Andrew G. Inglis, chairman and chief executive officer,said:”Second quarter results were underpinned by strong revenue and production from the Jubilee field. As a self-funded exploration company, our Ghana asset delivers multi-year growth in production, reserves and cash flow. This provides the financial foundation for our multi-well exploration campaign which continues to build momentum as we prepare to drill the Gargaa prospect beginning late in the fourth quarter.”
Gross production from the Jubilee field averaged approximately 104,000 barrels of oil per day (bopd) in the second quarter of 2014, an increase from 102,000 bopd in the first quarter of the year. The Jubilee field partners and the Government of Ghana are working together with various stakeholders to advance the export infrastructure needed to alleviate gas-related constraints currently limiting the field’s oil production.
Kosmos continues to mature a number of promising opportunities in its portfolio through additional seismic acquisition and interpretation. A 4,300 square kilometer 3D seismic program in the Tarhazoute Offshore and Essaouira Offshore blocks in Morocco was completed in early July, and a 5,100 square kilometer 3D seismic survey currently underway in the Cap Boujdour Offshore block is expected to be completed in the third quarter.
Based on encouraging results from ongoing seismic interpretation, the company’s exploration program in Mauritania is being accelerated with a farm-out initiative scheduled for later this year ahead of an initial exploration well targeted in 2015.
Second quarter results benefited from increased oil revenues partially offset by a previously announced non-cash mark-to-market charge of $22 million related to crude oil price risk management and a $12 million charge for restructuring costs. Oil revenues were $328 million versus $193 million in the same quarter of last year. The increase in revenue resulted from having an additional crude oil lifting from the Jubilee field during the quarter. This compared to two liftings in the second quarter of 2013. Realized oil price was $112.58 per barrel in the quarter compared with $99.51 per barrel in the second quarter of 2013.
Production expense for the current quarter was $23 million or an average cost of $7.87 per barrel versus $11.67 per barrel in the second quarter of last year, which included certain well workover and rig maintenance costs.
Exploration expenses in the second quarter of 2014 totaled $24 million compared with $95 million in the prior year quarter. Included in the quarter were costs associated with two large 3D seismic surveys and the FA-1 exploration well in Morocco. Depletion and depreciation expense was $70 million or $23.85 per barrel versus $30.13 per barrel in the second quarter of 2013, the improvement related to the Jubilee reserves addition at the end of last year.
General and administrative expenses decreased in the current quarter to $32 million versus $42 million in the second quarter of 2013 and income tax expense for the second quarter of 2014 was $81 million; the increase over the previous year quarter largely related to higher revenues.
In August 2014, the Company issued $300 million of 7.875% Senior Notes due 2021 and received net proceeds of $292.5 million after deducting discounts, commissions and other expenses. We have approximately $1.9 billion of liquidity available pro forma for the issuance.The company’s hedging position at the end of the second quarter totaled 10.2 million barrels.
Oil and gas revenue
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
We define EBITDAX as net income (loss) plus (i)exploration expense, (ii) depletion, depreciation and amortization expense, (iii) equity-based compensation expense, (iv)unrealized (gain) loss on commodity derivatives, (v)(gain) loss on sale of oil and gas properties, (vi)interest (income) expense, (vii)income taxes, (viii)loss on extinguishment of debt, (ix) doubtful accounts expense and (x)similar other material items which management believes affect the comparability of operating results.
The EBITDAX data for the twelve months ended June 30, 2014 was calculated by subtracting the unaudited data for the six months ended June 30, 2013 from the unaudited data for the year ended December 31, 2013, and adding the unaudited data for the six months ended June 30, 2014.
Overlifted by approximately 263,000 barrels as of June 30, 2014