Bold Moves

Fellow Shareholders,

Past Success Funds Future Growth

Operationally and financially, we ended 2012 in our best position ever. Achieving plateau production at Jubilee has delivered increased crude oil sales, which coupled with strong global oil markets and our enhanced debt capacity, has strengthened our balance sheet. We are now positioned to internally fund our future developments in Ghana and our exploration programs elsewhere, as well as to capitalize on new investment opportunities as they arise.

Looking ahead, the pathway to early and meaningful future growth is well defined. Our Ghana development asset is a substantial net cash generator for the medium to long-term, with a clear line of sight on additional reserves and production increases. Beyond Ghana, in executing our exploration strategy, our captured acreage has been dramatically increased since IPO, and new opportunities are currently being evaluated to optimize our portfolio. We are planning to commence a multi-year exploration drilling campaign to open potential new petroleum systems in the near future.

Maximizing the Value of Our Discoveries

A key part of ensuring sustainable, long-term success at Kosmos is progressively maximizing the value of our discoveries offshore Ghana. The Jubilee Field has now been producing for over two years. The reservoirs and the drainage plan are both performing exceptionally well, demonstrating the world-class nature of this outstanding oil discovery and development project.

During 2012, we successfully resolved the well productivity issues that impacted the first phase of development through effective acid treatments and did so at much lower costs than originally planned. We restored productivity of the treated wells to their initial level of deliverability, and in some cases, achieved even higher production rates.

Also during 2012, we began implementing the Jubilee Phase 1A development program, applying the initial learnings to establish new well deliverability levels and substantially increase well production capacity. With our successful production enhancement program, in addition to the new deliverability from Phase 1A, we exited 2012 with production at the highest level in the field’s history. Our goals for Jubilee in 2013 include maintaining this high level of current production, as well as testing the upside facility limits to enhance our base production even further.

Additional Developments Move Forward

In our other development and appraisal programs offshore Ghana, we have materially progressed the Tweneboa, Enyenra and Ntomme (TEN) discoveries. This included extending the Enyenra oil field and identifying a new oil pool down-dip at Ntomme in 2012. TEN represents our second major project development and the next tranche of production and cash flow growth for Kosmos.

At the same time, we are finalizing appraisal activities for our other discoveries at Mahogany, Teak and Akasa. The delineation of these fields has enabled us to define the most optimal development for their resources, which will likely be a tie-back to Jubilee.

These development projects, along with our ongoing Jubilee production, continue to highlight the substantial value of our assets and our significant growth profile. Clearly, our Ghana position is the result of outstanding exploration vision and leadership combined with a strong development and production focus.

Maturing Exploration Assets to the Drilling Stage

The prevailing competitive environment for high-quality exploration opportunities is intense. While we endeavor to try to think ahead of the rest of the industry and build our asset inventory through new venture efforts, we are also maturing leads and prospects to the drilling stage. This includes executing new seismic programs and integrating the interpretation of this data into our petroleum system analysis to properly perceive the potential reward and exploration risk. In addition, we are also focused on attracting strategic license partners to mitigate risks and manage costs.

In the first half of 2013, we are drilling the Liwenyi Prospect in our Ndian River Block in Cameroon, with the Sipo-1 exploration well. We have also made considerable progress offshore Morocco and are moving forward quickly with plans to commence a multi-well program there in the near future. Throughout 2012, we expanded our offshore Morocco position by acquiring additional interest in both the Essaouira and Foum Assaka Blocks. These blocks are located in the Agadir Basin, an area that is attracting significant industry attention. Seismic processing and interpretation continues on these blocks, and we are very excited about the hydrocarbon potential. We are continuing to prepare prospects for drilling on the Cap Boujdour Block as well.

We further expanded our leading acreage position in northwest Africa during 2012 by capturing three new licenses offshore Mauritania. This involves a petroleum system concept that is geologically similar to our discoveries in the Tano Basin offshore Ghana. For Kosmos, this venture in Mauritania represents an opportunity to leverage our exploration understanding to potentially deliver the industry’s first commercial success involving this proven concept since the discovery of Jubilee in 2007. We are planning to commence new seismic acquisition, including both 2D and 3D surveys offshore Mauritania in 2013.

Across the Atlantic in Suriname, we were very encouraged with the timely completion of our 3D seismic survey in deepwater Blocks 42 and 45 in 2012. We were also pleased to execute an agreement with Chevron to join our efforts. This agreement combines Kosmos’ successful exploration leadership with Chevron’s proven drilling and development capabilities. During 2013, we will focus our efforts in Suriname on maturing prospects for drilling.

By identifying, accessing and maturing an exploration portfolio to the drilling stage, we expect to have the risked value exposure and sufficient “shots on goal” to deliver high-impact success. Through these positions, coupled with attracting strategic partners and minimizing discovery cycle time, I am confident that we will maintain our track record of creating substantial shareholder value through exploration discovery and field development.

Leadership Above and Below the Ground

Another differentiator, and a pillar of our corporate strategy, is our enhanced focus on leading the industry“above the ground.” As part of this effort, we have adopted and are implementing sophisticated and integrated business practices that support our commitment to government and industry partnership, as well as corporate responsibility. We are committed to the people and places where we operate by working with our host countries and local communities, operating in a safe and efficient manner and protecting the environment in all that we do. This is core to Kosmos’ approach to creating, maximizing and sustaining real value.

Late last year, we were honored to welcome Sir Richard Dearlove and Lars Thunell to our Board of Directors. Distinguished by their talents and skills, these two gentlemen reflect the quality of our Board and our focus on governance, as well as Kosmos’ expanding capacity as an organization.

I am greatly encouraged by the Board’s unwavering support as well as the exceptional dedication of our employees. All of us are wholly committed to the success and future of Kosmos. I am more confident than ever in our ability to deliver industry-leading success and create significant value for our shareholders. With this in mind, I would like to sincerely thank our shareholders, Board and employees for their support of Kosmos Energy.

Brian F. Maxted
Chief Executive Officer