Kosmos Energy Announces Second Quarter 2014 Results

  Kosmos Energy Announces Second Quarter 2014 Results

Business Wire

DALLAS -- August 4, 2014

Kosmos Energy Ltd. (“Kosmos”) (NYSE: KOS) announced today financial and
operating results for the second quarter of 2014, which included net income of
$57 million, or $0.15 per basic and diluted share as compared with a net loss
of $71 million, or $0.19 per basic and diluted share in the same quarter last
year. As previously disclosed, the current quarter’s results include a
non-cash mark-to-market charge related to the company’s commodity derivatives
and an internal restructuring charge.

Andrew G. Inglis, chairman and chief executive officer,said:“Second quarter
results were underpinned by strong revenue and production from the Jubilee
field. As a self-funded exploration company, our Ghana asset delivers
multi-year growth in production, reserves and cash flow. This provides the
financial foundation for our multi-well exploration campaign which continues
to build momentum as we prepare to drill the Gargaa prospect beginning late in
the fourth quarter.”

Operational Update

Gross production from the Jubilee field averaged approximately 104,000 barrels
of oil per day (bopd) in the second quarter of 2014, an increase from 102,000
bopd in the first quarter of the year. The Jubilee field partners and the
Government of Ghana are working together with various stakeholders to advance
the export infrastructure needed to alleviate gas-related constraints
currently limiting the field’s oil production.

Kosmos continues to mature a number of promising opportunities in its
portfolio through additional seismic acquisition and interpretation. A 4,300
square kilometer 3D seismic program in the Tarhazoute Offshore and Essaouira
Offshore blocks in Morocco was completed in early July, and a 5,100 square
kilometer 3D seismic survey currently underway in the Cap Boujdour Offshore
block is expected to be completed in the third quarter.

Based on encouraging results from ongoing seismic interpretation, the
company’s exploration program in Mauritania is being accelerated with a
farm-out initiative scheduled for later this year ahead of an initial
exploration well targeted in 2015.

The Atwood Achiever drillship is scheduled for delivery in late August to
begin mobilizing to northwest Africa in advance of the company’s next
exploration well which is expected to spud in late 2014.

Financial Review

Second quarter results benefited from increased oil revenues partially offset
by a previously announced non-cash mark-to-market charge of $22 million
related to crude oil price risk management and a $12 million charge for
restructuring costs. Oil revenues were $328 million versus $193 million in the
same quarter of last year. The increase in revenue resulted from having an
additional crude oil lifting from the Jubilee field during the quarter. This
compared to two liftings in the second quarter of 2013. Realized oil price was
$112.58 per barrel in the quarter compared with $99.51 per barrel in the
second quarter of 2013.

Production expense for the current quarter was $23 million or an average cost
of $7.87 per barrel versus $11.67 per barrel in the second quarter of last
year, which included certain well workover and rig maintenance costs.

Exploration expenses in the second quarter of 2014 totaled $24 million
compared with $95 million in the prior year quarter. Included in the quarter
were costs associated with two large 3D seismic surveys and the FA-1
exploration well in Morocco. Depletion and depreciation expense was $70
million or $23.85 per barrel versus $30.13 per barrel in the second quarter of
2013, the improvement related to the Jubilee reserves addition at the end of
last year.

General and administrative expenses decreased in the current quarter to $32
million versus $42 million in the second quarter of 2013 and income tax
expense for the second quarter of 2014 was $81 million; the increase over the
previous year quarter largely related to higher revenues.

In August 2014, the Company issued $300 million of 7.875% Senior Notes due
2021 and received net proceeds of $292.5 million after deducting discounts,
commissions and other expenses. We have approximately $1.9 billion of
liquidity available pro forma for the issuance.The company’s hedging position
at the end of the second quarter totaled 10.2 million barrels.

Conference Call and Webcast Information

Kosmos will host a conference call and webcast to discuss second quarter 2014
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 2013 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, unaudited)
                                                                             
                     Three Months Ended              Six Months Ended
                     June 30,
                                                     June 30,
                     2014         2013            2014        2013
Revenues and
other income:
Oil and gas          $ 328,297       $ 193,413       $ 541,150     $ 421,479
revenue
Gain on sale of      —               —               23,769        —
assets
Interest income      196             44              254           114
Other income         869             321             1,308         575
Total revenues       329,362         193,778         566,481       422,168
and other income
                                                                             
Costs and
expenses:
Oil and gas          22,946          22,674          39,269        47,075
production
Exploration          23,509          94,522          36,318        118,777
expenses
General and          32,480          41,639          59,893        80,710
administrative
Depletion and        69,546          58,562          115,924       117,211
depreciation
Amortization -
deferred             2,559           2,785           5,345         5,483
financing costs
Interest expense     7,635           10,017          11,146        19,008
Derivatives, net     21,566          (12,707   )     19,538        (7,199    )
Restructuring        11,804          —               11,804        —
charges
Loss on
extinguishment       —               —               2,898         —
of debt
Other expenses,      26              849             1,303         1,481
net
Total costs and      192,071         218,341         303,438       382,546
expenses
                                                                             
Income (loss)
before income        137,291         (24,563   )     263,043       39,622
taxes
Income tax           80,784          46,253          131,567       90,344
expense
                                                                             
Net income           $ 56,507        $ (70,816 )     $ 131,476     $ (50,722 )
(loss)
                                                                             
Net income
(loss) per
share:
Basic                $ 0.15          $ (0.19   )     $ 0.34        $ (0.13   )
Diluted              $ 0.15          $ (0.19   )     $ 0.34        $ (0.13   )
                                                                             
                                                                             
Weighted average
number of shares
used to compute
net income
(loss) per
share:
Basic                 378,820        376,563        378,327      375,927
Diluted               381,818        376,563        381,157      375,927
                                                                             

                                                          
Kosmos Energy Ltd.

Condensed Consolidated Balance Sheets

(In thousands, unaudited)
                                                               
                                               June 30,        December 31,
                                               2014            2013
Assets
Current assets:
Cash and cash equivalents                      $ 621,631       $  598,108
Receivables                                    156,957         21,326
Other current assets                           126,961         115,527
Total current assets                           905,549         734,961
                                                               
Property and equipment, net                    1,564,404       1,522,962
Other non-current assets                       108,103         87,903
Total assets                                   $ 2,578,056     $  2,345,826
                                                               
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable                               $ 88,728        $  94,172
Accrued liabilities                            216,830         115,212
Other current liabilities                      21,380          9,940
Total current liabilities                      326,938         219,324
                                                               
Long-term liabilities:
Long-term debt                                 800,000         900,000
Deferred tax liability                         224,767         170,226
Other non-current liabilities                  73,393          63,941
Total long-term liabilities                    1,098,160       1,134,167
                                                               
Total shareholders’ equity                     1,152,958       992,335
Total liabilities and shareholders’ equity     $ 2,578,056     $  2,345,826
                                                                  

                                               
Kosmos Energy Ltd.

Condensed Consolidated Statements of Cash Flow

(In thousands, unaudited)
                                                                                
                   Three Months Ended               Six Months Ended
                   June 30,
                                                    June 30,
                   2014          2013             2014           2013
Operating
activities:
Net income         $  56,507       $ (70,816  )     $ 131,476        $ (50,722  )
(loss)
Adjustments to
reconcile net
income (loss)
to net cash
provided by
operating
activities:
Depletion,
depreciation       72,105          61,347           121,269          122,694
and
amortization
Deferred           25,550          31,731           55,817           52,646
income taxes
Unsuccessful       3,060           75,915           2,815            85,668
well costs
Change in fair
value of           23,111          (3,836     )     22,301           (3,302     )
derivatives
Cash
settlements on     45              (10,294    )     (1,510     )     (15,144    )
derivatives
Equity-based       22,998          18,062           40,898           37,000
compensation
Gain on sale       —               —                (23,769    )     —
of assets
Loss on
extinguishment     —               —                2,898            —
of debt
Other              88              1,431            (4,132     )     2,827
Changes in
assets and
liabilities:
Net changes in
working            (30,989   )     106,461          (62,002    )     45,203
capital
Net cash
provided by        172,475         210,001          286,061          276,870
operating
activities
                                                                                
Investing
activities:
Oil and gas        (89,977   )     (83,090    )     (186,463   )     (166,581   )
assets
Other property     (486      )     (2,464     )     (914       )     (3,278     )
Proceeds from      23,734          —                58,315           —
sale of assets
Restricted         583             1,079            (1,827     )     1,965
cash
Net cash used
in investing       (66,146   )     (84,475    )     (130,889   )     (167,894   )
activities
                                                                                
Financing
activities:
Payments on          —               (100,000 )       (100,000 )       (100,000 )
long-term debt
Purchase of          (10,869 )       (12,959  )       (10,940  )       (13,041  )
treasury stock
Deferred
financing           (1,857  )      (982     )      (20,709  )      (2,225   )
costs
Net cash used
in financing        (12,726 )      (113,941 )      (131,649 )      (115,266 )
activities
                                                                                
Net increase
(decrease) in        93,603          11,585           23,523           (6,290   )
cash and cash
equivalents
Cash and cash
equivalents at      528,028        497,289         598,108         515,164
beginning of
period
Cash and cash
equivalents at     $ 621,631       $ 508,874        $ 621,631        $ 508,874
end of period

                                                                          
Kosmos Energy Ltd.

EBITDAX

(In thousands, unaudited)
                                                                                           
                                                 Six Months Ended                Twelve
                   Three Months Ended                                            Months
                   June 30,                      June 30,                        Ended
                                                                                 June 30,
                   2014        2013            2014          2013            2014
                                                                                           
Net income         $  56,507     $ (70,816 )     $ 131,476       $ (50,722 )     $ 91,154
(loss)
Exploration        23,509        94,522          36,318          118,777         147,855
expenses
Depletion,
depreciation       72,105        61,347          121,269         122,694         232,173
and
amortization
Equity-based       18,043        18,062          35,943          37,000          67,969
compensation
Unrealized
(gain) loss on     22,096        (11,335   )     23,601          (5,246    )     40,625
commodity
derivatives
Gain on sale       —             —               (23,769   )     —               (23,769   )
of assets
Interest           7,439         9,973           10,892          18,894          28,534
expense, net
Income tax         80,784        46,253          131,567         90,344          208,221
expense
Loss on
extinguishment     —             —               2,898           —               2,898
of debt
Restructuring      11,804        —               11,804          —               11,804
charges
EBITDAX            $ 292,287     $ 148,006       $ 481,999       $ 331,741       $ 807,464
                                                                                           

We define EBITDAX as net income (loss) plus (i)exploration expense, (ii)
depletion, depreciation and amortization expense, (iii) equity-based
compensation expense, (iv)unrealized (gain) loss on commodity derivatives,
(v)(gain) loss on sale of oil and gas properties, (vi)interest (income)
expense, (vii)income taxes, (viii)loss on extinguishment of debt, (ix)
doubtful accounts expense and (x)similar other material items which
management believes affect the comparability of operating results.

The EBITDAX data for the twelve months ended June 30, 2014 was calculated by
subtracting the unaudited data for the six months ended June 30, 2013 from the
unaudited data for the year ended December 31, 2013, and adding the unaudited
data for the six months ended June 30, 2014.

                                                
Oil Revenue Summary
                                                     
                         Three Months Ended          Six Months Ended
                         June 30,                    June 30,
                         2014        2013          2014          2013
                                                                     
Net Oil Volume Sold
(millions of               2.916         1.944        4.853           3.935
barrels)
Realized Oil Price       $ 112.58      $ 99.51         $ 111.50      $ 107.11
(per barrel)
Oil Revenue              $ 328,297     $ 193,413       $ 541,150     $ 421,479
(thousands)
                                                                       

Overlifted by approximately 263,000 barrels as of June 30, 2014

                                                            
Hedging Summary

As of June 30, 2014
                                                             
                                        2014    2015    2016    Total
                                                                         
Hedging Position (millions of           3.0        5.2        2.0        10.2
barrels)

Contact:

Kosmos Energy Ltd.
Investor Relations
Jon Cappon, +1-214-445-9669
jcappon@kosmosenergy.com
or
Kosmos Energy Ltd.
Media Relations
Thomas Golembeski, +1-214-445-9674
tgolembeski@kosmosenergy.com
 
Press spacebar to pause and continue. Press esc to stop.