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TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION

Table of Contents

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

FORM 10-Q

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 ý    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 September 30, 2015: 414,533,629 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 businesses 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 2014 Annual Report on Form 10-K filed on February 23, 2015, 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:

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the timing or occurrence of the closing of the sale of our interests in Block 20 and 21 offshore Angola;



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our ability to successfully and efficiently execute our project appraisal, development and exploration activities;



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our liquidity and ability to finance our exploration, appraisal, development, and acquisition activities;



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oil and gas prices;



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lack or delay of partner, government and regulatory approvals related to our operations;



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projected and targeted capital expenditures and other costs and commitments;



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



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



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



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changes in environmental, safety and health laws and regulations or the implementation or interpretation of those laws and regulations;



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our and our partners' ability to obtain permits and licenses and drill and develop our prospects and discoveries in the U.S. Gulf of Mexico and offshore West Africa;



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



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competition;



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our ability to find, acquire or gain access to new prospects and renew our exploration portfolio;



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the availability, cost and reliability of drilling rigs, containment resources, production equipment and facilities, supplies, personnel and oilfield services;



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the ability of the containment resources we have under contract to perform as designed or contain or cap any oil spill, blow-out or uncontrolled flow of hydrocarbons;



•

the availability and cost of developing appropriate infrastructure around and transportation to our prospects, discoveries and appraisal and development projects;

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military operations, civil unrest, disease, piracy, terrorist acts, wars or embargoes;



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



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the cost and availability of adequate insurance coverage;



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the results or outcome of any legal proceedings or investigations we may be subject to;



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our ability to meet our obligations under the agreements governing our indebtedness; and



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other risk factors discussed in the "Risk Factors" section of our 2014 Annual Report on Form 10-K filed on February 23, 2015.

        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.

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Cobalt International Energy, Inc.

Condensed Consolidated Balance Sheets

   

See accompanying notes.

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Cobalt International Energy, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

   

See accompanying notes.

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Cobalt International Energy, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

   

See accompanying notes.

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Cobalt International Energy, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

   

See accompanying notes.

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

General

        Cobalt International Energy, Inc. (the "Company") is an independent exploration and production company with operations in the deepwater U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa.

        On August 22, 2015, Cobalt International Energy Angola Ltd., a wholly-owned subsidiary of the Company, executed a purchase and sale agreement with Sociedade Nacional de Combustíveis de Angola—Empresa Pública ("Sonangol") for the sale by the Company to Sonangol of the entire issued and outstanding share capital of its indirect wholly-owned subsidiaries CIE Angola Block 20 Ltd. and CIE Angola Block 21 Ltd., which respectively hold the Company's 40% working interest in each of Block 20 and Block 21 offshore Angola (the "Angola Transaction"). The Angola Transaction is subject to Angolan government approvals. Following the transfer of the share capital of CIE Angola Block 20 Ltd. and CIE Angola Block 21 Ltd., the Company will also relinquish its working interest in Block 9 offshore Angola to Sonangol. The Company's working interests in Blocks 9, 20, and 21 offshore Angola have been classified as "held for sale" on the consolidated balance sheet. The results of operations associated with Blocks 9, 20 and 21 offshore Angola have been presented as discontinued operations in the accompanying consolidated statement of operations. Historically, the Company's Angolan subsidiaries constituted a significant portion of its West Africa segment. The Company's operations in Gabon, which are deemed immaterial, have been combined with its United States segment and are reported as one segment.

        The terms "Company," "Cobalt," "we," "us," "our," "ours," and similar terms refer to Cobalt International Energy, Inc. unless the context indicates otherwise.

Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements include the financial statements of Cobalt International Energy, Inc. and all of its wholly-owned subsidiaries. All significant intercompany transactions and amounts have been eliminated for all periods presented.

        The accompanying unaudited condensed 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, 2014.

Recently Issued Accounting Standards

        In April 2015, the FASB amended Accounting Standard Codification Subtopic No. 835-30, Interest—Imputation of Interest (the "ASC Subtopic 835-30"). The amendments require that debt

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)

issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments. The amendments under ASC Subtopic 835-30 are effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. However, early adoption is permitted for financial statements that have not been previously issued. The Company expects to comply with the amendments to ASC Subtopic 835-30 for the financial statements at its effective date beginning after December 15, 2015. We do not expect the adoption of ASC 835-30 to have a material impact on the Company's financial statements.

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 the fair value of the liability component of the convertible senior notes and (iii) assumptions used in impairment testing. Although the Company believes these estimates are reasonable, actual results could differ from these estimates.

Investments

        The Company's policy on accounting for its investments, which consist entirely of debt securities, is based on the accounting guidance relating to "Accounting for Certain Investments in Debt and Equity Securities." The Company considers all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year are classified as long-term investments. The debt securities are carried at amortized cost, which approximates fair market value as of September 30, 2015 and December 31, 2014 and are classified as held-to-maturity as the Company has the positive intent and ability to hold them until they mature. The net carrying value of held-to-maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity over the life of the securities. Income related to these securities is reported as a component of interest income in the Company's condensed consolidated statement of operations. See Note 5—Investments.

        Investments are considered to be impaired when a decline in fair value is determined to be other-than-temporary. The Company conducts a regular assessment of its debt securities with unrealized losses to determine whether securities have other-than-temporary impairment ("OTTI"). This assessment considers, among other factors, the nature of the securities, credit rating or financial condition of the issuer, the extent and duration of the unrealized loss, market conditions and whether the Company intends to sell or whether it is more likely than not that the Company will be required to sell the debt securities. As of September 30, 2015 and December 31, 2014, the Company has no OTTI in its debt securities.

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)

Asset Retirement Obligation

        The Company expects to have significant obligations under its lease agreements and federal regulation to remove its equipment and restore land or seabed at the end of oil and natural gas production operations. These asset retirement obligations ("ARO") are primarily associated with plugging and abandoning wells and removing and disposing of offshore oil and natural gas platforms. Estimating the future restoration and removal cost is difficult and requires the Company to make estimates and judgments because most of the removal obligations are many years in the future and contracts and regulation often have vague descriptions of what constitutes removal. Asset removal technologies and cost are constantly changing, as are regulatory, political, environmental, safety and public relations considerations. Pursuant to the accounting guidance relating to "Assets Retirement Obligations", the Company is required to record a separate liability for the discounted present value of its asset retirement obligations, with an offsetting increase to the related oil and natural gas properties representing asset retirement costs on the balance sheet. The cost of the related oil and natural gas asset, including the asset retirement cost, is depreciated over the useful life of the asset. The asset retirement obligation is recorded at its estimated fair value, measured by reference to the expected future cash outflows required to satisfy the retirement obligation discounted at the Company's credit-adjusted risk-free interest rate. Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value.

        Inherent to the present value calculation are numerous estimates, assumptions and judgments, including the ultimate settlement amounts, inflation factors, credit adjusted risk-free rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the present value of the abandonment liability, the Company will make corresponding adjustments to both the asset retirement obligation and the related oil and natural gas property asset balance. Increases in the discounted abandonment liability resulting from the passage of time will be reflected as additional accretion expense in the consolidated statement of operations.

        During the quarterly period ended September 30, 2015, the Company recognized a retirement obligation for its Heidelberg field.

        The following summarizes the changes in the asset retirement obligation for the nine months ended September 30, 2015:

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)

Capitalized Interest

        For exploration and development projects that have not commenced production, interest is capitalized as part of the historical cost of developing and constructing assets. Capitalized interest is determined by multiplying the Company's weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation or impairment. See Note 7—Property, Plant, and Equipment and Note 9—Long-term Debt.

Earnings (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 includes the potential dilutive impact of non-vested restricted stock, non-vested restricted stock units, outstanding stock options, the 2.625% convertible senior notes due 2019 and the 3.125% convertible senior notes due 2024 during the period, unless their effect is anti-dilutive. For the three months and nine months ended September 30, 2015, 9,861,834 shares of non-vested restricted stock, non-vested restricted stock units, outstanding stock options, the 2.625% convertible senior notes due 2019 and the 3.125% convertible senior notes due 2024, were excluded from the diluted income (loss) per share calculation because they were anti-dilutive. For the three months and nine months ended September 30, 2014, 8,643,212 shares of non-vested restricted stock, non-vested restricted stock units, outstanding stock options and the 2.625% convertible senior notes due 2019 and the 3.125% convertible senior notes due 2024, were excluded from the diluted income (loss) per share because they are anti-dilutive.

2. Cash and Cash Equivalents

        Cash and cash equivalents consisted of the following:

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3. Restricted Cash and Cash Equivalents

        Restricted cash and cash equivalents consisted of the following:

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. These are usually settled within 30 days of the invoice date. As of September 30, 2015 and December 31, 2014, the balance in joint interest and other receivables consisted of the following:

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

5. Investments

        The Company's investments in held-to-maturity securities, which are recorded at amortized cost which approximates fair market value, were as follows as of September 30, 2015 and December 31, 2014:

        The Company's condensed consolidated balance sheet included the following held-to-maturity securities:

        The contractual maturities of these held-to-maturity securities as of September 30, 2015 and December 31, 2014 were as follows:

6. Fair Value Measurements

        The fair values of the Company's cash and cash equivalents, joint interest and other receivables, short-term restricted funds and investments approximate their carrying amounts due to their short-term duration. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The Company categorizes each of its fair value measurements as applicable to one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. The levels are:

        Level 1—Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. This category includes the Company's cash and money market funds.

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Fair Value Measurements (Continued)

        Level 2—Quoted prices in non-active markets or in active markets for similar assets or liabilities, and inputs other than quoted prices that are observable, for the asset or liability, either directly or indirectly, for substantially the full contractual term of the asset or liability being measured. This category includes the Company's U.S. Treasury bills, U.S. Treasury notes, commercial paper, U.S. agency securities, corporate bonds, and certificates of deposits.

        Level 3—Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the asset or liability. The Company does not currently have any financial instruments categorized as Level 3.

        The following tables summarize the Company's significant financial instruments measured on a recurring basis as categorized by the fair value measurement hierarchy:

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Fair Value Measurements (Continued)

 

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. Property, Plant, and Equipment

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

        The Company recorded $0.3 million and $0.4 million of depreciation and amortization expense for the three months ended September 30, 2015 and 2014, respectively, and $1.1 million and $1.3 million for the nine months ended September 30, 2015 and 2014, respectively.

Proved Oil and Gas Properties

        The Heidelberg project was formally sanctioned for development in mid-2013. As a result of the project sanction, the Company reclassified its Heidelberg exploration well costs to proved property well and development costs and these costs will be amortized when the related proved developed reserves are produced. During the quarter ended March 31, 2015, the Company assigned its 9.375% ownership interest in the Heidelberg prospect to its wholly owned subsidiary, Cobalt GOM #1 LLC ("GOM #1"). As a result, the carrying value of the costs capitalized for all the Heidelberg projects as of March 31, 2015 were transferred to GOM #1. GOM #1 was established to secure the Heidelberg assets creating a first priority lien in the Company's interest in preparation for debt instruments to fund

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. Property, Plant, and Equipment (Continued)

the Heidelberg development project. As of September 30, 2015, the well and development costs consist of $129.3 million relating to exploration, appraisal and development well costs and $189.5 million for costs associated with field development. As of December 31, 2014, the well and development costs consist of $51.1 million relating to exploration, appraisal and development well costs and $132.1 million for costs associated with field development.

Unproved Oil and Gas Properties

        As of September 30, 2015 and December 31, 2014, the Company has the following unproved property acquisition costs, net of valuation allowance on the consolidated balance sheets:

Capitalized Exploration Well Costs

        If an exploration well provides evidence as to the existence of sufficient quantities of hydrocarbons to justify evaluation for potential development, 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 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.

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. Property, Plant, and Equipment (Continued)

        The following tables reflect the Company's net changes in and the cumulative costs of capitalized exploration well costs (excluding any related leasehold costs):

        As of September 30, 2015, capitalized exploration well costs that have been suspended longer than one year are associated with the Company's Shenandoah, North Platte, and Diaman discoveries. These well costs are suspended pending ongoing evaluation including, but not limited to, results of additional appraisal drilling, well-test analysis, additional geological and geophysical data and approval of a development plan. Management believes these discoveries exhibit sufficient indications of hydrocarbons to justify potential development and is actively pursuing efforts to fully assess them. If additional information becomes available that raises substantial doubt as to the economic or operational viability of these discoveries, the associated costs will be expensed at that time. The Heidelberg discovery has

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. Property, Plant, and Equipment (Continued)

been sanctioned for development and the Heidelberg capitalized exploration and appraisal well costs were reclassified to development costs in 2013.

8. Other Assets

        As of September 30, 2015 and December 31, 2014, the balance in other assets consisted of the following:

9. Long-term Debt

        As of September 30, 2015, the Company's long-term debt consists of the Borrowing Base Facility Agreement (the "Facility Agreement") entered into on May 29, 2015, the 2.625% convertible senior notes due 2019 issued on December 17, 2012 (the "2.625% Notes"), and the 3.125% convertible senior notes due 2024 issued on May 13, 2014 (the "3.125% Notes", and, collectively with the 2.625% Notes, the "Notes"), as follows:

Borrowing Base Facility Agreement

        On May 29, 2015, Cobalt GOM #1 LLC ("GOM#1"), an indirect, wholly-owned subsidiary of the Company entered into a Borrowing Base Facility Agreement (the "Facility Agreement") with Société Générale, as administrative agent, and certain other lenders. GOM#1 is the direct owner of the oil and gas leases, wells, production facilities and other assets and agreements associated with the Company's Heidelberg development. GOM#1 does not own any of the Company's other oil and gas assets. The Facility Agreement provides for a limited recourse $150 million senior secured reserve-based term loan

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Long-term Debt (Continued)

facility. The proceeds of the loans under the Facility Agreement will be available to fund the majority of GOM#1's share of the remaining Heidelberg field development costs, subject to the maintenance of a debt to equity ratio of the total investment in the Heidelberg development of no more than 70:30. GOM#1 may request that the commitments under the Facility Agreement be increased by up to an additional $100 million upon the satisfaction of certain conditions set forth in the Facility Agreement, and such increase is subject to lender participation. In addition, GOM#1 may request a further commitment increase by up to $400 million if GOM#1's interest in the Heidelberg field is increased, with such commitment increase subject to lender participation.

        The Company is a party to the Facility Agreement and has limited funding obligations thereunder. Until completion of the Heidelberg development in accordance with the current field development plan and certain other requirements set forth in the Facility Agreement ("Completion"), the Company has guaranteed to fund cost overruns that may be incurred up to an aggregate of $38.7 million. The Company agreed to cash collateralize 50% of its funding obligation in respect of cost overruns by depositing $19.4 million in a collateral account to be established pursuant to the terms of the Facility Agreement. As of September 30, 2015 this amount has not been funded.

        The amount available for borrowing at any one time under the Facility Agreement is limited to a borrowing base amount determined twice a year using agreed projections by applying the lower of (i) a project life coverage ratio of 1.5:1.0 to the sum of discounted projected net revenues from the Heidelberg field and certain capital expenditures and (ii) a loan life coverage ratio of 1.3:1.0 to the sum of discounted projected net revenues from the Heidelberg field and certain capital expenditures. Interim borrowing base redeterminations can take place between scheduled redetermination dates in limited circumstances specified in the Facility Agreement. Loans made under the Facility Agreement are scheduled to amortize in the manner set forth in the Facility Agreement commencing in July 2018 and will mature on the earlier of (a) May 29, 2020 and (b) the last day of the quarter immediately preceding the first quarter in which the aggregate remaining reserves for the Heidelberg field are projected to be less than 20% of the initial approved reserves. In addition, on or before each redetermination, GOM#1 is required to repay such amount of the loans as is required to reduce the aggregate amount of the loans to the borrowing base amount applicable on the day after such redetermination. After Completion, loans are also subject to mandatory prepayment with 33% of GOM#1's excess cash flow.

        The Facility Agreement and certain related hedging obligations, if any, are secured by a first priority security interest in substantially all of the assets of GOM#1 (which are comprised only of the oil and gas leases, wells, production facilities and other assets associated with the Heidelberg development), including a mortgage on GOM#1's ownership interest in the Heidelberg field, a pledge of the equity interests of GOM#1 and a pledge of certain intercompany receivables held by the Company. All of GOM#1's revenues from the Heidelberg development will be deposited in collateral accounts established pursuant to the Facility Agreement and applied in accordance with a cash waterfall in the manner specified in the Facility Agreement. GOM#1 is required to maintain a debt service reserve account for the benefit of the lenders under the Facility Agreement, which must remain funded at all times to the level specified in the Facility Agreement.

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Long-term Debt (Continued)

        At GOM#1's election, interest for borrowings under the Facility Agreement are determined by reference to (a) the London interbank offered rate, or LIBOR, plus an applicable margin of (i) 6.00% per annum prior to Completion and (ii) 4.00% following Completion or (b) a base rate plus an applicable margin of (i) 5.00% prior to Completion and (ii) 3.00% following Completion. Prior to Completion, GOM#1 is also required to pay a commitment fee equal to 40% of the applicable margin payable on the unused commitments under the Facility Agreement. Interest on base rate loans and the commitment fee are generally payable quarterly. Interest on LIBOR loans are generally payable at the end of the applicable interest period but no less frequently than quarterly.

        The Facility Agreement contains various covenants that limit, among other things, GOM#1's ability to incur indebtedness, grant liens on its assets, merge or consolidate with other entities, sell its assets, make loans, acquisitions, capital expenditures and other investments, abandon or decommission the Heidelberg field, modify material agreements relating thereto, enter into commodity hedges and pay dividends and distributions to its parent entities.

        The Facility Agreement includes customary events of default for transactions of this type, including events of default relating to non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of covenants, cross-defaults, bankruptcy and insolvency events, certain unsatisfied judgments, loan documents not being valid, defaults under project documents that are not replaced, change in control, expropriation, abandonment or decommissioning of the Heidelberg field, material title defects, the failure to pay cost overruns when due and the failure to reach Completion on or before May 29, 2018.

        In addition, the Facility Agreement provides that an event of default will occur if (a) the debt to equity ratio exceeds 70:30 or (b) the then current projections show that (i) the project loan life coverage ratio in any calculation period will be 1.5:1.0 or less, (ii) the loan life coverage ratio in any calculation period will be 1.3:1.0 or less or (iii) the debt service coverage ratio in any calculation period will be 1.2:1.0 or less.

        If an event of default occurs, the lenders will be able to accelerate the maturity of the Facility Agreement and exercise other rights and remedies.

        As of September 30, 2015, the Company has not borrowed any amounts under the Facility Agreement.

2.625% Convertible Senior Notes due 2019

        On December 17, 2012, the Company issued $1.38 billion aggregate principal amount of the 2.625% Notes. The 2.625% Notes are the Company's senior unsecured obligations and interest is payable semi-annually in arrears on June 1 and December 1 of each year. The 2.625% Notes will mature on December 1, 2019, unless earlier repurchased or converted in accordance with the terms of the 2.625% Notes. The 2.625% Notes may be converted at the option of the holder at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, in multiples of $1,000 principal amount. The 2.625% Notes are convertible at an initial conversion rate of 28.023 shares of common stock per $1,000 principal amount, representing an initial conversion price of approximately $35.68 per share for a total of approximately 38.7 million underlying shares. The conversion rate is subject to adjustment upon the occurrence of certain events, as defined

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Long-term Debt (Continued)

in the indenture governing the 2.625% Notes, but will not be adjusted for any accrued and unpaid interest except in limited circumstances. Upon conversion, the Company's conversion obligation may be satisfied, at the Company's option, in cash, shares of common stock or a combination of cash and shares of common stock.

3.125% Convertible Senior Notes due 2024

        On May 13, 2014, the Company issued $1.3 billion aggregate principal amount of the 3.125% Notes. The 3.125% Notes are the Company's senior unsecured obligations and rank equal in right of payment to the 2.625% Notes. Interest on the 3.125% Notes is payable semi-annually in arrears on May 15 and November 15 of each year. The 3.125% Notes will mature on May 15, 2024, unless earlier repurchased, converted or redeemed in accordance with the terms of the Notes. Prior to November 15, 2023, the 3.125% Notes are convertible only under the following circumstances: (1) during any fiscal quarter commencing after March 31, 2015 (and only during such fiscal quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a 30 consecutive trading-day period ending on, and including, the last trading day of the immediately preceding fiscal quarter exceeds $30.00 on each applicable trading day; (2) during the five business-day period after any five consecutive trading-day period (the "3.125% Notes Measurement Period") in which the trading price per $1,000 principal amount of notes for each trading day of the 3.125% Notes Measurement Period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; (3) if the Company calls all or any portion of the 3.125% Notes for redemption, at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the related redemption date; or (4) upon the occurrence of specified distributions or the occurrence of specified corporate events. On or after November 15, 2023, the 3.125% Notes may be converted at the option of the holder at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the stated maturity date, in multiples of $1,000 principal amount. As of September 30, 2015, none of the conditions allowing holders of the 3.125% Notes to convert had been met.

        The 3.125% Notes are convertible at an initial conversion rate of 43.3604 shares of common stock per $1,000 principal amount, representing an initial conversion price of approximately $23.06 per share for a total of approximately 56.4 million underlying shares. The conversion rate is subject to adjustment upon the occurrence of certain events, as defined in the indenture governing the 3.125% Notes, but will not be adjusted for any accrued and unpaid interest except in limited circumstances. Upon conversion, the Company's conversion obligation may be satisfied, at the Company's option, in cash, shares of common stock or a combination of cash and shares of common stock.

        Holders of the Notes who convert their Notes in connection with a "make- whole fundamental change", as defined in the indenture governing these Notes, may be entitled to a make-whole premium in the form of an increase in the conversion rate. Additionally, in the event of a fundamental change, as defined in the indenture governing the Notes, holders of the Notes may require the Company to repurchase for cash all or a portion of their Notes equal to $1,000 or a multiple of $1,000 at a fundamental change repurchase price equal to 100% of the principal amount of Notes, plus accrued and unpaid interest, if any, to, but not including, the fundamental change repurchase date.

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Long-term Debt (Continued)

        Upon the occurrence of an Event of Default, as defined within the indenture governing the Notes, the trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable immediately

        In accordance with accounting guidance relating to, "Debt with Conversion and Other Options", the Company separately accounts for the liability and equity conversion components of the Notes due to the Company's option to settle the conversion obligation in cash. The fair value of the Notes excluding the conversion feature at the date of issuance was calculated based on the fair value of similar non-convertible debt instruments. The resulting value of the conversion option of the Notes was recognized as a debt discount and recorded as additional paid-in capital on the Company's consolidated balance sheets. Total debt issue cost on the Notes was allocated to the liability component and to the equity component of the Notes accordingly. The debt discount and the liability component of the debt issue costs are amortized over the term of the Notes. The effective interest rate used to amortize the debt discount and the liability component of the debt issue costs were approximately 8.40% and 8.97% on the 2.625% Notes and the 3.125% Notes, respectively, based on the Company's estimated non-convertible borrowing rate as of the date the Notes were issued. Since the Company incurred losses for all periods, the impact of the conversion option would be anti-dilutive to the earnings per share and therefore was not included in the calculation.

        The carrying amounts of the liability components of the Notes were as follows:

        The carrying amounts of the equity components of the Notes were as follows:

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Long-term Debt (Continued)

        Fair Value    The fair value of the Notes excluding the conversion feature was calculated based on the fair value of similar non-convertible debt instruments since an observable quoted price of the Notes or a similar asset or liability is not readily available. As of September 30, 2015 and December 31, 2014, the fair values of the Notes were as follows:

        As of September 30, 2015, the Company had $27.3 million accrued for interest on the Notes and commitment fees associated with the Facility Agreement.

        For the three months ended September 30, 2015 and 2014, the interest expense, net of capitalized amount, relating to the Notes and certain costs and commitment fees associated with the Facility Agreement was $14.7 million and $23.5 million, respectively. For the nine months ended September 30, 2015 and 2014, the interest expense, net of capitalized amount, relating to the Notes was $52.6 million and $52.6 million, respectively.

        As of September 30, 2015 and December 31, 2014, the debt discounts associated with the 2.625% Notes and the 3.125% Notes resulted in the recognition of $241.8 million and $264.3 million of deferred tax liability, respectively. The Company is in an overall net deferred tax asset position with a full valuation allowance. Therefore, the Company has determined that it is more likely than not that all of the deferred tax assets will not be realized.

10. Angola Transaction

        On August 22, 2015, Cobalt International Energy Angola Ltd. ("Cobalt Angola"), a wholly-owned subsidiary of the Company, executed a purchase and sale agreement (the "Purchase and Sale Agreement") with Sonangol for the sale by Cobalt Angola to Sonangol of the entire issued and outstanding share capital of CIE Angola Block 20 Ltd. and CIE Angola Block 21 Ltd., which respectively hold the Company's 40% working interest in each of Block 20 and Block 21 offshore Angola for aggregate gross consideration of $1.75 billion before Angolan withholding taxes of approximately $19.7 million (to be netted out of the gross consideration to be paid to Cobalt Angola) and certain other U.S. and Angolan taxes, expenses, and contingent liabilities. Sonangol Pesquisa e Produção, S.A., an affiliate of Sonangol, currently holds a 30% working interest in Block 20 and a 60% working interest in Block 21. The Angola Transaction is subject to Angolan government approvals.

        The Purchase and Sale Agreement provides for the payment of the net consideration by Sonangol to Cobalt Angola of (i) $250 million within 7 days following the execution of the Purchase and Sale Agreement (the "First Payment"), (ii) approximately $1.28 billion within 15 days following the receipt of the Angolan government approvals (the "Second Payment"), and (iii) $200 million within the earlier of 30 days following the execution of a transfer of operations agreement, which will contain terms and conditions governing the transition of operations on each of Block 20 and Block 21 from the Company

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

10. Angola Transaction (Continued)

to a new operator, or one year from the execution of the Purchase and Sale Agreement (the "Third Payment"). The Purchase and Sale Agreement further provides that within 15 days following the receipt of the Angolan government approvals, Sonangol shall reimburse Cobalt Angola for its share of costs attributable to Block 20 and Block 21 for the period from January 1, 2015 through the date upon which Cobalt Angola receives the Angolan government approvals (the "Reimbursement Amount"). The Company estimates that its share of costs attributable to Block 20 and Block 21 for the period from January 1, 2015 through September 30, 2015 is approximately $307 million, which excludes (i) a cash collateralized letter of credit of approximately $82.5 million related to Block 20 that will be released following the consummation of the Angola Transaction, and (ii) outstanding joint interest and other receivables attributable to Block 20 and Block 21 of approximately $57.9 million. The obligation of Cobalt Angola to transfer the share capital of CIE Angola Block 20 Ltd. and CIE Angola Block 21 Ltd. to Sonangol and consummate the Angola Transaction is subject to the receipt by Cobalt Angola of the First Payment, the Second Payment and the Reimbursement Amount. Following completion of the transfer of the shares of CIE Angola Block 20 Ltd. and CIE Angola Block 21 Ltd., the Company shall relinquish its interest in Block 9 offshore Angola to Sonangol. If the Angolan government approvals are not received within one year from the execution date of the Purchase and Sale Agreement, the Purchase and Sale Agreement will automatically terminate and any obligations executed by the parties thereto shall be restituted in order to put such parties in their original positions as if no agreement had been executed. As a result, the First Payment has been reported as restricted cash on the balance sheet.

        Pursuant to the Purchase and Sale Agreement, the Company is required to provide certain transition services to Sonangol, which may include continuing to support operations on Block 20 and 21 on a no-profit no-loss basis until Sonangol nominates a new operator or operators of such blocks, despite the fact that the Company may have already transferred the share capital of its subsidiaries holding its working interests in Blocks 20 and 21 to Sonangol.

        The Company received the First Payment during the quarterly period ended September 30, 2015. The Angola Transaction is currently pending Angola government approval, and the Company therefore has not received the Second Payment, Third Payment or Reimbursement Amount.

Royalty Agreement

        On February 13, 2009 the Company entered into a restated overriding royalty agreement (the "Royalty Agreement") with Whitton Petroleum Services Limited ("Whitton"). Pursuant to the terms of the Royalty Agreement, in consideration for Whitton's consulting services in connection with Blocks 9, 20 and 21 offshore Angola and the Company's business and operations in Angola, Whitton is to receive quarterly payments (measured in U.S. Dollars) equal to 2.5% of the market price of the Company's share of the crude oil produced in such quarter and not used in petroleum operations, less the cost recovery crude oil, assuming the applicable government contract is a production sharing agreement. If the applicable government contract is a risk services agreement and not a production sharing agreement (which is the case with respect to Blocks 9 and 21), pursuant to the Royalty Agreement the Company has undertaken to agree with Whitton an economic model (the "RSA Economic Model") containing terms equivalent to those in such risk services agreement and using actual production and costs. The RSA Economic Model has not yet been agreed with Whitton. Should the Company assign all

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

10. Angola Transaction (Continued)

of its interest in such Blocks, Whitton may, depending on the option the Company elects, have the right to receive the market value of its rights and obligations under the Royalty Agreement, based upon the amount in cash a willing transferee of such rights and obligations would pay a willing transferor in an arm's length transaction. Given potential issues regarding how such market value of Whitton's rights and obligations under the Royalty Agreement could be calculated, including, without limitation, outstanding issues related to the RSA Economic Model, the amount of any such payment that could be owed to Whitton upon completion of the Angola Transaction is uncertain, but may be material.

        The Company's working interests in Blocks 9, 20, and 21 offshore Angola have been classified as "held for sale" on the consolidated balance sheet. The results of operations associated with Blocks 9, 20 and 21 offshore Angola have been presented as discontinued operations in the accompanying consolidated statement of operations. Historically, the Company's Angolan subsidiaries constituted a significant portion of its West Africa segment. The Company's operations in Gabon have been combined with its United States segment and are reported as one segment.

        The following table summarizes the assets and liabilities associated with Blocks 9, 20, and 21 offshore Angola:

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

10. Angola Transaction (Continued)

        Results for Blocks 9, 20, and 21 offshore Angola classified within discontinued operations consisted of the following:

11. Seismic and Exploration Expenses

        Seismic and exploration expenses consisted of the following:

12. Equity Based Compensation

        The Company accounts for stock-based compensation at fair value. The Company grants various types of stock-based awards including stock options, restricted stock and performance-based awards. The fair value of stock option awards is determined using the Black-Scholes-Merton option-pricing model. For restricted stock awards with market conditions, the fair value of the awards is measured using the Monte Carlo pricing model. Restricted stock awards without market conditions are valued using the market price of the Company's common stock on the grant date. The Company records compensation cost, net of estimated forfeitures, for stock-based compensation awards over the requisite service period except for performance-based awards, which are amortized on a straight-line basis over a weighted average period.

        During the nine months ended September 30, 2015, the Company granted a total of 3,503,948 shares of restricted stock and 746,268 stock options to employees which include 379,746 shares of restricted stock and 746,268 stock options with both service and market conditions granted to three senior officers under the terms of their employment agreements. During the nine months ended September 30, 2015, the Company granted 35,814 shares of common stock as retainer awards and 105,846 restricted stock units to its non-employee directors.

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Cobalt International Energy, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

12. Equity Based Compensation (Continued)

        The Company recorded equity based compensation expense, net of forfeitures, of $6.5 million and $7.8 million for the three months ended September 30, 2015 and 2014, respectively, and $19.7 million and $23.1 million for the nine months ended September 30, 2015 and 2014, respectively.

        On February 20, 2015, the Company issued a total of 1,526,835 share appreciation rights ("SARs") under the Company's Long Term Incentive Plan (the "Plan") to the Company's officers, based on the common stock market price at the time of issuance of $8.87 per share. The SARs will vest with respect to one-third (1/3) of the underlying shares on each anniversary of the grant date over the next three years and may be settled, at the Company's discretion, by issuance of the Company's shares or by cash or by a combination of the Company's shares and cash based on the fair market value of the shares on date of exercise. The fair value of a SAR is determined using the Black-Scholes-Merton option-pricing model which at the date of grant was $4.53 per SAR share. The Company accounts for the SAR awards as compensation cost and records a corresponding liability based on the fair value of the SARs at the end of each reporting period. As of September 30, 2015, the fair value of each SAR decreased to $3.52, resulting in a reduction of the fair value of $0.8 million. For the three months and nine months ended September 30, 2015, the Company recognized $0.2 and $1.0 million, respectively, in compensation expense relating to the SAR awards.

        On April 30, 2015, the Company's stockholders approved the Company's 2015 Long Term Incentive Plan (the "2015 Plan"). The total number of shares of the Company's common stock available for issuance under the 2015 Plan is 12,000,000. The 2015 Plan provides for grants of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards. As of September 30, 2015, the Company has awarded 150,000 shares under the 2015 Plan.

13. Contingencies

        The Company is currently, and from time to time 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.

14. Other Matters

        As previously disclosed, in November 2011 a formal order of investigation was issued by the SEC related to the Company's operations in Angola. In August 2014, the Company received a Wells Notice from the SEC related to this investigation. In January 2015, the Company received a termination letter from the SEC advising that the SEC's FCPA investigation has concluded and the Staff does not intend to recommend any enforcement action by the SEC. This letter formally concluded the SEC's investigation. The Company continues to cooperate with the Department of Justice ("DOJ") with regard to its ongoing parallel investigation. The Company is unable to predict the outcome of the DOJ's ongoing investigation or any action that the DOJ may decide to pursue.

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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, 2014.

Overview

        We are an independent exploration and production company with operations in the deepwater U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa. Since our founding in 2005, our oil-focused, below-salt exploration efforts have been successful in each of our three operating areas, resulting in ten discoveries out of the seventeen exploration prospects drilled. These ten discoveries consist of North Platte, Heidelberg, Shenandoah and Anchor in the U.S. Gulf of Mexico; Cameia, Lontra, Mavinga, Bicuar and Orca offshore Angola; and Diaman offshore Gabon. In addition, we have an interest in the Yucatan discovery in the U.S. Gulf of Mexico. As of December 31, 2014, we had 8.4 million barrels ("MMBbls") of oil and 3.7 billion cubic feet ("Bcf") of gas of net proved undeveloped reserves, all of which is attributed to the Heidelberg field.

Angola Transaction

        On August 22, 2015, we executed a purchase and sale agreement (the "Purchase and Sale Agreement") with Sociedade Nacional de Combustíveis de Angola—Empresa Pública ("Sonangol") for the sale by us to Sonangol of the entire issued and outstanding share capital of our indirect wholly-owned subsidiaries CIE Angola Block 20 Ltd. and CIE Angola Block 21 Ltd., which respectively hold our 40% working interest in each of Block 20 and Block 21 offshore Angola, for aggregate gross consideration of $1.75 billion before Angolan withholding taxes of approximately $19.7 million (to be netted out of the gross consideration to be paid to us) and certain other U.S. and Angolan taxes and expenses (the "Angola Transaction"). The Angola Transaction is subject to Angolan government approvals.

        The Purchase and Sale Agreement provides for the payment of the net consideration by Sonangol to us of (i) $250 million within 7 days following the execution of the Purchase and Sale Agreement (the "First Payment"), (ii) approximately $1.28 billion within 15 days following the receipt of the Angolan government approvals (the "Second Payment"), and (iii) $200 million within the earlier of 30 days following the execution of a transfer of operations agreement, which will contain terms and conditions governing the transition of operations on each of Block 20 and Block 21 from us to a new operator, or one year from the execution of the Purchase and Sale Agreement (the "Third Payment"). The Purchase and Sale Agreement further provides that within 15 days following the receipt of the Angolan government approvals, Sonangol shall reimburse us for our share of costs attributable to Block 20 and Block 21 for the period from January 1, 2015 through the date upon which we receive the Angolan government approvals (the "Reimbursement Amount"). We estimate that our share of costs attributable to Block 20 and Block 21 for the period from January 1, 2015 through September 30, 2015 is approximately $307 million, which excludes (i) a cash collateralized letter of credit of approximately $82.5 million related to Block 20 that will be released following the consummation of the Angola Transaction and (ii) outstanding joint interest and other receivables attributable to Block 20 and Block 21 of approximately $57.9 million. Our obligation to transfer the share capital of CIE Angola Block 20 Ltd. and CIE Angola Block 21 Ltd. to Sonangol and consummate the Angola Transaction is subject to us having received the First Payment, the Second Payment and the Reimbursement Amount. Following completion of the transfer of the shares of CIE Angola Block 20 Ltd. and CIE Angola

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Block 21 Ltd., we will relinquish our interest in Block 9 offshore Angola to Sonangol. If the Angolan government approvals are not received within one year from the execution date of the Purchase and Sale Agreement, the Purchase and Sale Agreement will automatically terminate and any obligations executed by the parties thereto shall be restituted in order to put such parties in their original positions as if no agreement had been executed.

        We received the First Payment during the quarterly period ended September 30, 2015. The Angola Transaction is currently pending Angola government approval, and we therefore have not received the Second Payment, Third Payment or Reimbursement Amount. Please see "Part II—Item 1A. Risk Factors—The sale of our interests in Blocks 20 and 21 offshore Angola is subject to Angolan government approval, which may be delayed or may not be consummated. In addition, pursuant to the terms of the purchase and sale agreement governing such sale, we are obligated to transfer our interests in Block 20 and 21 prior to receipt of all consideration for such transfer."

Third Quarter 2015 Operational Highlights

U.S. Gulf of Mexico

•

With respect to our Heidelberg project, development drilling and production facility construction continue in order to support anticipated initial production in the second quarter of 2016. The hull has been moored in place in the U.S. Gulf of Mexico and the topsides have recently been installed. We own a 9.375% non-operated working interest in the Heidelberg project.



•

We completed operations on the Shenandoah #4 appraisal well which tested the updip extent of the basin. The subsequent Shenandoah #4 sidetrack encountered over 600 feet of net oil pay, extending the lowest known oil column downdip. A bypass coring operation on the reservoir interval is currently underway. We own a 20% non-operated working interest in the Shenandoah project.



•

We completed an appraisal sidetrack operation on our Anchor discovery. The appraisal sidetrack well was drilled down dip to delineate the Anchor discovery well. The appraisal well encountered 694 feet of net oil pay in a hydrocarbon column of at least 1,800 feet in Inboard Lower Tertiary Wilcox reservoirs. The Anchor discovery well was drilled in late 2014 and encountered 690 feet of net oil pay in multiple Inboard Lower Tertiary Wilcox sands. Complete appraisal of the field will require further delineation wells and technical studiess. We own a 20% non-operated working interest in the Anchor discovery unit.



•

We have recently successfully completed our drilling operations on our North Platte #3 appraisal well, and are currently evaluating well results utilizing electronic logging and pressure information that is being collected. The preliminary results of this first North Platte appraisal well are encouraging and indicate that the well encountered over 550 feet of net oil pay, which is similar to the discovery well, but with evidence of even better developed reservoirs. Additional appraisal and technical studies will be required to confirm the commerciality of North Platte. We are currently evaluating bypass coring and sidetrack options following the conclusion of current logging and evaluation operations. Our North Platte #1 discovery well was drilled in 2012 and encountered over 550 net feet of oil pay in multiple high-quality Inboard Lower Tertiary reservoirs. We own a 60% working interest in our North Platte discovery.

West Africa

•

We successfully drilled the Cameia #5 well which is intended to be a gas or water injection well for the Cameia field. We also re-entered and ran a production liner for the Cameia #3 well and recently began drilling operations on the Cameia #1A well to utilize it as a producer. Following the completion of drilling operations on the Cameia #1A well, we plan to temporarily suspend

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development well operations for the Cameia field and commence the drilling of two remaining exploration well obligations on Block 20. We expect to maintain this Block 20 exploration drilling activity into the first half of 2016 pending the closing of the Angola Transaction. Following the closing of the Angola Transaction and pursuant to the terms of the Purchase and Sale Agreement, we plan to transition operations on Block 20 and Block 21 to a new operator or operators.

Third Quarter 2015 Financial Highlights

•

We recorded a net loss from continuing operations of approximately $49.7 million, a 26% decrease from the third quarter of 2014. Total operating expenses were approximately $36.5 million, a decrease from the third quarter of 2014. The decrease in operating expenses for the three months ended September 30, 2015 as compared to the three months ended September 30, 2014, was primarily attributed to $10.9 million in dry hole expense and impairment charges during the three months ended September 30, 2015 compared to $17.4 million during the three months ended September 30, 2014.



•

Capital and operating expenditures from continuing operations were approximately $172.4 million for the three months ended September 30, 2015.



•

Including our existing cash, investments on hand, restricted cash, and restricted cash held within assets held for sale, as of September 30, 2015, we have approximately $1.7 billion of cash. This amount includes (i) the $250 million we received from Sonangol pursuant to the Purchase and Sale Agreement, which is classified as restricted cash pending the closing of the Angola Transaction and (ii) a cash collateralized letter of credit of approximately $82.5 million related to Block 20 that will be released following the consummation of the Angola Transaction.

Results of Operations

        The discussion of the results of operations and the period-to-period comparisons presented below for our consolidated continuing operations analyzes our historical results. The following discussion may not be indicative of future results.

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Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014

Consolidated:

        Oil and gas revenue.    We have not yet commenced production. Therefore, we did not realize any oil and gas revenue during the three months ended September 30, 2015 and 2014, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the three months ended September 30, 2015 and 2014:

        Seismic and exploration.    Seismic and exploration costs increased by $0.5 million during the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. The increase was primarily attributed to the acquisition of $10.1 million of seismic data acquired on various U.S. Gulf of Mexico prospects in the third quarter of 2015 compared to $7.9 million in the third quarter of 2014, and a decrease of $1.7 million of reprocessing costs on seismic data on various U.S. Gulf of Mexico and Gabon prospects in which we have a working interest during the three months ended September 30, 2015.

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        Dry hole expense and impairment.    Dry hole expense and impairment decreased by $6.5 million during the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. The decrease is reflected in the following table:

        General and administrative.    General and administrative costs decreased by $3.0 million during the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. The decrease of $3.0 million was attributable to a decrease of $2.7 million in insurance and other office supporting costs, an increase of $1.0 million in recoveries from partners for overhead and technical service charges pursuant to applicable joint operating agreements, and a $1.5 million decrease in consulting fees, all of which is offset by an increase of $0.7 million in salary and stock compensation and an increase of $1.5 million in legal fees.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the three months ended September 30, 2015, as compared to the three months ended September 30, 2014.

        Other income (expense).    Other income (expense) decreased by $8.3 million during the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. The decrease was primarily attributable to increased capitalized interest of $12 million due to project activity, offset by an increase of $3 million in amortization of debt discounts.

        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.

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Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014

Consolidated:

        Oil and gas revenue.    We have not yet commenced production. Therefore, we did not realize any oil and gas revenue during the nine months ended September 30, 2015 and 2014, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the nine months ended September 30, 2015 and 2014:

        Seismic and exploration.    Seismic and exploration costs increased by $17.5 million during the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. The increase was primarily attributed to the acquisition of $20.8 million in seismic data and $7.7 million of seismic reprocessing costs on seismic data on various U.S. Gulf of Mexico prospects in which we have a working interest during the nine months ended September 30, 2015. During the nine months ended September 30, 2014, we incurred $4.0 million in seismic data and $6.7 million in seismic reprocessing. This increase was offset by a decrease of $0.3 million in delay rentals.

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        Dry hole expense and impairment.    Dry hole expense and impairment decreased by $32.7 million during the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. The decrease is reflected in the following table:

        General and administrative.    General and administrative costs increased by $15.0 million during the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. The increase of $15.0 million was attributable to an increase of $6.3 million in salary and stock compensation, an increase of $3.1 million in legal fees, and a decrease of $9.6 million in recoveries from partners for overhead and technical service charges pursuant to applicable joint operating agreements, all of which is offset by a decrease of $4.0 million in consulting fees and office support expenses.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014.

        Other income (expense).    Other income (expense) decreased by $3.0 million during the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. The decrease was primarily attributable to a gain recognized on the sale of assets of $2.6 million in the second quarter of 2015.

        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.

        The discussion of the cash flows and the period-to-period comparisons presented below for our consolidated continuing operations analyzes our historical results. The following discussion may not be indicative of future results.

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Cash Flows

        Operating activities.    Net cash of $217.5 million and $0.8 million used in operating activities during nine months ended September 30, 2015 and 2014, respectively, were primarily related to cash payments for seismic and exploration expenses incurred in the U.S. Gulf of Mexico.

        Investing activities.    Net cash provided by investing activities for the nine months ended September 30, 2015 was $381.6 million compared to net cash used in investing activities of $878.9 million for the nine months ended September 30, 2014. The net cash used in investing activities for the nine months ended September 30, 2014 was primarily related to the investment of the $1.3 billion net proceeds from the 3.125% convertible senior notes due 2024 that were issued in May 2014. Net cash provided by investing activities for the nine months ended September 30, 2015 primarily consisted of proceeds from maturity of investment securities of $1.4 billion offset by an increase in restricted cash of $0.1 million, purchases of investment securities of $742.7 million and capital expenditures of $0.2 billion.

        Financing activities.    Net cash used in financing activities for the nine months ended September 30, 2015 was $4.0 million compared to net cash provided by financing activities of $1.3 billion for the nine months ended September 30, 2014. The $4.0 million used in financing activities for the nine months ended September 30, 2015 relates to debt issuance costs associated with the Facility Agreement entered into on May 29, 2015. The $1.3 billion provided by financing activities for the nine months ended September 30, 2014 relates to net proceeds from the 3.125% convertible senior notes due 2024 that were issued in May 2014.

Liquidity and Capital Resources

        As of September 30, 2015, we had approximately $1.7 billion in cash, which includes cash and cash equivalents, investments on hand, restricted cash, and restricted cash held within assets held for sale. This amount includes (i) the $250 million we received from Sonangol pursuant to the Purchase and Sale Agreement, which is classified as restricted cash pending the closing of the Angola Transaction and (ii) a cash collateralized letter of credit of approximately $82.5 million related to Block 20 that will be released following the consummation of the Angola Transaction. We expect to expend approximately $800 to $900 million for our capital and operating expenditures in 2015, which includes costs attributable to our operations on Blocks 20 and 21 offshore Angola. Any of our costs attributable to Blocks 20 and Block 21 for the period from January 1, 2015 through the date upon which we receive the Angolan government approvals shall be reimbursed by Sonangol pursuant to the terms of the Purchase and Sale Agreement. We expect to expend approximately $500 to $550 million for our continuing operations' capital and operating expenditures in 2015, which excludes costs attributable to our operations on Block 20 and 21 offshore Angola. Our capital and operating expenditures for our continuing operations were approximately $172.4 million and $373.9 million for the three and nine months ended September 30, 2015, respectively. Our capital and operating expenditures exclude interest payments, and items amortized in future years' operations. We expect that our existing cash on hand plus proceeds from the closing of the Angola Transaction will be sufficient to fund our current operations for the foreseeable future.

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        On May 29, 2015, Cobalt GOM #1 LLC, our indirect, wholly-owned subsidiary, entered into a Borrowing Base Facility Agreement (the "Facility Agreement") with Société Générale, as administrative agent, and certain other lenders. The Facility Agreement provides for a limited recourse $150 million senior secured reserve-based term loan facility. Currently, we have not borrowed any amounts under the Facility Agreement and the full $150 million remains available to us subject to the terms of the Facility Agreement.

        We currently do not generate any revenue from oil and gas production, although we expect to commence initial production from our Heidelberg project in the second quarter of 2016. Until substantial production is achieved, our primary sources of liquidity are expected to be cash on hand, the proceeds from the closing of the Angola Transaction, funds available to us under the Facility Agreement, proceeds from any future reserve-based lending arrangements, equity and debt financings, and asset-based ventures and asset monetizations.

        We expect to incur substantial expenditures and generate significant operating losses as we continue to:

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evaluate our discoveries through project appraisal and potential development towards first production and cash flow;



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continue our exploration activity on our existing acreage;



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seek the renewal of our worldwide exploration portfolio in locations applicable to our deepwater and below-salt exploration strength; and



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incur expenses related to operating as a public company and compliance with regulatory requirements.

        Our future financial condition and liquidity will be impacted by, among other factors, the timing or occurrence of the closing of the Angola Transaction, the production rates achieved upon initial production from our Heidelberg project, our ability to obtain financing, oil and gas prices, the number of commercially viable hydrocarbon discoveries made and the quantities of hydrocarbons discovered, the speed with which we can bring such discoveries to production, whether and to what extent we invest in additional oil leases and concessional licenses, and the actual cost of exploration, appraisal and development of our prospects. We may also seek additional funding through equity and debt financings. Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our existing stockholders. For example, if we raise additional funds by issuing additional equity securities, further dilution to our existing stockholders will result. Funds available to us under existing or future reserve-based lending arrangements, including the Facility Agreement, may decrease in connection with periodic redeterminations of the value of the oil and gas reserves pledged pursuant to such lending arrangements. If we are unable to obtain or maintain funding on a timely basis or on acceptable terms, we may be required to significantly curtail our exploration, appraisal and development activities.

Royalty Agreement

        On February 13, 2009 we entered into a restated overriding royalty agreement (the "Royalty Agreement") with Whitton Petroleum Services Limited ("Whitton"). Pursuant to the terms of the Royalty Agreement, in consideration for Whitton's consulting services in connection with Blocks 9, 20 and 21 offshore Angola and our business and operations in Angola, Whitton is to receive quarterly payments (measured in U.S. Dollars) equal to 2.5% of the market price of our share of the crude oil produced in such quarter and not used in petroleum operations, less the cost recovery crude oil, assuming the applicable government contract is a production sharing agreement. If the applicable government contract is a risk services agreement and not a production sharing agreement (which is the case with respect to Blocks 9 and 21), pursuant to the Royalty Agreement we have undertaken to agree

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with Whitton an economic model (the "RSA Economic Model") containing terms equivalent to those in such risk services agreement and using actual production and costs. The RSA Economic Model has not yet been agreed with Whitton. Should we assign all of our interest in such Blocks, Whitton may, depending on the option we elect, have the right to receive the market value of its rights and obligations under the Royalty Agreement, based upon the amount in cash a willing transferee of such rights and obligations would pay a willing transferor in an arm's length transaction. Given potential issues regarding how such market value of Whitton's rights and obligations under the Royalty Agreement could be calculated, including, without limitation, outstanding issues related to the RSA Economic Model, the amount of any such payment that could be owed to Whitton upon completion of the Angola Transaction is uncertain, but may be material. The Royalty Agreement is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q.

Critical Accounting Policies

        Our significant accounting policies are summarized in Note 1 of Notes to Consolidated Financial Statements included in our 2014 Annual Report on Form 10-K for the year ended December 31, 2014. Also refer to the Notes to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Report.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

        There have been no material changes in market risk from the information provided under Part II, Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" in our 2014 Annual Report on Form 10-K for the year ended December 31, 2014.

Item 4.    Controls and Procedures

        We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Securities Exchange Act of 1934, as amended (the "Exchange Act"), Rules 13a-15 and 15d-15 as of the end of the period covered by this Report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and such information is accumulated and communicated to management, as appropriate to allow timely decisions regarding required disclosure.

        There were no changes in our internal control over financial reporting during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

        There have been no material changes in the information provided under Part I, Item 3. "Legal Proceedings" in our 2014 Annual Report on Form 10-K for the year ended December 31, 2014.

Item 1A.    Risk Factors

        There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014 other than the following:

The sale of our interests in Blocks 20 and 21 offshore Angola is subject to Angolan government approval, which may be delayed or may not be consummated. In addition, pursuant to the terms of the purchase and sale agreement governing such sale, we are obligated to transfer our interests in Block 20 and 21 prior to receipt of all consideration for such transfer.

        On August 22, 2015, we executed a purchase and sale agreement (the "Purchase and Sale Agreement") with Sociedade Nacional de Combustíveis de Angola—Empresa Pública ("Sonangol") for the sale to Sonangol of the share capital of certain of our indirect, wholly-owned subsidiaries which hold our working interests in each of Blocks 20 and 21 offshore Angola. The consummation of this sale is subject to approval by the Angolan Ministry of Petroleum pursuant to the Angolan Petroleum Activities Law. If such approval is not received within one year from the execution date of the Purchase and Sale Agreement, this agreement will automatically terminate and any obligations executed by the parties thereto shall be restituted in order to put such parties in their original positions as if no agreement had been executed. There can be no assurance that such Angolan government approval will be forthcoming within the required time period. The closing of the sale of our interests in Blocks 20 and 21 could be delayed or ultimately not consummated, which could have a material adverse effect on our business, financial condition and results of operations.

        Pursuant to the Purchase and Sale Agreement, we are required to provide certain transition services to Sonangol, which may include continuing to support operations on Blocks 20 and 21 on a no-profit no-loss basis until Sonangol nominates a new operator or operators of such blocks, despite the fact that we may have already transferred the share capital of our subsidiaries holding our working interests in Blocks 20 and 21 to Sonangol. The duration of this transition period could be lengthy and require us to devote a substantial amount of resources to maintain operations on Blocks 20 and 21, which could have a material adverse effect on our business, financial condition or results of operations, and we may not be indemnified against any losses or liabilities that we may incur during the transition period. Furthermore, there can be no assurance that Sonangol will be able to nominate a new operator or operators for such blocks in a timely manner, which may delay the consummation of the sale of our interests in Blocks 20 and 21, or affect whether the required Angolan government approvals will be forthcoming by year-end.

        The consideration payable by Sonangol for our interests in Blocks 20 and 21 is to be paid in three installments. Should Angolan government approval for the sale be obtained, and should Sonangol pay the first two installments and reimburse us for our share of the costs attributable to Blocks 20 and 21 from the period from January 1, 2015 through the date upon which we receive the Angolan government approvals, we are obligated under the terms of the Purchase and Sale Agreement to transfer the share capital of our subsidiaries holding our working interests in Blocks 20 and 21 to Sonangol. The third installment, in an amount of $200 million, is due within the earlier of 30 days following the execution of a transfer of operations agreement, which will contain terms and conditions governing the transition of operations on each of Block 20 and Block 21 from us to a new operator, or one year from the execution of the Purchase and Sale Agreement. This third installment may not become payable until after the consummation of the transfer of our working interests. Should this occur, we would be subject to the risk that such third installment is not paid in full, or at all. The Purchase and Sale Agreement is governed by the laws of the Republic of Angola and requires any disputes thereunder to be settled by arbitration. There can be no assurance that we would be successful in enforcing our rights under the Purchase and Sale Agreement. Any delays in the receipt, or failure to receive, the full amount of the consideration set forth in the Purchase and Sale Agreement could have a material adverse effect on our business, financial condition and results of operations.

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

        None.

Item 3.    Defaults Upon Senior Securities

        None.

Item 4.    Mine Safety Disclosures

        Not applicable.

Item 5.    Other Information

        None.

Item 6.    Exhibits

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 3, 2015

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EXHIBIT INDEX

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