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  
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