that we can come forward with something that's really credible. I think, you know, the inherent value of the project is then developed. I think, you know, subsequent decisions would follow. For me, our first objective is to generate something which is truly value added. You know, as you look to the strategy of the company, I believe gas, as I said in my opening remarks, is something that is core to our future.
It creates longevity and quality to the company. Building out GTA is a piece of it. Following it with a project like BirAllah is entirely, you know, part of that. I don't think we're questioning the relevance of that of BirAllah in the portfolio. Clearly, we have work to do to come up with something where we truly have a compelling cost competitive project. You know, with regards to further appraisal, you know, the answer is sort of no. You know, how can you come forward with a scheme now where you're not getting caught up in the timeline of putting a lot of money into appraisal, which generally is only going to, you know, destroy returns and extend timelines. On Yakaar-Teranga, it's a different start.
I think, you know, the country is very clear about its needs. It's significantly larger population than Mauritania. A growing population. They're burning heavy fuel oil today for power generation, displacing that with gas not only brings economic benefit, it brings climate benefits. How can we accelerate the development of Yakaar-Teranga? It will be a modest, you know, domestic gas project as they convert those power stations, but one which is serving a real need for the country that creates a great investment opportunity for us. The follow on that can come from that, if you like, early gas scheme to one where I think there is an export component to that as well. That's our, you know, twin focus on these projects.
You know, how do we create a really cost competitive LNG export opportunity in Mauritania? You know, getting on with a domestic gas project which the country does need. How do you create optionality from that that follows? You know, we focused obviously a lot of our energy on phase one and then getting phase 2 moving. I think, you rightly talk about the value that's in our portfolio from these two projects, because I genuinely believe they are competitive gas sources globally and both in an export sense and from a domestic sense.
That's great. Thanks for the
Great.
Commentary.
Good. Thanks, Mark. Anything else? You good? All right. I'll go to.
Thank you. Sorry. Thank you. Our next question has come from the line of Bob Brackett with Bernstein Research. Please proceed with your questions.
Thanks. Just coming back with a fairly minor question. Was trying to understand the strategic or financial logic around the Panoro farm-in in Equatorial Guinea. What sort of consideration did you receive and what sort of drove that decision?
Yeah. No, it's, you know, it's interesting, Bob. Yeah. I won't go. You know, we can do it offline in terms of the exact numbers, but, you know, not big actually in the overall scheme of things. I think most important thing is to create alignment across the partnership. You know, Panoro obviously came in, picked up the Talos share, so they're going to Ceiba and Okume. You know, we haven't talked about it, but, you know, the big upside actually in Equatorial Guinea. You know, the asset is performing well. We're seeing the extension of production profiles from good production engineering, particularly around the VSP program.
The real upside is gonna come from the opportunity in the Albian and untested play, plus, you know, very strong four-way. Panoro wanted to get access to that opportunity, which is great because it sort of is, the decimals aren't quite right, but then we have alignment between the exploration potential and the ownership and the infrastructure. It's really around getting alignment around that rather than us not liking, as it were, the opportunity in the Akeng Deep. You know, I think Charles asked the question around, you know, Tiberius, what did we like about it and, you know, it is a compelling four-way.
The Albian play in Equatorial Guinea is equally interesting because it's got really strong, you know, geology. These are solid four-ways. There's clear source and, you know, we have a fundamentally a very good, you know, initial prospect and then real play extension now with the acreage around it.
Great. Thanks for that.
Great. Thanks, Bob.
Thank you. There are no further questions at this time. I would now like to turn the call back over to management for any closing comments.
Well, thank you everyone for joining us today, and that concludes today's call. If you have any follow-up questions, please reach out to Jamie. Thank you.
Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.