KOSMOS ENERGY LTD. (NYSE:KOS) Files An 8-K Regulation FD DisclosureItem 7.01. Regulation FD Disclosure.
Tullow Oil plc (“Tullow”), the operator for the Jubilee Field and the Tweneboa-Enyenra-Ntomme (“TEN”) project offshore Ghana, today provided an update on operations at the Jubilee Field and TEN project, which is set forth below. Our previously issued guidance on free cash flow for fiscal year 2017 took the matters set forth in this operational update into consideration and our estimate is unchanged at approximately $250 million.(1)
Jubilee Field
Gross production from the Jubilee Field averaged 73,700 barrels of oil per day (“bopd”) for fiscal year 2016. The Jubilee Field turret remediation work is progressing as planned, and the floating production, storage and offloading vessel (“FPSO”) is expected to be spread-moored on its current heading by the end of January 2017. This is expected to allow the tugboats currently required to hold the vessel on a fixed heading to be removed, which should significantly reduce the complexity of the current operation. The capital costs associated with this and subsequent remediation efforts are expected to be covered by the Joint Venture Hull and Machinery insurance policy.
The next phase of the remediation work will involve modifications to the turret systems for long-term spread-moored operations. In addition, the assessment of the optimum long-term heading continues, in order to determine if a rotation of the FPSO is required. Detailed planning for this continues with the joint venture partners together with the government of Ghana, with final decisions and approvals expected in the first half of 2017. It is anticipated that a facility shutdown of up to 12 weeks may be required during 2017; however, significant efforts are ongoing within the joint venture partnership to optimize the shutdown and we believe these efforts will lead to a significant reduction in shutdown duration.
TEN Project
Following first oil from the TEN project in August 2016, the oil production, gas compression and injection and water injection systems were commissioned and are now operational. In early January 2017, the capacity of the FPSO was successfully tested at an average rate of over 80,000 bopd during a short term flow test. Production testing and initial results from the 11 wells at the TEN project suggest reserves estimates for both the Ntomme and Enyenra fields are in line with previously guided expectations. However, due to certain issues with managing pressures in the Enyenra reservoir and because no new wells can be drilled until after the previously disclosed International Tribunal for the Law of the Sea (ITLOS) ruling expected later in 2017, Tullow has elected to manage the existing wells in a prudent manner to optimize long-term recovery over the lifetime of the field. As a result, Tullow expects production from the TEN project to be approximately 50,000 bopd in fiscal year 2017, although work continues among the project partners to consider ways to increase production. This production estimate remains consistent with our forecast of three to four cargo liftings in fiscal year 2017.
(1) Free cash flow is a supplemental non-GAAP financial measure used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines free cash flow as cash flow from operations less capital expenditures net of farm-out proceeds. Cash flow from operations is the most directly comparable financial measure calculated and presented in accordance with GAAP.
The Company believes that free cash flow is useful to investors because it is frequently used by investors in the evaluation of companies in the oil and gas sector and will provide a useful tool for assessing the comparability between periods, among securities analysts, as well as company to company.