Kosmos Energy Ltd. - FORM 10-K - EX-99.1 - EXHIBIT 99.1

Attached files

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EX-32.2 - EXHIBIT 32.2 - Kosmos Energy Ltd.	kos-12312017x10kex322.htm
EX-32.1 - EXHIBIT 32.1 - Kosmos Energy Ltd.	kos-12312017x10kex321.htm
EX-31.2 - EXHIBIT 31.2 - Kosmos Energy Ltd.	kos-12312017x10kex312.htm
EX-31.1 - EXHIBIT 31.1 - Kosmos Energy Ltd.	kos-12312017x10kex311.htm
EX-23.2 - EXHIBIT 23.2 - Kosmos Energy Ltd.	kos-12312017xex232.htm
EX-23.1 - EXHIBIT 23.1 - Kosmos Energy Ltd.	kos-12312017xex231.htm
EX-21.1 - EXHIBIT 21.1 - Kosmos Energy Ltd.	kos-12312017xex211.htm
EX-10.48 - EXHIBIT 10.48 - Kosmos Energy Ltd.	kos-12312017xex1048.htm
EX-10.47 - EXHIBIT 10.47 - Kosmos Energy Ltd.	kos-12312017xex1047.htm
EX-10.46 - EXHIBIT 10.46 - Kosmos Energy Ltd.	kos-12312017xex1046.htm
EX-10.45 - EXHIBIT 10.45 - Kosmos Energy Ltd.	kos-12312017xex1045.htm
EX-10.44 - EXHIBIT 10.44 - Kosmos Energy Ltd.	kos-12312017xex1044.htm
EX-10.43 - EXHIBIT 10.43 - Kosmos Energy Ltd.	kos-12312017xex1043.htm
EX-10.42 - EXHIBIT 10.42 - Kosmos Energy Ltd.	kos-12312017xex1042.htm
10-K - 10-K - Kosmos Energy Ltd.	kos-12312017x10k.htm

Kosmos Energy, LLC

January 24, 2018

Page 1

Exhibit 99.1

KOSMOS ENERGY, LLC

ESTIMATED

FUTURE RESERVES AND INCOME

ATTRIBUTABLE TO CERTAIN INTERESTS

IN THE GREATER JUBILEE AND TEN PROJECT AREAS

OFFSHORE, GHANA

AND

CEIBA AND OKUME PROJECT AREAS

OFFSHORE, EQUATORIAL GUINEA

SEC PARAMETERS

PROVED RESERVES

AS OF

DECEMBER 31, 2017

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 2

TABLE OF CONTENTS

GREATER JUBILEE AND TEN PROJECT AREA

OFFSHORE, GHANA

AND

CEIBA AND OKUME PROJECT AREAS

OFFSHORE, EQUATORIAL GUINEA

DISCUSSION

PETROLEUM RESERVES DEFINITIONS

ECONOMIC PROJECTIONS

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 3

KOSMOS ENERGY, LLC

Estimated

Future Reserves and Income

Attributable to Certain Interests

In the Greater Jubilee and TEN Project Areas

Offshore, Ghana

And

In the Ceiba and Okume Project Areas

Offshore, Equatorial Guinea

SEC Parameters

Proved Reserves

As of

December 31, 2017



/s/ Guale Ramirez		/s/ Tosin Famurewa
Guale Ramirez, P.E.		Tosin Famurewa, P.E., S.P.E.C.
TBPE License No. 48318		TBPE License No. 100569
Executive Vice President		Senior Vice President – International
[SEAL]		[SEAL]



/s/ Christine E. Neylon		/s/ Victor Abu
Christine E. Neylon, P.E.		Victor Abu
TBPE License No. 122128		Senior Petroleum Engineer
Senior Petroleum Engineer
[SEAL]

RYDER SCOTT COMPANY, L.P.

TBPE Firm Registration No. F-1580

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 1

January 24, 2018

Kosmos Energy, LLC

8176 Park Lane, Suite 500

Dallas, Texas 75231

Gentlemen:

At your request, Ryder Scott Company, L.P. (Ryder Scott) has prepared an estimate of the proved reserves, future production, and income attributable to certain interests of Kosmos Energy, LLC (Kosmos) as of December 31, 2017. The subject properties are located in the country of Ghana, offshore West Africa, in the West Cape Three Points (WCTP) and Deep Water Tano (DWT) blocks, hereafter referred to as the “Greater Jubilee and TEN Project Areas,” and in the country of Equatorial Guinea (EG), offshore Central Africa, in the G and F blocks, hereafter referred to as the “Ceiba and Okume Project Areas.” The reserves and income data were estimated based on the definitions and disclosure guidelines of the United States Securities and Exchange Commission (SEC) contained in Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register (SEC regulations). Our third party study, completed on January 20, 2018 and presented herein, was prepared for public disclosure by Kosmos in filings made with the SEC in accordance with the disclosure requirements set forth in the SEC regulations.

The properties evaluated by Ryder Scott in this report represent 100 percent of the total net proved liquid hydrocarbon reserves and 100 percent of the total net proved gas reserves of Kosmos as of December 31, 2017.

The estimated reserves and future net income amounts presented in this report, as of December 31, 2017, are related to hydrocarbon prices. The hydrocarbon prices used in the preparation of this report are based on the average prices during the 12-month period prior to the “as of date” of this report, determined as the unweighted arithmetic averages of the prices in effect on the first-day-of-the-month for each month within such period, unless prices were defined by contractual arrangements, as required by the SEC regulations. Actual future prices may vary significantly from the prices required by SEC regulations; therefore, volumes of reserves actually recovered and the amounts of income actually received may differ significantly from the estimated quantities presented in this report. The results of this study are summarized as follows.

SUITE 600, 1015 4TH STREET, S.W. CALGARY, ALBERTA T2R 1J4 TEL (403) 262-2799 FAX (403) 262-2790

621 17TH STREET, SUITE 1550 DENVER, COLORADO 80293-1501 TEL (303) 623-9147 FAX (303) 623-4258

Kosmos Energy, LLC

January 24, 2018

Page 2

SEC PARAMETERS

Estimated Net Reserves and Income Data

Derived Through Certain Interest in the Greater Jubilee, TEN, Ceiba and Okume Project Areas

Kosmos Energy, LLC

As of December 31, 2017



	Proved
	Developed							Total
	Producing		Non-Producing		Undeveloped			Proved
Net Remaining Reserves
Greater Jubilee Project Area
Oil/Condensate – MBBL	39,539		510		10,444			50,493
Fuel Gas – MMCF	11,646		0		0			11,646
Sales Gas – MMCF	0		0		0			0

TEN Project Area
Oil/Condensate – MBBL	18,695		0		12,162			30,857
Fuel Gas – MMCF	8,842		0		0			8,842
Sales Gas – MMCF	17,352		0		11,004			28,356

Total Ghana
Oil/Condensate – MBBL	58,234		510		22,606			81,350
Fuel Gas – MMCF	20,488		0		0			20,488
Sales Gas – MMCF	17,352		0		11,004			28,356

Ceiba Project Area
Oil/Condensate – MBBL	7,636		700		0			8,336
Fuel Gas – MMCF	7,626		0		0			7,626
Sales Gas – MMCF	0		0		0			0

Okume Project Area
Oil/Condensate – MBBL	10,278		0		0			10,278
Fuel Gas – MMCF	4,967		0		0			4,967
Sales Gas – MMCF	0		0		0			0

Total Equatorial Guinea
Oil/Condensate – MBBL	17,914		700		0			18,614
Fuel Gas – MMCF	12,593		0		0			12,593
Sales Gas – MMCF	0		0		0			0

Total Company
Oil/Condensate – MBBL	76,148		1,210		22,606			99,964
Fuel Gas – MMCF	33,081		0		0			33,081
Sales Gas – MMCF	17,352		0		11,004			28,356

Income Data (M$)
Greater Jubilee Project Area
Future Gross Revenue	$	2,155,822	$	27,810	$	569,434		$	2,753,066
Deductions	1,182,683		11,033		558,285			1,752,001
Future Net Income (FNI)	$	973,139		$16,777	$	11,149			$1,001,065

Discounted FNI @ 10% Before Taxes	$	720,174		$14,033	$	(28,321	)	$	705,886
Discounted FNI @ 10% After Taxes	$	582,322		$11,252	$	(49,722	)	$	543,852

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 3





TEN Project Area
Future Gross Revenue	$	1,028,204	$	0	$	668,740	$	1,696,944
Deductions	662,880		0		560,789		1,223,669
Future Net Income (FNI)	$	365,324		$0		$107,951	$	473,275

Discounted FNI @ 10% Before Taxes	$	320,619		$0	$	84,649	$	405,268
Discounted FNI @ 10% After Taxes	$	332,933		$0	$	85,184	$	418,117
Total Ghana
Future Gross Revenue	$	3,184,026	$	27,810	$	1,238,174	$	4,450,010
Deductions	1,845,563		11,033		1,119,074		2,975,670
Future Net Income (FNI)		$1,338,463		$16,777	$	119,100		$1,474,340

Discounted FNI @ 10% Before Taxes	$	1,040,793	$	14,033	$	56,328	$	1,111,154
Discounted FNI @ 10% After Taxes	$	915,255		$11,252	$	35,462	$	961,969

Ceiba Project Area
Future Gross Revenue	$	411,490	$	37,744	$	0	$	449,234
Deductions	306,630		24,938		0		331,568
Future Net Income (FNI)		$104,860		$12,806		$0		$117,666

Discounted FNI @ 10% Before Taxes	$	127,453	$	16,285	$	0	$	143,738
Discounted FNI @ 10% After Taxes	$	57,815	$	8,005		$0	$	65,820

Okume Project Area
Future Gross Revenue	$	553,859	$	0	$	0	$	553,859
Deductions	437,360		0		0		437,360
Future Net Income (FNI)	$	116,499	$	0	$	0	$	116,499

Discounted FNI @ 10% Before Taxes	$	157,892	$	0	$	0	$	157,892
Discounted FNI @ 10% After Taxes	$	63,325	$	0	$	0	$	63,325

Total Equatorial Guinea
Future Gross Revenue	$	965,349	$	37,744	$	0	$	1,003,093
Deductions	743,990		24,938		0		768,928
Future Net Income (FNI)	$	221,359		$12806		$0	$	234,165

Discounted FNI @ 10% Before Taxes	$	285,345	$	16,285	$	0	$	301,630
Discounted FNI @ 10% After Taxes	$	121,140	$	8,005	$	0	$	129,145

Total Company
Future Gross Revenue	$	4,149,375	$	65,554	$	1,238,174	$	5,453,103
Deductions	2,589,553		35,971		1,119,074		3,744,598
Future Net Income (FNI)	$	1,559,822	$	29,583	$	119,100	$	1,708,505

Discounted FNI @ 10% Before Taxes	$	1,326,138	$	30,318	$	56,328	$	1,412,784
Discounted FNI @ 10% After Taxes	$	1,036,395	$	19,257	$	35,462	$	1,091,114

Volumetric Data (Gross (100%))
Greater Jubilee Project Area
Original Oil In Place (OOIP) – MBBL							1,193,967
Estimated Ultimate Recovery (EUR) – MBBL	394,408		2,230		45,659		442,297

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 4



TEN Project Area
Original Oil In Place (OOIP) – MBBL				665,274
Estimated Ultimate Recovery (EUR) – MBBL	141,523	0	75,309	216,832

Total Ghana
Original Oil In Place (OOIP) – MBBL				1,859,241
Estimated Ultimate Recovery (EUR) – MBBL	535,931	2,230	120,968	659,129

Ceiba Project Area
Original Oil In Place (OOIP) – MBBL*
Estimated Ultimate Recovery (EUR) – MBBL	100,202	114,990	0	215,192

Okume Project Area
Original Oil In Place (OOIP) – MBBL*
Estimated Ultimate Recovery (EUR) – MBBL	224,821	20,132	0	244,953



Total Equatorial Guinea
Original Oil In Place (OOIP) – MBBL*
Estimated Ultimate Recovery (EUR) – MBBL	325,023	135,122	0	460,145

Total Company
Original Oil In Place (OOIP) – MBBL*
Estimated Ultimate Recovery (EUR) – MBBL	860,954	137,352	120,968	1,119,274

*Volumetric analyses were not done for the Ceiba and Okume Project Areas as the reserves were estimated by performance and analogy. Consequently, Original Oil In Place (OOIP) volumes are not displayed for these project areas, Total Equatorial Guinea or Total Company.

Liquid hydrocarbons are expressed in standard 42 gallon barrels and shown herein as thousands of barrels (MBBL). Fuel gas volumes are attributed to those volumes of gas that are consumed for fuel in field operations, while sales gas volumes are reported on an “as sold basis.” These gas volumes are expressed in millions of cubic feet (MMCF) at the official temperature and pressure bases of the areas in which the gas reserves are located. In this report, the revenues, deductions, and income data are expressed as thousands of U.S. dollars (M$).

The estimates of the reserves, future production, and income attributable to properties in this report were prepared using an economic model developed in Microsoft EXCEL. The program was used at the request of Kosmos. Ryder Scott has found this program to be generally acceptable, but notes that certain summaries and calculations may vary due to rounding and may not exactly match the sum of the properties being summarized. Furthermore, one line economic summaries may vary slightly from the more detailed cash flow projections of the same properties, also due to rounding. The rounding differences are not material.

The deductions include the normal direct costs of operating the wells and facilities, development costs, and certain abandonment costs net of salvage. Deductions in the Greater Jubilee and TEN project areas include Additional Oil Entitlements (“AOE”). AOE is a contractual mechanism that prevents the contractor group from collecting “windfall profits” and is treated herein as a deduction to the future gross revenue; however, for the Greater Jubilee and TEN Project Areas our economic analysis indicates no AOE deductions for the proved reserves. There are no production taxes associated with the Greater Jubilee, TEN, Ceiba and Okume Project Areas. The “Discounted FNI @ 10% Before Taxes” shown above does not include deductions for corporate income taxes and general administrative (G&A) overhead, and has

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 5

not been adjusted for outstanding loans that may exist, nor does it include any adjustment for cash on hand or undistributed income. This Future Net Income (FNI) value was then adjusted by deducting corporate income taxes and the result is shown above as “Discounted FNI @ 10% After Taxes”. The AOE calculation is determined at the block level and includes a rate of return calculation that is derived on an after corporate income tax basis based on interpretations of tax considerations made by Kosmos. All deductions pertaining to operating expenses, depletion, abandonment and royalties that were applied towards the calculation of corporate income taxes are strictly related to the Greater Jubilee, TEN, Ceiba and Okume Project Areas. There are no corporate income tax deductions for the AOE calculation that are related to expenditures, royalties, or any other deductible items outside of the Greater Jubilee and TEN Project area.

Due to the sequential time difference between when taxes are incurred and when they are paid and accounted for in the cash flow projections, certain years may show a negative annual FNI. The tax credits experienced in the Ceiba and Okume Project Areas are the allocation of the economic benefit generated when a component asset (Okume Project Area in this case) generates excess tax basis that is absorbed by another asset (Ceiba Project Area in this case) in regimes that ringfence assets together to determine the total income tax owed (in this case, the taxes for the Ceiba and Okume Project Areas are ringfenced and pooled at a block / contract level). The economic model’s sum of the income taxes for the Ceiba and Okume Project Areas will always be equivalent to the actual amount due at the ringfenced level.

In a few instances in the Greater Jubilee and TEN Project Areas, a tax credit is generated due to the reconciliation between two tax calculation methodologies. Tax reconciliation is required due to an updated tax agreement between Kosmos and the Ghana government. In addition, Kosmos is reimbursed for costs carried through first oil which can produce credits or deductions affecting the net cash flows in the Taxes & Adjustments section. Corporate tax calculations, specifically taxable income, also include deductions from outside the ringfence such as the interest expense deduction and G&A. The interest expense deduction has significant impact on tax payments and materially affects after tax FNI. Ryder Scott did not audit these deductions. In the Greater Jubilee and TEN Project Areas, abandonment costs (included in the “Development Costs” column of the cash flow projections) are triggered and escrowed several years before the economic limit is reached, and this may result in negative FNI values for certain years prior to abandonment.

Liquid hydrocarbon reserves account for approximately 99.69 percent and gas reserves account for the remaining 0.31 percent of the total future gross revenue from proved reserves. The discounted future net income shown above was calculated using a discount rate of 10 percent per annum compounded annually. These results are presented for your information and should not be construed as our estimate of fair market value.

Reserves Included in This Report

The proved reserves included herein conform to the definition as set forth in the Securities and Exchange Commission’s Regulations Part 210.4-10(a). An abridged version of the SEC reserves definitions from 210.4-10(a) entitled “Petroleum Reserves Definitions” is included as an attachment to this report.

The various proved reserve status categories are defined under the attachment entitled “Petroleum Reserves Status Definitions and Guidelines” in this report. The proved developed non-producing reserves included herein consist of the shut-in and behind-pipe categories.

Reserves are “estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations.” All reserve estimates involve an assessment of the uncertainty relating the likelihood that

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

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the actual remaining quantities recovered will be greater or less than the estimated quantities determined as of the date the estimate is made. The uncertainty depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved. Unproved reserves are less certain to be recovered than proved reserves, and may be further sub-classified as probable and possible reserves to denote progressively increasing uncertainty in their recoverability. At Kosmos’ request, this report addresses only the proved reserves attributable to the properties evaluated herein.

Proved oil and gas reserves are “those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward.” The proved reserves included herein were estimated using deterministic methods. The SEC has defined reasonable certainty for proved reserves, when based on deterministic methods, as a “high degree of confidence that the quantities will be recovered.”

Proved reserve estimates will generally be revised only as additional geologic or engineering data become available or as economic conditions change. For proved reserves, the SEC states that “as changes due to increased availability of geoscience (geological, geophysical, and geochemical), engineering, and economic data are made to the estimated ultimate recovery (EUR) with time, reasonably certain EUR is much more likely to increase or remain constant than to decrease.” Moreover, estimates of proved reserves may be revised as a result of future operations, effects of regulation by governmental agencies or geopolitical or economic risks. Therefore, the proved reserves included in this report are estimates only and should not be construed as being exact quantities, and if recovered, the revenues therefrom, and the actual costs related thereto, could be more or less than the estimated amounts.

The proved reserves reported herein are limited to the period prior to expiration of current contracts providing the legal rights to produce, or a revenue interest in such production. Furthermore, the subject properties located in Ghana and EG may be subjected to significantly varying contractual fiscal terms that affect the net revenue to Kosmos for the production of these volumes. The prices and economic return received for these net volumes can vary significantly based on the terms of these contracts. Therefore, when applicable, Ryder Scott reviewed the fiscal terms of such contracts and discussed with Kosmos the net economic benefit attributed to such operations for the determination of the net hydrocarbon volumes and income thereof. Ryder Scott has not conducted an exhaustive audit or verification of such contractual information. Neither our review of such contractual information nor our acceptance of Kosmos representations regarding such contractual information should be construed as a legal opinion on this matter.

Ryder Scott did not evaluate the country and geopolitical risks in the countries of Ghana and EG, where Kosmos operates or has interests. Kosmos operations may be subject to various levels of governmental controls and regulations. These controls and regulations may include, but may not be limited to, matters relating to the legal rights to produce hydrocarbons, drilling and production practices, environmental protection, marketing and pricing policies, royalties, various taxes and levies including income tax and are subject to change from time to time. Such changes in governmental regulations and policies may cause volumes of proved reserves actually recovered and amounts of proved income actually received to differ significantly from the estimated quantities.

The estimates of proved reserves presented herein were based upon a detailed study of the properties in which Kosmos owns an interest; however, we have not made any field examination of the properties. No consideration was given in this report to potential environmental liabilities that may exist nor were any costs included for potential liabilities to restore and clean up damages, if any, caused by past operating practices.

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

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Estimates of Reserves

The estimation of reserves involves two distinct determinations. The first determination results in the estimation of the quantities of recoverable oil and gas and the second determination results in the estimation of the uncertainty associated with those estimated quantities in accordance with the definitions set forth by the Securities and Exchange Commission’s Regulations Part 210.4-10(a). The process of estimating the quantities of recoverable oil and gas reserves relies on the use of certain generally accepted analytical procedures. These analytical procedures fall into three broad categories or methods: (1) performance-based methods; (2) volumetric-based methods; and (3) analogy. These methods may be used individually or in combination by the reserve evaluator in the process of estimating the quantities of reserves. Reserve evaluators must select the method or combination of methods which in their professional judgment is most appropriate given the nature and amount of reliable geoscience and engineering data available at the time of the estimate, the established or anticipated performance characteristics of the reservoir being evaluated, and the stage of development or producing maturity of the property.

In many cases, the analysis of the available geoscience and engineering data and the subsequent interpretation of this data may indicate a range of possible outcomes in an estimate, irrespective of the method selected by the evaluator. When a range in the quantity of reserves is identified, the evaluator must determine the uncertainty associated with the incremental quantities of the reserves. If the reserve quantities are estimated using the deterministic incremental approach, the uncertainty for each discrete incremental quantity of the reserves is addressed by the reserve category assigned by the evaluator. Therefore, it is the categorization of reserve quantities as proved, probable and/or possible that addresses the inherent uncertainty in the estimated quantities reported. For proved reserves, uncertainty is defined by the SEC as reasonable certainty wherein the “quantities actually recovered are much more likely than not to be achieved.” The SEC states that “probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.” The SEC states that “possible reserves are those additional reserves that are less certain to be recovered than probable reserves and the total quantities ultimately recovered from a project have a low probability of exceeding proved plus probable plus possible reserves.” All quantities of reserves within the same reserve category must meet the SEC definitions as noted above.

Estimates of reserves quantities and their associated reserve categories may be revised in the future as additional geoscience or engineering data become available. Furthermore, estimates of reserves quantities and their associated reserve categories may also be revised due to other factors such as changes in economic conditions, results of future operations, effects of regulation by governmental agencies or geopolitical or economic risks as previously noted herein.

The proved reserves for the properties included herein were estimated by a combination of performance methods, analogy and the volumetric methods. One hundred percent of the proved producing reserves attributable to producing wells and/or reservoirs were estimated by a combination of methods. The performance methods include, but may not be limited to, reservoir simulation, which utilized extrapolations of historical production and pressure data available through December 15, 2017 in those cases where such data were considered to be definitive. The data utilized in this analysis were furnished to Ryder Scott by Kosmos and were considered sufficient for the purpose thereof.

One hundred percent of the proved developed non-producing and undeveloped reserves included herein were estimated by a combination of the volumetric method and numerical reservoir simulation. These methods were used as a result of limited production performance data to establish performance trends or to use as a basis for reserve estimates. Well and seismic data incorporated into our volumetric analysis were provided by Kosmos and were considered sufficient for the purpose thereof.

The field development plan was incorporated into the newly developed reservoir simulation model for the TEN Project Area to estimate recovery factors. These recovery factors, when compared with actual and predicted estimates from the offset Greater Jubilee Project Area are considered reasonable. The

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

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January 24, 2018

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Greater Jubilee Project Area has historically been operated under a pressure maintenance plan by means of gas and water injection. The same type of pressure maintenance method is planned for the TEN Project Area.

To estimate economically recoverable proved oil and gas reserves and related future net cash flows, we consider many factors and assumptions including, but not limited to, the use of reservoir parameters derived from geological, geophysical and engineering data that cannot be measured directly, economic criteria based on current costs and SEC pricing requirements, and forecasts of future production rates. Under the SEC regulations 210.4-10(a)(22)(v) and (26), proved reserves must be anticipated to be economically producible from a given date forward based on existing economic conditions including the prices and costs at which economic producibility from a reservoir is to be determined. While it may reasonably be anticipated that the future prices received for the sale of production and the operating costs and other costs relating to such production may increase or decrease from those under existing economic conditions, such changes were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation.

Kosmos has informed us that they have furnished us all of the material accounts, records, geological and engineering data, and reports and other data required for this investigation. In preparing our forecast of future proved production and income, we have relied upon data furnished by Kosmos with respect to property interests and contractual terms that govern future net income, production and well tests from examined wells, normal direct costs of operating the Greater Jubilee, TEN, Ceiba and Okume Project Areas and all the required facilities such as the FPSO, other costs such as transportation and/or processing fees, recompletion and development costs, development plans, abandonment costs after salvage, product prices based on the SEC regulations, adjustments or differentials to product prices, geological structural and isochore maps, well logs, core analyses, and pressure measurements. Ryder Scott reviewed such factual data for its reasonableness; however, we have not conducted an independent verification of the data furnished by Kosmos. We consider the factual data used in this report appropriate and sufficient for the purpose of preparing the estimates of reserves and future net revenues herein.

In summary, we consider the assumptions, data, methods and analytical procedures used in this report appropriate for the purpose hereof, and we have used all such methods and procedures that we consider necessary and appropriate to prepare the estimates of reserves herein. The proved reserves included herein were determined in conformance with the United States Securities and Exchange Commission (SEC) Modernization of Oil and Gas Reporting; Final Rule, including all references to Regulation S-X and Regulation S-K, referred to herein collectively as the “SEC Regulations.” In our opinion, the proved reserves presented in this report comply with the definitions, guidelines and disclosure requirements as required by the SEC regulations.

Future Production Rates

For the Greater Jubilee Project Area, our forecasts of future production rates are based on a combination of historical performance data, volumetric analysis and a robust numerical simulation model. Future production rates were held constant, or adjusted for the effects of curtailment where appropriate, until a decline in ability to produce was anticipated. An estimated “simulation based decline rate” was then applied until depletion of the reserves.

For the TEN Project Area, our forecasts of future production rates are based on the limited historical performance data, history-matched numerical simulation model predictions. These forecasts were adjusted to limit the daily oil production output to the FPSO capacity of 80,000 barrels per day less a five percent downtime assumption. Well test and early performance data from active, offset wells were used to estimate the anticipated initial production rates for those wells or locations that are not currently producing. For reserves not yet on production, sales were estimated to commence at an anticipated date furnished by Kosmos. Wells or locations may start producing earlier or later than anticipated in our

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

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January 24, 2018

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estimates due to unforeseen factors causing a change in the timing to initiate production. Such factors may include delays due to weather, the availability of rigs, the sequence of drilling, completing and/or recompleting wells and/or constraints set by regulatory bodies.

In the Ceiba and Okume Project Areas, for wells currently on production, our forecasts of future production rates are based on historical performance data. If no production decline trend has been established, future production rates were held constant, or adjusted for the effects of curtailment where appropriate, until a decline in ability to produce was anticipated. An estimated rate of decline was then applied until depletion of the reserves. If a decline trend has been established, this trend was used as the basis for estimating future production rates.

The future production rates from the subject wells and locations may be more or less than estimated because of changes including, but not limited to, reservoir performance, operating conditions related to surface facilities, compression and artificial lift, pipeline capacity and/or operating conditions, producing market demand and/or allowables or other constraints set by regulatory bodies.

Hydrocarbon Prices

The hydrocarbon prices used herein are based on SEC price parameters using the average prices during the 12-month period prior to the “as of date” of this report, determined as the unweighted arithmetic averages of the prices in effect on the first-day-of-the-month for each month within such period, unless prices were defined by contractual arrangements. For hydrocarbon products sold under contract, the contract prices, including fixed and determinable escalations, exclusive of inflation adjustments, were used until expiration of the contract. All the proved volumes projected herein are forecast to be recovered prior to contract expiration.

Kosmos furnished us with the above mentioned average prices in effect on December 31, 2017. These initial SEC hydrocarbon prices were determined using the 12-month average first-day-of-the-month benchmark prices appropriate to the geographic area where the hydrocarbons are sold. These benchmark prices are prior to the adjustments for differentials as described herein. The table below summarizes the “benchmark prices” and “price reference” used for the geographic area included in this report.

The product prices that were actually used to determine the future gross revenue for the subject property reflect adjustments to the benchmark prices for gravity, quality, local conditions, and/or distance from market, referred to herein as “differentials.” The differentials used in the preparation of this report were furnished to us by Kosmos. In the case of the Greater Jubilee Project Area, TEN Project Area, and the Ceiba and Okume Project Areas, Kosmos has estimated that the applicable differentials are +$0.104/bbl, +$0.021/bbl and -$0.535/bbl respectively. The differentials furnished to us were accepted as factual data and reviewed by us for their reasonableness; however, we have not conducted an independent verification of the data used by Kosmos to determine these differentials.

In addition, the table below summarizes the net volume weighted benchmark prices adjusted for differentials and referred to herein as the “average realized prices.” The average realized prices shown in the table below were determined from the total future gross revenue before production taxes and the total net reserves for the geographic area and presented in accordance with SEC disclosure requirements for each of the geographic areas included in the report.

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 10



Geographic Area	Product	Price Reference	Average Benchmark Price	Average Realized Price
West Africa
Greater Jubilee Project Area	Oil	Brent	$54.42/Bbl	$54.52/Bbl
TEN Project Area	Oil	Brent	$54.42/Bbl	$54.44/Bbl
TEN Project Area	Gas	Contract	$0.60/mcf	$0.60/mcf

Central Africa
Ceiba Project Area	Oil	Brent	$54.42/Bbl	$53.89/Bbl
Okume Project Area	Oil	Brent	$54.42/Bbl	$53.89/Bbl

The effects of derivative instruments designated as price hedges of oil and gas quantities are not reflected in our individual property evaluations.

Costs

Operating costs for the properties in this report were furnished by Kosmos and are based on their operating expense reports for the Greater Jubilee and TEN Project Areas, and Ceiba and Okume Project Areas. Such costs include only those costs directly applicable to the subject properties. The operating costs include a portion of general and administrative costs allocated directly to the contract area and wells. The operating costs furnished to us were accepted as factual data and reviewed by us for their reasonableness; however, we have not conducted an independent verification of the operating cost data used by Kosmos. No deduction was made for loan repayments, interest expenses, or exploration and development prepayments that were not charged directly to the contract area or wells.

Development costs were furnished to us by Kosmos and are based on authorizations for expenditure for the proposed work or actual costs for similar projects. The development costs furnished to us were accepted as factual data and reviewed by us for their reasonableness; however, we have not conducted an independent verification of these costs. The estimated net cost of abandonment after salvage was included for properties where abandonment costs net of salvage were significant. The estimates of the net abandonment costs furnished by Kosmos were accepted without independent verification.

The proved developed non-producing and undeveloped reserves in this report have been incorporated herein in accordance with Kosmos’ plans to develop these reserves as of December 31, 2017. The implementation of Kosmos’ development plans as presented to us and incorporated herein is subject to the approval process adopted by Kosmos’ management. As the result of our inquiries during the course of preparing this report, Kosmos has informed us that the development activities included herein have been subjected to and received the internal approvals required by Kosmos management at the appropriate local, regional and/or corporate level. In addition to the internal approvals as noted, certain development activities may still be subject to specific partner AFE processes, Joint Operating Agreement (JOA) requirements or other administrative approvals external to Kosmos. Additionally, Kosmos has informed us that they are not aware of any legal, regulatory or political obstacles that would significantly alter their plans. While these plans could change or evolve from those under existing economic conditions as of December 31, 2017, such changes were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation.

Current costs used by Kosmos were held constant throughout the life of the properties until a time in the future where Kosmos has estimated that expected synergies from unifying the activities of project areas and late field life ramp down activities indicate a reduction in costs.

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 11

Standards of Independence and Professional Qualification

Ryder Scott is an independent petroleum engineering consulting firm that has been providing petroleum consulting services throughout the world since 1937. Ryder Scott is employee-owned and maintains offices in Houston, Texas; Denver, Colorado; and Calgary, Alberta, Canada. We have over eighty engineers and geoscientists on our permanent staff. By virtue of the size of our firm and the large number of clients for which we provide services, no single client or job represents a material portion of our annual revenue. We do not serve as officers or directors of any privately-owned or publicly-traded oil and gas company and are separate and independent from the operating and investment decision-making process of our clients. This allows us to bring the highest level of independence and objectivity to each engagement for our services.

Ryder Scott actively participates in industry-related professional societies and organizes an annual public forum focused on the subject of reserves evaluations and SEC regulations. Many of our staff have authored or co-authored technical papers on the subject of reserves related topics. We encourage our staff to maintain and enhance their professional skills by actively participating in ongoing continuing education.

Prior to becoming an officer of the Company, Ryder Scott requires that staff engineers and geoscientists have received professional accreditation in the form of a registered or certified professional engineer’s license or a registered or certified professional geoscientist’s license, or the equivalent thereof, from an appropriate governmental authority or a recognized self-regulating professional organization.

We are independent petroleum engineers with respect to Kosmos Energy, LLC. Neither we nor any of our employees have any financial interest in the subject properties and neither the employment to do this work nor the compensation is contingent on our estimates of reserves for the properties which were reviewed.

The results of this study, presented herein, are based on technical analysis conducted by teams of geoscientists and engineers from Ryder Scott. The professional qualifications of the undersigned, the technical person primarily responsible for overseeing, reviewing and approving the evaluation of the reserves information discussed in this report, are included as an attachment to this letter.

Terms of Usage

The results of our third party study, presented in report form herein, were prepared in accordance with the disclosure requirements set forth in the SEC regulations and intended for public disclosure as an exhibit in filings made with the SEC by Kosmos.

Kosmos makes periodic filings on Form 10-K with the SEC under the 1934 Exchange Act. Furthermore, Kosmos has certain registration statements filed with the SEC under the 1933 Securities Act into which any subsequently filed Form 10-K is incorporated by reference. We have consented to the incorporation by reference in the registration statements on Forms S-3 and S-8 of Kosmos Energy, LLC of the references to our name as well as to the references to our third party report for Kosmos Energy, LLC, which appears in the December 31, 2017 annual report on Form 10-K of Kosmos Energy, LLC. Our written consent for such use is included as a separate exhibit to the filings made with the SEC by Kosmos Energy, LLC.

We have provided Kosmos with a digital version of the original signed copy of this report letter. In the event there are any differences between the digital version included in filings made by Kosmos and

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 12

the original signed report letter, the original signed report letter shall control and supersede the digital version.

The data and work papers used in the preparation of this report are available for examination by authorized parties in our offices. Please contact us if we can be of further service.

Very truly yours,

RYDER SCOTT COMPANY, L.P.

TBPE Firm Registration No. F-1580

/s/ Guale Ramirez

Guale Ramirez, P.E.

TBPE License No. 48318

Executive Vice President [SEAL]

/s/ Tosin Famurewa

Tosin Famurewa, P.E., S.P.E.C.

TBPE License No. 100569

Senior Vice President – International [SEAL]

/s/ Christine E. Neylon

Christine E. Neylon, P.E.

TBPE License No. 122128

Senior Petroleum Engineer [SEAL]

/s/ Victor Abu

Victor Abu

Senior Petroleum Engineer

GR-TF-CEN-VA (DCR)/pl

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Kosmos Energy, LLC

January 24, 2018

Page 1

Professional Qualifications of Primary Technical Person

The conclusions presented in this report are the result of technical analysis conducted by teams of geoscientists and engineers from Ryder Scott Company, L.P. Guadalupe Ramirez was the primary technical person responsible for overseeing the estimate of the reserves, future production and income.

Mr. Ramirez, an employee of Ryder Scott Company, L.P. (Ryder Scott) since 1981, is the Executive Vice President and also serves as a member of the Board of Directors. He is responsible for coordinating and supervising staff and consulting engineers of the company in ongoing reservoir evaluation studies worldwide. Before joining Ryder Scott, Mr. Ramirez served in a number of engineering positions with Sun Oil Company and Natomas North America. For more information regarding Mr. Ramirez’s geographic and job specific experience, please refer to the Ryder Scott Company website at www.ryderscott.com/Company/Employees.

Mr. Ramirez earned a Bachelor of Science Degree in Mechanical Engineering with honors from Texas A&M University in 1976 and is a licensed Professional Engineer in the State of Texas. He is also a member of the Society of Petroleum Engineers and Society of Petroleum Evaluation Engineers.

In addition to gaining experience and competency through prior work experience, the Texas Board of Professional Engineers requires a minimum of fifteen hours of continuing education annually, including at least one hour in the area of professional ethics, which Mr. Ramirez fulfills. As part of his 2016 continuing education hours, Mr. Ramirez attended and internally received 21 hours of formalized training as well as a day-long public forum, the 2016 RSC Reserves Conference relating to the definitions and disclosure guidelines contained in the United States Securities and Exchange Commission Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register. Mr. Ramirez has also presented courses on the new SEC and SPE-PRMS reserves definitions on various occasions during 2011, 2012, 2013 and 2015 and received 8 hours of formalized external training during 2016, covering such topics as the Guidelines for Application of the SPE/WPC/AAPG/SPEE Petroleum Resources Management System, reservoir engineering, geoscience and petroleum economics evaluation methods, procedures and software, unconventional resources and ethics for consultants.

Based on his educational background, professional training and more than 35 years of practical experience in the estimation and evaluation of petroleum reserves, Mr. Ramirez has attained the professional qualifications as a Reserves Estimator and Reserves Auditor set forth in Article III of the “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information” promulgated by the Society of Petroleum Engineers as of February 19, 2007.

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PETROLEUM RESERVES DEFINITIONS

Page 1

PETROLEUM RESERVES DEFINITIONS

As Adapted From:

RULE 4-10(a) of REGULATION S-X PART 210

UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)

PREAMBLE

On January 14, 2009, the United States Securities and Exchange Commission (SEC) published the “Modernization of Oil and Gas Reporting; Final Rule” in the Federal Register of National Archives and Records Administration (NARA). The “Modernization of Oil and Gas Reporting; Final Rule” includes revisions and additions to the definition section in Rule 4-10 of Regulation S-X, revisions and additions to the oil and gas reporting requirements in Regulation S-K, and amends and codifies Industry Guide 2 in Regulation S-K. The “Modernization of Oil and Gas Reporting; Final Rule”, including all references to Regulation S-X and Regulation S-K, shall be referred to herein collectively as the “SEC regulations”. The SEC regulations take effect for all filings made with the United States Securities and Exchange Commission as of December 31, 2009, or after January 1, 2010. Reference should be made to the full text under Title 17, Code of Federal Regulations, Regulation S-X Part 210, Rule 4-10(a) for the complete definitions (direct passages excerpted in part or wholly from the aforementioned SEC document are denoted in italics herein).

Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. All reserve estimates involve an assessment of the uncertainty relating the likelihood that the actual remaining quantities recovered will be greater or less than the estimated quantities determined as of the date the estimate is made. The uncertainty depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved. Unproved reserves are less certain to be recovered than proved reserves and may be further sub-classified as probable and possible reserves to denote progressively increasing uncertainty in their recoverability. Under the SEC regulations as of December 31, 2009, or after January 1, 2010, a company may optionally disclose estimated quantities of probable or possible oil and gas reserves in documents publicly filed with the SEC. The SEC regulations continue to prohibit disclosure of estimates of oil and gas resources other than reserves and any estimated values of such resources in any document publicly filed with the SEC unless such information is required to be disclosed in the document by foreign or state law as noted in §229.1202 Instruction to Item 1202.

Reserves estimates will generally be revised only as additional geologic or engineering data become available or as economic conditions change.

Reserves may be attributed to either natural energy or improved recovery methods. Improved recovery methods include all methods for supplementing natural energy or altering natural forces in the reservoir to increase ultimate recovery. Examples of such methods are pressure maintenance, natural gas cycling, waterflooding, thermal methods, chemical flooding, and the use of miscible and immiscible displacement fluids. Other improved recovery methods may be developed in the future as petroleum technology continues to evolve.

Reserves may be attributed to either conventional or unconventional petroleum accumulations. Petroleum accumulations are considered as either conventional or unconventional based on the nature of their in-place characteristics, extraction method applied, or degree of processing prior to sale. Examples

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PETROLEUM RESERVES DEFINITIONS

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of unconventional petroleum accumulations include coalbed or coalseam methane (CBM/CSM), basin-centered gas, shale gas, gas hydrates, natural bitumen and oil shale deposits. These unconventional accumulations may require specialized extraction technology and/or significant processing prior to sale.

Reserves do not include quantities of petroleum being held in inventory.

Because of the differences in uncertainty, caution should be exercised when aggregating quantities of petroleum from different reserves categories.

RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §210.4-10(a)(26) defines reserves as follows:

Reserves. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project.

Note to paragraph (a)(26): Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir, or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).

PROVED RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §210.4-10(a)(22) defines proved oil and gas reserves as follows:

Proved oil and gas reserves. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(i) The area of the reservoir considered as proved includes:

(A) The area identified by drilling and limited by fluid contacts, if any, and

(B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

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PETROLEUM RESERVES DEFINITIONS

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PROVED RESERVES (SEC DEFINITIONS) CONTINUED

(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when:

(A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and

(B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PETROLEUM RESERVES STATUS DEFINITIONS AND GUIDELINES

Page 1

PETROLEUM RESERVES STATUS DEFINITIONS AND GUIDELINES

As Adapted From:

RULE 4-10(a) of REGULATION S-X PART 210

UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)

and

PETROLEUM RESOURCES MANAGEMENT SYSTEM (SPE-PRMS)

Attached files

Kosmos Energy Ltd. Reports

Also read


(1)	completion intervals which are open at the time of the estimate, but which have not started producing;


(2)	wells which were shut-in for market conditions or pipeline connections; or


(i)	Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.