Kosmos Energy Ltd Earnings Call Insights: Production Guidance, Teak-4 Results

On Monday, Kosmos Energy Ltd (NYSE:KOS) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared.

Production Guidance

Edward Westlake – Credit Suisse: Just a quick question and so it sounds as if the asset certification or asset stimulation is doing better than expected, do you think you’ll be able to sort of get back to close to the original production guidance without having to drill further sidetracks, maybe just talk through that and how much data, how long will it take before you can actually say that it’s a success?

Brian F. Maxted – CEO: Thanks Ed, this is Brian here. Thanks to everybody for joining us on the call this morning. We appreciate everybody’s interest in the company. Let me pass it on to Darrell, our COO to answer that Jubilee question.

Darrell McKenna – COO: Yes, indeed we are encouraged by the response of the wells that we’ve stimulated and we have a third one ongoing right now. Our view is that it will take us at least a couple months to see the total effect and that we will get some nine months of productivity on each of these cases. Our guidance for the year will stay with our production forecast that we originally put on the table, which was 70,000 to 90,000 barrels per day and that we would achieve full production rate by year-end 2012 for the FPSO.

Edward Westlake – Credit Suisse: Maybe asking in a different way. I mean you’ve done the J-7 sidetrack, you’ve got Phase 1A, so how many other sidetracks you’re planning in the CapEx program this year or you have to drop those in favour of asset stimulation?

Brian F. Maxted – CEO: Yeah, right now we want to continue to see what these asset stimulations will do, so right now we’ve not put any new additional sidetracks on this schedule.

Edward Westlake – Credit Suisse: Just on the development to MTAB, clearly TEN is moving forward and looking great, MTAB with these Teak-4s ultimate, how long do you think it will take before you make a decision on whether that’s tied to Jubilee or whether it’s going to be a standalone development and turn right?

Brian F. Maxted – CEO: Yeah, we’re disappointed in Teak-4 results. We do have substantial resource there. We want to take the time to properly integrate all the information we have, into all the fields, Mahogany, Akasa and Banda and then look forward to set a new course in terms of what we have in the area. But at least by closing year end, we’d have a view of what we are doing with the development.

Teak-4 Results

Brendon Warn – Jefferies: Just one quick question, just in the terms of the Teak-4 results. I mean, you still show a few prospects in the region of Teak-4, they are now under question, and just secondly, I missed any comment or update on just Cedrela, if you can make a comment on that please?

Brian F. Maxted – CEO: Let me take the second question first. Cedrela is still under discussion with the government, as it was at the last earnings call, and we anticipate that those discussions will move forward, over the course of the next few months, and until we have got those issues resolved, then we can’t make a statement on Cedrela. With respect to Teak-4, the Teak-4 results, as Darren pointed out, were disappointing in and of themselves, but there is a substantial resource in multiple pools, at multiple horizons in the Teak, Mahogany, Akasa and Banda area, which given the nature of those resources, is going to require more appraisal and delineation to do than for example, on Jubilee, which is a different beast and underpinning that appraisal program as we go forward will be the ongoing integration of the results of the wells that we drilled so the important point for us to do now is to ensure that we incorporate the Teak-4A results into an updated field model, resource estimation and understand how we can best price and delineate the field to maximize the volumetric uncertainty reduction and therefore define an optimal development plan.