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In accordance with the mark-to-market method of accounting, the Company recognizes changes in fair values of its derivative contracts as gains or losses in earnings during the period in which they occur. The Company expects to reclassify $0.1 million of losses from AOCI(L)&#160;to interest expense within the next 12 months. See Note 11&#8212;Fair Value Measurements for additional information regarding the Company&#8217;s derivative instruments.</font></p></td></tr></table> <table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> <p style="MARGIN: 0in 0in 0pt"><b><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold" size="2">11. 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Currently, no Ghanaian environmental regulations expressly require that companies abandon or remove offshore assets although under international industry standards we would do so. The Petroleum Law provides for restoration that includes removal of property and abandonment of wells, but further states the manner of such removal and abandonment will be as provided in the Regulations; however, such Regulations have not been promulgated. Under the Environmental Permit for the Jubilee Field, a decommissioning plan will be prepared and submitted to the Ghana Environmental Protection Agency. ASC&#160;410&#8212;Asset Retirement and Environmental Obligations requires the Company to recognize this liability in the period in which the liability was incurred. We have recorded an asset retirement obligation for fields that have commenced production, including wells in progress in such fields. Additional asset retirement obligations will be recorded in the period in which wells within such producing fields are commissioned.</font></p></td></tr></table> <table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> <p style="MARGIN: 0in 0in 0pt"><b><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold" size="2">13. Convertible Preferred Units</font></b></p> <p style="MARGIN: 0in 0in 0pt"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" size="2">&#160;</font></p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0in 0in 0pt"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" size="2">Contemporaneous with Kosmos Energy&#160;Ltd.&#8217;s IPO, the Series&#160;A Convertible Preferred Units (&#8220;Series&#160;A Units&#8221;), Series&#160;B Convertible Preferred Units (&#8220;Series&#160;B Units&#8221;) and Series&#160;C Convertible Preferred Units (&#8220;Series&#160;C Units&#8221;) of Kosmos Energy Holdings were exchanged into our common shares based on the pre-offering equity value of such interests. This resulted in the Series A Units, Series&#160;B Units and Series&#160;C Units being exchanged into 163.1&#160;million; 109.8&#160;million; and 4.8&#160;million common shares of Kosmos Energy&#160;Ltd., respectively, or 277.7&#160;million common shares in the aggregate. The common shares have one vote per share and a par value of $0.01. The exchange of the Convertible Preferred Units had the effect of increasing the book value of shareholders&#8217; equity by approximately $1.0&#160;billion. Accretion to redemption value of the Convertible Preferred Units was recorded through the date of the exchange. After the date of the exchange, the related accretion on the Convertible Preferred Units ceased to accrue and all rights of the holders with respect to the Convertible Preferred Units terminated, except for the right to receive shares of common shares issuable upon the exchange and the rights entitled to a holder of a common share.</font></p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0in 0in 0pt"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" size="2">&#160;</font></p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0in 0in 0pt"><font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" size="2">The Convertible Preferred Units were issued in separate series at an issue price of $10 per unit, $25 per unit, and $28.25 per unit, respectively. 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Founding management and directors vested 20% as of the date of issuance and an additional 20% on the anniversary date for each of the next four years. Profit units issued to employees vested 50% on the second and fourth anniversary of the issuance date. 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