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

nshah@kosmosenergy.com

 

Media Relations

Thomas Golembeski

+1.214.445.9674

tgolembeski@kosmosenergy.com

 



 

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