Kosmos Energy Records 2Q Net Loss of $71 Mln

Kosmos Energy Ltd. announced today financial and operating results for the second quarter of 2013, which included a net loss of $71 million, or $0.19 per basic and diluted share. These results include the previously announced Sipo-1 charge of $76 million net. For the second quarter of 2012, Kosmos reported a net loss of $25 million, or $0.07 per basic and diluted share.

Brian F. Maxted, Chief Executive Officer, commented, “Our second quarter achievements continued to build the strategic foundation that is designed to deliver substantial value to our shareholders. During the quarter the Plan of Development for our second major oil development in Ghana, the Tweneboa-Enyenra-Ntomme (TEN) Project, was approved, which paves the way for anticipated first oil production in 2016. In addition, we continued to mature our existing exploration assets in preparation for a multi-year drilling campaign scheduled to begin early next year.”

Oil and gas revenue in the second quarter of 2013 was $193 million on the sale of approximately two million barrels of oil versus $112 million in the second quarter of 2012 on the sale of nearly one million barrels of oil. The increase in sales volumes was the result of the successful Jubilee production enhancement programs executed during the second half of 2012. Realized pricing was $99.51 per barrel of oil sold in the second quarter of 2013 versus $112.60 per barrel of oil sold in the second quarter of 2012.

Forecasted capital expenditures for 2013 are expected to increase slightly to $560 million, which reflects the acceleration of the Ireland seismic program, moving it from 2014 to 2013.

Production expense, which included certain well workover and rig equipment maintenance costs, was $23 million in the second quarter of 2013 versus $20 million in the second quarter of 2012. Production expense excluding well workover and rig equipment maintenance costs was $6.54 per barrel of oil sold in the second quarter of 2013 and $9.37 per barrel of oil sold in the second quarter of 2012. The per-barrel price reduction in the second quarter of 2013 primarily reflected an efficiency gain associated with increased field production.

Exploration expenses in the second quarter of 2013 totaled $93 million, which included the Sipo-1 well charge and ongoing seismic acquisition, processing, and interpretation expenditures. Exploration expense was $17 million in the second quarter of 2012.

General and administrative expenses in the second quarter of 2013 were $43 million versus $35 million in the second quarter of 2012. The increase over the 2012 quarter was largely related to staffing growth. Depletion and depreciation expense was $59 million, or $30.13 per barrel of oil sold. The per-barrel rate represents a nine percent decline from the second quarter 2012 rate, primarily the result of the reclassification of proved undeveloped reserves as proved developed reserves at the end of 2012.

Derivative gains for the second quarter of 2013 were $13 million, which primarily represented the unrealized favorable change in the valuation of the Company’s oil derivative contracts. Income tax expense for the second quarter of 2013 was $46 million; the majority of the amount was related to the Company’s operations in Ghana.

Operational Update:

The Jubilee Field operator has advised its decision to extend the planned shutdown of the Jubilee production facility for routine maintenance at the end of the third quarter 2013. Additionally, the operator has revised its production forecast for Jubilee to approximately 95,000 barrels of oil per day gross for the full year 2013.

During the second quarter of 2013, gross Jubilee Field production averaged approximately 106,000 barrels of oil per day. Phase 1A drilling and completion operations continued with two production wells and one injection well associated with the Phase 1A campaign currently online. The rig-less well intervention program was successfully executed during the quarter with acid stimulation programs performed on five production wells.

The Jubilee Field co-venturers continue work on enhancing the gas handling capabilities associated with the Jubilee floating production, storage, and offloading (FPSO) vessel through improved compressor performance in conjunction with a third gas injection well that is scheduled to be operational in the fourth quarter of 2013. With these enhancements, Kosmos is targeting a Jubilee year-end 2013 production rate of more than 120,000 barrels of oil per day gross.

The Plan of Development for the TEN Project, now approved by the Government of Ghana, is expected to deliver first oil production in 2016 with production staged up to a facilities-designed plateau production rate of 80,000 barrels of oil per day. The gross project cost is now estimated at $4.9 billion excluding FPSO lease costs.

Darrell McKenna, Chief Operating Officer, commented, “Second quarter Jubilee Field production remained stable, and we expect the Phase 1A drilling and completion campaign to continue through the remainder of the year. Approval of the TEN Project was a major milestone. We are pleased to have secured a long-term rig agreement for the Atwood Achiever and have executed a letter of intent for an additional rig slot that will support first quarter 2014 drilling operations offshore Morocco. We now have the rig resources required to fulfill the Company’s activities in Morocco, as well as our long-term exploration strategy.”

The Moroccan acreage farm-out process progressed during the second quarter of 2013 with its finalization expected during the second half of the year.

In April, Kosmos announced the Company had entered into two farm-in agreements in the Porcupine Basin offshore western Ireland that cover three licensed areas. Approval was received from the Irish government in early July to convert these areas to frontier exploration licenses. A 3D seismic survey is currently underway, which will encompass the three areas.

A 6,300 kilometer 2D seismic survey was completed in the second quarter of 2013 over Kosmos’ acreage positions C8, C12, and C13 offshore Mauritania. Based on encouraging initial results of the 2D data, a 3D seismic program was accelerated and the survey area expanded to 10,000 square kilometers. The 3D survey, which covers portions of the C8 and C12 licenses, commenced in June and is scheduled to be completed in the fourth quarter of 2013.

As previously announced, the Sipo-1 exploration well drilled in the Ndian River Block, onshore Cameroon was plugged and abandoned after the well failed to encounter commercial reservoirs.