Kosmos Energy Announces Fourth Quarter and Full Year 2013 Results

  Kosmos Energy Announces Fourth Quarter and Full Year 2013 Results

Business Wire

DALLAS -- February 24, 2014

Kosmos Energy Ltd. (“Kosmos”) (NYSE: KOS) announced today financial and
operating results for the fourth quarter and full year 2013. For the fourth
quarter of 2013, the Company reported net income of $4 million, or $0.01 per
basic and diluted share. For the full year 2013, the Company generated a net
loss of $91 million or $0.24 per basic and diluted share. Total oil revenues
in 2013 were $851 million on eight oil liftings, net to Kosmos.

Highlights for the quarter ended December 31, 2013, include:

  *Sold just under two million barrels of oil, net to Kosmos
  *Realized a net reserve replacement ratio of 140% at year-end 2013
  *Advanced the development of the TEN project following plan of development
    approval
  *Executed our Northwest Africa farm-out initiatives to BP and Cairn Energy
  *Completed significant 3D seismic programs offshore Ireland and Mauritania
  *Secured the Maersk Discoverer rig to drill our first exploration well in
    Morocco

Brian F. Maxted, chief executive officer and chief exploration officer,
commented, “We enter 2014 well-positioned to execute on our high-impact,
multi-well exploration program with the first well in Morocco expected to spud
next month. Our plan of development for our second major oil development in
Ghana, TEN, was approved last year and work is quickly advancing with first
oil targeted for 2016. As a self-funded explorer, we continue to be
disciplined in our investment programs to deliver the most value to
shareholders.”

Fourth quarter 2013 oil revenues were $215 million versus $218 million in the
same quarter of 2012, on sales of nearly two million barrels of oil for each
period. Realized pricing was $111.13 per barrel of oil sold in the fourth
quarter of 2013 versus $109.26 per barrel of oil sold in the fourth quarter of
2012, excluding the impact of the Company’s hedging program. At the end of
2013, the Company was in a net underlift position of approximately 311,000
barrels of oil.

Production expense for the fourth quarter of 2013 was $17 million, or $8.88
per barrel sold, versus $23 million in the fourth quarter of 2012, due to the
absence of workover activities in the latest quarter.

Exploration expenses in the fourth quarter of 2013 totaled $36 million.
Included in the quarter were costs related to large 3D seismic surveys in
Ireland and Mauritania; ongoing seismic processing and interpretation
expenditures throughout the Company’s portfolio; and the cost of the Akasa-2A
appraisal well which confirmed the oil-water contact in the Akasa field.

Depletion and depreciation expense was $47 million, or $24.33 per barrel of
oil sold versus $28.75 per barrel sold in the fourth quarter of 2012. The
decrease in the fourth quarter 2013 depletion rate was a result of the
increase in proved reserves as of year-end 2013. General and administrative
expense was $40 million for the fourth quarter of 2013 versus $45 million in
the fourth quarter of 2012.

Derivative expense for the fourth quarter of 2013 was $17 million, which
represents the change in the mark-to-market of the Company’s oil derivative
contracts as of December 31, 2013. Income tax expense for the fourth quarter
of 2013 was $42 million; the majority of the amount was related to the
Company’s operations in Ghana.

The Company’s hedging position at year-end 2013 included 6.0 million barrels
of 2014 production and 3.7 million barrels of 2015 production.

Operational Update

“Reservoir performance from Jubilee continues to be strong as demonstrated by
the increase in our year-end proved reserves,” said Darrell McKenna, chief
operating officer at Kosmos. “From a facilities standpoint, the Jubilee field
partners and the Government of Ghana are working to address gas-related
surface constraints which are currently limiting oil production from the
Jubilee field. In addition, we are continuing to advance the TEN development
and are now fully aligned with the government regarding the MTA appraisal
program. On the exploration side, we are highly focused on our upcoming
drilling operations in Morocco with the rig currently in transit to our FA-1
well location.”

2014 year-to-date gross production from the Jubilee field has averaged
approximately 104,000 barrels of oil per day (bopd). In the fourth quarter of
2013, Jubilee field production averaged nearly 93,000 bopd, an increase over
the third quarter’s production of around 88,000 bopd which was impacted by the
planned maintenance program performed on the Jubilee floating production,
storage and offloading vessel (FPSO) in late September.

Phase 1A drilling and completion operations continued during the fourth
quarter, with three production wells and the two water injection wells
associated with Phase 1A now online. Due to continued delays in the gas export
infrastructure and the resulting limits on gas disposition, the Jubilee field
partners are actively pursuing various alternatives to handle the gas
associated with Jubilee production. Discussions are ongoing with the
Government of Ghana.

The Tweneboa, Enyenra and Ntomme (TEN) project continues to build positive
momentum. Construction on the FPSO is ongoing, and development drilling began
in the fourth quarter. The second major oil development project in Ghana, TEN
is expected to deliver first oil in 2016 with production staged up to a
facilities-designed gross production target of 80,000 barrels of oil per day.

Appraisal of the Mahogany, Teak and Akasa (MTA) discoveries within the Greater
Jubilee area continued in the fourth quarter with the completion of the
Akasa-2A appraisal well. The well successfully tested the down-dip extent of
the Akasa accumulation and further refined the resource base attributable to
the three discovery areas.

In preparation for our 2014 drilling campaign, the farm-out of our Morocco
license acreage was completed in October with BP acquiring a non-operating
interest in the Essaouira Offshore, Foum Assaka Offshore and Tarhazoute
Offshore blocks in the Agadir Basin, and Cairn Energy acquiring a
non-operating interest in the Cap Boujdour Offshore block in the Aaiun Basin,
offshore Western Sahara, subject to receipt of requisite government approvals.

During the fourth quarter, Kosmos continued to make progress on a number of
other exploration initiatives. A 5,000 square kilometer 3D seismic program in
the Porcupine Basin offshore western Ireland was completed in October, and a
10,300 square kilometer 3D seismic survey was completed in November offshore
Mauritania.

Conference Call and Webcast Information

Kosmos will host a conference call and webcast to discuss fourth quarter and
full year 2013 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 along the Atlantic Margin. Our
assets include existing production and other major development projects
offshore Ghana, as well as exploration licenses with significant hydrocarbon
potential offshore Ireland, Mauritania, Morocco (including Western Sahara) and
Suriname. As an ethical and transparent company, Kosmos is committed to doing
things the right way. The company’s Business Principles articulate our
commitment to transparency, ethics, human rights, safety and the environment.
Read more about this commitment in the Kosmos 2012 Corporate Responsibility
Report. 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’ 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’ 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)

                   Three Months Ended          Year Ended
                     December 31,                  December 31,
                     2013        2012            2013          2012
                     (unaudited)
Revenues and
other income:
Oil and gas          $ 214,564     $ 217,591       $ 851,212       $ 667,951
revenue
Interest income        84            (57     )       275             1,108
Other income          233          2,220         941           3,150   
Total revenues         214,881       219,754         852,428         672,209
and other income
                                                                   
Costs and
expenses:
Oil and gas            17,140        23,318          96,791          95,109
production
Exploration            35,930        4,518           230,314         100,652
expenses
General and            39,634        44,529          158,421         157,087
administrative
Depletion and          46,966        57,265          222,544         185,707
depreciation
Amortization -
deferred               2,785         2,402           11,054          8,984
financing costs
Interest expense       9,022         8,490           36,811          52,207
Derivatives, net       16,641        5,083           17,027          31,490
Loss on
extinguishment         —             5,342           —               5,342
of debt
Other expenses,       167          747           3,512         1,475   
net
Total costs and       168,285      151,694       776,474       638,053 
expenses
                                                                   
Income before          46,596        68,060          75,954          34,156
income taxes
Income tax            42,430       36,454        166,998       101,184 
expense
                                                                   
Net income           $ 4,166       $ 31,606        (91,044 )     $ (67,028 )
(loss)
                                                                   
Net income
(loss) per
share:
Basic                $ 0.01        $ 0.08         $ (0.24   )     $ (0.18   )
Diluted              $ 0.01        $ 0.08         $ (0.24   )     $ (0.18   )
                                                                   
Weighted average
number of shares
used to compute
net income
(loss) per:
Basic                 377,738      373,953       376,819       371,847 
Diluted               378,316      374,146       376,819       371,847 



Kosmos Energy Ltd.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)

                                             December 31,   December 31,
                                               2013             2012
Assets
Current assets:
Cash and cash equivalents                      $  598,108       $  515,164
Receivables                                       21,326           134,216
Other current assets                             115,527         100,738
Total current assets                              734,961          750,118
                                                                
Property and equipment, net                       1,522,962        1,525,762
Other non-current assets                         87,903          90,243
Total assets                                   $  2,345,826     $  2,366,123
                                                                
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable                               $  94,172        $  128,855
Accrued liabilities                               115,212          41,021
Other current liabilities                        9,940           20,377
Total current liabilities                         219,324          190,253
                                                                
Long-term liabilities:
Long-term debt                                    900,000          1,000,000
Deferred tax liability                            170,226          104,137
Other non-current liabilities                    63,941          42,827
Total long-term liabilities                       1,134,167        1,146,964
                                                                
Total shareholders’ equity                       992,335         1,028,906
Total liabilities and shareholders’ equity     $  2,345,826     $  2,366,123



Kosmos Energy Ltd.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

                 Three Months Ended            Year Ended
                   December 31,                    December 31,
                    2013        2012          2013         2012     
Operating
Activities:
Net income         $ 4,166         $ 31,606        $ (91,044  )     $ (67,028  )
(loss)
Adjustments to
reconcile net
income (loss)
to net cash
provided by
operating
activities:
Depletion,
depreciation         49,751          59,667          233,598          194,691
and
amortization
Deferred             19,623          28,169          82,380           80,036
income taxes
Unsuccessful         8,653           12,872          107,565          32,229
well costs
Non-cash
change in fair       18,341          4,618           23,093           18,465
value of
derivatives
Cash
settlements on       (14,753 )       (9,839  )       (33,411  )       (28,594  )
derivatives
Equity-based         18,234          25,208          69,026           83,423
compensation
Loss on
extinguishment       —               5,342           —                5,342
of debt
Other                448             151             4,916            7,890
Changes in
assets and
liabilities:
Net changes in
working             136,592       63,626        126,281        45,076   
capital
Net cash
provided by          241,055         221,420         522,404          371,530
operating
activities
                                                                    
Investing
activities:
Oil and gas          (72,961 )       (96,309 )       (317,413 )       (368,990 )
assets
Other property       (1,258  )       (964    )       (4,970   )       (9,994   )
Restricted          (8,964  )      (589    )      (1,750   )      (23,678  )
cash
Net cash used
in investing         (83,183 )       (97,862 )       (324,133 )       (402,662 )
activities
                                                                    
Financing
activities:
Payments on          —               —               (100,000 )       (110,000 )
long-term debt
Purchase of          (31     )       —               (13,101  )       (8,378   )
treasury stock
Deferred
financing           —             (8,044  )      (2,226   )      (8,418   )
costs
Net cash used
in financing        (31     )      (8,044  )      (115,327 )      (126,796 )
activities
                                                                    
Net increase
(decrease) in        157,841         115,514         82,944           (157,928 )
cash and cash
equivalents
Cash and cash
equivalents at      440,267       399,650       515,164        673,092  
beginning of
period
Cash and cash
equivalents at     $ 598,108      $ 515,164      $ 598,108       $ 515,164  
end of period



Net Proved Developed and Undeveloped                            
Reserves
(unaudited)                                                          
                                                 Oil         Gas       Total
                                                 (MMBbl)     (Bcf)     (MMBoe)
                                                                       
Net proved developed and undeveloped             42          9         43
reserves at December 31, 2012
Extensions and discoveries                       —           —         —
Production                                       (8   )      (1  )     (8   )
Purchases of minerals-in-place                   —           —         —
Revisions in estimates                           11         3        12   
Net proved developed and undeveloped             45         11       47   
reserves at December 31, 2013
                                                                       
                                                                     
                                                 Oil         Gas       Total
                                                 (MMBbl)     (Bcf)     (MMBoe)
Proved reserves at December 31, 2013(1)
Proved developed reserves                        36          10        38
Proved undeveloped reserves                      9           1         9

            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, 2013.

                                                  
                         Ghana         Other (1)          Total
                                       (in thousands)
Property acquisition
Unproved                 $ —           $    13,787        $ 13,787
Proved                     —                —               —
Exploration                183,635          183,213         366,848
Development               61,071          —              61,071
Total costs incurred     $ 244,706     $    197,000       $ 441,706

   (1)  Includes Africa, excluding Ghana, Europe and South America.

Contact:

Kosmos Energy Ltd.
Investor Relations
Jon Cappon, +1-214-445-9669
jcappon@kosmosenergy.com
or
Media Relations
Thomas Golembeski, +1-214-445-9674
tgolembeski@kosmosenergy.com
 
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