News Release Details

DALLAS--(BUSINESS WIRE)--Aug. 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 Section 27A of the Securities Act of 1933 and Section 21E 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 June 30,										Six Months Ended June 30,
			2014					2013					2014				2013
Revenues and other income:
Oil and gas revenue			$	328,297				$	193,413				$	541,150			$	421,479
Gain on sale of assets			—					—					23,769				—
Interest income			196					44					254				114
Other income			869					321					1,308				575
Total revenues and other income			329,362					193,778					566,481				422,168
Costs and expenses:
Oil and gas production			22,946					22,674					39,269				47,075
Exploration expenses			23,509					94,522					36,318				118,777
General and administrative			32,480					41,639					59,893				80,710
Depletion and depreciation			69,546					58,562					115,924				117,211
Amortization - deferred financing costs			2,559					2,785					5,345				5,483
Interest expense			7,635					10,017					11,146				19,008
Derivatives, net			21,566					(12,707		)			19,538				(7,199		)
Restructuring charges			11,804					—					11,804				—
Loss on extinguishment of debt			—					—					2,898				—
Other expenses, net			26					849					1,303				1,481
Total costs and expenses			192,071					218,341					303,438				382,546
Income (loss) before income taxes			137,291					(24,563		)			263,043				39,622
Income tax expense			80,784					46,253					131,567				90,344
Net income (loss)			$	56,507				$	(70,816	)			$	131,476			$	(50,722	)
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 June 30,											Six Months Ended June 30,
			2014						2013					2014					2013
Operating activities:
Net income (loss)			$		56,507				$	(70,816	)			$	131,476				$	(50,722	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization			72,105						61,347					121,269					122,694
Deferred income taxes			25,550						31,731					55,817					52,646
Unsuccessful well costs			3,060						75,915					2,815					85,668
Change in fair value of derivatives			23,111						(3,836		)			22,301					(3,302		)
Cash settlements on derivatives			45						(10,294		)			(1,510		)			(15,144		)
Equity-based compensation			22,998						18,062					40,898					37,000
Gain on sale of assets			—						—					(23,769		)			—
Loss on extinguishment of debt			—						—					2,898					—
Other			88						1,431					(4,132		)			2,827
Changes in assets and liabilities:
Net changes in working capital			(30,989			)			106,461					(62,002		)			45,203
Net cash provided by operating activities			172,475						210,001					286,061					276,870
Investing activities:
Oil and gas assets			(89,977			)			(83,090		)			(186,463		)			(166,581		)
Other property			(486			)			(2,464		)			(914		)			(3,278		)
Proceeds from sale of assets			23,734						—					58,315					—
Restricted cash			583						1,079					(1,827		)			1,965
Net cash used in investing activities			(66,146			)			(84,475		)			(130,889		)			(167,894		)
Financing activities:
Payments on long-term debt				—						(100,000	)				(100,000	)				(100,000	)
Purchase of treasury stock				(10,869		)				(12,959	)				(10,940	)				(13,041	)
Deferred financing costs				(1,857		)				(982	)				(20,709	)				(2,225	)
Net cash used in financing activities				(12,726		)				(113,941	)				(131,649	)				(115,266	)
Net increase (decrease) in cash and cash equivalents				93,603						11,585					23,523					(6,290	)
Cash and cash equivalents at beginning of period				528,028						497,289					598,108					515,164
Cash and cash equivalents at end of period			$	621,631					$	508,874				$	621,631				$	508,874

Kosmos Energy Ltd. EBITDAX (In thousands, unaudited)
			Three Months Ended June 30,										Six Months Ended June 30,										Twelve Months Ended June 30,
			2014					2013					2014					2013					2014
Net income (loss)			$		56,507			$	(70,816	)			$	131,476				$	(50,722	)			$	91,154
Exploration expenses			23,509					94,522					36,318					118,777					147,855
Depletion, depreciation and amortization			72,105					61,347					121,269					122,694					232,173
Equity-based compensation			18,043					18,062					35,943					37,000					67,969
Unrealized (gain) loss on commodity derivatives			22,096					(11,335		)			23,601					(5,246		)			40,625
Gain on sale of assets			—					—					(23,769		)			—					(23,769		)
Interest expense, net			7,439					9,973					10,892					18,894					28,534
Income tax expense			80,784					46,253					131,567					90,344					208,221
Loss on extinguishment of debt			—					—					2,898					—					2,898
Restructuring charges			11,804					—					11,804					—					11,804
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 June 30,								Six Months Ended June 30,
			2014				2013				2014					2013
Net Oil Volume Sold (millions of barrels)				2.916				1.944				4.853					3.935
Realized Oil Price (per barrel)			$	112.58			$	99.51				$	111.50			$	107.11
Oil Revenue (thousands)			$	328,297			$	193,413				$	541,150			$	421,479

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 barrels)				3.0				5.2				2.0				10.2

Source: Kosmos Energy Ltd.

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