UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) |
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2015
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-35167
Kosmos Energy Ltd.
(Exact name of registrant as specified in its charter)
Bermuda |
|
98-0686001 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization) |
|
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, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ |
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Accelerated filer ☐ |
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|
|
Non-accelerated filer ☐ |
|
Smaller reporting company ☐ |
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
|
Outstanding at October 26, 2015 |
Common Shares, $0.01 par value |
385,055,559 |
Unless otherwise stated in this report, references to “Kosmos,” “we,” “us” or “the company” refer to Kosmos Energy Ltd. and its subsidiaries. We have provided definitions for some of the industry terms used in this report in the “Glossary and Selected Abbreviations” beginning on page 3.
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Page |
PART I. FINANCIAL INFORMATION |
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3 | |
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Item 1. Financial Statements |
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Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014 |
7 |
8 | |
9 | |
Consolidated Statements of Shareholders’ Equity for the nine months ended September 30, 2015 |
10 |
Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 |
11 |
12 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
26 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
36 |
38 | |
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PART II. OTHER INFORMATION |
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39 | |
39 | |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
39 |
39 | |
39 | |
39 | |
41 | |
42 | |
43 |
2
KOSMOS ENERGY LTD.
GLOSSARY AND SELECTED ABBREVIATIONS
The following are abbreviations and definitions of certain terms that may be used in this report. Unless listed below, all defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings.
“2D seismic data” |
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Two-dimensional seismic data, serving as interpretive data that allows a view of a vertical cross-section beneath a prospective area. |
|
|
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“3D seismic data” |
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Three-dimensional seismic data, serving as geophysical data that depicts the subsurface strata in three dimensions. 3D seismic data typically provides a more detailed and accurate interpretation of the subsurface strata than 2D seismic data. |
|
|
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“API” |
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A specific gravity scale, expressed in degrees, that denotes the relative density of various petroleum liquids. The scale increases inversely with density. Thus lighter petroleum liquids will have a higher API than heavier ones. |
|
|
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“ASC” |
|
Financial Accounting Standards Board Accounting Standards Codification. |
|
|
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“ASU” |
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Financial Accounting Standards Board Accounting Standards Update. |
|
|
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“Barrel” or “Bbl” |
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A standard measure of volume for petroleum corresponding to approximately 42 gallons at 60 degrees Fahrenheit. |
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“BBbl” |
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Billion barrels of oil. |
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|
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“BBoe” |
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Billion barrels of oil equivalent. |
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|
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“Bcf” |
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Billion cubic feet. |
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|
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“Boe” |
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Barrels of oil equivalent. Volumes of natural gas converted to barrels of oil using a conversion factor of 6,000 cubic feet of natural gas to one barrel of oil. |
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|
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“Boepd” |
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Barrels of oil equivalent per day. |
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|
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“Bopd” |
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Barrels of oil per day. |
|
|
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“Bwpd” |
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Barrels of water per day. |
|
|
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“Debt cover ratio” |
|
The “debt cover ratio” is broadly defined, for each applicable calculation date, as the ratio of (x) total long-term debt less cash and cash equivalents and restricted cash, to (y) the aggregate EBITDAX (see below) of the Company for the previous twelve months. |
|
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“Developed acreage” |
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The number of acres that are allocated or assignable to productive wells or wells capable of production. |
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“Development” |
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The phase in which an oil or natural gas field is brought into production by drilling development wells and installing appropriate production systems. |
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“Dry hole” |
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A well that has not encountered a hydrocarbon bearing reservoir expected to produce in commercial quantities. |
3
|
|
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“EBITDAX” |
|
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 (realized losses are deducted and realized gains are added back), (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. |
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“E&P” |
|
Exploration and production. |
|
|
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“FASB” |
|
Financial Accounting Standards Board. |
|
|
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“Farm-in” |
|
An agreement whereby a party acquires a portion of the participating interest in a block from the owner of such interest, usually in return for cash and for taking on a portion of the drilling costs of one or more specific wells or other performance by the assignee as a condition of the assignment. |
|
|
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“Farm-out” |
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An agreement whereby the owner of the participating interest agrees to assign a portion of its participating interest in a block to another party for cash and/or for the assignee taking on a portion of the drilling costs of one or more specific wells and/or other work as a condition of the assignment. |
|
|
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“Field life cover ratio” |
|
The “field life cover ratio” is broadly defined, for each applicable forecast period, as the ratio of (x) the forecasted net present value of net cash flow through the depletion of the Jubilee Field plus the net present value of the forecast of certain capital expenditures incurred in relation to the Jubilee Field and certain other fields in Ghana, to (y) the aggregate loan amounts outstanding under the Facility less the Resource Bridge, as applicable. |
|
|
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“FPSO” |
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Floating production, storage and offloading vessel. |
|
|
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“Interest cover ratio” |
|
The “interest cover ratio” is broadly defined, for each applicable calculation date, as the ratio of (x) the aggregate EBITDAX (see above) of the Company for the previous twelve months, to (y) interest expense less interest income for the Company for the previous twelve months. |
|
|
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“Loan life cover ratio” |
|
The “loan life cover ratio” is broadly defined, for each applicable forecast period, as the ratio of (x) net present value of forecasted net cash flow through the final maturity date of the Facility plus the net present value of forecasted capital expenditures incurred in relation to the Jubilee Field and certain other fields in Ghana, to (y) the aggregate loan amounts outstanding under the Facility less the Resource Bridge, as applicable. |
|
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“Make-whole redemption price” |
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The “make-whole redemption price” is equal to the outstanding principal amount of such notes plus the greater of 1) 1% of the then outstanding principal amount of such notes and 2) the present value of the notes at 103.9% and required interest payments thereon through August 1, 2017 at such redemption date. |
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“MBbl” |
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Thousand barrels of oil. |
|
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|
4
“Mcf” |
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Thousand cubic feet of natural gas. |
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“Mcfpd” |
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Thousand cubic feet per day of natural gas. |
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“MMBbl” |
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Million barrels of oil. |
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“MMBoe” |
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Million barrels of oil equivalent. |
|
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“MMcf” |
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Million cubic feet of natural gas. |
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“Natural gas liquid” or “NGL” |
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Components of natural gas that are separated from the gas state in the form of liquids. These include propane, butane and ethane, among others. |
|
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“Petroleum contract” |
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A contract in which the owner of hydrocarbons gives an E&P company temporary and limited rights, including an exclusive option to explore for, develop, and produce hydrocarbons from the lease area. |
|
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“Petroleum system” |
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A petroleum system consists of organic material that has been buried at a sufficient depth to allow adequate temperature and pressure to expel hydrocarbons and cause the movement of oil and natural gas from the area in which it was formed to a reservoir rock where it can accumulate. |
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“Plan of development” or “PoD” |
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A written document outlining the steps to be undertaken to develop a field. |
|
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“Productive well” |
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An exploratory or development well found to be capable of producing either oil or natural gas in sufficient quantities to justify completion as an oil or natural gas well. |
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“Prospect(s)” |
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A potential trap that may contain hydrocarbons and is supported by the necessary amount and quality of geologic and geophysical data to indicate a probability of oil and/or natural gas accumulation ready to be drilled. The five required elements (generation, migration, reservoir, seal and trap) must be present for a prospect to work and if any of these fail neither oil nor natural gas may be present, at least not in commercial volumes. |
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“Proved reserves” |
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Estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be economically recoverable in future years from known reservoirs under existing economic and operating conditions, as well as additional reserves expected to be obtained through confirmed improved recovery techniques, as defined in SEC Regulation S-X 4-10(a)(2). |
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“Proved developed reserves” |
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Those proved reserves that can be expected to be recovered through existing wells and facilities and by existing operating methods. |
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“Proved undeveloped reserves” |
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Those proved reserves that are expected to be recovered from future wells and facilities, including future improved recovery projects which are anticipated with a high degree of certainty in reservoirs which have previously shown favorable response to improved recovery projects. |
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“Reconnaissance contract” |
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A contract in which the owner of hydrocarbons gives an E&P company rights to perform evaluation of existing data or potentially acquire additional data but may not convey an exclusive option to explore for, develop, and/or produce hydrocarbons from the lease area. |
5
|
|
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“Resource Bridge” |
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Borrowing Base availability attributable to probable reserves and contingent resources from Jubilee Field Future Phases, Tweneboa, Enyenra and Ntomme fields and potentially Mahogany, Teak and Akasa fields. |
|
|
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“Shelf margin” |
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The path created by the change in direction of the shoreline in reaction to the filling of a sedimentary basin. |
|
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“Stratigraphy” |
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The study of the composition, relative ages and distribution of layers of sedimentary rock. |
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|
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“Stratigraphic trap” |
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A stratigraphic trap is formed from a change in the character of the rock rather than faulting or folding of the rock and oil and/or natural gas is held in place by changes in the porosity and permeability of overlying rocks. |
|
|
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“Structural trap” |
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A topographic feature in the earth’s subsurface that forms a high point in the rock strata. This facilitates the accumulation of oil and natural gas in the strata. |
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“Structural-stratigraphic trap” |
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A structural-stratigraphic trap is a combination trap with structural and stratigraphic features. |
|
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“Submarine fan” |
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A fan-shaped deposit of sediments occurring in a deep water setting where sediments have been transported via mass flow, gravity induced, processes from the shallow to deep water. These systems commonly develop at the bottom of sedimentary basins or at the end of large rivers. |
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“Three-way fault trap” |
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A structural trap where at least one of the components of closure is formed by offset of rock layers across a fault. |
|
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“Trap” |
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A configuration of rocks suitable for containing hydrocarbons and sealed by a relatively impermeable formation through which hydrocarbons will not migrate. |
|
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“Undeveloped acreage” |
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Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and/or natural gas regardless of whether such acreage contains discovered resources. |
6
KOSMOS ENERGY LTD.
(In thousands, except share data)
|
|
September 30, |
|
December 31, |
|
||
|
|
2015 |
|
2014 |
|
||
|
|
(Unaudited) |
|
|
|
|
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Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
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Cash and cash equivalents |
|
$ |
366,035 |
|
$ |
554,831 |
|
Restricted cash |
|
|
36,770 |
|
|
15,926 |
|
Receivables: |
|
|
|
|
|
|
|
Joint interest billings |
|
|
96,484 |
|
|
60,592 |
|
Oil sales |
|
|
— |
|
|
61,731 |
|
Other |
|
|
32,520 |
|
|
41,221 |
|
Inventories |
|
|
76,366 |
|
|
55,354 |
|
Prepaid expenses and other |
|
|
32,736 |
|
|
25,278 |
|
Deferred tax assets |
|
|
12,319 |
|
|
32,268 |
|
Derivatives |
|
|
164,172 |
|
|
163,275 |
|
Total current assets |
|
|
817,402 |
|
|
1,010,476 |
|
|
|
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
|
Oil and gas properties, net |
|
|
2,111,367 |
|
|
1,773,186 |
|
Other property, net |
|
|
9,174 |
|
|
11,660 |
|
Property and equipment, net |
|
|
2,120,541 |
|
|
1,784,846 |
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
Restricted cash |
|
|
4,875 |
|
|
16,125 |
|
Long-term receivables - joint interest billings |
|
|
31,343 |
|
|
14,174 |
|
Deferred financing costs, net of accumulated amortization of $40,341 and $33,389 at September 30, 2015 and December 31, 2014, respectively |
|
|
49,864 |
|
|
48,753 |
|
Long-term deferred tax assets |
|
|
14,773 |
|
|
9,182 |
|
Derivatives |
|
|
66,247 |
|
|
89,210 |
|
Total assets |
|
$ |
3,105,045 |
|
$ |
2,972,766 |
|
|
|
|
|
|
|
|
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Liabilities and shareholders’ equity |
|
|
|
|
|
|
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Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
259,336 |
|
$ |
184,400 |
|
Accrued liabilities |
|
|
130,195 |
|
|
201,967 |
|
Deferred tax liability |
|
|
64,435 |
|
|
61,683 |
|
Derivatives |
|
|
1,386 |
|
|
721 |
|
Total current liabilities |
|
|
455,352 |
|
|
448,771 |
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
Long-term debt |
|
|
899,355 |
|
|
794,269 |
|
Derivatives |
|
|
3,463 |
|
|
68 |
|
Asset retirement obligations |
|
|
50,368 |
|
|
44,023 |
|
Deferred tax liability |
|
|
398,081 |
|
|
337,961 |
|
Other long-term liabilities |
|
|
9,474 |
|
|
8,715 |
|
Total long-term liabilities |
|
|
1,360,741 |
|
|
1,185,036 |
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Preference shares, $0.01 par value; 200,000,000 authorized shares; zero issued at September 30, 2015 and December 31, 2014 |
|
|
— |
|
|
— |
|
Common shares, $0.01 par value; 2,000,000,000 authorized shares; 393,866,094 and 392,443,048 issued at September 30, 2015 and December 31, 2014, respectively |
|
|
3,939 |
|
|
3,924 |
|
Additional paid-in capital |
|
|
1,920,589 |
|
|
1,860,190 |
|
Accumulated deficit |
|
|
(588,686) |
|
|
(494,850) |
|
Accumulated other comprehensive income |
|
|
— |
|
|
767 |
|
Treasury stock, at cost, 8,797,511 and 5,555,088 shares at September 30, 2015 and December 31, 2014, respectively |
|
|
(46,890) |
|
|
(31,072) |
|
Total shareholders’ equity |
|
|
1,288,952 |
|
|
1,338,959 |
|
Total liabilities and shareholders’ equity |
|
$ |
3,105,045 |
|
$ |
2,972,766 |
|
See accompanying notes.
7
KOSMOS ENERGY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
||||
Revenues and other income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas revenue |
|
$ |
96,584 |
|
$ |
137,485 |
|
$ |
324,948 |
|
$ |
678,635 |
|
Gain on sale of assets |
|
|
— |
|
|
— |
|
|
24,651 |
|
|
23,769 |
|
Other income |
|
|
(1,266) |
|
|
882 |
|
|
89 |
|
|
2,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues and other income |
|
|
95,318 |
|
|
138,367 |
|
|
349,688 |
|
|
704,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production |
|
|
23,157 |
|
|
15,097 |
|
|
75,481 |
|
|
54,366 |
|
Exploration expenses |
|
|
18,904 |
|
|
21,334 |
|
|
132,384 |
|
|
57,652 |
|
General and administrative |
|
|
26,692 |
|
|
35,148 |
|
|
106,538 |
|
|
95,041 |
|
Depletion and depreciation |
|
|
35,995 |
|
|
36,959 |
|
|
110,534 |
|
|
152,883 |
|
Interest and other financing costs, net |
|
|
9,926 |
|
|
12,362 |
|
|
29,675 |
|
|
31,497 |
|
Derivatives, net |
|
|
(142,129) |
|
|
(40,407) |
|
|
(129,579) |
|
|
(20,869) |
|
Restructuring charges |
|
|
— |
|
|
(46) |
|
|
— |
|
|
11,758 |
|
Other expenses, net |
|
|
290 |
|
|
329 |
|
|
5,184 |
|
|
1,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
(27,165) |
|
|
80,776 |
|
|
330,217 |
|
|
383,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
122,483 |
|
|
57,591 |
|
|
19,471 |
|
|
320,634 |
|
Income tax expense |
|
|
62,218 |
|
|
38,468 |
|
|
113,307 |
|
|
170,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
60,265 |
|
$ |
19,123 |
|
$ |
(93,836) |
|
$ |
150,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.16 |
|
$ |
0.05 |
|
$ |
(0.25) |
|
$ |
0.39 |
|
Diluted |
|
$ |
0.15 |
|
$ |
0.05 |
|
$ |
(0.25) |
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used to compute net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
383,924 |
|
|
379,969 |
|
|
382,603 |
|
|
378,881 |
|
Diluted |
|
|
390,586 |
|
|
382,190 |
|
|
382,603 |
|
|
382,287 |
|
See accompanying notes.
8
KOSMOS ENERGY LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
60,265 |
|
$ |
19,123 |
|
$ |
(93,836) |
|
$ |
150,599 |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustments for derivative gains included in net income (loss) |
|
|
(378) |
|
|
(290) |
|
|
(767) |
|
|
(1,101) |
|
Other comprehensive loss |
|
|
(378) |
|
|
(290) |
|
|
(767) |
|
|
(1,101) |
|
Comprehensive income (loss) |
|
$ |
59,887 |
|
$ |
18,833 |
|
$ |
(94,603) |
|
$ |
149,498 |
|
See accompanying notes.
9
KOSMOS ENERGY LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
Additional |
|
|
|
|
Other |
|
|
|
|
|
|
|
||
|
|
Common Shares |
|
Paid-in |
|
Accumulated |
|
Comprehensive |
|
Treasury |
|
|
|
|
|||||||
|
|
Shares |
|
Amount |
|
Capital |
|
Deficit |
|
Income |
|
Stock |
|
Total |
|
||||||
Balance as of December 31, 2014 |
|
392,443 |
|
$ |
3,924 |
|
$ |
1,860,190 |
|
$ |
(494,850) |
|
$ |
767 |
|
$ |
(31,072) |
|
$ |
1,338,959 |
|
Equity-based compensation |
|
— |
|
|
— |
|
|
62,577 |
|
|
— |
|
|
— |
|
|
— |
|
|
62,577 |
|
Derivatives, net |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(767) |
|
|
— |
|
|
(767) |
|
Restricted stock awards and units |
|
1,423 |
|
|
15 |
|
|
(15) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Restricted stock forfeitures |
|
— |
|
|
— |
|
|
16 |
|
|
— |
|
|
— |
|
|
(16) |
|
|
— |
|
Purchase of treasury stock |
|
— |
|
|
— |
|
|
(2,179) |
|
|
— |
|
|
— |
|
|
(15,802) |
|
|
(17,981) |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(93,836) |
|
|
— |
|
|
— |
|
|
(93,836) |
|
Balance as of September 30, 2015 |
|
393,866 |
|
$ |
3,939 |
|
$ |
1,920,589 |
|
$ |
(588,686) |
|
$ |
— |
|
$ |
(46,890) |
|
$ |
1,288,952 |
|
See accompanying notes.
10
KOSMOS ENERGY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
||||
|
|
2015 |
|
2014 |
|
||
Operating activities |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(93,836) |
|
$ |
150,599 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depletion, depreciation and amortization |
|
|
118,307 |
|
|
160,821 |
|
Deferred income taxes |
|
|
77,229 |
|
|
103,372 |
|
Unsuccessful well costs |
|
|
87,379 |
|
|
3,091 |
|
Change in fair value of derivatives |
|
|
(127,706) |
|
|
(13,508) |
|
Cash settlements on derivatives (including $154.3 million and $(0.2) million on commodity hedges) |
|
|
153,065 |
|
|
(9,661) |
|
Equity-based compensation |
|
|
62,400 |
|
|
59,941 |
|
Gain on sale of assets |
|
|
(24,651) |
|
|
(23,769) |
|
Loss on extinguishment of debt |
|
|
165 |
|
|
2,898 |
|
Other |
|
|
6,731 |
|
|
(4,368) |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
(Increase) decrease in receivables |
|
|
17,548 |
|
|
(104,708) |
|
Increase in inventories |
|
|
(21,059) |
|
|
(10,197) |
|
(Increase) decrease in prepaid expenses and other |
|
|
(7,458) |
|
|
6,924 |
|
Increase (decrease) in accounts payable |
|
|
74,936 |
|
|
(4,334) |
|
Increase (decrease) in accrued liabilities |
|
|
(50,571) |
|
|
55,133 |
|
Net cash provided by operating activities |
|
|
272,479 |
|
|
372,234 |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
Oil and gas assets |
|
|
(559,342) |
|
|
(290,218) |
|
Other property |
|
|
(793) |
|
|
(1,403) |
|
Proceeds on sale of assets |
|
|
28,692 |
|
|
58,315 |
|
Restricted cash |
|
|
(9,594) |
|
|
2,229 |
|
Net cash used in investing activities |
|
|
(541,037) |
|
|
(231,077) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
Borrowings under long-term debt |
|
|
100,000 |
|
|
— |
|
Payments on long-term debt |
|
|
(200,000) |
|
|
(400,000) |
|
Net proceeds from issuance of senior secured notes |
|
|
206,774 |
|
|
294,000 |
|
Purchase of treasury stock |
|
|
(17,981) |
|
|
(11,067) |
|
Deferred financing costs |
|
|
(9,031) |
|
|
(21,572) |
|
Net cash provided by (used in) financing activities |
|
|
79,762 |
|
|
(138,639) |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(188,796) |
|
|
2,518 |
|
Cash and cash equivalents at beginning of period |
|
|
554,831 |
|
|
598,108 |
|
Cash and cash equivalents at end of period |
|
$ |
366,035 |
|
$ |
600,626 |
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
Interest |
|
$ |
39,341 |
|
$ |
20,192 |
|
Income taxes |
|
$ |
28,744 |
|
$ |
101,068 |
|
See accompanying notes.
11
KOSMOS ENERGY LTD.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization
Kosmos Energy Ltd. was incorporated pursuant to the laws of Bermuda in January 2011 to become a holding company for Kosmos Energy Holdings. Kosmos Energy Holdings is a privately held Cayman Islands company that was formed in March 2004. As a holding company, Kosmos Energy Ltd.’s management operations are conducted through a wholly owned subsidiary, Kosmos Energy, LLC. The terms “Kosmos,” the “Company,” “we,” “us,” “our,” “ours,” and similar terms refer to Kosmos Energy Ltd. and its wholly owned subsidiaries, unless the context indicates otherwise.
Kosmos 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 Mauritania, Portugal, Sao Tome, Senegal, Suriname, Morocco and Western Sahara. Kosmos is listed on the New York Stock Exchange and is traded under the ticker symbol KOS.
We have one reportable segment, which is the exploration and production of oil and natural gas. Substantially all of our long-lived assets and product sales are currently related to production located offshore Ghana.
2. Accounting Policies
General
The interim-period financial information presented in the consolidated financial statements included in this report is unaudited and, in the opinion of management, includes all adjustments of a normal recurring nature necessary to present fairly the consolidated financial position as of September 30, 2015, the changes in the consolidated statements of shareholders’ equity for the nine months ended September 30, 2015, the consolidated results of operations for the three and nine months ended September 30, 2015 and 2014, and consolidated cash flows for the nine months ended September 30, 2015 and 2014. The results of the interim periods shown in this report are not necessarily indicative of the final results to be expected for the full year. The consolidated financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by Generally Accepted Accounting Principles in the United States of America (“GAAP”) have been condensed or omitted from these interim consolidated financial statements. These consolidated financial statements and the accompanying notes should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2014, included in our annual report on Form 10-K.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current year presentation. Such reclassifications had no impact on our reported net income (loss), current assets, total assets, current liabilities, total liabilities or shareholders’ equity.
Restricted Cash
In accordance with our commercial debt facility (the “Facility”), we are required to maintain a restricted cash balance that is sufficient to meet the payment of interest and fees for the next six-month period on the 7.875% Senior Secured Notes due 2021 (“Senior Notes”) plus the Corporate Revolver or the Facility, whichever is greater. As of September 30, 2015 and December 31, 2014, we had $24.4 million and $15.9 million, respectively, in current restricted cash to meet this requirement.
In addition, in accordance with certain of our petroleum contracts, we have posted letters of credit related to performance guarantees for our minimum work obligations. These letters of credit are cash collateralized in accounts held by us and as such are classified as restricted cash. Upon completion of the minimum work obligations and/or
12
entering into the next phase of the petroleum contract, the requirement to post the existing letters of credit will be satisfied and the cash collateral will be released. However, additional letters of credit may be required should we choose to move into the next phase of certain of our petroleum contracts. As of September 30, 2015 and December 31, 2014, we had $12.4 million and zero, respectively, of short-term restricted cash and $4.9 million and $16.1 million, respectively, of long-term restricted cash used to collateralize performance guarantees related to our petroleum contracts.
Inventories
Inventories consisted of $71.9 million and $55.3 million of materials and supplies and $4.5 million and $0.1 million of hydrocarbons as of September 30, 2015 and December 31, 2014, respectively. The Company’s materials and supplies inventory primarily consists of casing and wellheads and is stated at the lower of cost, using the weighted average cost method, or market.
Hydrocarbon inventory is carried at the lower of cost, using the weighted average cost method, or market. Hydrocarbon inventory costs include expenditures and other charges incurred in bringing the inventory to its existing condition. Selling expenses and general and administrative expenses are reported as period costs and excluded from inventory costs.
Recent Accounting Standards
In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330) — Simplifying the Measurement of Inventory.” ASU 2015-11 changes the measurement principle for entities that do not measure inventory using the last-in, first-out (LIFO) or retail inventory method from the lower of cost or market to lower of cost and net realizable value. The ASU also eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606) — Deferral of the Effective Date.” ASU 2015-14 defers the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017 with early adoption permitted for periods beginning after December 15, 2016. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2015, the FASB issued ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30) — Presentation and Subsequent Measurement of Debt Issuance Costs Associated with the Line-of-Credit Arrangements.” ASU 2015-15 clarifies the guidance regarding line-of-credit arrangements with regards to the recently issued ASU 2015-03 to incorporate statements made by the SEC Staff during their June 18, 2015 Emerging Issues Task Force meeting. The SEC Staff has clarified they would not object to an entity deferring and presenting debt issue costs as an asset and subsequently amortizing the deferred debt issue costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of credit arrangement. The adoption of this standard will result in $41.2 million of net deferred financing costs (as of September 30, 2015) being reclassified as a direct reduction of debt on the balance sheet upon adoption of ASU 2015-03 during the first quarter of 2016.
3. Acquisitions and Divestitures
In March 2015, we closed a farm-in agreement with Repsol Exploracion, S.A. (“Repsol”), acquiring a non-operated interest in the Camarao, Ameijoa, Mexilhao and Ostra blocks in the Peniche Basin offshore Portugal. As part of the agreement, we will reimburse a portion of Repsol’s previously incurred exploration costs, as well as partially carry Repsol’s share of the costs of a planned 3D seismic program. After giving effect to the farm-in agreement, our participating interest is 31% in each of the blocks.
In March 2015, we closed a farm-out agreement with Chevron Mauritania Exploration Limited, a wholly owned subsidiary of Chevron Corporation (“Chevron”), covering the C8, C12 and C13 petroleum contracts offshore Mauritania. Under the terms of the farm-out agreement, Chevron acquired a 30% non-operated working interest in each of the contract areas. Chevron will pay a disproportionate share of the costs of one exploration well and a second contingent exploration well, subject to maximum expenditure caps. In addition, Chevron paid its proportionate share of certain
13
previously incurred exploration costs. Chevron did not fund drilling of the Tortue prospect, but retains the option to elect to participate in this prospect subject to Chevron paying a disproportionate share of its costs related to the Tortue prospect. After giving effect to the farm-out agreements, Kosmos, Chevron and Societe Mauritanienne des Hydrocarbures et de Patrimoine Minier’s (“SMHPM”) (Mauritania’s national oil company) participating interest in Block C8, Block C12 and Block C13 is 60%, 30% and 10%, respectively, and we remain as operator. The final allocation resulted in sales proceeds of $28.7 million, which exceeded our book basis in the assets, resulting in a $24.7 million gain on the transaction.
In October 2015, we closed a sale and purchase agreement with ERHC Energy EEZ, LDA, whereby we acquired an 85% participating interest and operatorship in Block 11 offshore Sao Tome. The National Petroleum Agency, Agencia Nacional Do Petroleo De Sao Tome E Príncipe (“ANPSTP”), has a 15% carried interest.
4. Joint Interest Billings
The Company’s joint interest billings consist of receivables from partners with interests in common oil and gas properties operated by the Company. Joint interest billings are classified on the face of the consolidated balance sheets as current and long-term receivables based on when collection is expected to occur.
In 2014, the Ghana National Petroleum Corporation (“GNPC”) notified us and our block partners that it would exercise its right for the contractor group to pay its 5% share of the Tweneboa, Enyenra and Ntomme (“TEN”) development costs. We will be reimbursed for our portion of such costs plus interest from GNPC’s TEN production revenues under the terms of the Deepwater Tano (“DT”) petroleum contract. As of September 30, 2015 and December 31, 2014, the joint interest billing receivables due from GNPC for the TEN development costs were $31.3 million and $14.2 million, respectively, which are classified as long-term on the consolidated balance sheets.
5. Property and Equipment
Property and equipment is stated at cost and consisted of the following:
|
|
September 30, |
|
December 31, |
|
||
|
|
2015 |
|
2014 |
|
||
|
|
(In thousands) |
|
||||
Oil and gas properties: |
|
|
|
|
|
|
|
Proved properties |
|
$ |
1,285,424 |
|
$ |
1,156,868 |
|
Unproved properties |
|
|
493,769 |
|
|
363,717 |
|
Support equipment and facilities |
|
|
1,147,467 |
|
|
968,722 |
|
Total oil and gas properties |
|
|
2,926,660 |
|
|
2,489,307 |
|
Less: accumulated depletion |
|
|
(815,293) |
|
|
(716,121) |
|
Oil and gas properties, net |
|
|
2,111,367 |
|
|
1,773,186 |
|
|
|
|
|
|
|
|
|
Other property |
|
|
34,603 |
|
|
33,718 |
|
Less: accumulated depreciation |
|
|
(25,429) |
|
|
(22,058) |
|
Other property, net |
|
|
9,174 |
|
|
11,660 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
2,120,541 |
|
$ |
1,784,846 |
|
We recorded depletion expense of $33.6 million and $34.6 million for the three months ended September 30, 2015 and 2014, respectively, and $103.4 million and $145.8 million for the nine months ended September 30, 2014 and 2015, respectively.
14
6. Suspended Well Costs
The following table reflects the Company’s capitalized exploratory well costs on completed wells as of and during the nine months ended September 30, 2015. The table excludes $62.7 million in costs that were capitalized and subsequently expensed during the same period.
|
|
Nine Months Ended |
|
|
|
|
September 30, |
|
|
|
|
2015 |
|
|
|
|
(In thousands) |
|
|
Beginning balance |
|
$ |
226,714 |
|
Additions to capitalized exploratory well costs pending the determination of proved reserves |
|
|
153,815 |
|
Reclassification due to determination of proved reserves |
|
|
— |
|
Capitalized exploratory well costs charged to expense |
|
|
(23,375) |
|
Ending balance |
|
$ |
357,154 |
|
The following table provides an aging of capitalized exploratory well costs based on the date drilling was completed and the number of projects for which exploratory well costs have been capitalized for more than one year since the completion of drilling:
|
|
September 30, 2015 |
|
December 31, 2014 |
|
||
|
|
(In thousands, except well counts) |
|
||||
Exploratory well costs capitalized for a period of one year or less |
|
$ |
143,558 |
|
$ |
16,814 |
|
Exploratory well costs capitalized for a period of one to two years |
|
|
3,790 |
|
|
40,865 |
|
Exploratory well costs capitalized for a period of three to six years |
|
|
209,806 |
|
|
169,035 |
|
Ending balance |
|
$ |
357,154 |
|
$ |
226,714 |
|
Number of projects that have exploratory well costs that have been capitalized for a period greater than one year |
|
|
4 |
|
|
5 |
|
As of September 30, 2015, the projects with exploratory well costs capitalized for more than one year since the completion of drilling are related to the Mahogany, Teak (formerly Teak-1 and Teak-2) and Akasa discoveries in the West Cape Three Points (“WCTP”) Block and the Wawa discovery in the DT Block, which are all in Ghana.
Mahogany— In March 2015, we submitted a declaration of commerciality to Ghana’s Ministry of Petroleum (formerly Ghana’s Ministry of Energy and Petroleum) and expect to submit a PoD incorporating the Mahogany discovery later this year.
Teak Discovery—In March 2015, we submitted a declaration of commerciality to Ghana’s Ministry of Petroleum and expect to submit a PoD incorporating the Teak discovery later this year.
Akasa Discovery— We are currently in discussions with the government of Ghana regarding additional technical studies and evaluation that we want to conduct before we are able to make a determination regarding commerciality of the discovery. If we determine the discovery to be commercial, a declaration of commerciality would be provided and a PoD would be prepared and submitted to Ghana’s Ministry of Petroleum, as required under the WCTP petroleum contract.
Wawa Discovery—In April 2015, the Special Chamber of the International Tribunal of the Law of the Sea (“ITLOS”) issued an order in response to the provisional measures sought by the government of Cote d’Ivoire in its pending maritime boundary dispute with the government of Ghana. ITLOS rejected the request that Ghana suspend all ongoing exploration and development operations in the disputed area in which the Wawa Discovery is situated until ITLOS gives its decision on the maritime boundary dispute, which is expected in late 2017. ITLOS did order Ghana to suspend new drilling in the disputed area. We plan to discuss with the government of Ghana the effects of the ITLOS order on the proposed Wawa appraisal activities so that we can more clearly define our future plans and corresponding timeline. In the meantime, we continue to reprocess seismic data and have acquired a high resolution seismic survey over the discovery area. Following additional evaluation and potential appraisal activities, a decision regarding commerciality of the Wawa discovery will be made by the DT Block partners. Within nine months of a declaration of commerciality, a PoD would be prepared and submitted to Ghana’s Ministry of Petroleum, as required under the DT petroleum contract.
15
7. Accrued Liabilities
Accrued liabilities consisted of the following:
|
|
September 30, |
|
December 31, |
|
||
|
|
2015 |
|
2014 |
|
||
|
|
(In thousands) |
|
||||
Accrued liabilities: |
|
|
|
|
|
|
|
Exploration, development and production |
|
$ |
99,947 |
|
$ |
139,393 |
|
General and administrative expenses |
|
|
19,675 |
|
|
21,926 |
|
Interest |
|
|
7,120 |
|
|
10,271 |
|
Income taxes |
|
|
2,129 |
|
|
9,233 |
|
Taxes other than income |
|
|
1,324 |
|
|
20,315 |
|
Other |
|
|
— |
|
|
829 |
|
|
|
$ |
130,195 |
|
$ |
201,967 |
|
8. Debt
|
|
September 30, |
|
December 31, |
|
||
|
|
2015 |
|
2014 |
|
||
|
|
(In thousands) |
|
||||
Outstanding debt principal balances: |
|
|
|
|
|
|
|
Facility |
|
$ |
400,000 |
|
$ |
500,000 |
|
Senior Notes |
|
|
525,000 |
|
|
300,000 |
|
Total |
|
|
925,000 |
|
|
800,000 |
|
Unamortized issuance discounts |
|
|
(25,645) |
|
|
(5,731) |
|
Long-term debt |
|
$ |
899,355 |
|
$ |
794,269 |
|
Facility
In March 2014, the Company amended and restated the Facility with a total commitment of $1.5 billion from a number of financial institutions, including the International Finance Corporation. The Facility supports our oil and gas exploration, appraisal and development programs and corporate activities.
As part of the debt refinancing in March 2014, the repayment of borrowings under the existing facility attributable to financial institutions that did not participate in the amended Facility was accounted for as an extinguishment of debt, and existing unamortized debt issuance costs attributable to those participants were expensed. As a result, we recorded a $2.9 million loss on the extinguishment of debt. As of September 30, 2015, we have $39.2 million of net deferred financing costs related to the Facility, which will be amortized over the remaining term of the Facility, including certain costs related to the amendment.
As of September 30, 2015, borrowings under the Facility totaled $400.0 million and the undrawn availability under the Facility was $1.1 billion.
The Facility provides a revolving-credit and letter of credit facility. The availability period for the revolving-credit facility, as amended in March 2014 expires on March 31, 2018. However the Facility has a revolving-credit sublimit, which will be the lesser of $500.0 million and the total available facility at that time, that will be available for drawing until the date falling one month prior to the final maturity date. The letter of credit facility expires on the final maturity date. The available facility amount is subject to borrowing base constraints and, beginning on March 31, 2018, outstanding borrowings will be constrained by an amortization schedule. The Facility has a final maturity date of March 31, 2021. As of September 30, 2015, we had no letters of credit issued under the Facility.
We were in compliance with the financial covenants contained in the Facility as of September 30, 2015 (the most recent assessment date). The Facility contains customary cross default provisions.
16
Corporate Revolver
In June 2015, we amended and restated the Corporate Revolver from a number of financial institutions, increasing the borrowing capacity to $400.0 million, extending the maturity date to November 2018 and lowering the commitment fees on the undrawn portion of the total commitments to 30% per annum of the respective margin. The Corporate Revolver is available for all subsidiaries for general corporate purposes and for oil and gas exploration; appraisal and development programs. As of September 30, 2015, we have $8.7 million of net deferred financing costs related to the Corporate Revolver, which will be amortized over the remaining term. Additionally, a negative covenant was added that restricts our ability to incur additional indebtedness that would not be permitted by the indenture governing our 7.875% senior secured notes due 2021.
As of September 30, 2015, there were no borrowings outstanding under the Corporate Revolver and the undrawn availability under the Corporate Revolver was $400.0 million. We were in compliance with the financial covenants contained in the Corporate Revolver as of September 30, 2015 (the most recent assessment date). The Corporate Revolver contains customary cross default provisions.
Revolving Letter of Credit Facility
In July 2013, we entered into a revolving letter of credit facility agreement (“LC Facility”). The size of the LC Facility is $100.0 million, with additional commitments up to $50.0 million being available if the existing lender increases its commitment or if commitments from new financial institutions are added. In July 2015, we reduced the size of our LC Facility by $25.0 million to $75.0 million, with additional commitments up to $50.0 million being available if the existing lender increases its commitment or if commitments from new financial institutions are added. As of September 30, 2015, there were eight outstanding letters of credit totaling $23.1 million under the LC Facility. The LC Facility contains customary cross default provisions.
7.875% Senior Secured Notes due 2021
In August 2014, the Company issued $300.0 million of Senior Notes and received net proceeds of approximately $292.5 million after deducting discounts, commissions and deferred financing costs. The Company used the net proceeds to repay a portion of the outstanding indebtedness under the Facility and for general corporate purposes.
In April 2015, we issued an additional $225.0 million Senior Notes and received net proceeds of $206.8 million after deducting discounts, commissions and other expenses. The net proceeds were used to repay a portion of the outstanding indebtedness under the Facility and for general corporate purposes. The additional $225.0 million of Senior Notes have identical terms to the initial $300.0 million of Senior Notes, other than the date of issue, the initial price, the first interest payment date and the first date from which interest will accrue.
The Senior Notes mature on August 1, 2021. Interest is payable semi-annually in arrears each February 1 and August 1 commencing on February 1, 2015 for the initial $300.0 million Senior Notes and August 1, 2015 for the additional $225.0 million Senior Notes. The Senior Notes are secured (subject to certain exceptions and permitted liens) by a first ranking fixed equitable charge on all shares held by us in our direct subsidiary, Kosmos Energy Holdings. The Senior Notes are currently guaranteed on a subordinated, unsecured basis by our existing restricted subsidiaries that guarantee the Facility and the Corporate Revolver, and, in certain circumstances, the Senior Notes will become guaranteed by certain of our other existing or future restricted subsidiaries.
17
At September 30, 2015, the estimated repayments of debt during the five fiscal year periods and thereafter are as follows:
|
|
Payments Due by Year |
|
||||||||||||||||
|
|
2015(2) |
|
2016 |
|
2017 |
|
2018 |
|
2019 |
|
Thereafter |
|
||||||
|
|
(In thousands) |
|
||||||||||||||||
Principal debt repayments(1) |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
925,000 |
|
(1) |
Includes the scheduled principal maturities for the $525.0 million aggregate principal amount of Senior Notes issued in August 2014 and April 2015 and the Facility. The scheduled maturities of debt related to the Facility are based on the level of borrowings and the estimated future available borrowing base as of September 30, 2015. Any increases or decreases in the level of borrowings or increases or decreases in the available borrowing base would impact the scheduled maturities of debt during the next five years and thereafter. As of September 30, 2015, there were no borrowings under the Corporate Revolver. |
(2) |
Represents payments for the period October 1, 2015 through December 31, 2015. |
Interest and other financing costs, net
Interest and other financing costs, net incurred during the period comprised of the following:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
||||
|
|
(In thousands) |
|
||||||||||
Interest expense |
|
$ |
20,031 |
|
$ |
14,406 |
|
$ |
54,687 |
|
$ |
36,400 |
|
Amortization—deferred financing costs |
|
|
2,554 |
|
|
2,593 |
|
|
7,773 |
|
|
7,938 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
— |
|
|
165 |
|
|
2,898 |
|
Capitalized interest |
|
|
(15,152) |
|
|
(4,904) |
|
|
(37,146) |
|
|
(13,007) |
|
Deferred interest |
|
|
129 |
|
|
(118) |
|
|
1,421 |
|
|
(3,964) |
|
Interest income |
|
|
(168) |
|
|
(69) |
|
|
(508) |
|
|
(323) |
|
Other, net |
|
|
2,532 |
|
|
454 |
|
|
3,283 |
|
|
1,555 |
|
Interest and other financing costs, net |
|
$ |
9,926 |
|
$ |
12,362 |
|
$ |
29,675 |
|
$ |
31,497 |
|
9. Derivative Financial Instruments
We use financial derivative contracts to manage exposures to commodity price and interest rate fluctuations. We do not hold or issue derivative financial instruments for trading purposes. We manage market and counterparty credit risk in accordance with our policies and guidelines. In accordance with these policies and guidelines, our management determines the appropriate timing and extent of derivative transactions.
18
Oil Derivative Contracts
The following table sets forth the volumes in barrels underlying the Company’s outstanding oil derivative contracts and the weighted average Dated Brent prices per Bbl for those contracts as of September 30, 2015.
|
|
|
|
|
|
Weighted Average Dated Brent Price per Bbl |
|
||||||||||||||||
|
|
|
|
|
|
Net Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term |
|
Type of Contract |
|
MBbl |
|
Payable |
|
Swap |
|
Put |
|
Floor |
|
Ceiling |
|
Call |
|
||||||
2015 : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October — December |
|
Three-way collars |
|
1,064 |
|
$ |
0.46 |
|
$ |
— |
|
$ |
— |
|
$ |
87.43 |
|
$ |
110.00 |
|
$ |
133.82 |
|
October — December |
|
Swaps with calls |
|
503 |
|
|
— |
|
|
93.59 |
|
|
— |
|
|
— |
|
|
— |
|
|
115.00 |
|
2016 : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January — December |
|
Purchased puts |
|
2,000 |
|
$ |
3.41 |
|
$ |
— |
|
$ |
— |
|
$ |
85.00 |
|
$ |
— |
|
$ |
— |
|
January — December |
|
Three-way collars |
|
2,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
85.00 |
|
|
110.00 |
|
|
135.00 |
|
January — December |
|
Swaps with puts |
|
2,000 |
|
|
— |
|
|
75.00 |
|
|
60.00 |
|
|
— |
|
|
— |
|
|
— |
|
2017 : |
|
|
|
|
|
|
|
|
|
|
|
|