Kosmos Energy Ltd. (“Kosmos”) (NYSE: KOS) announced today financial and
operating results for the first quarter of 2014, which included net
income of $75 million, or $0.20 per basic share and $0.19 per diluted
share as compared with $20 million, or $0.05 per basic and diluted share
in the same quarter last year.
The current quarter’s results include a benefit to income of $24 million
related to the farm-down of a portion of the company’s interest in three
exploration licenses in Morocco’s Agadir Basin. In addition, first
quarter results benefited from lower costs that more than offset a
decrease in oil sales revenue primarily associated with lower oil prices.
Andrew G. Inglis, chairman and chief executive officer, commented: “We
had a strong first quarter largely due to consistent production from the
Jubilee field and lower costs overall. Looking to the future, we are
encouraged by the quality of our exploration portfolio as we mature the
prospects to the drilling stage from recently acquired 3D seismic. We
plan to drill a series of potentially play-opening exploration wells,
with the next spud targeted for late 2014. With our cash flow from Ghana
and existing liquidity, we remain extremely well-positioned to deliver
this program as a self-funded explorer.”
Operational Update
In Morocco, the FA-1 well in the Foum Assaka Offshore block has reached
a total depth of 3,830 meters and will be plugged and abandoned after
failing to encounter commercial hydrocarbons. The well, which is the
first in a series of play-opening wells designed to unlock the Agadir
Basin, was drilled to test the salt diapir play concept targeting the
Cretaceous interval in a combined structural-stratigraphic trap. This is
one of several independent play types and fairways present in the Agadir
Basin.
Importantly, FA-1 encountered oil and gas shows while drilling and in
sidewall cores suggesting the presence of a working petroleum system.
The well has also provided key seismic calibration information and the
well results will now be integrated into Kosmos’ ongoing petroleum
system analysis; in particular, the assessment of charge and reservoir
play risks, as well as the evaluation and ranking of trap types ahead of
the next tests of this petroleum system in 2015 and beyond.
Additionally, a 4,300 square kilometer 3D seismic program in the
Essaouira Offshore and Tarhazoute Offshore blocks in Morocco commenced
during March and is expected to be completed late in the second quarter.
Furthermore, seismic acquisition, seismic interpretation work and
prospect maturation studies are progressing well in our exploration
blocks offshore Ireland, Mauritania, Suriname and Western Sahara in
advance of our continued exploration drilling program commencing end of
2014.
Gross production from the Jubilee field averaged approximately 102,000
barrels of oil per day (bopd) in the first quarter of 2014, an increase
from 93,000 bopd in the fourth quarter of last year. Collectively with
our Jubilee field partners and the Government of Ghana, we are
continuing work to address gas-related constraints which currently limit
oil production from the field.
Appraisal of the Mahogany, Teak and Akasa (MTA) discoveries within the
Greater Jubilee area continued in the first quarter as a Jubilee
development well was successfully deepened to evaluate the Mahogany
interval.
Government approval was received for the farm-out of a non-operating
interest to BP for the Essaouira Offshore, Foum Assaka Offshore and
Tarhazoute Offshore blocks in the Agadir Basin, and for the farm-out of
a non-operated interest to Capricorn Exploration and Development Company
Limited, a wholly-owned subsidiary of Cairn Energy in the Cap Boujdour
Offshore block in the Aaiun Basin.
Financial Review
First quarter 2014 oil revenues were $213 million versus $228 million in
the same quarter of 2013.
Production expense for the first quarter of 2014 was $16 million, versus
$24 million in the first quarter of 2013 reflecting lower well workover
and rig maintenance expense.
Exploration expenses in the first quarter of 2014 totaled $13 million
compared with $24 million in the prior year quarter. Included in the
quarter were initial costs related to a large 3D seismic survey in
Morocco. Depletion and depreciation expense was $46 million versus $59
million in the first quarter of 2013 with the improvement primarily
related to the increase in proved reserves at the end of 2013.
General and administrative expenses in the first quarter of 2014 were
$27 million versus $39 million in the first quarter of 2013 and income
tax expense for the first quarter of 2014 was $51 million; the majority
of the amount was related to the company’s operations in Ghana.
The company’s hedging position at the end of the first quarter totaled
9.7 million barrels.
The company is realigning and reorganizing its activities to better
focus on delivering its exploration strategy. In this regard, the
company intends to record an estimated $9 million charge during the
second quarter to cover costs associated with these actions and
associated staff redundancies.
Conference Call and Webcast Information
Kosmos will host a conference call and webcast to discuss first 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 2012
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.
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Kosmos Energy Ltd.
Consolidated Statements of Operations
(in thousands, except per share amounts)
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Three Months Ended March 31,
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2014
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2013
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(unaudited)
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Revenues and other income:
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Oil and gas revenue
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$
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212,853
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|
$
|
228,066
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Gain on sale of assets
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23,769
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—
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Interest income
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58
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70
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Other income
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439
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254
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Total revenues and other income
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237,119
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|
228,390
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Costs and expenses:
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Oil and gas production
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16,323
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|
24,401
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Exploration expenses
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12,809
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24,255
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General and administrative
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|
27,413
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39,071
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Depletion and depreciation
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46,378
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58,649
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Amortization - deferred financing costs
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2,786
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|
2,698
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Interest expense
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|
3,511
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8,991
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Derivatives, net
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(2,028
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)
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5,508
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Loss on extinguishment of debt
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2,898
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—
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Other expenses, net
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1,277
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|
|
632
|
Total costs and expenses
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111,367
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164,205
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Income before income taxes
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125,752
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64,185
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Income tax expense
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50,783
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|
44,091
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|
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Net income
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$
|
74,969
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$
|
20,094
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Net income per share:
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Basic
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$
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0.20
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$
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0.05
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Diluted
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$
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0.19
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$
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0.05
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Weighted average number of shares used to compute net income per:
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Basic
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377,830
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375,284
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Diluted
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381,472
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375,651
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Kosmos Energy Ltd.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
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March 31,
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December 31,
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2014
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2013
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Assets
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Current assets:
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Cash and cash equivalents
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$
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528,028
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$
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598,108
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Receivables
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108,626
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21,326
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Other current assets
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123,435
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|
115,527
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Total current assets
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760,089
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734,961
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Property and equipment, net
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1,544,821
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|
1,522,962
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Other non-current assets
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108,451
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|
|
87,903
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Total assets
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$
|
2,413,361
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$
|
2,345,826
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Liabilities and shareholders’ equity
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Current liabilities:
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Accounts payable
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$
|
103,563
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$
|
94,172
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Accrued liabilities
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|
150,524
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|
115,212
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Other current liabilities
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|
|
8,107
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|
|
9,940
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Total current liabilities
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262,194
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|
219,324
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Long-term liabilities:
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Long-term debt
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800,000
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|
900,000
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Deferred tax liability
|
|
|
205,509
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|
170,226
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Other non-current liabilities
|
|
|
60,931
|
|
|
63,941
|
Total long-term liabilities
|
|
|
1,066,440
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|
|
1,134,167
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Total shareholders’ equity
|
|
|
1,084,727
|
|
|
992,335
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Total liabilities and shareholders’ equity
|
|
|
$
|
2,413,361
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|
|
$
|
2,345,826
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|
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Kosmos Energy Ltd.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
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Three Months Ended March 31,
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2014
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|
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2013
|
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Operating Activities:
|
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|
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Net income
|
|
|
$
|
74,969
|
|
|
$
|
20,094
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
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Depletion, depreciation and amortization
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49,164
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61,347
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Deferred income taxes
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30,267
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20,915
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Unsuccessful well costs
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(245
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)
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|
9,753
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Change in fair value of derivatives
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(810
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)
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|
534
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Cash settlements on derivatives
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(1,555
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)
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(4,850
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)
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Equity-based compensation
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17,900
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18,938
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Gain on sale of assets
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(23,769
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)
|
|
—
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Loss on extinguishment of debt
|
|
|
2,898
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|
—
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Other
|
|
|
(4,220
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)
|
|
1,396
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|
Changes in assets and liabilities:
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Net changes in working capital
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(31,013
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)
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|
(61,258
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)
|
Net cash provided by operating activities
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|
|
113,586
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|
66,869
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Investing activities:
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Oil and gas assets
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|
|
(96,486
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)
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|
(83,491
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)
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Other property
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|
|
(428
|
)
|
|
(814
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)
|
Proceeds on sale of assets
|
|
|
34,581
|
|
|
—
|
|
Restricted cash
|
|
|
(2,410
|
)
|
|
886
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|
Net cash used in investing activities
|
|
|
(64,743
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)
|
|
(83,419
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)
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Financing activities:
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
|
(100,000
|
)
|
|
—
|
|
Purchase of treasury stock
|
|
|
(71
|
)
|
|
(82
|
)
|
Deferred financing costs
|
|
|
(18,852
|
)
|
|
(1,243
|
)
|
Net cash used in financing activities
|
|
|
(118,923
|
)
|
|
(1,325
|
)
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(70,080
|
)
|
|
(17,875
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
598,108
|
|
|
515,164
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
528,028
|
|
|
$
|
497,289
|
|
|
|
|
Kosmos Energy Ltd.
Oil Revenue Summary
|
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Three Months Ended March 31,
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2014
|
|
2013
|
|
|
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Net Oil Volume Sold (millions of barrels)
|
|
|
1.937
|
|
|
1.991
|
Realized Oil Price (per barrel)
|
|
$109.87
|
|
$114.54
|
Oil Revenue (thousands)
|
|
$212,853
|
|
$228,066
|
|
|
|
|
|
Underlifted by approximately 481,500 barrels as of March 31, 2014
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Kosmos Energy Ltd.
Hedging Summary
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2014
|
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2015
|
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2016
|
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Remaining 2014 Hedging Position (millions of barrels)
|
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|
|
4.5
|
|
|
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5.2
|
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1.0
|
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Through April 30, 2014
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Copyright Business Wire 2014