Kosmos Energy Announces Fourth Quarter and Full Year 2012 Results

  Kosmos Energy Announces Fourth Quarter and Full Year 2012 Results

Business Wire

DALLAS -- February 25, 2013

Kosmos Energy (“Kosmos”) (NYSE: KOS) announced today financial and operating
results for the fourth quarter and full year 2012. For the fourth quarter of
2012, the Company reported net income attributable to common shareholders of
$32 million, or $0.08 per basic and diluted share. For the fourth quarter of
2011, Kosmos reported net income attributable to common shareholders of $34
million, or $0.09 per basic and diluted share. For the full year 2012, the
Company generated a net loss attributable to common shareholders of $67
million. Total oil revenues in 2012 were $668 million on six oil liftings, net
to Kosmos.

Highlights for the quarter ended December 31, 2012, include:

  *Sold approximately two million barrels of oil, net to Kosmos
  *Performed two successful acid treatments on Jubilee Phase 1 production
    wells
  *Commenced production from the Phase 1A development at Jubilee
  *Exited 2012 with Jubilee production of approximately 110,000 barrels of
    oil per day
  *Submitted a Plan of Development for the Tweneboa, Enyenra, and Ntomme
    fields on the Deepwater Tano Block to the government of Ghana
  *Completed the assignment of 50 percent of the Company’s 100 percent
    participating interest in Blocks 42 and 45, offshore Suriname, to Chevron
  *Secured a new Corporate Revolving Credit Facility, with $260 million
    available
  *Enhanced financial liquidity position, with cash on hand of $515 million
    and available borrowings of over $600 million at the end of 2012

Brian F. Maxted, Chief Executive Officer, commented, “During the fourth
quarter, we achieved a number of significant milestones, exiting 2012 in our
best position ever, both operationally and financially. We have established
great momentum at Jubilee, with production now at a record level, and we are
working to enhance throughput even further. Moving forward, we are preparing
for additional developments in Ghana, as well as the commencement of a
high-impact exploration program elsewhere, with multiple wells anticipated
annually beginning as soon as late 2013. Our disciplined strategy, strong
balance sheet and substantial existing cash flows have positioned Kosmos to
internally fund our investment programs well into the future. I am excited
about all we have accomplished, even more so, the meaningful potential in our
exploration and development programs ahead.”

Fourth quarter 2012 oil revenues were $218 million versus $220 million in the
same quarter of 2011, on sales of nearly two million barrels of oil for each
period. The average fourth quarter 2012 realized oil price was approximately
$109 per barrel versus $110 per barrel in the fourth quarter of 2011,
excluding the impact of the Company’s strategic hedging program. At the end of
2012, the Company was in a net overlift position of approximately 51,000
barrels of oil since field startup.

Production expense for the fourth quarter of 2012 was $23 million, which
included costs from two acid stimulation treatments performed on Phase 1 wells
at the Jubilee field. Excluding workover costs, production expense for the
quarter was approximately $8.60 per barrel sold. The reduction from the fourth
quarter 2011 per barrel rate is primarily attributable to the purchase of the
Jubilee floating production, storage and offloading vessel (FPSO) in late
2011, which capitalized the asset and ceased ongoing lease payments.

Exploration expense in the fourth quarter of 2012 totaled $4 million. Included
in the fourth quarter of 2012 were costs related to the Okure well offshore
Ghana. The completion of the Company’s assignment of interest in Blocks 42 and
45 offshore Suriname during the fourth quarter of 2012 resulted in a reduction
to exploration expense. In the fourth quarter of 2011, exploration expense
included seismic acquisition costs related to the Company’s Morocco acreage
position.

General and administrative expense was $45 million for the fourth quarter of
2012, with the increase from the same quarter of 2011 mostly a result of
higher non-cash, equity-based compensation expense.

Depletion and depreciation expense was $57 million in the fourth quarter of
2012, or $28.75 per barrel sold. The fourth quarter 2012 per barrel rate was
positively impacted by the recording of year-end 2012 reserves, which
reflected a reclassification of proved reserves from undeveloped to developed.
This was primarily a result of the Company’s successful acid stimulation
program in 2012. The per barrel rate increase versus the fourth quarter of
2011 is mostly a result of the purchase of the Jubilee FPSO and the ongoing
capital spend for development of the Jubilee field.

Derivative expense for the fourth quarter of 2012 was $5 million, which
represents the change in the mark to market of the Company’s oil derivative
contracts as of December 31, 2012. During the fourth quarter of 2012, Kosmos
added new hedge positions covering two million barrels of oil in 2013 and 1.5
million barrels in 2014.

Included in the Company’s fourth quarter 2012 results was a $5 million loss on
the extinguishment of debt resulting from the amendment of the Company’s
reserve-based lending facility.

Income tax expense for the fourth quarter of 2012 was $36 million, with the
majority of the amount resulting from the Company’s Ghana operations.

Year-End 2012 Reserves

The Company’s proved reserves at the end of 2012 were 43 million barrels of
oil equivalent, with the difference from year-end 2011 largely a result of the
Company’s net sales volumes in 2012. In addition, Kosmos removed 14 billion
cubic feet of natural gas from its proved reserves in 2012 as a result of
lower anticipated utilization of fuel gas for operations. The Company’s proved
natural gas reserves at the end of 2012 represent only those amounts
anticipated to be consumed on the FPSO in association with proved oil
reserves.

Kosmos’ proved developed reserves as a percentage of total proved increased
from 50 percent at year-end 2011 to 77 percent at year-end 2012. The increase
was a result of the successful acid stimulation treatments on Jubilee Phase 1
wells and the startup of Phase 1A. The Company’s reported reserves are
prepared by Netherland Sewell & Associates, Inc., an independent reserve
engineering firm.

Total costs incurred in oil and gas activities in 2012 were $419 million.
Exploration represented approximately 60 percent of the costs incurred amount,
with development comprising the remainder.

Conference Call and Webcast Information

Kosmos will host a conference call and webcast to discuss fourth quarter and
full year 2012 financial and operating results today at 10:00 a.m. Central
time (11:00 a.m. Eastern time). A live webcast of the event can be accessed on
the Investors page of Kosmos’ website at www.kosmosenergy.com. The dial-in
telephone number for the call is +1.877.407.3982. Callers outside the United
States should dial +1.201.493.6780. A replay of the webcast will be available
on the Investors page of Kosmos’ website for approximately 90 days following
the event.

About Kosmos Energy

Kosmos Energy is a leading independent oil and gas exploration and production
company focused on frontier and emerging areas in Africa and South America.
The Company’s asset portfolio includes existing production and other major
project developments offshore Ghana, as well as exploration licenses with
significant hydrocarbon potential offshore Mauritania, Morocco and Suriname
and onshore Cameroon. Kosmos is listed on the New York Stock Exchange and is
traded under the ticker symbol KOS. For additional information, visit
www.kosmosenergy.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
Section27A of the Securities Act of 1933 and Section21E of the Securities
Exchange Act of 1934. All statements, other than statements of historical
facts, included in this press release that address activities, events or
developments that Kosmos expects, believes or anticipates will or may occur in
the future are forward-looking statements. Kosmos’s estimates and
forward-looking statements are mainly based on its current expectations and
estimates of future events and trends, which affect or may affect its
businesses and operations. Although Kosmos believes that these estimates and
forward-looking statements are based upon reasonable assumptions, they are
subject to several risks and uncertainties and are made in light of
information currently available to Kosmos. When used in this press release,
the words “anticipate,” “believe,” “intend,” “expect,” “plan,” “will” or other
similar words are intended to identify forward-looking statements. Such
statements are subject to a number of assumptions, risks and uncertainties,
many of which are beyond the control of Kosmos, which may cause actual results
to differ materially from those implied or expressed by the forward-looking
statements. Further information on such assumptions, risks and uncertainties
is available in Kosmos’s Securities and Exchange Commission (“SEC”) filings.
Kosmos undertakes no obligation and does not intend to update or correct these
forward-looking statements to reflect events or circumstances occurring after
the date of this press release, except as required by applicable law. You are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this press release. All forward-looking
statements are qualified in their entirety by this cautionary statement.

                                                              
                                                                   
Kosmos Energy Ltd.
Consolidated Statement of Operations
(in thousands, except per share amounts, unaudited)
                                                                   
                           Three Months
                           Ended                     Year Ended
                           December 31,              December 31,
                           2012          2011        2012          2011
Revenues and other
income:
Oil and gas revenue        $ 217,591     $ 219,998   $ 667,951     $ 666,912
Interest income              (57     )     1,634       1,108         9,093
Other income                2,220       40         3,150       775     
Total revenues and other     219,754       221,672     672,209       676,780
income
                                                                   
Costs and expenses:
Oil and gas production       23,318        25,070      95,109        83,551
Exploration expenses         3,808         21,752      97,712        126,409
General and                  45,239        41,439      160,027       113,579
administrative
Depletion and                57,265        51,509      185,707       140,469
depreciation
Amortization - deferred      2,402         2,194       8,984         16,193
financing costs
Interest expense             8,490         10,510      52,207        65,749
Derivatives, net             5,083         6,527       31,490        11,777
Loss on extinguishment       5,342         —           5,342         59,643
of debt
Doubtful accounts            —             —           —             (39,782 )
expense
Other expenses, net         747         167        1,475       149     
Total costs and expenses    151,694     159,168    638,053     577,737 
                                                                   
Income before income         68,060        62,504      34,156        99,043
taxes
Income tax expense          36,454      28,181     101,184     76,686  
                                                                   
Net income (loss)            31,606        34,323      (67,028 )     22,357
                                                                   
Accretion to redemption
value of convertible
preferred units             —           —          —           (24,442 )
                                                                   
Net income (loss)
attributable to common
shareholders/unit          $ 31,606     $ 34,323    $ (67,028 )   $ (2,085  )
holders
                                                                   
Net income (loss) per
share attributable to
common shareholders (the
year ended
December 31, 2011
represents the period
from
May 16, 2011 to December
31, 2011):
Basic                      $ 0.08       $ 0.09      $ (0.18   )   $ 0.09    
Diluted                    $ 0.08       $ 0.09      $ (0.18   )   $ 0.09    
Weighted average number
of shares used to
compute net income
(loss) per share (the
year
ended December 31, 2011
represents the
period from May 16, 2011
to December 31,
2011):
Basic                       373,953     369,134    371,847     368,474 
Diluted                     374,146     369,134    371,847     368,607 



Kosmos Energy Ltd.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
                                                         
                                             December 31,   December 31,
                                             2012           2011
                                                            
Assets
Current assets:
Cash and cash equivalents                    $  515,164     $  673,092
Receivables                                     134,216        310,155
Other current assets                           100,738       129,234
Total current assets                            750,118        1,112,481
                                                            
Property and equipment, net                     1,525,762      1,377,041
Other non-current assets                       90,243        62,412
Total assets                                 $  2,366,123   $  2,551,934
                                                            
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable                             $  128,855     $  278,006
Accrued liabilities                             41,021         37,194
Other current liabilities                      20,377        24,407
Total current liabilities                       190,253        339,607
                                                            
Long-term liabilities:
Long-term debt                                  1,000,000      1,110,000
Deferred tax liability                          104,137        47,608
Other non-current liabilities                  42,827        33,993
Total long-term liabilities                     1,146,964      1,191,601
                                                            
Total shareholders’ equity                     1,028,906     1,020,726
Total liabilities and shareholders’ equity   $  2,366,123   $  2,551,934

                                                           
                                                                
Kosmos Energy Ltd.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
                                                                
                    Three Months
                    Ended                        Year Ended
                    December 31,                 December 31,
                    2012          2011           2012           2011
Operating
Activities:
Net income (loss)   $ 31,606      $ 34,323       $ (67,028  )   $ 22,357
Adjustments to
reconcile net
income (loss) to
net cash
provided by (used
in) operating
activities:
Depletion,
depreciation and      59,667        53,703         194,691        156,662
amortization
Deferred income       28,169        19,281         80,036         56,457
taxes
Unsuccessful well     12,872        3,409          32,229         91,254
costs
Non-cash change
in fair value of      4,618         4,068          18,465         21,014
derivatives
Cash settlements      (9,839  )     (14,424  )     (28,594  )     (19,203    )
on derivatives
Equity-based          25,208        21,702         83,423         50,966
compensation
Doubtful accounts     —             —              —              (39,782    )
expense
Loss on
extinguishment of     5,342         —              5,342          59,643
debt
Other                 151           1,014          7,890          2,953
Changes in assets
and liabilities:
Net changes in       63,626      (25,313  )    45,076       (37,412    )
working capital
Net cash provided
by (used in)          221,420       97,763         371,530        364,909
operating
activities
                                                                
Investing
activities:
Oil and gas           (96,309 )     (196,845 )     (368,990 )     (478,943   )
assets
Other property        (964    )     (2,375   )     (9,994   )     (4,303     )
Notes receivable      —             9,205          —              13,653
Restricted cash      (589    )    (1,098   )    (23,678  )    84,453     
Net cash used in
investing             (97,862 )     (191,113 )     (402,662 )     (385,140   )
activities
                                                                
Financing
activities:
Borrowings under      —             110,000        —              1,503,000
long-term debt
Payments on           —             —              (110,000 )     (1,438,000 )
long-term debt
Net proceeds from
the initial           —             —              —              580,374
public offering
Purchase of           —             —              (8,378   )     —
treasury stock
Deferred             (8,044  )    —            (8,418   )    (52,466    )
financing costs
Net cash provided
by (used in)         (8,044  )    110,000      (126,796 )    592,908    
financing
activities
                                                                
Net increase
(decrease) in         115,514       16,650         (157,928 )     572,677
cash and cash
equivalents
Cash and cash
equivalents at       399,650     656,442      673,092      100,415    
beginning of
period
Cash and cash
equivalents at      $ 515,164    $ 673,092     $ 515,164     $ 673,092    
end of period
                                                                             
                                                                             

Net Proved Developed and Undeveloped Reserves                 
(unaudited)                                                    
                                                Oil       Gas     Total
                                                (MMBbl)   (Bcf)   (MMBoe)
                                                                  
Net proved developed and undeveloped reserves
at December 31, 2011                            47        24      51
Extensions and discoveries                      —         —       —
Production                                      (6   )    (1  )   (6   )
Purchases of minerals-in-place                  —         —       —
Revisions in estimates                          1        (14 )   (2   )
Net proved developed and undeveloped reserves
at December 31, 2012                            42       9      43   
                                                                  
                                                                  
                                                Oil       Gas     Total
                                                (MMBbl)   (Bcf)   (MMBoe)
Proved reserves at December 31, 2012 (1)
Proved developed reserves                       32        9       33
Proved undeveloped reserves                     10        1       10

                The sum of proved developed reserves and proved undeveloped
     (1)  reserves may not add to net proved developed and undeveloped
                reserves due to rounding
                
                

Costs Incurred in Oil and Gas Activities
(unaudited)

The following table reflects total costs incurred, both capitalized and
expensed, for oil and gas property acquisition, exploration, and development
activities for the year ended December 31, 2012.

                                               
                       Ghana       Other (2)        Total
                                   (in thousands)
Property acquisition
Unproved               $ —         $     5,000      $ 5,000
Proved                   —               —            —
Exploration              173,463         78,939       252,402
Development             161,925        —           161,925
Total costs incurred   $ 335,388   $     83,939     $ 419,327

   (2)  Includes Africa, excluding Ghana, and South America.

Contact:

Kosmos Energy
Investor Relations
Brad Whitmarsh, +1-214-445-9772
bwhitmarsh@kosmosenergy.com