POSITIVE ENERGY 2014 ANNUAL REPORT Kosmos Energy is proudly contrarian. We strive to be a first mover, not a follower. As a self-funded explorer, we target high-value, high-volume barrels in frontier and emerging basins. This strategy delivered world-class production and development assets in Ghana. Building on this success, we are now embarking on a ‘second inning’ exploration campaign with multiple basin and play opening wells, testing several billion barrels of potential gross resource. Fellow Shareholders, 2014 was a good year for Kosmos. cheaper power generation at a time when the people We acted decisively and ahead of the of Ghana are suffering from severe power outages. As we continue to increase gas exports from Jubilee and industry to prepare the company for lift the FPSO gas processing rate, we expect to raise oil continued success in a period of production toward FPSO capacity in 2015. With cash lower oil prices. costs around $20 per barrel, Jubilee production will continue to generate significant cash flow even in the With world-class assets that generate significant cash current oil price environment. flow even in the current price environment, and a strong The TEN project, the second major oil development balance sheet, we are well positioned to seize the in Ghana, remains within budget and on-track to opportunities provided by the oil and gas market and deliver first oil in the second half of 2016. The project create value for our shareholders. is now more than 50 percent complete with all 10 of the wells expected to be online at first oil already RESERVES AND PRODUCTION drilled. Activity is expected to increase in 2015 as well GROWTH IN GHANA completions begin and equipment continues to be Through strong reserves growth, we demonstrated fabricated in advance of installation. the quality of our Ghana assets last year. We ended 2014 with total proved reserves of 75 million barrels The appraisal of the Mahogany, Teak and Akasa (MTA) of oil equivalent, up from 47 million barrels the year discoveries was completed at year-end 2014 as scheduled. before, an impressive result that highlights the growth The results of the appraisal will be combined with the potential of our Ghana assets. The increase in reserves partnership’s views on additional phases of development stemmed from continued strong performance at Jubilee at Jubilee. The plan for full field development of Jubilee field, as well as the initial booking of reserves from the and MTA is expected to be presented to the Government Tweneboa, Enyenra and Ntomme (TEN) development. of Ghana in 2015. This plan is expected to maximize production and profits for all, and make a material Gross production at Jubilee averaged 102,000 barrels of difference to the lives of people in Ghana. oil per day sales throughout the year and, as a result, we lifted nine cargoes for the year net to Kosmos, slightly With Jubilee production increasing toward FPSO ahead of expectations. In November 2014, the Jubilee capacity and TEN expected to come online in the partnership connected the FPSO Kwame Nkrumah second half of 2016, we believe that we have a clear path to the Ghana National Gas Company’s onshore gas to doubling production to 200,000 barrels (gross) per processing facility at Atuabo. This new infrastructure day in Ghana by 2017. has enabled the Jubilee partners to ship natural gas to EXPLORATION PORTFOLIO WITH the facility. Once processed, gas is then transported to SCALE AND QUALITY a Volta River Authority facility at Aboadze where it is used to generate electricity for public and industrial use. Kosmos’ differentiated exploration strategy focuses on This was an important milestone for both the Jubilee under-explored frontier and emerging basins that are partnership and the country as it enabled increased oil at the low end of the development cost curve, and thus production and, equally important, more reliable and have the potential to produce good economic returns 1 in a lower oil price environment. The combination of A PARTNER OF CHOICE targeting giant prospects and quality fiscal terms makes Successful exploration and development in today’s world this possible and drives our exploration strategy. requires more than technical expertise. It demands that Recently, we added to our exploration portfolio with we are just as good at managing our relationships above the acquisition of new licenses offshore Senegal and ground as we are operating below ground. In 2014, we Portugal. Including these assets, our current exploration raised our level of engagement in Ghana by forming an portfolio is approximately 114,000 square kilometers, independent advisory council comprised of respected a total area about the size of Ohio. We also have an Ghanaian business leaders to help us support the industry-leading position offshore Northwest Africa. As country’s needs as a developing economy. In Western a whole, we believe that the portfolio has an un-risked Sahara, Kosmos was the first international oil company potential of approximately 37 billion barrels. Each of our to engage local people regarding the potential benefits acreage positions offers multiple plays and fairways with of hydrocarbon exploration. numerous highly dependent prospects, which maximizes No matter where we work, our commitment to corporate the chance of initial success, as well as post-discovery responsibility is unwavering. We support the long-term value creation. development of our host countries through programs While portfolio scale is important, quality is also critical that improve lives and build capability. In 2014, we – especially in the current environment. With some completed our project with Safe Water Network to cost deflation, we believe our exploration portfolio can bring potable water to more than 27,000 people in 19 achieve break-evens in the $30 to $50 per barrel range. communities in Ghana’s Western Region. In 2015, we This enables Kosmos to remain at the low-end of the will bring technical personnel from Ghana National supply cost curve. Petroleum Corporation to our office in Dallas on four-to- six month assignments to work alongside our in-house experts. The more successful our host countries become, We entered 2015 in our strongest the more valuable our assets will be. Being a responsible financial position ever, with operator and a good neighbor in one country opens new approximately $1.9 billion in liquidity opportunities in another. and $213 million of net debt. OUTLOOK The future continues to look very promising for Kosmos. This combination of scale and quality enables Kosmos We’re excited by the development opportunities in to continue its frontier exploration drilling program, Ghana and the potential of our exploration portfolio. counter-cyclical to the industry. We believe our assets and approach are differentiated. As a result, we will be When I arrived at Kosmos in 2014, I set a very clear pushing ahead with exploration as the industry pulls agenda for the company: back, giving us additional optionality and opportunities. Grow production and reserves in Ghana, Our drilling program is expected to test this world-class portfolio with three to four potentially basin-opening Deliver exploration success from our extensive and wells per year over the next three years, providing high-quality portfolio, and consistent catalysts to create shareholder value. Create a positive and lasting impact on people’s lives SOLID FINANCIAL POSITION in the countries where we work. Kosmos can continue to invest through the cycle We achieved a great deal in 2014, but there is much because we are a self-funded explorer with a strong more for us to do. I am confident we will deliver. balance sheet. We entered 2015 in our strongest financial When I visit our operations around the world, it is clear position ever, with approximately $1.9 billion in liquidity that Kosmos team members are filled with a positive and $213 million of net debt. energy that they bring to each task and every encounter. They demonstrate a strong and enduring commitment to We were ahead of the curve in building liquidity by excellence, which drives our strategy. refinancing our debt and reducing costs. In August, we accessed the high-yield market to raise capital ahead By working together, we delivered strong performance of our needs. In May, we reorganized the company and in 2014 and I look forward to 2015 being even better. reduced general and administrative costs by 33 percent before the oil price drop. Our active hedging program also helps to manage oil price uncertainty and underpins our self-funded model. As of mid-January 2015, we had approximately 12 million barrels hedged through the end of 2016 with an average floor price above $85 per barrel. Andrew (Andy) G. Inglis Chairman of the Board After the TEN project comes online in 2016, we expect and Chief Executive Officer to generate significant free cash flow from Ghana that will provide greater funding and flexibility for our next development. 2 $700 MILLION IMPROVEMENT IN LIQUIDITY OVER YEAR-END 2013 2014 BUSINESS HIGHLIGHTS MTA Appraisal Completed New Acreage Acquired in Senegal and Portugal In 2014, we completed the appraisal % program for our Mahogany, Teak Kosmos recently signed agreements 33 and Akasa discoveries. We intend to capture large and highly to submit a plan for full field prospective$700 exploration positionsREDUCTION in 50% Senegal50% and Portugal, which together 100,000 development of Jubilee and MTA to IN GENERAL the Government of Ghana in 2015. significantlyMILLION increase the size of our AND TEN ADMINISTRATIVE TEN IMPROVEMENT bpd We expect MTA will be tied back to exploration portfolio. These acreage COSTS acquisitionsIN LIQUIDITY are consistent with the Jubilee FPSO. OVER YEAR-END our strategy of2013 exporting the core Jubilee Exceeds 100,000 bpd Cretaceous theme we proved in Production Target MOROCCO the Gulf of Guinea to other frontier We successfully delivered our 2014 and emerging areas along the WESTERN operations plan in Ghana, maintaining SAHARA Atlantic Margin.