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TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the transition period from            to

Commission file number: 001-34579

Cobalt International Energy, Inc.
(Exact name of registrant as specified in its charter)

(713) 579-9100
(Registrant's telephone number, including area code)

        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 ý No o

        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 o No o

        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.

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

        Number of shares of the registrant's common stock outstanding at June 30, 2010: 356,173,766 shares.

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Cautionary Note Regarding Forward-Looking Statements

        This Quarterly Report on Form 10-Q contains estimates and forward-looking statements, principally in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our business and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Many important factors, in addition to the factors described in our 2009 Annual Report on Form 10-K filed on March 30, 2010, our Quarterly Report on Form 10-Q filed on May 11, 2010 and this Quarterly Report on Form 10-Q, may adversely affect our results as indicated in forward-looking statements. You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect.

        Our estimates and forward-looking statements may be influenced by the following factors, among others:

•

the impact of the explosion and sinking of the Deepwater Horizon drilling rig in the U.S. Gulf of Mexico, the resulting oil spill and the legislative and regulatory response thereto;



•

uncertainties inherent in making estimates of our oil and natural gas data;



•

the volatility of oil prices;



•

discovery and development of oil reserves;



•

projected and targeted capital expenditures and other costs, commitments and revenues;



•

current and future government regulation of the oil and gas industry;



•

changes in environmental laws or the implementation of those laws;



•

termination of or intervention in concessions, licenses, permits, rights or authorizations granted by the United States, Angolan and Gabonese governments to us;



•

competition;



•

our ability to find, acquire or gain access to other prospects and to successfully develop our current prospects;



•

the successful implementation of our and our partners' prospect development and drilling plans;



•

the availability and cost of drilling rigs, production equipment, supplies, personnel and oilfield services;



•

the availability and cost of developing appropriate infrastructure around and transportation to our prospects;



•

military operations, terrorist acts, wars or embargoes;



•

the ability to obtain financing;



•

our dependence on our key management personnel and our ability to attract and retain qualified personnel;



•

our vulnerability to severe weather events, especially tropical storms and hurricanes in the U.S. Gulf of Mexico;



•

the cost and availability of adequate insurance coverage; and



•

other risk factors discussed in the "Risk Factors" section of this Quarterly Report on Form 10-Q, our Quarterly Report on Form 10-Q filed on May 11, 2010 and our 2009 Annual Report on Form 10-K filed on March 30, 2010.

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        The words "believe," "may," "will," "aim," "estimate," "continue," "anticipate," "intend," "expect," "plan" and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this Quarterly Report on Form 10-Q might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, including, but not limited to, the factors mentioned above. Because of these uncertainties, you should not place undue reliance on these forward-looking statements.

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PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements.

COBALT INTERNATIONAL ENERGY, INC.

(pka COBALT INTERNATIONAL ENERGY, L.P.)

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Condensed Consolidated Balance Sheets

(Unaudited)

See accompanying notes.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Condensed Consolidated Statements of Operations

(Unaudited)

See accompanying notes.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Condensed Consolidated Statements of Changes in Partners' Capital and Stockholders' Equity

(Unaudited)

See accompanying notes.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Organization

        Cobalt International Energy, Inc. (the "Company") was incorporated pursuant to the laws of the State of Delaware in August, 2009 to become a holding company for Cobalt International Energy, L.P. (the "Partnership"). The Partnership is a Delaware limited partnership formed on November 10, 2005 by funds affiliated with Goldman, Sachs & Co., Riverstone Holdings LLC and The Carlyle Group as well as members of the Partnership's management team, collectively constituting Class A limited partners. In 2006, funds affiliated with KERN Partners Ltd. and certain limited partners in such funds affiliated with KERN Partners Ltd, were admitted as a Class A limited partner. In 2007, First Reserve and Four Winds Consulting were admitted as Class A limited partners.

        A corporate reorganization occurred concurrently with the completion of the Company's initial public offering ("IPO") on December 21, 2009. All the outstanding interests of the Partnership were exchanged for 283,200,000 shares of the Company's common stock and as a result the Partnership became wholly-owned by the Company. The shares of CIP GP Corp., the general partner of the Partnership, were contributed by certain of the Class A limited partners holding such shares to the Company for no consideration.

        On December 21, 2009, the Company closed its IPO with the issuance of 63,000,000 shares of common stock from the public offering and 3,125,000 of shares issued in a private placement at a price of $13.50 per share. The proceeds received of approximately $900 million were used to fund the offering expenses and will be primarily used to fund the Company's drilling and exploration program. On January 7, 2010, the Company issued an additional 7,978,000 shares of common stock at the public offering price of $13.50 per share pursuant to the exercise of the over-allotment option by the underwriters.

Operations

        The Company is an independent, oil-focused exploration and production company with a current focus in the deepwater U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa. The terms "Company," "Cobalt," "we," "us," "our," "ours," and similar terms refer to Cobalt International Energy, Inc. unless the context indicates otherwise.

        On April 20, 2010, the Transocean Deepwater Horizon drilling rig under contract to BP plc exploded, burned for two days and sank, resulting in loss of life, injuries and an oil spill in the U.S. Gulf of Mexico. Hydrocarbons have been discharged continuously into the U.S. Gulf of Mexico from the well since the time of this disaster until July 15, 2010 when a capping mechanism at least temporarily stopped the flow of hydrocarbons. At the time of this report, efforts to permanently stop the flow of hydrocarbons from the well and clean up the spill continue. The Company has no economic interest in this well or the Deepwater Horizon. In response to this crisis, the U.S. government and its regulatory agencies with jurisdiction over oil and gas exploration in the U.S. Gulf of Mexico have imposed certain restrictions on deepwater drilling applicable to the Company. As a result of these restrictions, the Company was prevented from spudding the North Platte #1 exploratory well, Anadarko Petroleum Corporation ("Anadarko") was prevented from spudding the Heidelberg #3

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Organization and Basis of Presentation (Continued)

appraisal well, which is the substitute well for the Heidelberg #2 well that was permanently abandoned due to mechanical problems earlier this year, and all of the Company's other plans for exploration and appraisal drilling activities in the U.S. Gulf of Mexico have been delayed. The successful execution of the Company's U.S. Gulf of Mexico business plan depends on the Company's ability to continue its exploration and appraisal efforts including drilling for oil in the U.S. Gulf of Mexico. Given the current restrictions, potential future restrictions and the uncertainty surrounding the availability of any exceptions to any restrictions, the Company cannot predict when it will be able to continue its exploratory and appraisal program in the U.S. Gulf of Mexico, if at all.

        With respect to the Company's West African operations, since the signing of the Risk Services Agreements for Blocks 9 and 21 offshore Angola on February 24, 2010, the Company has been establishing its organizational capabilities and office space in Luanda, Angola and it has initiated tenders for long lead equipment and drilling services, all of which support an early 2011 spud date for the Company's first exploratory well offshore Angola.

        As of June 30, 2010, the Company had no proved oil and gas reserves.

Business Relationships

TOTAL Alliance

        On April 6, 2009, the Company announced a long-term alliance with TOTAL E&P USA, INC. ("TOTAL") in which, through a series of transactions, the Company combined its respective U.S. Gulf of Mexico exploratory lease inventory (which excludes the Heidelberg portion of its Ligurian/Heidelberg prospect, its Shenandoah prospect, and all developed or producing properties held by TOTAL in the U.S. Gulf of Mexico) through the exchange of a 40% interest in its leases for a 60% interest in TOTAL's leases, resulting in a current combined alliance portfolio covering 225 blocks. The Company will act as operator on behalf of the alliance through the exploration and appraisal phases of development. As part of the alliance, TOTAL committed, among other things, to (i) provide a 5^th generation deepwater rig to drill a mandatory five-well program on the Company's existing operated blocks, (ii) pay up to $300 million to carry a substantial share of the Company's costs with respect to this five-well program (above the amounts TOTAL is obligated to pay as owner of a 40% interest), (iii) pay an initial amount of approximately $280 million primarily as reimbursement of the Company's share of historical costs in its contributed properties and consideration under purchase and sale agreements, (iv) pay 40% of the general and administrative costs relating to the Company's operations in the U.S. Gulf of Mexico during the 10-year alliance term, and (v) award the Company up to $180 million based on the success of the alliance's initial five-well program, in all cases subject to certain conditions and limitations. Additionally, as part of the alliance, TOTAL and the Company formed a U.S. Gulf of Mexico-wide area of mutual interest, whereby each party has the right to participate in any oil and natural gas lease interest acquired by the other party within this area.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Organization and Basis of Presentation (Continued)

Sonangol Partnership

        On April 22, 2009, the Company announced a partnership in the U.S. Gulf of Mexico with the national oil company of Angola, Sociedade Nacional de Combustíveis de Angola—Empresa Pública ("Sonangol"), whereby Sonangol acquired a 25% non-operated interest of the Company's pre-TOTAL alliance interests in 11 of the Company's U.S. Gulf of Mexico leases. The price Sonangol paid the Company for this interest was calculated using the price the Company paid for such leases plus $10 million to cover the Company's historical seismic and exploration costs. Additionally, as part of the partnership, the Company formed an area of mutual interest with Sonangol covering a subset of the U.S. Gulf of Mexico, whereby each party had the right to participate in any oil and natural gas lease interest acquired by the other party within this area until May 15, 2010. This transaction is notable as it represents Sonangol's initial entry into the North American exploration and production sector.

Sonangol Risk Services Agreements

        On February 24, 2010, the Company executed Risk Services Agreements (the "RSAs") for Blocks 9 and 21 offshore Angola with Sonangol, as well as Sonangol Pesquisa e Produção, S.A., Nazaki Oil and Gáz, S.A. ("Nazaki") and Alper Oil, Limitada. The RSAs govern the Company's 40% interest in and operatorship of Blocks 9 and 21 offshore Angola and form the basis of its exploration, development and production operations on these blocks. In conjunction with the RSAs, the Company also obtained written approval from Sonangol dated March 3, 2010 for expenditures incurred for technical work on Blocks 9 and 21 offshore Angola as pre-RSA expenditures. As a result, Nazaki reimbursed the Company for its share of the leasehold bonus and related pre-RSA expenditures incurred on these blocks. The execution of these agreements was a key milestone that allows for the commencement of the Company's offshore Angola drilling program, currently planned to begin in early 2011.

2. Basis of Presentation

        The accompanying condensed unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the condensed consolidated financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be presented for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009. Because the Company is a development stage enterprise, the Company has presented its financial statements in accordance with FASB Accounting Standards Codification (ASC) No. 915 "Development Stage Entities".

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Basis of Presentation (Continued)

Use of Estimates

        The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by the Company include (i) accruals related to expenses, (ii) assumptions used in estimating fair value of equity based awards and (iii) assumptions used in impairment testing. Although the Company believes these estimates are reasonable, actual results could differ from these estimates.

Reclassifications

        Certain reclassifications have been made to prior periods' financial statements to conform to the current presentation.

Income (Loss) Per Share

        Basic income (loss) per share was calculated by dividing net income or loss applicable to common shares by the weighted average number of common shares outstanding during the periods presented. The calculation of diluted income (loss) per share should include the potential dilutive impact of nonvested restricted shares outstanding during the year, unless their effect is anti-dilutive. Nonvested restricted stock awards of 6,550,106 shares for the three and six months ended June 30, 2010 were excluded from the diluted income (loss) per share because they are anti-dilutive.

        Pro forma basic income (loss) per share was calculated by dividing pro forma net income or loss applicable to common shares by the pro forma weighted average number of common shares outstanding during the three and six months ended June 30, 2009. Pro forma net income or loss applicable to common shares reflects net income (loss) as reported and gives effect to (i) an adjustment for income taxes as if the Company was subject to taxation for the entire period and (ii) an adjustment to remove management fees paid to the Partnership's former private equity owners that terminated at the time of the IPO. The calculation of pro forma diluted income (loss) per share should include the potential dilutive impact of nonvested restricted shares outstanding during the year, unless their effect is anti-dilutive. Pro forma nonvested restricted stock awards of 6,078,981 shares for the three and six months ended June 30, 2009, respectively, were excluded from the pro forma diluted income (loss) per share because they are anti-dilutive.

        The pro forma weighted average shares outstanding used in the computation of pro forma basic and diluted income (loss) per share for the three and six months ended June 30, 2009 have been computed taking into account the conversion ratio at the time of the IPO of all partnership units into shares of common stock, including vested shares of restricted stock, as if the conversion occurred as of the beginning of the period.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3. Restricted Deposits

        As of June 30, 2010, restricted deposits represent $186.5 million held in an escrow account established in December, 2009 as a guarantee of performance to ENSCO International plc for the ENSCO 8503 rig contract, $151.3 million held in a collateral account established in March, 2010 as collateral for letters of credit issued in support of the Company's contractually agreed work program obligations in Angola and $0.7 million held in collateral accounts for other vendors. As of June 30, 2010, the $151.3 million is invested in U.S. Treasury bills having maturities in excess of 90 days and as a result, the funds are accounted for as held-to-maturity securities based on the Company's intent to hold the securities to maturity. These securities are stated at amortized costs, which approximate fair market value as of June 30, 2010. Income related to these securities is reported as a component of interest income in the Company's consolidated statements of operations.

4. Joint Interest and Other Receivables

        Joint interest and other receivables result primarily from billing shared costs under the respective operating agreements to the Company's partners in the leases. As of June 30, 2010, the balance due from the Company's joint interest partners in the U.S. Gulf of Mexico and West Africa was $19.5 million and represents amounts due for operated exploration wells and seismic expenditures. Receivables are expected to be settled within 30 days.

5. Inventory

        Inventories consist of various tubular products that are used in the Company's drilling programs. The products are stated at the lower of cost or market. Cost is determined on weighted average method and comprises of purchase price and other directly attributable costs.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Property, Plant, and Equipment

        Property, plant, and equipment is stated at cost less accumulated depreciation/amortization and consisted of the following:

        The Company recorded $0.2 million, $0.1 million, $0.4 million, $0.3 million and $2.4 million of depreciation and amortization expense for the three and six months ended June 30, 2010 and 2009 and for the period November 10, 2005 (inception) through June 30, 2010, respectively.

        Acquisition costs of unproved leasehold properties are assessed for impairment during the holding period and transferred to proved oil and gas properties to the extent associated with successful exploration activities. Significant unproved leases are assessed individually for impairment based on the Company's current exploration plans and an allowance is provided if impairment is indicated. Unproved leasehold costs for properties that are individually less than $1 million in carrying value are amortized on a group basis over the average terms of the leases, at rates that provide for full amortization of leases upon lease expiration or abandonment. As of June 30, 2010, the balance for unproved leaseholds that were individually less than $1 million was $64.9 million. For the three and six months ended June 30, 2010 and 2009, and for the period November 10, 2005 (inception) through June 30, 2010, the Company recorded $2.3 million, $0, $4.6 million, $0 and $4.6 million of allowance against future impairments on unproved leasehold properties, respectively.

Capitalized Exploratory Well Costs

        If an exploratory well provides evidence as to the existence of sufficient quantities of hydrocarbons to justify potential completion as a producing well, drilling costs associated with the well are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. This determination may take longer than one year in certain areas (generally, deepwater and international locations) depending upon, among other things, (i) the amount of hydrocarbons discovered, (ii) the outcome of planned geological

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Property, Plant, and Equipment (Continued)

and engineering studies, (iii) the need for additional appraisal drilling activities to determine whether the discovery is sufficient to support an economic development plan and (iv) the requirement for government sanctioning in international locations before proceeding with development activities.

        During 2008, the Company participated in the drilling of the Shenandoah #1 exploratory well and the Heidelberg #1 exploratory well, both of which were announced as discoveries in early 2009. As of June 30, 2010, the cost of both wells remained capitalized as the Company continues its technical assessment of the commerciality of both discoveries. On October 28, 2009, the Company announced it had temporarily suspended operations on the Ligurian #1 exploratory well and on February 7, 2010 the Company suspended operations on the Criollo #1 exploratory well. Although both wells encountered oil bearing sands, further technical evaluation is required to determine the commerciality of these prospects and portions of both wells were determined to have no future value. As a result, the Company recorded $14.5 million of impairment charges to dry hole expense for the impaired portion of both wells in 2009. The Company recorded additional impairment charges to dry hole expense for the six months ended June 30, 2010 of $0.6 million for costs incurred in 2010 related to the Ligurian #1 exploratory well and $8.7 million for the Criollo #1 exploratory well. In April, 2010, the Company announced that the Heidelberg #2 appraisal well was permanently plugged and abandoned by the operator due to mechanical problems. As a result, the Company charged the total capitalized costs of $11.1 million incurred for the Heidelberg #2 appraisal well to impairment expense for the six months ended June 30, 2010. In May, 2010, the Company announced that the Firefox #1 exploratory well would be plugged and abandoned by the operator resulting in impairment charges to dry hole expense of $12.4 million for the six months ended June 30, 2010. In addition, for the six months ended June 30, 2010, the Company wrote off $2.3 million of capitalized pre-spud costs and expensed an additional $10.0 million of force majeure costs, all related to the North Platte #1 exploratory well due to drilling activities that were suspended as a result of the explosion and sinking of the Deepwater Horizon drilling rig in the U.S. Gulf of Mexico, the resulting oil spill and the legislative and regulatory response thereto.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Property, Plant, and Equipment (Continued)

        The following table reflects the Company's net changes in and the cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs):

 

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Property, Plant, and Equipment (Continued)

        As of June 30, 2010, no exploratory wells have been drilled by the Company offshore Angola or Gabon.

7. Stockholders' Equity

        Upon closing of the IPO on December 21, 2009, the Company was authorized to issue 2,000,000,000 shares of common stock, $0.01 par value per share, and 200,000,000 shares of preferred stock, $0.01 par value per share. As a result of the corporate reorganization, all the outstanding partnership interests in the Partnership were exchanged for 283,200,000 shares of the Company's common stock, of which 274,392,583 were issued on December 21, 2009 and 8,015,041 were recorded as nonvested restricted stock.

        On December 21, 2009, the Company issued 63,000,000 shares of its common stock through the IPO and 3,125,000 shares of common stock through a private placement at a price of $13.50 per share.

        On January 7, 2010, the Company closed the sale of an additional 7,978,000 shares of its common stock at the public offering price of $13.50 per share pursuant to the exercise over-allotment option by the underwriters of the IPO.

8. Seismic and Exploration Expenses

        Seismic and exploration expenses consisted of the following:

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Equity Based Compensation

        The Company recognizes compensation cost for equity-based awards to employees and non-employee directors using the straight-line method over the period during which the recipient is required to provide service in exchange for the award, based on the fair value of the equity instrument on the date of grant. A summary of share activity pursuant to equity-based payment plans for employees and non-employee directors for the six months ended June 30, 2010, is as follows:

        During the six months ended June 30, 2010, 45,000 nonvested shares held by a former officer of the Company were accounted for as vested and 585,778 nonvested restricted shares were forfeited pursuant to the terms of the Separation Agreement between the officer and the Company. The terms of the Separation Agreement were accounted for in accordance with FASB ASC No. 718, Compensation—Stock Compensation and resulted in $0.5 million recognized in stock compensation expense for the vested shares and $2.4 million recognized as a reduction to the stock compensation expense for the forfeited shares during the three months ended June 30, 2010.

        For the three months ended June 30, 2010 and 2009, and for period from November 10, 2005 (inception) through June 30, 2010, the Company recognized equity based compensation expense of $2.1 million, $0.6 million and $14.9 million, respectively, relating to restricted stock granted to employees. For the six months ended June 30, 2010 and 2009, and for period from November 10, 2005 (inception) through June 30, 2010, the Company recognized equity based compensation expense of $6.6 million, $1.0 million and $14.9 million, respectively, relating to restricted stock granted to employees.

        The Company granted 46,264 and 53,121 restricted stock unit awards to non-employee directors during the three and six months ended June 30, 2010, respectively. During the three and six months ended June 30, 2010, the Company also granted 3,448 and 7,368 shares of common stock, respectively, as retainer awards to non-employee directors who elected to be compensated by stock in lieu of cash payments. For the three and six months ended June 30, 2010, the Company recognized total stock compensation expense of $0.1 million and $0.2 million, respectively, for restricted stock and retainer awards granted to non-employee directors.

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

10. Income (Loss) Per Share

        The following table presents the calculation of basic and diluted income (loss) per share and pro forma basic and diluted income (loss) per share for the three and six months ended June 30, 2010 and 2009, respectively, as discussed further in the summary of significant accounting policies in Note 2 ($ in thousands except per share data):

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Cobalt International Energy, Inc.
(pka Cobalt International Energy, L.P.)
(a Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

11. Contingencies

        The Company is not currently party to any legal proceedings. However, from time to time the Company may be subject to various lawsuits, claims and proceedings that arise in the normal course of business, including employment, commercial, environmental, safety and health matters. It is not presently possible to determine whether any such matters will have a material adverse effect on the Company's consolidated financial position, results of operations, or liquidity.

        The Company has contracted to use a drilling rig in the U.S. Gulf of Mexico and may be required to make certain payments under such rig agreement even if the Company cannot use it. On March 4, 2010, the Company entered into a rig assignment agreement with Anadarko providing for the assignment to the Company of the Ocean Monarch drilling rig and the related underlying drilling contract which Anadarko had originally entered into with the owner of the Ocean Monarch, Diamond Offshore Company. The term of the assignment agreement is for a minimum term of 75 days and commenced on May 24, 2010. Because the Deepwater Horizon explosion resulted in the U.S. government and its regulatory agencies with jurisdiction over oil and gas exploration in the U.S. Gulf of Mexico imposing certain restrictions on the Company that made it impossible for the Company to drill the North Platte #1 exploratory well, on May 28, 2010 the Company invoked force majeure pursuant to the underlying drilling contract for the Ocean Monarch that was assigned to us by Anadarko. Should such invocation of force majeure not be enforceable, the Company may be liable to pay the full operating rate (at approximately $441,000 per day (gross)) for the use of the Ocean Monarch for the entire 75 day minimum term of the assignment despite not being able to use the drilling rig, even though the Company believes it is only obligated to pay for 33.5 days of this term.

12. Supplemental Cash Flow Information

        The following reflects the Company's supplemental cash flow information:

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" and the other matters set forth in this Quarterly Report on Form 10-Q. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2009.

Overview

        We are an independent, oil-focused exploration and production company with a world-class below salt prospect inventory in the deepwater U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa. We have established a current portfolio of 134 identified, well-defined prospects, comprised of 48 prospects located in the deepwater U.S. Gulf of Mexico and 86 prospects located in offshore West Africa.

Second Quarter 2010 Operational Highlights

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On April 20, 2010, the Transocean Deepwater Horizon drilling rig under contract to BP plc exploded, burned for two days and sank, resulting in loss of life, injuries and an oil spill in the U.S. Gulf of Mexico. Hydrocarbons have been discharged continuously into the U.S. Gulf of Mexico from the well since the time of this disaster until July 15, 2010 when a capping mechanism at least temporarily stopped the flow of hydrocarbons. At the time of the report, efforts to permanently stop the flow of hydrocarbons from the well and clean up the spill continue. We have no economic interest in this well or the Deepwater Horizon. In response to this crisis, the U.S. government and its regulatory agencies with jurisdiction over oil and gas exploration in the U.S. Gulf of Mexico have imposed certain restrictions on deepwater drilling applicable to us. As a result of these restrictions, we were prevented from spudding the North Platte #1 exploratory well, Anadarko Petroleum Corporation ("Anadarko") was prevented from spudding the Heidelberg #3 appraisal well, which is the substitute well for the Heidelberg #2 well that was permanently abandoned due to mechanical problems earlier this year and in which we have a 9.375% working interest, and all of our other plans for exploration and appraisal drilling activities in the U.S. Gulf of Mexico have been delayed. See "—Impact of the U.S. Gulf of Mexico Oil Spill."



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Since the signing of the Risk Services Agreements for Blocks 9 and 21 offshore Angola on February 24, 2010, we have been establishing our organizational capabilities and office space in Luanda, Angola and we have initiated tenders for long lead equipment and drilling services, all of which support an early 2011 spud date for our first exploratory well offshore Angola.



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During the second quarter 2010, we were awarded the following six blocks in the U.S. Gulf of Mexico as a result of our high bids that totaled approximately $1.6 million (net to Cobalt) during the Central Gulf of Mexico Lease Sale 213 held on March 17, 2010 by the Minerals Management Service: Garden Banks 764 and 808, Green Canyon 414 and Keathley Canyon 33, 155 and 373.

Second Quarter 2010 Financial Highlights

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We recorded a net loss of approximately $41.8 million.



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Expenditures were $38.5 million, consisting primarily of exploration drilling associated with the Criollo #1 exploratory well, Firefox #1 exploratory well and Heidelberg #2 appraisal well, other

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exploration activities and general and administrative related expenses. Expenditures were $76.5 million for the six months ended June 30, 2010, out of our full year 2010 approved budget of $430 million.

Impact of the U.S. Gulf of Mexico Oil Spill

        On April 20, 2010, the Transocean Deepwater Horizon, a semi-submersible offshore drilling rig operating in the deepwater U.S. Gulf of Mexico under contract to BP plc exploded, burned for two days and sank, resulting in loss of life, injuries and an oil spill. Hydrocarbons have been discharged continuously from the well since the time of this disaster until July 15, 2010 when a capping mechanism at least temporarily stopped the flow of hydrocarbons. At the time of this report, efforts to permanently stop the flow of hydrocarbons from the well and clean up the spill continue. We have no economic interest in this well or the Deepwater Horizon. In response to this crisis, the U.S. government and its regulatory agencies with jurisdiction over oil and gas exploration in the U.S. Gulf of Mexico have imposed certain restrictions on deepwater drilling applicable to us, including:

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On May 27, 2010, President Obama announced a six month drilling and permitting moratorium in which operations were suspended on thirty-three current deepwater drilling projects in the U.S. Gulf of Mexico, including our North Platte #1 exploratory well, and the issuance of permits to drill new deepwater wells was suspended;



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On the afternoon of May 27, 2010, we were notified by U.S. Minerals Management Service, now the Bureau of Ocean Energy Management, Regulation and Enforcement (the "BOEMRE"), that operations on our North Platte #1 exploratory well were suspended;



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Effective May 30, 2010, the moratorium announced by President Obama was formally established pursuant to Notice to Lessees, NTL No. 2010-N04 ("NTL #4"), issued by the BOEMRE;



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Effective June 8, 2010, the BOEMRE issued a second Notice to Lessees, NTL No. 2010-N05 ("NTL #5"), which set forth increased safety measures for offshore energy development and requires, among other things, for offshore operators, including us, to submit written certifications as to compliance with BOEMRE rules and regulations as well as the submission of independent third party written certifications as to the capabilities of certain safety devices, including blowout preventers;



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Effective June 18, 2010, the BOEMRE issued a third Notice to Lessees, NTL No. 2010-N06 ("NTL #6"), which set forth information requirements for exploration plans, development and production plans and development operations coordination documents in the U.S. Gulf of Mexico;



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Subsequent to the issuance of NTL No. #5 and NTL No. #6, the BOEMRE issued two sets of Frequently Asked Questions which further elaborated on the requirements and restrictions presented in these Notices to Lessees; and



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On July 13, 2010, the U.S. Secretary of the Interior issued a Decision Memorandum (the "Decision Memorandum") instructing the Director of the BOEMRE to direct the suspension of certain offshore permitting and drilling activities in the U.S. Gulf of Mexico through November 30, 2010, subject to limited exceptions. This suspension supersedes and replaces the moratorium established by NTL #4.

        As a result of these restrictions, all of which stem from the Deepwater Horizon explosion, we were prevented from spudding the North Platte #1 exploratory well and Anadarko was prevented from spudding the Heidelberg #3 appraisal well.

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        On March 4, 2010, we entered into a rig assignment agreement (the "Assignment Agreement") with Anadarko for the purpose of procuring the Ocean Monarch drilling rig to drill our North Platte #1 exploratory well. The Assignment Agreement provided for the assignment of the Ocean Monarch drilling rig to us as well as the underlying drilling contract (the "Underlying Contract") that governed the use of the Ocean Monarch, which Anadarko had previously entered into with Diamond Offshore Company ("Diamond"), the owner of the rig. The term of Assignment Agreement is for a minimum of 75 days and commenced on May 24, 2010. The Ocean Monarch drilling rig and the Underlying Contract were assigned to us on May 24, 2010, after which we mobilized the Ocean Monarch to Garden Banks Block 959 in preparation to spud the North Platte #1 exploratory well. At the time President Obama announced a six month drilling and permitting moratorium on May 27, 2010, we were running storm anchors to secure the Ocean Monarch drilling rig to spud the North Platte #1 exploratory well and were in the process of examining the blow out preventer and well control system for the Ocean Monarch. However, given the announcement and the verbal notification we received from the BOEMRE, this work was not completed and the Ocean Monarch was towed at the direction of Diamond to a secure "stack" location on West Cameron Block 184. The Ocean Monarch is currently stacked at West Cameron Block 184, not having spud the North Platte #1 exploratory well.

        As a result of the restrictions implemented in response to the Deepwater Horizon explosion, we invoked force majeure on May 28, 2010 pursuant to the Underlying Contract. We believe that, in addition to the 3.5 days at full rate payable between May 24, 2010 and our invocation of force majeure, we are only obligated under the Underlying Contract to pay thirty days at the force majeure day rate, which is equal to the operating day rate of approximately $441,000 per day (gross), after which time no day rate is payable. In addition, we also believe that we have the option to terminate the Underlying Contract at this time. We have a 60% interest in the North Platte #1 exploratory well. However, on July 13, 2010 we received an invoice from Diamond for use of the Ocean Monarch for the month of June in which Diamond acknowledged the invocation of force majeure through June 23, 2010, the day after the Eastern District Court of Louisiana issued a preliminary injunction with respect to the enforcement of NTL #4. We believe it is Diamond's view that the imposition of a preliminary injunction against the enforcement of NTL #4 interrupted the continuance of force majeure. We disagree with this view. Should our invocation of force majeure not be enforceable, we may be liable to pay the full operating rate for the use of the Ocean Monarch for the 75 day minimum term of the Assignment Agreement, or 41.5 days in addition to the 33.5 days that we believe we are obligated to pay. We have accrued $10.0 million for second quarter 2010 force majeure costs (net to Cobalt) related to the Ocean Monarch and other equipment and services that were to be used to drill the North Platte #1 exploratory well.

        All of our other plans for exploration and appraisal drilling activities in the U.S. Gulf of Mexico, including our plans as a non-operator, have been delayed. The successful execution of our U.S. Gulf of Mexico business plan depends on our ability to continue our exploration and appraisal efforts including drilling for oil in the U.S. Gulf of Mexico. Given the current restrictions, potential future restrictions and the uncertainty surrounding the availability of any exceptions to any restrictions, we cannot predict when we will be able to continue our exploratory and appraisal program in the U.S. Gulf of Mexico, if at all. Furthermore, the BOEMRE could require us to resubmit an application for a permit to drill our North Platte #1 exploratory well or otherwise extend the permitting process, which could result in additional delays. A prolonged suspension of or delay in our drilling operations would adversely affect our business, financial position or future results of operations.

        We believe that the ENSCO 8503 drilling rig, which we expect to take delivery of in January 2011, will be compliant with all current BOEMRE requirements, including NTL #5 and related requirements regarding blowout preventers and independent third party certifications, but due to the current regulatory uncertainty surrounding requirements of drilling equipment used in the U.S. Gulf of Mexico,

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there can be no assurance that the ENSCO 8503 drilling rig will comply with all future requirements which may be released by BOEMRE or enacted by the federal government.

        In addition, we cannot predict how federal and state authorities will further respond to the incident or whether additional changes in laws and regulations governing oil and gas operations in the U.S. Gulf of Mexico will result. It is possible that additional regulations or limitations may be imposed on us. There are currently numerous bills before the U.S. Congress which seek to impose strict regulations concerning the operations and financial strength of companies involved in the exploration and production of hydrocarbons in the U.S. Gulf of Mexico. Such regulations may require a change in the way we conduct our business, may increase our costs of doing business, may delay our business plans or may ultimately prohibit us (either explicitly or as a result of our inability to meet certain prescribed conditions such as minimum insurance or bonding requirements) from drilling for or producing hydrocarbons in the U.S. Gulf of Mexico. In addition, the ENSCO 8503 may not satisfy any future regulations for operations in the U.S. Gulf of Mexico and we may not be able to obtain any drilling rigs for our use as operator that can do so. We cannot predict with any certainty what form any additional laws or regulations will take, or the extent to which they may impact our business, financial position or future results of operations. Please see "Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q.

Results of Operations

Three Months Ended June 30, 2010 Compared to the Three Months Ended June 30, 2009

        The following tables set forth selected financial data for the periods indicated:

        Oil and gas revenue.    We have not yet commenced oil production. Therefore, we did not realize any oil and gas revenue during the three months ended June 30, 2010 and 2009, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the three months ended June 30, 2010 and 2009:

        Seismic and exploration.    Seismic and exploration costs increased by $23.3 million during the three months ended June 30, 2010, as compared to the three months ended June 30, 2009. The increase in

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seismic and exploration costs during this period was primarily due to (i) a $3.3 million increase in seismic and exploration costs incurred in the U.S. Gulf of Mexico and for West Africa, (ii) a $10.0 million accrual for force majeure costs related to the drilling rig and other equipment and services which were to be used to drill the North Platte #1 exploratory well that was suspended as a result of the explosion and sinking of the Deepwater Horizon drilling rig in the U.S. Gulf of Mexico and (iii) the absence in 2010 of $10.0 million received in 2009 from a partner in the U.S. Gulf of Mexico as reimbursement of historical seismic expenditures.

        Dry hole expense and impairment.    Dry hole expense and impairment for the three months ended June 30, 2010 includes charges of $4.6 million for the Heidelberg #2 appraisal well, $4.7 million for the Firefox #1 exploratory well and $2.3 million for pre-spud costs for the North Platte #1 exploratory well. In addition, for the three months ended June 30, 2010, we recorded an allowance of $2.3 million against future impairment on the carrying value of our unproved leasehold properties.

        General and administrative.    General and administrative costs increased by $2.4 million during the three months ended June 30, 2010 as compared to the three months ended June 30, 2009. The increase in general and administrative costs during this period was primarily attributed to a $2.8 million increase in costs related to staff additions and equity-based compensation, a $1.5 million increase in office related support expenses, offset by a decrease of $1.9 million in legal and other fees.

        Depreciation and amortization.    Depreciation and amortization did not change significantly during the three months ended June 30, 2010 as compared to the three months ended June 30, 2009.

        Other income.    Other income did not change significantly during the three months ended June 30, 2010 as compared to the three months ended June 30, 2009.

        Income tax expense/benefit.    No income tax benefit has been reflected since a full valuation allowance has been established against the deferred tax asset that would have been generated as a result of the operating results.

Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009

        The following tables set forth selected financial data for the periods indicated:

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