PART I. FINANCIAL INFORMATION [Glossary and Select Abbreviations](index=3&type=section&id=Glossary%20and%20Select%20Abbreviations) Defines key industry-specific terms and abbreviations for clarity throughout the report - The report includes a comprehensive glossary defining technical and financial terms relevant to the oil and gas industry, ensuring clarity for readers[12](index=12&type=chunk) [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited financial statements showing decreased revenue and net income due to lower oil prices [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Details the company's financial position, showing growth in total assets, liabilities, and equity Consolidated Balance Sheet Highlights (as of Sep 30, 2023 vs. Dec 31, 2022) | Account | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $138,742 | $183,405 | | Oil and gas properties, net | $4,174,239 | $3,837,437 | | **Total assets** | **$4,969,401** | **$4,579,988** | | Long-term debt, net | $2,389,197 | $2,195,911 | | **Total liabilities** | **$3,969,732** | **$3,792,140** | | **Total stockholders' equity** | **$999,669** | **$787,848** | [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) Summarizes operational performance, highlighting a year-over-year decline in net income and revenue Statement of Operations Summary (Unaudited) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Nine Months 2023 (in thousands) | Nine Months 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Oil and gas revenue | $526,348 | $456,056 | $1,193,843 | $1,735,439 | | **Net income** | **$85,185** | **$222,254** | **$191,839** | **$340,827** | | Diluted EPS | $0.18 | $0.47 | $0.40 | $0.72 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Outlines cash movements, showing a significant decrease in operating cash flow and a net decrease in cash Cash Flow Summary (Nine Months Ended Sep 30) | Activity | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $471,394 | $863,236 | | Net cash used in investing activities | ($658,546) | ($474,039) | | Net cash provided by (used in) financing activities | $142,489 | ($332,196) | | **Net increase (decrease) in cash** | **($44,663)** | **$57,001** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed disclosures on accounting policies, debt structure, derivatives, and segment performance - The company is a deepwater independent oil and gas E&P company with key assets and production offshore Ghana, Equatorial Guinea, the U.S. Gulf of Mexico, and gas projects in Mauritania and Senegal[29](index=29&type=chunk) - In September 2023, the company **fully repaid the remaining $137.5 million** of its GoM Term Loan using cash on hand, and the loan was subsequently terminated[65](index=65&type=chunk) Debt Principal Balances (as of Sep 30, 2023) | Debt Instrument | Principal Balance (in thousands) | | :--- | :--- | | Facility | $925,000 | | 7.125% Senior Notes | $650,000 | | 7.750% Senior Notes | $400,000 | | 7.500% Senior Notes | $450,000 | | GoM Term Loan | $0 | | **Total long-term debt** | **$2,425,000** | Segment Revenue and Income (Q3 2023) | Segment | Oil and Gas Revenue (in thousands) | Net Income (Loss) (in thousands) | | :--- | :--- | :--- | | Ghana | $348,366 | $78,076 | | Equatorial Guinea | $75,014 | $16,346 | | U.S. Gulf of Mexico | $102,968 | $27,209 | | Mauritania/Senegal | $0 | $21,563 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes financial results, attributing revenue changes to sales volumes and commodity price fluctuations - The company's 2023 capital budget is approximately **$800 million**, allocated to maintenance, development, and exploration projects[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - An oil discovery was announced at the **Tiberius exploration prospect** in the U.S. Gulf of Mexico, with approximately 75 meters of net oil pay[122](index=122&type=chunk) - The **Jubilee South East project** in Ghana successfully started up in July 2023 with two producer wells online[116](index=116&type=chunk) Sales Volume and Price Comparison | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Sales (MBoe) | 6,727 | 4,685 | 16,344 | 16,877 | | Avg. Sales Price ($/Boe) | $78.24 | $97.34 | $73.04 | $102.83 | [Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Details exposure to commodity price and interest rate risks and the use of derivatives for mitigation - The company actively uses **derivative contracts** (collars, puts, calls) to manage exposure to volatile oil prices[182](index=182&type=chunk) - A hypothetical **10% increase in commodity prices** would decrease future pre-tax earnings by approximately **$44.9 million** due to hedge positions[185](index=185&type=chunk) - A **10% increase in the floating market rate** would add an estimated **$4.9 million** in annual interest expense on its **$925.0 million** of variable-rate debt[186](index=186&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of September 30, 2023[188](index=188&type=chunk) - **No material changes** occurred in the company's internal control over financial reporting during the most recent fiscal quarter[189](index=189&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) Reports no material changes to legal proceedings from the latest Annual Report - There have been **no material changes** to legal proceedings since the last annual report[190](index=190&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) States no material changes to risk factors since the 2022 Annual Report - There have been **no material changes** to the company's risk factors since the 2022 Form 10-K[191](index=191&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities during the period - None[192](index=192&type=chunk) [Other Information](index=45&type=section&id=Item%205.%20Other%20Information) Indicates no material changes requiring disclosure that were not previously reported - **No material changes** have occurred that have not been previously disclosed[195](index=195&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the report, including key agreements and required certifications - Filed exhibits include the **Amended and Restated Facility Agreement** dated October 19, 2023, and CEO/CFO certifications[200](index=200&type=chunk)

Financial Data and Key Metrics Changes - The company reported a CapEx of $170 million in Q2, which was below the guidance range of $200 million to $225 million, primarily due to lower accruals on the subsea work scope for the Tortue project [37] - The company experienced an under-lift of approximately 1 million barrels in Q2, which is expected to normalize in the second half of the year [37] - OpEx per barrel increased quarter-on-quarter due to scheduled TEN cargo in Q3, but is expected to decrease again in Q4 with higher production levels from Jubilee [38] Business Line Data and Key Metrics Changes - Jubilee gross production averaged around 100,000 barrels of oil per day, contributing significantly to the company's growth target [28][46] - In the Gulf of Mexico, net production was approximately 16,000 barrels of oil equivalent per day, consistent with guidance [30] - The company plans to commence drilling three more wells at Jubilee, which is expected to enhance production further in Q4 [56] Market Data and Key Metrics Changes - The company signed a temporary agreement for Jubilee gas delivery at $2.90 per MMBtu through September 2023, while finalizing a long-term gas sales agreement [29] - The gas price in Ghana is expected to stabilize as discussions with the government progress [7][46] Company Strategy and Development Direction - The company aims to grow production by around 50% from the 2022 baseline, with significant contributions expected from the Jubilee South East project and the Tortue LNG project [26][27] - The strategy includes disciplined capital allocation towards debt paydown, funding growth opportunities, and potential shareholder returns [27][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the performance of Jubilee, noting an increase from 70,000 barrels gross at the beginning of the year to 100,000 barrels per day [46] - The company is nearing a free cash flow inflection point as production rises and CapEx is expected to fall [39][51] Other Important Information - The first gas from the Tortue project is now expected in Q1 2024 due to delays in the subsea workstream [35] - The company is working closely with the operator to address the subsea delay and optimize other work streams [80] Q&A Session Summary Question: Can you provide clarity on the CapEx issue related to Tortue and Jubilee production capacity? - Management indicated that additional CapEx is expected due to delays, and Jubilee production capacity is targeted at 120,000 barrels per day by year-end [45][46] Question: What is the expected timeline for first gas from Tortue? - First gas is now targeted for Q1 2024, with a focus on addressing the subsea delay [35][95] Question: How will the company manage the under-lift and cash flow in the second half of the year? - Management noted that the under-lift was primarily due to timing of cargoes and is expected to normalize in Q3 and Q4 [9][93]

Potential drilling locations and resource potential estimates have not been risked by the Company. Actual locations drilled and quantities that may be ultimately recovered from the Company's interest may differ substantially from these estimates. There is no commitment by the Company to drill all of the drilling locations that have been attributed these quantities. Factors affecting ultimate recovery include the scope of the Company's ongoing drilling program, which will be directly affected by the availabi ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Glossary and Select Abbreviations](index=3&type=section&id=Glossary%20and%20Select%20Abbreviations) This section defines technical, industry-specific, and company-specific terms and abbreviations used throughout the report - The report includes a comprehensive glossary defining key oil and gas industry terminology, financial metrics like **EBITDAX**, and project-specific abbreviations to aid in understanding the document's content[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk) [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents Kosmos Energy Ltd.'s unaudited interim consolidated financial statements for Q2 and H1 2023, including balance sheets, statements of operations, equity, cash flows, and notes [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$4.81 billion** by June 30, 2023, driven by oil and gas properties, with total liabilities rising to **$3.90 billion** and stockholders' equity to **$903.9 million** Consolidated Balance Sheet Highlights (as of June 30, 2023 vs. Dec 31, 2022) | Balance Sheet Item | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 85,729 | 183,405 | | Oil and gas properties, net | 4,073,399 | 3,837,437 | | **Total assets** | **4,807,619** | **4,579,988** | | Long-term debt, net | 2,358,689 | 2,195,911 | | **Total liabilities** | **3,903,715** | **3,792,140** | | **Total stockholders' equity** | **903,904** | **787,848** | [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2023 net income decreased to **$23.3 million** from **$117.2 million** in Q2 2022 due to lower revenue, while H1 2023 net income was **$106.7 million** Q2 & H1 2023 vs 2022 Performance | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Oil and gas revenue ($ thousands) | 273,255 | 620,368 | 667,495 | 1,279,383 | | Net income ($ thousands) | 23,345 | 117,173 | 106,654 | 118,573 | | Diluted EPS ($) | 0.05 | 0.25 | 0.22 | 0.25 | [Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity increased to **$903.9 million** by June 30, 2023, primarily due to **$106.7 million** in net income - Stockholders' equity grew to **$903.9 million** by June 30, 2023, up from **$787.8 million** at year-end 2022, mainly due to the net income earned during the first half of the year[23](index=23&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2023 net cash from operations decreased to **$222.0 million**, with increased investing activities and a net cash decrease of **$97.7 million** Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity ($ thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | 221,963 | 608,186 | | Net cash used in investing activities | (450,162) | (234,727) | | Net cash provided by (used in) financing activities | 130,523 | (324,696) | | **Net (decrease) increase in cash** | **(97,676)** | **48,763** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, debt facilities totaling **$2.41 billion**, derivative instruments, and segmented financial results across key operating regions Total Long-Term Debt Principal (as of June 30, 2023) | Debt Instrument | Principal Balance ($ thousands) | | :--- | :--- | | Facility | 775,000 | | 7.125% Senior Notes | 650,000 | | 7.750% Senior Notes | 400,000 | | 7.500% Senior Notes | 450,000 | | GoM Term Loan | 137,500 | | **Total** | **2,412,500** | - As of June 30, 2023, the company had outstanding oil derivative contracts (collars) covering **9.5 MMBbl** for the remainder of 2023 and 2024 to hedge against price volatility[71](index=71&type=chunk) Segment Oil & Gas Revenue (Six Months Ended June 30, 2023) | Geographic Segment | Revenue ($ thousands) | | :--- | :--- | | Ghana | 380,100 | | Equatorial Guinea | 104,629 | | U.S. Gulf of Mexico | 182,766 | | Mauritania/Senegal | — | | **Total** | **667,495** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2023 revenue decline, operational updates including Jubilee South East and Greater Tortue Ahmeyim (first gas Q1 2024), a **$700-$750 million** capital budget, and **$705 million** in liquidity - The Greater Tortue Ahmeyim Phase 1 project's first gas is now targeted for the **first quarter of 2024** due to delays in the subsea work scope[122](index=122&type=chunk) - The Jubilee South East project in Ghana successfully started up in **July 2023** with two producer wells online, and three additional wells are expected in H2 2023[114](index=114&type=chunk) - The company estimates a capital expenditure budget of approximately **$700-$750 million** for 2023, allocated to maintenance, development projects (Jubilee South East, Greater Tortue, Winterfell), and infrastructure-led exploration[152](index=152&type=chunk)[153](index=153&type=chunk) Sales Volumes and Average Prices | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Sales (MBoe) | 4,116 | 5,677 | 9,618 | 12,191 | | Average Sales Price ($/Boe) | 66.38 | 109.28 | 69.40 | 104.94 | - Q2 2023 oil and gas revenue decreased by **$347.1 million** compared to Q2 2022, primarily due to the timing of international oil liftings, lower average oil prices, and natural field decline[130](index=130&type=chunk) Liquidity Position (as of June 30, 2023) | Liquidity Source | Amount ($ thousands) | | :--- | :--- | | Availability under the Facility | 370,083 | | Availability under the Corporate Revolver | 250,000 | | Cash and cash equivalents | 85,729 | | **Total Available Liquidity** | **705,812** | [Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details market risk exposure from commodity price and interest rate fluctuations, with derivative contracts used to mitigate price volatility and significant floating-rate debt - As of June 30, 2023, a hypothetical **10%** increase in commodity futures prices would decrease future pre-tax earnings by approximately **$27.5 million**, while a **10%** decrease would increase earnings by **$36.1 million**, reflecting the impact on the company's hedge portfolio[186](index=186&type=chunk) - The company is exposed to interest rate risk on **$912.5 million** of variable-rate debt. A **10%** increase in the floating market rate would result in an estimated additional **$4.8 million** in annual interest expense[187](index=187&type=chunk) Outstanding Oil Derivative Contracts (as of June 30, 2023) | Term | Type | Volume (MBbl) | Floor Price ($/Bbl) | Ceiling Price ($/Bbl) | | :--- | :--- | :--- | :--- | :--- | | Jul - Dec 2023 | Three-way collars | 3,000 | 71.67 | 107.58 | | Jul - Dec 2023 | Two-way collars | 2,500 | 72.00 | 112.00 | | Jan - Dec 2024 | Three-way collars | 2,000 | 70.00 | 97.50 | | Jan - Jun 2024 | Two-way collars | 2,000 | 65.00 | 85.00 | [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of **June 30, 2023**[188](index=188&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[189](index=189&type=chunk) [PART II. OTHER INFORMATION](index=45&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) There have been no material changes to legal proceedings since the last annual report on Form 10-K - There have been no material changes to legal proceedings since the last annual report[190](index=190&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors since the 2022 Annual Report on Form 10-K - There have been no material changes to the company's risk factors since the 2022 Form 10-K[191](index=191&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[192](index=192&type=chunk) [Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[193](index=193&type=chunk) [Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[194](index=194&type=chunk) [Other Information](index=45&type=section&id=Item%205.%20Other%20Information) No material changes required to be disclosed under this item that were not previously reported in the annual report - There have been no material changes required to be reported under this Item that have not previously been disclosed[195](index=195&type=chunk)

Financial Data and Key Metrics Changes - The company reported net production of approximately 59,000 barrels of oil equivalent per day, consistent with guidance, with full-year guidance remaining unchanged at 65,000 to 69,000 barrels of oil equivalent per day [10][17][27] - Realized pricing was lower quarter-on-quarter due to lower commodity prices during Q1, offset by lower operating expenses [27][40] Business Line Data and Key Metrics Changes - Jubilee gross oil production averaged around 72,000 barrels per day, down from the previous quarter due to reduced water injection [10][17] - TEN gross oil production averaged just over 20,000 barrels per day, with plans for additional wells to maintain production levels [3] - Equatorial Guinea's gross oil production averaged just over 27,000 barrels per day, with a three-well infill drilling campaign expected to begin in Q4 [4] Market Data and Key Metrics Changes - The company expects production growth primarily from Jubilee, with gross production anticipated to rise over 50% from Q1 to more than 110,000 barrels of oil per day in Q4 [20][21] - The Gulf of Mexico net production was approximately 16,000 barrels of oil equivalent per day, in line with guidance [5] Company Strategy and Development Direction - The company is focused on near-term development projects, including Jubilee Southeast, Tortue Phase 1, and Winterfell, which are expected to collectively increase production by around 50% from now to 2024 [17][18] - The company plans to drill the Tiberius ILX well in the Gulf of Mexico next quarter and is progressing on the second phase of Tortue with partners in Mauritania and Senegal [18][24] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of maintaining production levels and extending the plateau at Jubilee, with a target to keep gross production above 100,000 barrels per day through the end of the decade [21][22] - The company anticipates a free cash flow inflection point in the second half of the year as production increases and capital expenditures decrease [40] Other Important Information - The company has identified over 30 development drilling opportunities at Jubilee, aiming to maintain production levels [21] - Recent transactions in the sector have underscored the value of strategic gas assets, with the company emphasizing its unique portfolio across Mauritania and Senegal [37][38] Q&A Session Summary Question: Update on free cash flow outlook for the year - Management indicated that free cash flow is expected to ramp up in the second half of the year as production increases and capital expenditures decrease [40][70] Question: Insights on Jubilee production guidance - Management confirmed that reaching 110,000 barrels per day by Q4 is consistent with operator guidance, with better knowledge of well performance contributing to confidence [48][49] Question: Update on Tortue Phase 1 and critical path items - Management clarified that the subsea installation is now the critical path to first gas, with good progress being made [55][94] Question: Expectations for Equatorial Guinea infill campaign - Management expects marginal growth from the infill campaign, with significant production increases anticipated from the Akeng Deep well [62] Question: Update on LNG forward selling - Management stated that there are currently no plans for forward selling LNG from Phase 1, with ongoing discussions with various parties [93]

1 First Quarter 2023 Results Forward-Looking Statements This presentation 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 presentation that address activities, events or developments that Kosmos Energy Ltd. ("Kosmos" or the "Company") expects, believes or anticipates will or may occur in the future are forward-looking statemen ...

```markdown PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for Q1 2023 show total assets of **$4.70 billion**, net income of **$83.3 million** (up from **$1.4 million** in Q1 2022 due to derivative gains), and operating cash flow of **$203.9 million** [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2023, Kosmos Energy reported total assets of **$4.70 billion** (up from **$4.58 billion**), with total liabilities at **$3.83 billion** and stockholders' equity increasing to **$869.4 million** due to net income | (In thousands) | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $443,318 | $468,721 | | **Property and equipment, net** | $3,966,178 | $3,842,647 | | **Total assets** | **$4,698,145** | **$4,579,988** | | **Total current liabilities** | $624,513 | $574,254 | | **Total long-term liabilities** | $3,204,192 | $3,217,886 | | **Total stockholders' equity** | $869,440 | $787,848 | | **Total liabilities and stockholders' equity** | **$4,698,145** | **$4,579,988** | [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) For Q1 2023, Kosmos reported net income of **$83.3 million** (or **$0.17** diluted EPS), a significant increase from **$1.4 million** in Q1 2022, primarily due to a **$6.8 million** gain on derivatives offsetting lower oil and gas revenue | (In thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Oil and gas revenue** | $394,240 | $659,015 | | **Total costs and expenses** | $254,235 | $646,214 | | *Derivatives, net* | *($6,840)* | *$282,172* | | **Income before income taxes** | $139,632 | $12,853 | | **Net income** | **$83,309** | **$1,400** | | **Diluted EPS** | **$0.17** | **$0.00** | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2023, net cash from operations was **$203.9 million** (down from **$329.6 million** in Q1 2022), with **$239.4 million** used in investing and **$116.6 million** in financing, leading to a **$55.0 million** net decrease in cash | (In thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $203,853 | $329,628 | | **Net cash provided by (used in) investing activities** | ($239,356) | $9,388 | | **Net cash used in financing activities** | ($116,633) | ($19,475) | | **Net increase (decrease) in cash** | **($54,978)** | **$222,383** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, debt instruments totaling **$2.26 billion**, derivative contracts, segment performance, and recent operational activities including new petroleum contracts and farm-out agreements - In February 2023, Kosmos entered a petroleum contract for Block EG-01 offshore Equatorial Guinea with a **24% participating interest**. In March 2023, the company farmed out a **6.0% interest** in Block S, reducing its stake to **34.0%**[41](index=41&type=chunk)[42](index=42&type=chunk) - The company has long-term receivables of **$237.5 million** as of March 31, 2023, related to financing the national oil companies of Mauritania and Senegal for their share of Greater Tortue Ahmeyim Phase 1 development costs[43](index=43&type=chunk) | Debt Instrument | Principal Balance (Mar 31, 2023) | | :--- | :--- | | Facility | $625,000,000 | | 7.125% Senior Notes | $650,000,000 | | 7.750% Senior Notes | $400,000,000 | | 7.500% Senior Notes | $450,000,000 | | GoM Term Loan | $137,500,000 | | **Total long-term debt** | **$2,262,500,000** | - As of March 31, 2023, the company had outstanding oil derivative contracts (collars) covering **9.25 million barrels** for the remainder of 2023 and 2024 to hedge against price volatility[74](index=74&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2023 revenue decrease to lower volumes and prices, while net income rose significantly due to derivative gains; key development projects are progressing, with a 2023 capital expenditure budget of **$700-$750 million** and strong liquidity of **$996.5 million** [Recent Developments](index=29&type=section&id=Recent%20Developments) Key Q1 2023 operational updates include advancing the Jubilee drilling campaign in Ghana, Winterfell development in the U.S. Gulf of Mexico, a new drilling campaign in Equatorial Guinea, and the Greater Tortue Ahmeyim Phase 1 project targeting first gas by end of Q4 2023 - Ghana: The Jubilee partnership expects to bring **five new wells** online in 2023. The commitment to provide **200 Bcf** of free gas to the government was fulfilled as of January 1, 2023[108](index=108&type=chunk)[109](index=109&type=chunk) - U.S. Gulf of Mexico: The Winterfell development project is progressing, with first production targeted for the end of **Q1 2024**. The Tiberius exploration prospect is planned for drilling in **Q3 2023**[113](index=113&type=chunk)[114](index=114&type=chunk) - Mauritania and Senegal: Phase 1 of the Greater Tortue Ahmeyim project is progressing toward first gas at the **end of Q4 2023**. The development concept for Phase 2, a gravity-based structure (GBS) with **2.5-3.0 MMTPA** capacity, has been confirmed[118](index=118&type=chunk)[119](index=119&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) In Q1 2023, oil and gas revenue decreased by **$264.8 million** due to lower sales volumes and prices, yet net income significantly increased from **$1.4 million** to **$83.3 million**, primarily driven by a **$289.0 million** positive swing in derivative values | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total Sales Volume (MBoe) | 5,501 | 6,515 | | Average Sales Price per Boe | $71.67 | $101.15 | | Oil and Gas Revenue (in thousands) | $394,240 | $659,015 | | Oil and Gas Production Costs (in thousands) | $83,936 | $124,703 | | Net Income (in thousands) | $83,309 | $1,400 | - The decrease in oil and gas revenue was a result of lower production due to the conclusion of a pre-emption transaction in March 2022, natural field decline, and lower average oil prices[123](index=123&type=chunk) - The significant increase in net income was primarily driven by a net gain on derivatives of **$6.8 million** in Q1 2023, compared to a net loss of **$282.2 million** in Q1 2022[127](index=127&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, total liquidity was **$996.5 million** with net debt at **$2.13 billion**; the 2023 capital expenditure budget is **$700-$750 million**, funded by operating cash flow and various debt facilities | Liquidity Position (as of Mar 31, 2023) | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $128,427 | | Availability under the Facility | $618,034 | | Availability under the Corporate Revolver | $250,000 | | **Total Available Liquidity** | **$996,461** | - The 2023 capital expenditure budget is estimated at **$700-$750 million**, focused on maintenance (**$250-$300M**), development (**$350-$400M**), and exploration/appraisal (**$50-$100M**)[140](index=140&type=chunk)[147](index=147&type=chunk) - In April 2023, the borrowing base capacity under the main credit Facility was redetermined to approximately **$1.15 billion**, a reduction of about **$100 million** in availability[133](index=133&type=chunk)[144](index=144&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from commodity price and interest rate volatility, using derivatives to mitigate price risk; a **10%** oil price change could impact pre-tax earnings by approximately **$24.5-$30.1 million**, and a **10%** floating rate increase would add an estimated **$3.9 million** in annual interest expense - As of March 31, 2023, a hypothetical **10%** increase in commodity futures prices would decrease future pre-tax earnings by approximately **$24.5 million**, while a **10%** decrease would increase earnings by **$30.1 million** due to derivative positions[176](index=176&type=chunk) - The company has **$762.5 million** in floating-rate debt. A **10%** increase in the floating market rate would result in an estimated additional **$3.9 million** in annual interest expense[177](index=177&type=chunk) | Term | Type of Contract | Volume (MBbl) | Floor/Put Price | Ceiling Price | | :--- | :--- | :--- | :--- | :--- | | Apr - Dec 2023 | Three-way collars | 4,500 | $71.67 / $49.17 | $107.58 | | Apr - Dec 2023 | Two-way collars | 2,750 | $72.73 | $118.18 | | Jan - Dec 2024 | Three-way collars | 2,000 | $70.00 / $45.00 | $97.50 | [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2023, the CEO and CFO concluded that disclosure controls and procedures were **effective**, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2023[179](index=179&type=chunk) - No changes occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[180](index=180&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) No material changes were reported regarding legal proceedings from the Annual Report on Form 10-K - There have been no material changes from the information concerning legal proceedings discussed in the annual report on Form 10-K[181](index=181&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported regarding risk factors from the Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes from the risks discussed in the "Item 1A. Risk Factors" sections of the annual report on Form 10-K for the year ended December 31, 2022[182](index=182&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - None[183](index=183&type=chunk) ```

Financial Performance - Oil and gas revenue for 2022 reached $2,245.4 million, a significant increase of 68.7% compared to $1,332.0 million in 2021[496]. - Total revenues and other income for 2022 amounted to $2,299.8 million, up 72.5% from $1,333.8 million in 2021[496]. - Net income for 2022 was $226.6 million, a turnaround from a net loss of $77.8 million in 2021[496]. - Basic net income per share for 2022 was $0.50, compared to a loss of $0.19 per share in 2021[496]. - Total costs and expenses increased to $1,962.7 million in 2022, up 42.4% from $1,377.2 million in 2021[496]. - Net cash provided by operating activities for 2022 was $1,130.5 million, a substantial increase from $374.3 million in 2021[501]. - The company did not declare dividends in 2022, maintaining a dividend of $0.0452 per share in 2021[496]. Assets and Liabilities - The net book value of the company's oil and gas properties was $3.8 billion as of December 31, 2022, with a depletion expense of $471.4 million for the year[472]. - As of December 31, 2022, the company's asset retirement obligations totaled $302.5 million[475]. - The company's total assets decreased from $4,940.7 million in 2021 to $4,580.0 million in 2022, reflecting a decline of approximately 7.3%[494]. - Long-term debt decreased from $2,590.5 million in 2021 to $2,195.9 million in 2022, a reduction of approximately 15.2%[494]. - The company's accumulated deficit improved from $(1,712.4) million in 2021 to $(1,485.8) million in 2022, indicating a reduction of approximately 13.3%[494]. - The company's total current liabilities increased from $530.9 million in 2021 to $574.3 million in 2022, an increase of approximately 8.2%[494]. Risk Management - The company manages market and counterparty credit risk in accordance with established policies, determining the timing and extent of derivative transactions[449]. - The company utilizes oil derivative contracts to mitigate exposure to commodity price risk, reflecting a proactive approach to risk management[528]. - As of December 31, 2022, the company's open commodity derivative instruments were in a net asset position of $1.5 million, with a hypothetical 10% price increase in commodity futures expected to decrease future pre-tax earnings by approximately $30.8 million[457]. Impairments and Write-downs - The company recorded an impairment of $450.0 million related to certain oil and gas proved properties during the year ended December 31, 2022[479]. - The company reported an impairment of long-lived assets of $450.0 million in 2022, compared to no impairment in 2021[501]. - Impairment charges of $450,000,000 were recognized for long-lived assets due to negative proved oil and gas reserve revisions, reducing the carrying value of the TEN Fields to an estimated fair value of $235,700,000[628]. Capital Expenditures and Investments - The company is focused on expanding its operations in the offshore Atlantic Margins, particularly in Ghana, Equatorial Guinea, and the U.S. Gulf of Mexico[504]. - In March 2022, the company acquired an additional 5.5% interest in the Winterfell area for $9.6 million, increasing its participating interest to 25.0% in certain Green Canyon blocks[540]. - In June 2022, the company acquired an additional 5.9% interest in the Kodiak oil field for approximately $29.0 million, raising its working interest from 29.1% to 35.0%[542]. - The company extended the Block G petroleum contract term to 2040, agreeing to a work program that includes drilling three development wells and one exploration well[541]. Debt and Financing - Outstanding borrowings totaled approximately $770.0 million as of December 31, 2022, with a weighted average interest rate of 8.3%, exposing the company to interest rate risk[458]. - The Company issued $650 million of 7.125% Senior Notes in April 2019, with net proceeds of approximately $640 million used to redeem previous notes and repay debt[587]. - The Company issued $400 million of 7.750% Senior Notes in October 2021, receiving net proceeds of approximately $395 million for refinancing purposes[594]. - The Company issued $450 million of 7.500% Senior Notes in March 2021, with net proceeds of approximately $444.4 million used to repay debt and for general corporate purposes[601]. - The GoM Term Loan bears an effective interest rate of approximately 6.9% per annum and includes an accordion feature for incremental commitments of up to $100 million[607]. Shareholder Equity and Compensation - The total equity-based compensation to be recognized on unvested restricted stock units was $20,100,000 over a weighted average period of 1.7 years as of December 31, 2022[636]. - Share-based compensation expense for the year ended December 31, 2022, was $34,546,000, an increase from $31,651,000 in 2021[640]. - The fair value of awards vested in 2022 was $22,205,000, significantly higher than $9,435,000 in 2021[640]. Taxation - The total tax benefit for the year ended December 31, 2022, was $5,933,000, compared to $5,786,000 in 2021[640]. - The net tax shortfall (windfall) for the year ended December 31, 2022, was $673,000, a decrease from $6,307,000 in 2021[640].

Kosmos Energy Ltd. (NYSE:KOS) Q4 2022 Earnings Conference Call February 27, 2023 11:00 AM ET Company Participants Jamie Buckland - Vice President of Investor Relations Andy Inglis - Chairman and Chief Executive Officer Neal Shah - Chief Financial Officer Conference Call Participants Charles Meade - Johnson Rice Alex Smith - Investec Neil Mehta - Goldman Sachs Subash Chandra - The Benchmark James Hosie - Barclays Mark Wilson - Jefferies Matt Smith - Bank of America Operator Good day, everyone, welcome to Kos ...

1 Forward-Looking Statements This presentation 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 presentation that address activities, events or developments that Kosmos Energy Ltd. ("Kosmos" or the "Company") expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the ge ...