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Form 8-K Kosmos Energy Ltd. For: Nov 03

November 3, 2014 6:59 AM

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM�8-K

CURRENT REPORT
Pursuant to Section�13 or 15(d)�of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

November�3, 2014

KOSMOS ENERGY LTD.

(Exact Name of Registrant as Specified in its Charter)

Bermuda

001-35167

98-0686001

(State or other jurisdiction
of incorporation)

(Commission
File Number)

(I.R.S. Employer
Identification No.)

Clarendon House

2 Church Street

Hamilton, Bermuda

HM 11

(Address of Principal Executive Offices)

(Zip Code)

Registrant�s telephone number, including area code: +1 441 295 5950

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form�8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o��Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425)

o��Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12)

o��Pre-commencement communications pursuant to Rule�14d-2(b)�under the Exchange Act (17 CFR 240.14d-2(b))

o��Pre-commencement communications pursuant to Rule�13e-4(c)�under the Exchange Act (17 CFR 240.13e-4(c))



Item 2.02������������� Results of Operations and Financial Condition.

On November�3, 2014, Kosmos Energy Ltd. (the �Company�) issued a news release announcing results for the fiscal quarter ended September�30, 2014. A copy of the news release issued by the Company is attached hereto as Exhibit�99.1 and is incorporated herein by reference.

The information in this Form�8-K and Exhibit�99.1 shall not be deemed �filed� for purposes of Section�18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section.

Item 7.01������������� Regulation FD Disclosure.

On November�3, 2014, the Company issued a news release announcing results for the fiscal quarter ended September�30, 2014. A copy of the news release issued by the Company is attached hereto as Exhibit�99.1 and is incorporated herein by reference.

The information in this Form�8-K and Exhibit�99.1 shall not be deemed �filed� for purposes of Section�18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section.

Item 9.01������������� Financial Statements and Exhibits.

(d)

Exhibits.

The�following�exhibit�is�furnished�as�part�of�this�current�report�on�Form�8-K:

99.1

News Release dated November�3, 2014 announcing results for the fiscal quarter ended September�30, 2014.

2



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November�3, 2014

KOSMOS ENERGY LTD.

By:

/s/ W. Greg Dunlevy

W. Greg Dunlevy

Chief Financial Officer and Executive Vice President

3



INDEX TO EXHIBITS

Exhibit�No.

Description

99.1

News Release dated November�3, 2014 announcing results for the fiscal quarter ended September�30, 2014.

4


Exhibit�99.1

NEWS RELEASE

KOSMOS ENERGY ANNOUNCES THIRD QUARTER 2014 RESULTS

DALLAS, Texas, November�3, 2014 � Kosmos Energy Ltd. (�Kosmos�) (NYSE: KOS) announced today financial and operating results for the third quarter of 2014, which included net income of $19 million, or $0.05 per basic and diluted share compared with a net loss of $44 million, or $0.12 per basic and diluted share in the same quarter last year.

Andrew G. Inglis, chairman and chief executive officer,�said:��In the third quarter, we continued to deliver strong operational performance.� The combination of high margin cash flow from Ghana and our strong balance sheet form the financial foundation of the company that allows us to self-fund our exploration and development capex program.� With the Atwood Achiever currently in transit to northwest Africa, we are now on the cusp of drilling out our transformation exploration program.�

Operational Update

Gross production from the Jubilee field averaged approximately 102,000 barrels of oil per day (bopd) during third quarter and has averaged approximately 103,000 bopd through the first nine months of 2014. Collectively with our Jubilee field partners and the Government of Ghana, we continue to support the Ghana National Gas Company�s gas infrastructure project which is needed to alleviate gas-related constraints currently limiting oil production.

In August, the company entered into farm-in agreements in Portugal and Senegal. The non-operated position in Portugal covers approximately 12,000 square kilometers off the west coast of Portugal and is subject to customary closing conditions, including final government approvals. In Senegal, the company acquired an operated interest in two offshore areas covering nearly 18,000 square kilometers. Consistent with our exploration strategy, both opportunities target Cretaceous-age objectives.

Kosmos continues to advance the exploration portfolio through additional seismic acquisition and interpretation. A 5,100 square kilometer 3D seismic program in the Cap Boujdour Offshore block was completed in early September, and a 7,000 square kilometer 3D seismic survey currently underway on our Senegal blocks is expected to be completed in the first quarter of 2015.

The Atwood Achiever drillship is currently mobilizing to northwest Africa in advance of the company�s multi-year drilling campaign. The initial exploration well targeting the Al Khayr prospect (previously named Gargaa) is expected to spud late in the fourth quarter.

Financial Review

Oil revenues in the third quarter of 2014 were $137 million versus $215 million in the third quarter of 2013. The decrease in revenue resulted largely from having one and one-half crude oil liftings from the Jubilee field during the quarter compared to two liftings in the third quarter of 2013. Realized oil price was $95.26 per barrel of oil sold in the quarter versus $112.52 per barrel in the same quarter of last year.



The third quarter results benefited from the previously announced non-cash mark-to-market gain of $40 million related to the company�s oil derivative contracts. The company hedged additional forward production during the quarter resulting in 9.7 million barrels hedged at the end of the third quarter.

Production expense for the current quarter was $15 million or an average cost of $10.46 per barrel versus $17.04 per barrel in the third quarter of last year, which included certain well workover costs.

Exploration expenses in the third quarter of 2014 totaled $21 million compared with $76 million in the prior year quarter. Included in the current quarter were costs associated with large 3D seismic surveys offshore Western Sahara and Senegal.

General and administrative expenses in the current quarter were $35 million versus $38 million in the third quarter of 2013. Depletion and depreciation expense was $37 million or $25.61 per barrel of oil sold versus $30.52 per barrel in the third quarter of 2013, the improvement related to reserves addition at the end of last year.

As of September�30, 2014, the company had approximately $1.9 billion of liquidity, which included $601 million in cash and cash equivalents. Net debt at the end of the quarter was $149 million, a reduction from $416 million as of September�30, 2013.

Conference Call and Webcast Information

Kosmos will host a conference call and webcast to discuss third 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), Senegal 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,� �estimate,� �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.

###

CONTACT:

Investor Relations

Neal Shah

+1.214.445.9628

[email protected]

Media Relations

Thomas Golembeski

+1.214.445.9674

[email protected]



Kosmos Energy Ltd.

Consolidated Statement of Operations

(In thousands, except per share amounts, unaudited)

Three�Months�Ended
September�30,

Nine�Months�Ended
September�30,

2014

2013

2014

2013

Revenues and other income:

Oil and gas revenue

$

137,485

$

215,169

$

678,635

$

636,648

Gain on sale of assets

23,769

Interest income

69

77

323

191

Other income

882

133

2,190

708

Total revenues and other income

138,436

215,379

704,917

637,547

Costs and expenses:

Oil and gas production

15,097

32,576

54,366

79,651

Exploration expenses

21,334

75,607

57,652

194,384

General and administrative

35,148

38,077

95,041

118,787

Depletion and depreciation

36,959

58,367

152,883

175,578

Amortization - deferred financing costs

2,593

2,786

7,938

8,269

Interest expense

9,838

8,781

20,984

27,789

Derivatives, net

(40,407

)

7,585

(20,869

)

386

Restructuring charges

(46

)

11,758

Loss on extinguishment of debt

2,898

Other expenses, net

329

1,864

1,632

3,345

Total costs and expenses

80,845

225,643

384,283

608,189

Income (loss) before income taxes

57,591

(10,264

)

320,634

29,358

Income tax expense

38,468

34,224

170,035

124,568

Net income (loss)

$

19,123

$

(44,488

)

$

150,599

$

(95,210

)

Net income (loss) per share:

Basic

$

0.05

$

(0.12

)

$

0.39

$

(0.25

)

Diluted

$

0.05

$

(0.12

)

$

0.39

$

(0.25

)

Weighted average number of shares used to compute net income (loss) per share:

Basic

379,969

377,654

378,881

376,509

Diluted

382,190

377,654

382,287

376,509



Kosmos Energy Ltd.

Condensed Consolidated Balance Sheets

(In thousands, unaudited)

September�30,

December�31,

2014

2013

Assets

Current assets:

Cash and cash equivalents

$

600,626

$

598,108

Receivables

116,135

21,326

Other current assets

129,600

115,527

Total current assets

846,361

734,961

Property and equipment, net

1,653,601

1,522,962

Other non-current assets

103,245

87,903

Total assets

$

2,603,207

$

2,345,826

Liabilities and shareholders� equity

Current liabilities:

Accounts payable

$

89,838

$

94,172

Accrued liabilities

197,132

115,212

Other current liabilities

1,994

9,940

Total current liabilities

288,964

219,324

Long-term liabilities:

Long-term debt

794,106

900,000

Deferred tax liability

271,376

170,226

Other non-current liabilities

57,829

63,941

Total long-term liabilities

1,123,311

1,134,167

Total shareholders� equity

1,190,932

992,335

Total liabilities and shareholders� equity

$

2,603,207

$

2,345,826



Kosmos Energy Ltd.

Condensed Consolidated Statements of Cash Flow

(In thousands, unaudited)

Three�Months�Ended
September�30,

Nine�Months�Ended
September�30,

2014

2013

2014

2013

Operating activities:

Net income (loss)

$

19,123

$

(44,488

)

$

150,599

$

(95,210

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depletion, depreciation and amortization

39,552

61,153

160,821

183,847

Deferred income taxes

47,555

10,111

103,372

62,757

Unsuccessful well costs

276

13,244

3,091

98,912

Change in fair value of derivatives

(35,809

)

8,054

(13,508

)

4,752

Cash settlements on derivatives

(8,151

)

(3,514

)

(9,661

)

(18,658

)

Equity-based compensation

19,043

13,792

59,941

50,792

Gain on sale of assets

(23,769

)

Loss on extinguishment of debt

2,898

Other

(236

)

1,641

(4,368

)

4,468

Changes in assets and liabilities:

Net changes in working capital

4,820

(55,514

)

(57,182

)

(10,311

)

Net cash provided by operating activities

86,173

4,479

372,234

281,349

Investing activities:

Oil and gas assets

(103,755

)

(77,871

)

(290,218

)

(244,452

)

Other property

(489

)

(434

)

(1,403

)

(3,712

)

Proceeds from sale of assets

58,315

Restricted cash

4,056

5,249

2,229

7,214

Net cash used in investing activities

(100,188

)

(73,056

)

(231,077

)

(240,950

)

Financing activities:

Payments on long-term debt

(300,000

)

(400,000

)

(100,000

)

Net proceeds from issuance of senior notes

294,000

294,000

Purchase of treasury stock

(127

)

(28

)

(11,067

)

(13,069

)

Deferred financing costs

(863

)

(2

)

(21,572

)

(2,227

)

Net cash used in financing activities

(6,990

)

(30

)

(138,639

)

(115,296

)

Net increase (decrease) in cash and cash equivalents

(21,005

)

(68,607

)

2,518

(74,897

)

Cash and cash equivalents at beginning of period

621,631

508,874

598,108

515,164

Cash and cash equivalents at end of period

$

600,626

$

440,267

$

600,626

$

440,267



Kosmos Energy Ltd.

EBITDAX

(In thousands, unaudited)

Three�Months�Ended
September�30,

Nine�Months�Ended
September�30,

Twelve�
Months

Ended
September�30,

2014

2013

2014

2013

2014

Net income (loss)

$

19,123

$

(44,488

)

$

150,599

$

(95,210

)

$

154,765

Exploration expenses

21,334

75,607

57,652

194,384

93,582

Depletion, depreciation and amortization

39,552

61,153

160,821

183,847

210,572

Equity-based compensation

19,043

13,793

54,986

50,792

73,220

Unrealized (gain) loss on commodity derivatives

(38,360

)

6,518

(14,265

)

3,070

(5,557

)

Gain on sale of assets

(23,769

)

(23,769

)

Interest expense, net

9,769

8,704

20,661

27,598

29,599

Income tax expense

38,468

34,224

170,035

124,568

212,465

Loss on extinguishment of debt

2,898

2,898

Restructuring charges

(46

)

11,758

11,758

EBITDAX

$

108,883

$

155,511

$

591,376

$

489,049

$

759,533

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 September�30, 2014 was calculated by subtracting the unaudited data for the nine months ended September�30, 2013 from the unaudited data for the year ended December�31, 2013, and adding the unaudited data for the nine months ended September�30, 2014.

Oil Revenue Summary

Three�Months�Ended
September�30,

Nine�Months�Ended
September�30,

2014

2013

2014

2013

Net Oil Volume Sold (millions of barrels)

1.443

1.912

6.297

5.847

Realized Oil Price (per barrel)

$

95.26

$

112.52

$

107.78

$

108.88

Oil Revenue (thousands)

$

137,485

$

215,169

$

678,635

$

636,648

Underlifted by approximately 430,000 barrels as of September�30, 2014

Hedging Summary

As of September�30, 2014

2014

2015

2016

Total

Hedging Position (millions of barrels)

1.5

6.2

2.0

9.7


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