10-Q

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TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION

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

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                             to

Commission file number: 001-34579

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

Delaware (State or other jurisdiction of incorporation or organization)	27-0821169 (I.R.S. Employer Identification No.)
Cobalt Center 920 Memorial City Way, Suite 100 Houston, Texas (Address of principal executive offices)	77024 (Zip code)

(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.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if a
smaller reporting company) Smaller reporting company o

        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 March 31, 2012: 410,691,735 shares.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35

2

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 2011 Annual Report on Form 10-K filed on February 21, 2012, may adversely affect our results as indicated in forward-looking statements. You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect.

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

•

the discovery and development of oil and gas reserves;

•

to what extent the implementation of our and our partners' prospect development and drilling plans is successful;

•

projected and targeted capital expenditures and other costs and commitments;

•

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

•

our and our partners' ability to obtain permits and licenses and drill in the U.S. Gulf of Mexico and offshore West Africa and to comply with applicable legislation and regulation;

•

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

•

changes in environmental laws or the implementation or interpretation of those laws;

•

the costs and delays associated with complying with additional legislation and regulation of the oil and gas industry;

•

our ability to obtain financing;

•

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

•

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

•

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

•

competition;

•

the volatility of oil prices;

•

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

•

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;

•

military operations, terrorist acts, wars or embargoes;

3

•

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

•

the cost and availability of adequate insurance coverage; and

•

other risk factors discussed in the "Risk Factors" section of our 2011 Annual Report on Form 10-K filed on February 21, 2012.

        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.

4

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements.

COBALT INTERNATIONAL ENERGY, INC.

Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011	6
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and 2011, and for the period November 10, 2005 (Inception) through March 31, 2012	7
Condensed Consolidated Statements of Changes in Partners' Capital and Stockholders' Equity for the Three Months Ended March 31, 2012 and for the period November 10, 2005 (Inception) through March 31, 2012	8
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011, and for the period November 10, 2005 (Inception) through March 31, 2012	9
Notes to Condensed Consolidated Financial Statements	10

5

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

Condensed Consolidated Balance Sheets

(Unaudited)

	March 31, 2012			December 31, 2011
	($ in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	280,008		$	292,546
Joint interest and other receivables		46,230			56,983
Prepaid expenses and other current assets		20,112			22,214
Inventory		33,579			36,049
Short-term restricted funds		150,780			69,009
Short-term investments		795,016			858,293
Total current assets		1,325,725			1,335,094
Property, plant, and equipment:
Oil and gas properties, successful efforts method of accounting, net of accumulated depletion of $-0-		940,553			861,955
Other property and equipment, net of accumulated depreciation and amortization of $3,756 and $3,555, as of March 31, 2012 and December 31, 2011, respectively		2,006			1,371
Total property, plant, and equipment, net		942,559			863,326
Long-term restricted funds		395,034			270,235
Long-term investments		181,003			47,232
Other assets		8,768			12,057
Total assets	$	2,853,089		$	2,527,944
Liabilities and Stockholders' Equity
Current liabilities:
Trade and other accounts payable	$	35,932		$	71,186
Accrued liabilities		61,564			34,418
Short-term contractual obligations		49,019			132,465
Total current liabilities		146,515			238,069
Long-term contractual obligations		168,238			210,961
Stockholders' Equity:
Common stock, $0.01 par value per share; 2,000,000,000 shares authorized, 405,867,734 and 387,531,630 issued and outstanding as of March 31, 2012 and December 31, 2011, respectively		4,059			3,875
Additional paid-in capital		3,215,644			2,719,875
Deficit accumulated during the development stage		(681,367	)		(644,836	)
Total stockholders' equity		2,538,336			2,078,914
Total liabilities and stockholders' equity	$	2,853,089		$	2,527,944

See accompanying notes.

6

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

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended March 31,
							For the Period November 10, 2005 (Inception) Through March 31, 2012
	2012			2011
	($ in thousands except per share data)
Oil and gas revenue	$	—		$	—		$	—
Operating costs and expenses:
Seismic and exploration		17,350			2,440			345,940
Dry hole expense and impairment		5,324			2,514			109,971
General and administrative		14,840			11,618			232,819
Depreciation and amortization		201			183			3,756
Total operating costs and expenses		37,715			16,755			692,486
Operating income (loss)		(37,715	)		(16,755	)		(692,486	)
Other income:
Interest income		1,184			697			11,119
Total other income		1,184			697			11,119
Net loss before income tax		(36,531	)		(16,058	)		(681,367	)
Income tax expense		—			—			—
Net income (loss)	$	(36,531	)	$	(16,058	)	$	(681,367	)
Basic and diluted income (loss) per share	$	(0.09	)	$	(0.05	)
Basic and diluted weighted average common shares outstanding		394,058,437			350,848,559

See accompanying notes.

7

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

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

(Unaudited)

	General Partner		Class A Limited Partners			Class B Limited Partners			Class C Limited Partners			Common Stock			Additional Paid-in Capital			Accumulated Deficit During Development Stage			Total
	($ in thousands)
Balance, November 10, 2005 (Inception)	$	—	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Class A limited partners' contributions		—		1,256,738			—			—			—			—			—			1,256,738
Class B & C limited partners' equity compensation		—		—			6,984			734			—			—			—			7,718
Common stock issued upon corporate reorganization		—		(1,256,738	)		(6,984	)		(734	)		2,743			1,261,713			—			—
Common stock issued at initial public offering, net of offering costs		—		—			—			—			630			806,629			—			807,259
Common stock issued at private placement		—		—			—			—			32			42,156			—			42,188
Common stock issued at the closing of the over-allotment portion of initial public offering, net of offering costs		—		—			—			—			80			101,176			—			101,256
Common stock issued at public offering, net of costs		—		—			—			—			357			477,846			—			478,203
Common stock issued for restricted stock and stock options		—		—			—			—			34			(34	)		—			—
Equity based compensation		—		—			—			—			—			30,579			—			30,579
Common stock withheld for taxes on equity based compensation		—		—			—			—			(1	)		(190	)		—			(191	)
Net income (loss)		—		—			—			—			—			—			(644,836	)		(644,836	)
Balance, December 31, 2011		—		—			—			—			3,875			2,719,875			(644,836	)		2,078,914
Common stock issued at public offering, net of costs		—		—			—			—			181			489,307			—			489,488
Common stock issued for restricted stock and stock options		—		—			—			—			3			(3	)		—			—
Equity based compensation		—		—			—			—			—			6,636			—			6,636
Common stock withheld for taxes on equity based compensation		—		—			—			—			—			(171	)		—			(171	)
Net income (loss)		—		—			—			—			—			—			(36,531	)		(36,531	)
Balance, March 31, 2012	$	—	$	—		$	—		$	—		$	4,059		$	3,215,644		$	(681,367	)	$	2,538,336

See accompanying notes.

8

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

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,						For the Period November 10, 2005 (Inception) Through March 31, 2012
	2012			2011
	($ in thousands)
Cash flows provided from operating activities
Net income (loss)	$	(36,531	)	$	(16,058	)	$	(681,367	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		201			183			3,756
Dry hole expense and impairment of unproved properties		5,324			2,514			109,971
Equity based compensation		6,636			3,887			44,933
Amortization of premium (accretion of discount) on investment securities		4,203			1,435			19,006
Other		—			—			558
Changes in operating assets and liabilities:
Joint interest and other receivables		7,694			(5,084	)		(50,906	)
Inventory		2,471			(4,296	)		(33,578	)
Prepaid expense and other assets		5,390			(999	)		(28,881	)
Trade and other accounts payable		(35,253	)		(6,061	)		35,568
Accrued liabilities and other		(17,579	)		2,282			23,505
Net cash provided by (used in) operating activities		(57,444	)		(22,197	)		(557,435	)
Cash flows from investing activities
Capital expenditures for oil and gas properties		(122,851	)		—			(826,957	)
Capital expenditures for other property and equipment		(472	)		(119	)		(5,398	)
Exploratory wells drilling in process		(42,880	)		(296	)		(307,252	)
Proceeds from sale of oil and gas properties		—			—			339,001
Change in restricted funds		4,451			(10,772	)		(334,293	)
Proceeds from maturity of investment securities		307,582			374,885			1,822,412
Purchase of investment securities		(590,241	)		(459,021	)		(3,024,282	)
Net cash provided by (used in) investing activities		(444,411	)		(95,323	)		(2,336,769	)
Cash flows from financing activities
Capital contributions prior to IPO—Class A limited partners		—			—			1,256,180
Proceeds from initial public offering, net of costs		—			—			950,702
Proceeds from public offerings, net of costs		489,488			—			967,692
Payments for common stock withheld for taxes on equity based compensation		(171	)		—			(362	)
Net cash provided by (used in) financing activities		489,317			—			3,174,212
Net increase (decrease) in cash and cash equivalents		(12,538	)		(117,520	)		280,008
Cash and cash equivalents, beginning of period		292,546			302,720			—
Cash and cash equivalents, end of period	$	280,008		$	185,200		$	280,008
Non-Cash Disclosures
Capital expenditures in liabilities	$	255,681		$	25,100		$	255,681
Transfer of investment securities to and from restricted funds	$	211,796		$	—		$	211,631

See accompanying notes.

9

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

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Operations

Organization

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

        A corporate reorganization occurred concurrently with the completion of the initial public offering ("IPO") on December 21, 2009. All the outstanding interests of the Partnership were exchanged for 283,200,000 shares of the Company's common stock and as a result the Partnership became wholly-owned by the Company. The shares of CIP GP Corp., the general partner of the Partnership were contributed by certain of the Class A limited partners holding such shares to the Company for no consideration. Prior to reorganization, the Company was not subject to federal or state income taxes. Upon completion of the corporate reorganization, the Company became subject to federal and state income taxes.

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

Operations

        The Company is an independent, oil-focused exploration and production company with a world-class below salt prospect inventory in the deepwater of the U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa. All of its prospects are oil-focused. In the U.S. Gulf of Mexico, the Company has drilled as operator two exploratory wells (Ligurian #1 and Criollo #1) and participated as non-operator in three exploratory wells (Heidelberg #1, Shenandoah #1 and Firefox #1) and two appraisal wells (Heidelberg #2 and Heidelberg #3). These drilling efforts have resulted in the discovery of oil at Shenandoah and the discovery and successful appraisal of an oil accumulation at Heidelberg. The Company is currently drilling as operator the Ligurian #2 exploratory well. Offshore Angola, the Company has drilled as operator the Cameia #1 exploratory well on Block 21 which resulted in the Cameia pre-salt oil discovery. The Company is currently drilling as operator the Cameia #2 appraisal well. The Company continues to mature high impact prospects in its portfolio for upcoming exploratory drilling in both the deepwater of the U.S. Gulf of Mexico and the deepwater offshore Angola and Gabon. The Company has two geographic operating segments: the U.S. Gulf of Mexico and West Africa.

        As of March 31, 2012, the Company had no proved oil and gas reserves.

2. Summary of Significant Accounting Policies

Basis of Presentation

        The accompanying condensed unaudited consolidated financial statements include the financial statements of Cobalt International Energy, Inc. and all of its wholly owned subsidiaries. All significant

10

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (Continued)

intercompany transactions and amounts have been eliminated. Because the Company is a development stage enterprise, it has presented its financial statements in accordance with FASB Accounting Standards Codification (ASC) No. 915 "Development Stage Entities."

        The accompanying condensed unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the condensed consolidated financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be presented for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

Use of Estimates

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

Recently Adopted Accounting Standards

        Effective January 1, 2012, the Company adopted the accounting standards update that required hierarchy classification for items whose fair value is only disclosed in the footnotes, additional disclosure about fair value measurements that involve significant unobservable inputs, including additional quantitative information about the unobservable inputs, a description of valuation techniques used, and a qualitative evaluation of the sensitivity of these measurements. The adoption of these standards have no material impact to the Company's financial statements.

Income (Loss) Per Share

        Basic income (loss) per share was calculated by dividing net income or loss applicable to common shares by the weighted average number of common shares outstanding during the periods presented. The calculation of diluted income (loss) per share should include the potential dilutive impact of non-vested restricted shares, non-vested restricted stock units and outstanding stock options during the period, unless their effect is anti-dilutive. For the three months ended March 31, 2012 and 2011, 6,595,786 and 6,719,961 shares of non-vested restricted stock, non-vested restricted stock units and outstanding stock options, respectively, were excluded from the diluted income (loss) per share because they are anti-dilutive.

11

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (Continued)

Investments

        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 costs and classified as held-to-maturity securities 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. Held-to-maturity securities are stated at amortized cost, which approximates fair market value as of March 31, 2012 and December 31, 2011. 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 March 31, 2012 and December 31, 2011, the Company has no OTTI in its debt securities.

3. Cash and Cash Equivalents

        Cash and cash equivalents consisted of the following:

	March 31, 2012		December 31, 2011
	(in thousands)
Cash at banks	$	2,451	$	2,992
Money market funds		199,583		104,805
Held-to-maturity securities(1)		77,974		184,749
	$	280,008	$	292,546

(1)

These securities mature three months or less from the date of purchase.

12

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

4. Restricted Funds

        Restricted funds consisted of the following:

	March 31, 2012		December 31, 2011
	(in thousands)
Short-term:
Ocean Confidence escrow account	$	10,806	$	10,804
Collateral on Letters of Credit for Angola		50,056		53,322
Ensco 8503 escrow account		89,918		4,883
	$	150,780	$	69,009
Long-term:
Ensco 8503 escrow account	$	89,918	$	181,159
Collateral on letters of credit for Angola		304,398		88,358
Other vendor restricted funds		718		718
	$	395,034	$	270,235

5. Investments

        The Company's investments in held-to-maturity securities, which are stated at amortized cost, were as follows as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
	(in thousands)
U.S. Treasury securities	$	372,746	$	379,618
Corporate securities		684,953		535,846
Commercial paper		472,560		369,432
U.S. government agency securities		28,721		71,856
Municipal bonds		22,084		42,193
Certificates of deposit		—		12,500
Total	$	1,581,064	$	1,411,445

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

	March 31, 2012		December 31, 2011
	(in thousands)
Cash and cash equivalents	$	77,974	$	184,749
Short-term investments		795,016		858,293
Short-term restricted funds		132,755		53,322
Long-term restricted funds		394,316		267,849
Long-term investments		181,003		47,232
	$	1,581,064	$	1,411,445

13

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

5. Investments (Continued)

        The contractual maturities of these held-to-maturity securities as of March 31, 2012 and December 31, 2011 were as follows:

	March 31, 2012				December 31, 2011
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,400,061	$	1,400,061	$	1,364,213	$	1,364,213
After 1 year		181,003		181,003		47,232		47,232
	$	1,581,064	$	1,581,064	$	1,411,445	$	1,411,445

6. Fair Value Measurements

        The fair values of the Company's cash and cash equivalents, accounts receivable, 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.

        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, U.S. Government agency securities, commercial paper, corporate bonds, municipal 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.

14

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Fair Value Measurements (Continued)

        The following tables summarize the Company's significant financial instruments as categorized by the fair value measurement hierarchy:

	Level 1				Level 2
									Balance as of March 31, 2012
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	2,451	$	2,451	$	—	$	—	$	2,451
Money market funds		199,583		199,583		—		—		199,583
Commercial paper		—		—		74,383		74,383		74,383
Corporate bonds		—		—		3,591		3,591		3,591
Subtotal		202,034		202,034		77,974		77,974		280,008
Short-term restricted funds:
Cash		10,806		10,806		—		—		10,806
Money market funds		7,219		7,219		—		—		7,219
U.S. Treasury bills		—		—		50,056		50,056		50,056
U.S. Treasury notes		—		—		82,699		82,699		82,699
Subtotal		18,025		18,025		132,755		132,755		150,780
Short-term investments:
U.S. government agency securities		—		—		28,721		28,721		28,721
Corporate bonds		—		—		346,034		346,034		346,034
Municipal bonds		—		—		22,084		22,084		22,084
Commercial paper		—		—		398,177		398,177		398,177
Subtotal		—		—		795,016		795,016		795,016
Long-term restricted funds:
Cash		718		718		—		—		718
U.S. Treasury bills		—		—		87,485		87,485		87,485
U.S. Treasury notes		—		—		152,506		152,506		152,506
Corporate bonds		—		—		154,325		154,325		154,325
Subtotal		718		718		394,316		394,316		395,034
Long-term investments:
Corporate bonds		—		—		181,003		181,003		181,003
Subtotal		—		—		181,003		181,003		181,003
Total	$	220,777	$	220,777	$	1,581,064	$	1,581,064	$	1,801,841

15

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Fair Value Measurements (Continued)

	Level 1				Level 2
									Balance as of December 31, 2011
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	2,992	$	2,992	$	—	$	—	$	2,992
Money market funds		104,805		104,805		—		—		104,805
Commercial paper		—		—		172,249		172,249		172,249
Certificate of deposits		—		—		12,500		12,500		12,500
Subtotal		107,797		107,797		184,749		184,749		292,546
Short-term restricted funds:
Cash		4,883		4,883		—		—		4,883
Money market funds		10,804		10,804		—		—		10,804
U.S. Treasury bills		—		—		53,322		53,322		53,322
Subtotal		15,687		15,687		53,322		53,322		69,009
Short-term investments:
U.S. Treasury bills		—		—		112,507		112,507		112,507
U.S. Government agency securities		—		—		40,000		40,000		40,000
Corporate bonds		—		—		466,411		466,411		466,411
Municipal bonds		—		—		42,193		42,193		42,193
Commercial paper		—		—		197,182		197,182		197,182
Subtotal		—		—		858,293		858,293		858,293
Long-term restricted funds:
Cash		718		718		—		—		718
Money market funds		1,668		1,668		—		—		1,668
U.S. Treasury bills		—		—		40,597		40,597		40,597
U.S. Treasury notes		—		—		173,192		173,192		173,192
Corporate bonds		—		—		54,060		54,060		54,060
Subtotal		2,386		2,386		267,849		267,849		270,235
Long-term investments:
U.S. Government agency securities		—		—		31,856		31,856		31,856
Corporate bonds		—		—		15,376		15,376		15,376
Subtotal		—		—		47,232		47,232		47,232
Total	$	125,870	$	125,870	$	1,411,445	$	1,411,445	$	1,537,315

(1)

As of March 31, 2012 and December 31, 2011, the Company did not record any OTTI on these assets.

16

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. 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. As of March 31, 2012 and December 31, 2011, the balance due primarily from the Company's partners in the U.S. Gulf of Mexico and West Africa totaled $37.1 million and $46.7 million, respectively. These are usually settled within 30 days of the invoice date. In addition, other receivables which primarily include accrued interest on investment securities were $9.1 million and $10.3 million as of March 31, 2012 and December 31, 2011, respectively.

8. Inventory

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

9. Property, Plant, and Equipment

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

	Estimated Useful Life (Years)		March 31, 2012			December 31, 2011
			($ in Thousands)
Oil and Gas Properties:
Unproved oil and gas properties			$	701,892		$	701,892
Less: accumulated valuation allowance				(21,289	)		(18,275	)
				680,603			683,617
Exploratory wells in process				259,950			178,338
Total oil and gas properties, net				940,553			861,955
Other Property and Equipment:
Computer equipment and software		3		2,891			2,847
Office equipment and furniture		3		1,134			1,114
Vehicles		3		129			129
Leasehold improvements		3		1,608			836
				5,762			4,926
Less: accumulated depreciation and amortization				(3,756	)		(3,555	)
Total other property and equipment, net				2,006			1,371
Property, plant, and equipment, net			$	942,559		$	863,326

        The Company recorded $0.2 million, $0.2 million and $3.8 million of depreciation and amortization expense for the three months ended March 31, 2012 and 2011, and for the period November 10, 2005 (inception) through March 31, 2012, respectively.

17

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Property, Plant, and Equipment (Continued)

Unproved Oil and Gas Properties

        On December 20, 2011, the Company acquired a 40% working interest in Block 20 offshore Angola for a total consideration of $347.1 million, of which $337.1 million is contractually scheduled to be paid over five years commencing in January 2012. In addition to the Block 20 interests, the Company has $10.8 million of unproved property acquisition costs relating to 40% interests in Blocks 9 and 21 offshore Angola and Gabon. No significant impairment of these properties has been recognized since the Company intends to continue exploration and development of these properties. The Company also has $322.7 million of unproved property acquisition costs, net of valuation allowance, relating to its U.S. Gulf of Mexico properties. As of March 31, 2012 and December 31, 2011, the Company has a net total of $680.6 million and $683.6 million, respectively, of unproved property acquisition costs on the condensed consolidated balance sheets.

        Acquisition costs of unproved leasehold properties are assessed for impairment during the holding period and transferred to proved oil and gas properties to the extent associated with successful exploration activities. Significant unproved leases are assessed individually for impairment based on the Company's current exploration plans and an allowance is provided if impairment is indicated. Unproved oil and gas leases for properties in the U.S. Gulf of Mexico with carrying value greater than $1 million are assessed individually for impairment, based on the Company's current exploration plans, and amortized, if impairment is indicated. Leases that are individually less than $1.0 million in carrying value or are near expiration are amortized on a group basis over the average terms of the leases, at rates that provide for full amortization of leases upon lease expiration. These leases have expiration dates ranging from 2012 through 2020. As of March 31, 2012 and December 31, 2011, the balance for unproved leaseholds that were subject to amortization before impairment provision was $73.9 million and $65.1 million, respectively. For the three months ended March 31, 2012 and 2011, and for the period November 10, 2005 (inception) through March 31, 2012, the Company recorded $3.0 million, $2.5 million, and $21.4 million, respectively, as an allowance on its unproved leasehold properties which are reflected in dry hole expense and impairment in accompanying condensed consolidated statements of operations.

Capitalized Exploratory Well Costs

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

18

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Property, Plant, and Equipment (Continued)

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

	March 31, 2012			December 31, 2011
	($ in thousands)
Beginning of period	$	178,338		$	106,881
Addition to capitalized exploratory well cost pending determination of proved reserves
U.S. Gulf of Mexico:
Shenandoah #1 Exploratory Well		198			(53	)
Heidelberg #1 Exploratory Well		(468	)		—
Heidelberg #2 Appraisal Well		—			5,999
Heidelberg #3 Appraisal Well		7,583			4,056
Heidelberg #3 Appraisal Well Side Track		2,310			—
Ligurian #2 Exploratory Well		17,383			2,034
Criollo #1 Exploratory Well		—			(822	)
West Africa:
Bicuar #1 Exploratory Well pre-spud costs(1)		(3,035	)		25,444
Cameia #1 Exploratory Well		36,284			71,405
Cameia #2 Appraisal Well		23,667			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(2)		(2,310	)		(36,606	)
End of period	$	259,950		$	178,338

(1)

The amount of $3,035 represents pre-spud mobilization and insurance costs allocated to the Bicuar #1 pre-salt exploratory well planned as one of two exploratory wells initially scheduled to be drilled offshore Angola. With the success of the Cameia #1 exploratory well, the drilling of the Cameia #2 appraisal well was substituted for the Bicuar #1 pre-salt exploratory well. Hence these costs were reallocated to the Cameia #2 appraisal well.

(2)

These amounts represent impairment charges on exploratory wells.

	Spud Year		March 31, 2012		December 31, 2011
			($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Shenandoah #1 Exploratory Well		2008	$	69,667	$	69,468
Heidelberg #1 Exploratory Well		2008		19,772		20,240
Ligurian #1 Exploratory Well		2009		8,100		8,100
Ligurian #2 Exploratory Well		2011		19,416		2,034
Heidelberg #3 Appraisal Well		2011		11,639		4,056

19

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Property, Plant, and Equipment (Continued)

	Spud Year		March 31, 2012		December 31, 2011
			($ in thousands)
West Africa:
Bicuar #1 Exploratory Well		2011		—		3,035
Cameia #1 Exploratory Well		2011		107,689		71,405
Cameia #2 Appraisal Well		2012		23,667		—
			$	259,950	$	178,338
Exploratory Well costs capitalized for a period greater than one year after completion of drilling at March 31, 2012 (included in table above)			$	97,539	$	97,808

        Capitalized exploratory well costs that have been suspended longer than one year are associated with the Shenandoah #1, Heidelberg #1 and Ligurian #1 projects. These exploratory 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 projects 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 projects, the associated costs will be expensed at that time.

        As of March 31, 2012, no exploratory wells have been drilled by the Company offshore Gabon.

10. Other Assets

        Costs associated with the mobilization and equipment upgrades of the Ensco 8503 drilling rig and subsea containment were deferred in other assets. In January 2012, the Company started amortizing these costs to the respective exploratory wells over the term of the Ensco 8503 drilling contract. These costs are capitalized to oil and gas properties as exploratory drilling costs. For the three months ended March 31, 2012, the costs capitalized to oil and gas properties totaled $3.0 million. As of March 31, 2012 and December 31, 2011, the accumulated costs, net of amortization, associated with the Ensco 8503 drilling rig and subsea containment in other assets were $8.8 million and $12.1 million, respectively.

20

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

11. Contractual Obligations

        The short-term and long-term contractual obligations consist of the following:

	March 31, 2012		December 31, 2011
	($ in thousands)
Short-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	150	$	1,300
Social obligation payments for Block 21, offshore Angola		300		2,600
Social obligation and bonus payments for Block 20, offshore Angola		48,569		128,565
	$	49,019	$	132,465
Long-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	848	$	800
Social obligation payments for Block 21, offshore Angola		1,684		1,600
Social obligation and bonus payments for Block 20, offshore Angola		165,706		208,561
	$	168,238	$	210,961

12. Stockholders' Equity

        On April 15, 2011, the Company issued 35,650,000 shares of its common stock at a public offering price of $14.00 per share.

        On December 21, 2011, the Company withheld and cancelled an aggregate amount of 13,763 shares of its common stock, at a price of $13.85 per share, to satisfy tax withholding obligations of certain of its employees that arose upon the lapse of restrictions on restricted stock.

        On January 15, 2012, the Company withheld the issuance of an aggregate amount of 9,127 shares of its common stock, at a price of $18.74 per share, to satisfy tax withholding obligations of certain of its officers that arose upon the distribution of deferred stock compensation.

        On February 29, 2012, the Company issued 18,050,000 shares of common stock at a public offering price of $28.00 per share.

21

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

13. Seismic and Exploration Expenses

        Seismic and exploration expenses consisted of the following:

	Three Months Ended March 31,				For the Period November 10, 2005 (Inception) through March 31, 2012
	2012		2011
	($ in Thousands)
Seismic data costs(1)	$	15,214	$	756	$	289,688
Leasehold delay rentals		1,409		1,035		27,929
Force Majeure expense(2)		—		—		13,549
Drilling rig acceptance expense		727		649		14,774
	$	17,350	$	2,440	$	345,940

(1)

These amounts for the period November 10, 2005 (inception) through March 31, 2012 reflect a recovery of $25,126 of past seismic costs incurred by the Company from its joint venture partners.

(2)

These amounts represent expenditures resulting from suspension of drilling activities in the U.S. Gulf of Mexico as a result of the explosion and sinking of the Deepwater Horizon drilling rig in the U.S. Gulf of Mexico, the resulting oil spill and the regulatory response thereto and other exploratory expenses.

14. 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 asset-or-nothing option pricing model. Restricted stock awards without market conditions and the performance-based awards 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. For performance-based awards, compensation cost is recognized over the requisite service period as and when the Company determines that the achievement of the performance condition is probable, using the per-share fair value measured at grant date.

        On February 24, 2012, the Company amended certain terms and conditions of its restricted stock units (RSUs) award agreement which resulted in the Company using the fair value of its common stock as of the date of such amendments to recognize the equity based compensation expense for the RSUs that vested during the first quarter of 2012 as well as the RSUs that are expected to vest during the remainder of 2012. The Company also amended certain terms and conditions of its non-qualified stock option (NQSO) Agreement. These amendments have no impact on the equity-based stock compensation expense relating to the NQSOs.

22

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

14. Equity Based Compensation (Continued)

        The following table summarizes grant, vesting and forfeiture information about the Company's restricted stock and restricted stock units from December 31, 2011 to March 31, 2012:

	Number of shares relating to Restricted Stock			Weighted Average Grant Date Fair Value Per Share		Number of shares relating Restricted Stock Units			Weighted Average Grant Date Fair Value Per Unit
Non-vested at December 31, 2011		4,599,783		$	11.27		198,838		$	12.45
Granted		272,810		$	29.77		—			—
Vested		(93,594	)	$	19.73		(74,537	)	$	30.50
Forfeited or expired		—			—		—			—
Non-vested at March 31, 2012		4,778,999		$	12.15		124,301		$	30.50
Weighted-average period remaining		2.5 years					1.71 years
Unrecognized compensation ($ in thousands)	$	34,385				$	**

**

The Restricted Stock Units ("RSUs") will vest in amounts of up to 200% of the target amount of shares of common stock, on the applicable vesting dates and contingent upon the recipient's continued service at such vesting dates and based upon the achievement of successful drilling results as defined in the RSU award agreement. Compensation cost will be recognized as and when the performance conditions are satisfied or when the Company determines that the achievement of the performance condition is probable. For the three months ended March 31, 2012, the Company recognized $2.8 million of stock compensation for the RSUs based on the performance targets achieved from the success of the Cameia #1 exploratory well and approved by the Compensation Committee during the first quarter of 2012, and the probable achievement of performance targets during the remainder of 2012.

        There were no restricted stock unit awards granted to non-employee directors during the three months ended March 31, 2012. As of March 31, 2012, the Company has granted a cumulative total of 104,741 restricted stock units to non-employee directors. During the three months ended March 31, 2012 and 2011, the Company also granted 4,169 and 5,163 shares of common stock, respectively, as retainer awards to non-employee directors who elected to be compensated by stock in lieu of cash payments.

        Non-Qualified Stock Options.    The Company grants non-qualified stock options to employees at an exercise price equal to the market value of the Company's common stock on the grant date. The non-qualified stock option awards granted in December 2010 have contractual terms of 10 years and vest ratably over the requisite service period from date of grant. The non-qualified stock option awards granted in February 2012 have contractual terms of 10 years and are scheduled to vest on December 31, 2014. There were no non-qualified stock options granted prior to December 3, 2010.

23

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

14. Equity Based Compensation (Continued)

        The fair value of each stock option granted is determined using the Black-Scholes-Merton option-pricing model based on several assumptions. These assumptions are based on management's best estimate at the time of grant. The Company used the following weighted average of each assumption based on the grants issued during the three months ended March 31, 2012 (there were no new stock options granted in 2011):

	2012
Expected Term in Years		6.50
Expected Volatility		54.92	%
Expected Dividends		0	%
Risk-Free Interest Rate		4.61	%

        The Company estimates expected volatility based on its historical stock price since the IPO in December 2009. The Company estimates the expected term of its option awards based on the vesting period and average remaining contractual term, referred to as the "simplified method". The Company uses this method to provide a reasonable basis for estimating its expected term based on a lack of sufficient historical employee exercise data on stock option awards.

        A summary of the stock options activities for the year ended March 31, 2012 is presented below:

	Number of Stock Options			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ($ in thousands)
Outstanding at January 1, 2012		1,133,960		$	12.45		8.9	$	3,481
Granted		457,704		$	30.50		9.9	$	—
Exercised		(3,919	)	$	12.45		—	$	(71	)
Forfeited or expired		—			—		—	$	—
Outstanding at March 31, 2012		1,587,745		$	17.65		9.3	$	19,651
Vested as of March 31, 2012		283,490		$	12.45		9.3	$	4,984
Exercisable at March 31, 2012		279,571		$	12.45		9.3	$	4,915

        The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2012 was $17.92 per option, using the Black-Scholes option-pricing model. As of March 31, 2012, $12.8 million of total unrecognized compensation cost related to stock option is expected to be recognized over a weighted-average period of 2.71 years.

24

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

14. Equity Based Compensation (Continued)

        The table below summarizes the equity-based compensation costs, net of forfeitures, recognized for the three months ended March 31, 2012 and 2011, and for the period November 10, 2005 (inception) through March 31, 2012:

	Three Months Ended March 31,				For the Period November 10, 2005 (Inception) through March 31, 2012
	2012		2011
	($ in thousands)
Restricted stock:
Employees	$	2,998	$	3,131	$	36,213
Non-employee directors		242		143		1,554
Stock options:
Employees		569		613		2,511
Restricted stock units (performance-based)		2,827		—		2,827
Deferred stock compensation(1)		—		—		1,828
	$	6,636	$	3,887	$	44,933

(1)

In December 2008, the Company adopted a deferred compensation plan and provided certain executive officers the opportunity to defer under the Plan all or a portion of their salary and/or annual bonus for 2009. Amounts deferred under the Plan generally are deemed to be invested in a money market account prior to the IPO and shares of the Company's common stock following the IPO. The deferred amounts were distributed to these executive officers on January 15, 2012 in the form of 121,637 shares of the Company's common stock.

25

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

15. Segment Information

        As described in Note 1, "Organization and Operations", the Company currently has two geographic operating segments for its exploratory operations. The operating segments are focused in the deepwater U.S. Gulf of Mexico and offshore West Africa. The following tables provide the geographic operating segment information for the three months ended March 31, 2012 and 2011:

	U.S. Gulf of Mexico			West Africa			Total
	($ in thousands)
Three months ended March 31, 2012
Operating costs and expense	$	24,671		$	13,044		$	37,715
Interest income		(1,184	)		—			(1,184	)
Net income (loss)	$	(23,487	)	$	(13,044	)	$	(36,531	)
Net properties and equipment	$	453,046		$	489,513		$	942,559
Three months ended March 31, 2011
Operating costs and expense	$	14,472		$	2,283		$	16,755
Interest income		(697	)		—			(697	)
Net income (loss)	$	(13,775	)	$	(2,283	)	$	(16,058	)
Net properties and equipment	$	440,584		$	20,903		$	461,487

16. Contingencies

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

26

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, 2011.

Overview

        We are an independent, oil-focused exploration and production company with a world-class below salt prospect inventory in the deepwater of the U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa. All of our prospects are oil-focused. In the U.S. Gulf of Mexico, we have drilled as operator two exploratory wells (Ligurian #1 and Criollo #1) and participated as non-operator in three exploratory wells (Heidelberg #1, Shenandoah #1 and Firefox #1) and two appraisal wells (Heidelberg #2 and Heidelberg #3). These drilling efforts have resulted in the discovery of oil at Shenandoah and the discovery and successful appraisal of an oil accumulation at Heidelberg. We are currently drilling as operator the Ligurian #2 exploratory well. Offshore Angola, we have drilled as operator the Cameia #1 exploratory well on Block 21 which resulted in the Cameia pre-salt oil discovery. We are currently drilling as operator the Cameia #2 appraisal well. We continue to mature high impact prospects in our portfolio for upcoming exploratory drilling in both the deepwater of the U.S. Gulf of Mexico and the deepwater offshore Angola and Gabon. In addition, we will progress our existing discoveries toward development and production through follow-on appraisal drilling and pre-development planning activities.

First Quarter 2012 Operational Highlights

•

On January 10, 2012, we announced that the results our of Cameia #1 exploratory well confirmed (i) our West Africa pre-salt geologic model, (ii) a significant oil column with high quality volatile oil, (iii) anticipated net pay estimates that were better than we originally expected, (iv) a high quality carbonate reservoir, and (v) that our drilling had not encountered an oil-to-water contact.

•

On February 9, 2012, we announced that the Cameia #1 exploratory well was drilled in 5,518 feet (1,682 meters) of water to a total depth of 16,030 feet (4,886 meters), at which point an extensive wire-line evaluation program was conducted. The results of this wire-line evaluation program confirmed the presence of a 1,180 foot (360 meter) gross continuous oil column with over a 75% net to gross pay estimate. No gas/oil or oil/water contact was evident on the wire line logs. An extended Drill Stem Test ("DST") was performed on the Cameia #1 exploratory well to provide additional information. The DST flowed at an un-stimulated sustained rate of 5,010 barrels per day of 44-degree API gravity oil and 14.3 million cubic feet per day of associated gas (approximately 7,400 BOEPD) with minimal bottom-hole pressure drawdown. Upon shut-in, the bottom-hole pressure reverted to its initial state in less than one minute. The well bore used in the DST had a perforated interval of less than one-third of the reservoir section. The flow rate, which was restricted by surface equipment, facility and safety precautions, confirmed the presence of a very thick, continuous, high quality reservoir saturated with light oil. We believe the well, without such restrictions, would have the potential to produce in excess of 20,000 barrels of oil per day. As the Cameia #1 exploratory well only tested the pre-salt carbonate section and did not drill the entire pre-salt interval, we believe upside potential exists for additional oil in deeper pre-salt intervals.

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•

On February 27, 2012, we spud the Cameia #2 appraisal well, which will be drilled to a planned total depth of up to 18,000 feet. The Cameia #2 appraisal well is expected to take 100-120 days to drill, followed by an evaluation period based on the well's results. The Cameia #2 appraisal well will help to determine the extent of the Cameia pre-salt oil discovery as well as test the upside potential in the deeper intervals not tested by the Cameia #1 exploratory well.

•

Our existing contract with Z North Sea, Ltd., a subsidiary of Diamond Offshore Company ("Diamond"), for the Ocean Confidence drilling rig allows us to drill one additional well following the completion of drilling operations on our Cameia #2 appraisal well. On April 27, 2012, we executed a letter agreement with Diamond that extends the Ocean Confidence drilling contract by allowing us to use the Ocean Confidence drilling rig for an incremental additional well slot, meaning that we will be able to use the Ocean Confidence to drill two wells offshore Angola following our Cameia #2 appraisal well. In return for this additional well slot, we have agreed to allow another operator to use the Ocean Confidence to drill one well offshore Congo, which will be drilled immediately after our Cameia #2 appraisal well and before our next two wells. We expect this offshore Congo well, including mobilization and demobilization, will take approximately 120 days to drill. Our first well following our Cameia #2 appraisal well will be at a rate of $375,000 per day and the second well will be at a rate of $430,000 per day.

•

We expect to complete the acquisition of approximately 4,200 square kilometers of 3-D seismic data on Block 20 offshore Angola within the next week, and are already currently processing this data.

•

On January 1, 2012, we spud the Ligurian #2 exploratory well on Green Canyon Block 814 in the U.S. Gulf of Mexico. The Ligurian #2 exploratory well was designed to test the northwest flank of the field discovered by the Heidelberg #1 well and to evaluate deeper Miocene formations. As of April 30, 2012, we had drilled through the interval discovered by the Heidelberg #1 exploratory well and we did not encounter commercial hydrocarbons. Our drilling operations continue as we have yet to reach the deeper Miocene formations. We anticipate announcing the results of the deeper Miocene formations in the Ligurian #2 exploratory well in May. After completion of drilling activities on the Ligurian #2 exploratory well, we will immediately move the Ensco 8503 drilling rig to our North Platte #1 exploratory well location.

•

We participated as a non-operator in the Heidelberg #3 appraisal well which was spud in late 2011 in Green Canyon Block 903. The Heidelberg #3 well appraised the Heidelberg Miocene oil discovery where more than 200 feet of net oil pay was discovered in February 2009. On February 16, 2012, the operator of the well announced the successful results of the well, which encountered approximately 250 feet of net pay thickness in high-quality Miocene sands. The appraisal well was drilled to a total depth of 31,030 feet in approximately 5,000 feet of water, about 1.5 miles south and 550 feet structurally updip from the Heidelberg #1 well. Log and pressure data from the Heidelberg #1 exploratory well and Heidelberg #3 appraisal well indicate excellent quality, continuous and pressure-connected reservoirs with high-quality oil.

First Quarter 2012 Financial Highlights

•

We recorded a net loss of approximately $36.5 million, a 127% increase from the first quarter of 2011.

•

Total operating expenses were approximately $37.7 million, a 125% increase from the first quarter of 2011.

•

Cash expenditures, excluding changes in working capital, were approximately $236.3 million, which includes the approximate $123 million we funded in January 2012 to satisfy our initial obligations under our Production Sharing Contract for Block 20 offshore Angola.

28

•

On February 29, 2012, we completed a registered underwritten offering of 18,050,000 shares of our common stock at a public offering price of $28.00 per share, resulting in net proceeds to us, after expenses and underwriting discounts, of approximately $489.5 million. Including the net proceeds from this offering, our existing cash and investments on hand and restricted funds as of March 31, 2012, we have approximately $1.8 billion of liquidity.

Results of Operations

        We operate our business in two geographic segments: the U.S. Gulf of Mexico and West Africa. The discussion of the results of operations and the period-to-period comparisons presented below for each operating segment and our consolidated operations analyzes our historical results. The following discussion may not be indicative of future results.

29

Three Months Ended March 31, 2012 Compared to the Three Months Ended March 31, 2011

	Three Months Ended March 31,
	2012			2011			Increase (Decrease)			%
	($ in thousands)
U.S. Gulf of Mexico Segment:
Oil and gas revenue	$	—		$	—		$	—			—
Operating costs and expenses:
Seismic and exploration		6,164			1,987			4,177			210.22	%
Dry hole expense and impairment		5,324			2,514			2,810			111.77	%
General and administrative		13,017			9,797			3,220			32.87	%
Depreciation and amortization		166			174			(8	)		(4.60	)%
Total operating costs and expenses		24,671			14,472			10,199			70.47	%
Operating income (loss)		(24,671	)		(14,472	)		10,199			70.47	%
Other income:
Interest income		1,184			697			487			69.87	%
Total other income		1,184			697			487			69.87	%
Net income (loss) before income tax		(23,487	)		(13,775	)		9,712			70.50	%
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	(23,487	)	$	(13,775	)	$	9,712			70.50	%
West Africa Segment:
Oil and gas revenue	$	—		$	—		$	—			—
Operating costs and expenses:
Seismic and exploration		11,186			453			10,733			2369.32	%
Dry hole expense and impairment		—			—			—			—
General and administrative		1,823			1,821			2			0.11	%
Depreciation and amortization		35			9			26			288.89	%
Total operating costs and expenses		13,044			2,283			10,761			471.35	%
Operating income (loss)		(13,044	)		(2,283	)		10,761			471.35	%
Other income:
Interest income		—			—			—			—
Total other income		—			—			—			—
Net income (loss) before income tax		(13,044	)		(2,283	)		10,761			471.35	%
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	(13,044	)	$	(2,283	)	$	10,761			471.35	%
Consolidated Operations:
Oil and gas revenue	$	—		$	—		$	—			—
Operating costs and expenses:
Seismic and exploration		17,350			2,440			14,910			611.07	%
Dry hole expense and impairment		5,324			2,514			2,810			111.77	%
General and administrative		14,840			11,618			3,222			27.73	%
Depreciation and amortization		201			183			18			9.84	%
Total operating costs and expenses		37,715			16,755			20,960			125.10	%
Operating income (loss)		(37,715	)		(16,755	)		20,960			125.10	%
Other income:
Interest income		1,184			697			487			69.87	%
Total other income		1,184			697			487			69.87	%
Net income (loss) before income tax		(36,531	)		(16,058	)		20,473			127.49	%
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	(36,531	)	$	(16,058	)	$	20,473			127.49	%

30

U.S. Gulf of Mexico Segment:

        Oil and gas revenue.    We have not yet commenced oil production. Therefore, we did not realize any oil and gas revenue during the three months ended March 31, 2012 and 2011, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the three months ended March 31, 2012 and 2011:

        Seismic and exploration.    Seismic and exploration costs increased by $4.2 million during the three months ended March 31, 2012, as compared to the three months ended March 31, 2011. The increase was primarily due to an increase of $4.2 million for the purchase of seismic data over prospects in the U.S. Gulf of Mexico, an increase of $0.4 million in lease rental costs and a decrease of $0.4 million in rig related charges. The seismic and exploration costs incurred for the three months ended March 31, 2012 consisted of (i) $4.2 million incurred for seismic data acquisition for the U.S. Gulf of Mexico. (ii) $1.4 million for leasehold delay rentals and (iii) $0.6 million of other technical study costs.

        Dry hole expense and impairment.    Dry hole expense and impairment increased by $2.8 million during the three months ended March 31, 2012, as compared to the three months ended March 31, 2011. The increase is due to $2.3 million recorded during the quarter for the impairment to dry hole expense for the Heidelberg #3 sidetrack well and an increase of $0.5 million in the allowance for future impairment of the carrying value of our unproved leasehold properties. For the three months ended March 31, 2012, we recorded an allowance of $3.0 million against future impairment on the carrying value of our unproved leasehold properties that are individually less than $1 million or are near expiration and $2.3 million related to the Heidelberg #3 sidetrack appraisal well.

        General and administrative.    General and administrative costs increased by $3.2 million during the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. The increase in general and administrative costs during this period was primarily attributed to a $3.5 million increase in staff related expenses which includes equity compensation, a $1.8 million increase in office related expenses, offset by an increase of $2.1 million in recoveries from partners due to the increase in operating activity.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the three months ended March 31, 2012 as compared to the three months ended March 31, 2011.

        Other income.    Other income increased by $0.5 million for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. The increase was due to an increase in interest recognized on investment securities.

        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.

West Africa Segment:

        Oil and gas revenue.    We have not yet commenced oil production. Therefore, we did not realize any oil and gas revenue during the three months ended March 31, 2012 and 2011, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the three months ended March 31, 2012 and 2011:

        Seismic and exploration.    Seismic and exploration costs increased by $10.7 million during the three months ended March 31, 2012, as compared to the three months ended March 31, 2011. The increase was primarily due to the acquisition of seismic data on Block 20 offshore Angola. The seismic and exploration costs incurred for the three months ended March 31, 2012 consisted of (i) $10.7 million

31

incurred for seismic data acquisition and processing for offshore West Africa, and (ii) $0.5 million for other technical studies.

        Dry hole expense and impairment.    No dry hole or impairment charges were incurred during the periods ending March 31, 2012 or March 31, 2011.

        General and administrative.    General and administrative costs did not change significantly for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the three months ended March 31, 2012 as compared to the three months ended March 31, 2011.

        Other income.    No other income was recorded during the periods ending March 31, 2012 as compared to the three months ended March 31, 2011.

        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.

Liquidity and Capital Resources

        We are a development stage enterprise and will continue to be so until commencement of substantial production from our oil properties or we have proved reserves. We do not know how long it will take to achieve substantial production from our oil properties. With respect to our Cameia pre-salt oil discovery, we are currently preparing the development schedule and do not have an estimate of first oil and cash flow at this time. With respect to our non-operated U.S. Gulf of Mexico discoveries, we are unable to provide information with respect to the operator's development schedule and estimates of first oil and cash flow at this time. Until substantial production is achieved, our primary sources of liquidity are expected to be cash on hand, amounts paid pursuant to the terms of our Total alliance and funds from future equity and debt financings, asset sales and farm-out arrangements.

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

•

conduct our current exploration and appraisal drilling program in the U.S. Gulf of Mexico and offshore Angola and Gabon, including increased industry costs in the U.S. Gulf of Mexico resulting from the Deepwater Horizon incident;

•

develop our discoveries which we determine to be commercially viable;

•

purchase and analyze seismic data in order to assess current prospects and identify future prospects;

•

opportunistically invest in additional oil leases and concessional licenses in our focus areas; and

•

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 success of our exploration and appraisal drilling program, 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.

        As of March 31, 2012, we had approximately $1.8 billion in liquidity, which includes cash and cash equivalents, short-term restricted funds, short-term investments, long-term restricted funds and long-term investments. This amount does not include the Total carry, of which approximately $172 million

32

remains available to us, or any success payments of up to $180 million Total is obligated to pay us pursuant to the terms of our U.S. Gulf of Mexico alliance. We expect to expend approximately $550 to $650 million for our ongoing operations and general corporate purposes in 2012. First quarter cash expenditures, excluding changes in working capital, were approximately $236.3 million, which includes the approximate $123 million we funded in January 2012 to satisfy our initial obligations under our Production Sharing Contract for Block 20 offshore Angola. We expect that our existing cash on hand will be sufficient to fund our planned exploration and appraisal drilling program at least through the end of 2013. However, we may require additional funds earlier than we currently expect in order to execute our strategy as planned. We may seek additional funding through asset sales, farm-out arrangements and 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. If we are unable to obtain funding on a timely basis or on acceptable terms, we may be required to significantly curtail one or more of our exploration and appraisal drilling programs. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our prospects which we would otherwise develop on our own, or with a majority working interest.

Cash Flows

	Three Months Ended March 31,
	2012			2011
	($ in thousands)
Net cash provided by (used in):
Operating Activities	$	(57,444	)	$	(22,197	)
Investing Activities		(444,441	)		(95,323	)
Financing Activities		489,317			—

        Operating activities.    Net cash used in operating activities for the three months ended March 31, 2012 was $57.4 million compared with net cash used in operating activities of $22.2 million for the three months ended March 31, 2011. The increase was attributed primarily to drilling activities in both the U.S. Gulf of Mexico and West Africa.

        Investing activities.    Net cash used in investing activities for the three months ended March 31, 2012 was $444.4 million compared with net cash used in investing activities of $95.3 million for the three months ended March 31, 2011. The increase in net cash used in investing activities for the three months ended March 31, 2012 was primarily attributed to the investment of proceeds from the follow-on public offering of our common stock that closed on February 29, 2012.

        Financing activities.    Net cash from financing activities for the three months ended March 31, 2012 was $489.3 million compared with zero for the three months ended March 31, 2011. The increase is the result of the follow-on public offering of our common stock that closed February 29, 2012.

Critical Accounting Policies

        Our significant accounting policies are summarized in Note 1 of Notes to Consolidated Financial Statements included in our 2011 Annual Report on Form 10-K for the year ended December 31, 2011. Also refer to the Notes to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Report.

33

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 2011 Annual Report on Form 10-K for the year ended December 31, 2011.

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 March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

        We are not currently party to any legal proceedings. However, from time to time we 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 our consolidated financial position, results of operations, or liquidity.

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, 2011.

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.

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Item 6.    Exhibits

Exhibit Number			Description of Document
	31.1	*	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
	31.2	*	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
	32.1	*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2	*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101.INS	**	XBRL Instance Document
	101.SCH	**	XBRL Schema Document
	101.CAL	**	XBRL Calculation Linkbase Document
	101.DEF	**	XBRL Definition Linkbase Document
	101.LAB	**	XBRL Labels Linkbase Document
	101.PRE	**	XBRL Presentation Linkbase Document

*

Filed herewith.

**

Furnished herewith.

35

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.

Cobalt International Energy, Inc.
By:	/s/ JOSEPH H. BRYANT
	Name:	Joseph H. Bryant
	Title:	Chairman of the Board of Directors and Chief Executive Officer

Dated: May 1, 2012

36

EXHIBIT INDEX

Exhibit Number			Description of Document
	31.1	*	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
	31.2	*	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
	32.1	*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2	*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101.INS	**	XBRL Instance Document
	101.SCH	**	XBRL Schema Document
	101.CAL	**	XBRL Calculation Linkbase Document
	101.DEF	**	XBRL Definition Linkbase Document
	101.LAB	**	XBRL Labels Linkbase Document
	101.PRE	**	XBRL Presentation Linkbase Document

*

Filed herewith.

**

Furnished herewith.

EX-31.1

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Exhibit 31.1

CERTIFICATIONS

I, Joseph H. Bryant, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Cobalt International Energy, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 1, 2012 /s/ JOSEPH H. BRYANT
Joseph H. Bryant
Chairman of the Board of Directors and Chief Executive Officer

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Exhibit 31.1

CERTIFICATIONS

EX-31.2

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Exhibit 31.2

CERTIFICATIONS

I, John P. Wilkirson, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Cobalt International Energy, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 1, 2012 /s/ JOHN P. WILKIRSON
John P. Wilkirson
Chief Financial Officer and Executive Vice President

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Exhibit 31.2

CERTIFICATIONS

EX-32.1

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Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report on Form 10-Q of Cobalt International Energy, Inc. (the "Company") for the quarterly period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Joseph H. Bryant, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

        (1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

        (2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ JOSEPH H. BRYANT
	Name:	Joseph H. Bryant
	Title:	Chairman of the Board of Directors and Chief Executive Officer

Date: May 1, 2012

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report on Form 10-Q of Cobalt International Energy, Inc. (the "Company") for the quarterly period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), John P. Wilkirson, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

        (1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

        (2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ JOHN P. WILKIRSON
	Name:	John P. Wilkirson
	Title:	Chief Financial Officer and Executive Vice President

Date: May 1, 2012

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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Joint Interests and Other Receivables (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012 D	Dec. 31, 2011
Joint Interests Receivables
Receivable attributable to joint interest partners	$ 37.1	$ 46.7
Settlement period for bills under operating agreements (in days)	30
Other receivables	$ 9.1	$ 10.3

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Equity Based Compensation (Details 3) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		77 Months Ended			3 Months Ended		77 Months Ended	3 Months Ended		77 Months Ended	3 Months Ended		77 Months Ended	3 Months Ended	77 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012	Mar. 31, 2012 Deferred stock compensation	Jan. 15, 2012 Executive officers Deferred stock compensation	Mar. 31, 2012 Restricted Stock Employees	Mar. 31, 2011 Restricted Stock Employees	Mar. 31, 2012 Restricted Stock Employees	Mar. 31, 2012 Restricted Stock Non-employee directors	Mar. 31, 2011 Restricted Stock Non-employee directors	Mar. 31, 2012 Restricted Stock Non-employee directors	Mar. 31, 2012 Stock options Employees	Mar. 31, 2011 Stock options Employees	Mar. 31, 2012 Stock options Employees	Mar. 31, 2012 Restricted stock units (performance-based)	Mar. 31, 2012 Restricted stock units (performance-based)
Equity based Compensation
Equity-based compensation costs	$ 6,636	$ 3,887	$ 44,933	$ 1,828		$ 2,998	$ 3,131	$ 36,213	$ 242	$ 143	$ 1,554	$ 569	$ 613	$ 2,511	$ 2,827	$ 2,827
Shares available under the plan to be distributed to these executives					121,637

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Equity Based Compensation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		77 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
Weighted Average Grant Date Fair Value Per Share
Equity based compensation	$ 6,636	$ 3,887	$ 44,933
Restricted Stock
Restricted stock activity
Non-vested shares at beginning of year	4,599,783
Granted (in shares)	272,810
Vested (in shares)	(93,594)
Non-vested shares at end of year	4,778,999		4,778,999
Weighted Average Grant Date Fair Value Per Share
Non-vested shares at beginning of year (in dollars per share)	$ 11.27
Granted (in dollars per share)	$ 29.77
Vested (in dollars per share)	$ 19.73
Non-vested shares at end of year (in dollars per share)	$ 12.15		$ 12.15
Weighted-average period remaining (in years)	2.5
Unrecognized compensation	34,385		34,385
Awards granted (in shares)	272,810
Weighted average fair value of shares at grant date (in dollars per share)	$ 29.77
Retainer awards | Non-employee directors
Restricted stock activity
Granted (in shares)	4,169	5,163
Weighted Average Grant Date Fair Value Per Share
Awards granted (in shares)	4,169	5,163
Restricted stock units
Restricted stock activity
Non-vested shares at beginning of year	198,838
Vested (in shares)	(74,537)
Non-vested shares at end of year	124,301		124,301
Weighted Average Grant Date Fair Value Per Share
Non-vested shares at beginning of year (in dollars per share)	$ 12.45
Vested (in dollars per share)	$ 30.50
Non-vested shares at end of year (in dollars per share)	$ 30.50		$ 30.50
Weighted-average period remaining (in years)	1.71
Unrecognized compensation	0		0
Vesting range, maximum (as a percent)	200.00%
Vesting range in shares, minimum	0
Vesting range in shares, maximum	2
Equity based compensation	$ 2,800
Restricted stock units | Non-employee directors
Restricted stock activity
Granted (in shares)	104,741
Weighted Average Grant Date Fair Value Per Share
Awards granted (in shares)	104,741

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Organization and Operations (Details)	1 Months Ended	3 Months Ended
	Dec. 31, 2009	Mar. 31, 2012 Segment well
Organization and Operations
Number of shares issued in exchange for Partnership interests	283,200,000
Number of exploratory wells drilled by the Company as operator in the U.S. Gulf of Mexico		2
Number of exploratory wells in which the Company participated as non-operator in the U.S. Gulf of Mexico		3
Number of appraisal wells in which the Company participated as non-operator in the U.S. Gulf of Mexico		2
Number of geographic operating segments		2

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Restricted Funds (Tables)

3 Months Ended

Mar. 31, 2012

Restricted Funds

Schedule of restricted funds

	March 31, 2012		December 31, 2011
	(in thousands)
Short-term:
Ocean Confidence escrow account	$	10,806	$	10,804
Collateral on Letters of Credit for Angola		50,056		53,322
Ensco 8503 escrow account		89,918		4,883
	$	150,780	$	69,009
Long-term:
Ensco 8503 escrow account	$	89,918	$	181,159
Collateral on letters of credit for Angola		304,398		88,358
Other vendor restricted funds		718		718
	$	395,034	$	270,235

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Other Assets (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Other Assets
Accumulated cost associated with the Ensco 8503 drilling rig included in other assets	$ 8.8	$ 12.1
Costs capitalized to oil and gas properties	$ 3.0

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Investments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Investments
Fair market value	$ 1,581,064	$ 1,411,445
Held-to-maturities, Amortized Cost
Within 1 year	1,400,061	1,364,213
After 1 year	181,003	47,232
Total	1,581,064	1,411,445
Held-to-maturity securities, Estimated fair value
Within 1 year	1,400,061	1,364,213
After 1 year	181,003	47,232
Total	1,581,064	1,411,445
Cash and cash equivalents
Investments
Fair market value	77,974	184,749
Short-term investments
Investments
Fair market value	795,016	858,293
Short-term restricted funds
Investments
Fair market value	132,755	53,322
Long-term restricted funds
Investments
Fair market value	394,316	267,849
Long-term investments
Investments
Fair market value	181,003	47,232
U.S. Treasury securities
Investments
Fair market value	372,746	379,618
Corporate securities
Investments
Fair market value	684,953	535,846
Commercial paper
Investments
Fair market value	472,560	369,432
U.S. government agency securities
Investments
Fair market value	28,721	71,856
Municipal bonds
Investments
Fair market value	22,084	42,193
Certificates of deposit
Investments
Fair market value		$ 12,500

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Equity Based Compensation (Details 2) (Non-Qualified Stock Options, USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended
	Dec. 31, 2010 Y	Mar. 31, 2012 Y
Non-Qualified Stock Options
Equity based Compensation
Contractual term for options granted in December 2010 / February 2012 (in years)	10	10
Assumptions used to determine the fair value of each stock option granted using the Black-Scholes-Merton option-pricing model
Expected Term in Years		6.5
Expected Volatility (as a percent)		54.92%
Expected Dividends (as a percent)		0.00%
Risk-Free Interest Rate (as a percent)		4.61%
Number of Stock Options
Outstanding at the beginning of the period (in shares)		1,133,960
Granted (in shares)		457,704
Exercised (in shares)		(3,919)
Outstanding at the end of the period (in shares)		1,587,745
Vested or expected to vest at the end of the period (in shares)		283,490
Exercisable at the end of the period		279,571
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)		$ 12.45
Granted (in dollars per share)		$ 30.50
Exercised (in dollars per share)		$ 12.45
Outstanding at the end of the period (in dollars per share)		$ 17.65
Vested or expected to vest at the end of the period (in dollars per share)		$ 12.45
Exercisable at the end of the period (in dollars per share)		$ 12.45
Weighted-Average Remaining Contractual Term (in years)
Outstanding at the beginning of the period (in years)		8.9
Granted (in years)		9.9
Outstanding at the end of the period (in years)		9.3
Vested or expected to vest at the end of the period (in years)		9.3
Exercisable at the end of the period (in years)		9.3
Aggregate Intrinsic Value
Outstanding at the beginning of the period		$ 3,481
Exercised		(71)
Outstanding at the end of the period		19,651
Vested or expected to vest at the end of the period		4,984
Exercisable at the end of the period		4,915
Weighted-average grant-date fair value of awards granted (in dollars per share)		$ 30.50
Weighted average fair value of shares at grant date (in dollars per share)		$ 17.92
Unrecognized compensation cost		$ 12,800
Period for recognition of unrecognized compensation cost (in years)		2.71

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Cash and Cash Equivalents

3 Months Ended

Mar. 31, 2012

Cash and Cash Equivalents

Cash and Cash Equivalents

3. Cash and Cash Equivalents

        Cash and cash equivalents consisted of the following:

	March 31, 2012		December 31, 2011
	(in thousands)
Cash at banks	$	2,451	$	2,992
Money market funds		199,583		104,805
Held-to-maturity securities(1)		77,974		184,749
	$	280,008	$	292,546

(1)

These securities mature three months or less from the date of purchase.

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Contractual Obligations (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Contractual obligations
Short-term Contractual Obligations: Social obligation payments	$ 49,019	$ 132,465
Long-term Contractual Obligations: Social obligation payments	168,238	210,961
Block 9, offshore Angola
Contractual obligations
Short-term Contractual Obligations: Social obligation payments	150	1,300
Long-term Contractual Obligations: Social obligation payments	848	800
Block 21, offshore Angola
Contractual obligations
Short-term Contractual Obligations: Social obligation payments	300	2,600
Long-term Contractual Obligations: Social obligation payments	1,684	1,600
Block 20, offshore Angola
Contractual obligations
Short-term Contractual Obligations: Social obligation payments	48,569	128,565
Long-term Contractual Obligations: Social obligation payments	$ 165,706	$ 208,561

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Contractual Obligations (Tables)

3 Months Ended

Mar. 31, 2012

Contractual Obligations

Summary of components of short-term and long-term contractual obligations

	March 31, 2012		December 31, 2011
	($ in thousands)
Short-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	150	$	1,300
Social obligation payments for Block 21, offshore Angola		300		2,600
Social obligation and bonus payments for Block 20, offshore Angola		48,569		128,565
	$	49,019	$	132,465
Long-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	848	$	800
Social obligation payments for Block 21, offshore Angola		1,684		1,600
Social obligation and bonus payments for Block 20, offshore Angola		165,706		208,561
	$	168,238	$	210,961

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Property, Plant, and Equipment (Tables)

3 Months Ended

Mar. 31, 2012

Property, Plant, and Equipment

Schedule of Property, Plant, and Equipment

	Estimated Useful Life (Years)		March 31, 2012			December 31, 2011
			($ in Thousands)
Oil and Gas Properties:
Unproved oil and gas properties			$	701,892		$	701,892
Less: accumulated valuation allowance				(21,289	)		(18,275	)
				680,603			683,617
Exploratory wells in process				259,950			178,338
Total oil and gas properties, net				940,553			861,955
Other Property and Equipment:
Computer equipment and software		3		2,891			2,847
Office equipment and furniture		3		1,134			1,114
Vehicles		3		129			129
Leasehold improvements		3		1,608			836
				5,762			4,926
Less: accumulated depreciation and amortization				(3,756	)		(3,555	)
Total other property and equipment, net				2,006			1,371
Property, plant, and equipment, net			$	942,559		$	863,326

Schedule of net changes in capitalized exploratory well costs

	March 31, 2012			December 31, 2011
	($ in thousands)
Beginning of period	$	178,338		$	106,881
Addition to capitalized exploratory well cost pending determination of proved reserves
U.S. Gulf of Mexico:
Shenandoah #1 Exploratory Well		198			(53	)
Heidelberg #1 Exploratory Well		(468	)		—
Heidelberg #2 Appraisal Well		—			5,999
Heidelberg #3 Appraisal Well		7,583			4,056
Heidelberg #3 Appraisal Well Side Track		2,310			—
Ligurian #2 Exploratory Well		17,383			2,034
Criollo #1 Exploratory Well		—			(822	)
West Africa:
Bicuar #1 Exploratory Well pre-spud costs(1)		(3,035	)		25,444
Cameia #1 Exploratory Well		36,284			71,405
Cameia #2 Appraisal Well		23,667			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(2)		(2,310	)		(36,606	)
End of period	$	259,950		$	178,338

(1)

The amount of $3,035 represents pre-spud mobilization and insurance costs allocated to the Bicuar #1 pre-salt exploratory well planned as one of two exploratory wells initially scheduled to be drilled offshore Angola. With the success of the Cameia #1 exploratory well, the drilling of the Cameia #2 appraisal well was substituted for the Bicuar #1 pre-salt exploratory well. Hence these costs were reallocated to the Cameia #2 appraisal well.

(2)

These amounts represent impairment charges on exploratory wells.

Schedule of cumulative costs of capitalized exploratory well costs

	Spud Year		March 31, 2012		December 31, 2011
			($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Shenandoah #1 Exploratory Well		2008	$	69,667	$	69,468
Heidelberg #1 Exploratory Well		2008		19,772		20,240
Ligurian #1 Exploratory Well		2009		8,100		8,100
Ligurian #2 Exploratory Well		2011		19,416		2,034
Heidelberg #3 Appraisal Well		2011		11,639		4,056
West Africa:
Bicuar #1 Exploratory Well		2011		—		3,035
Cameia #1 Exploratory Well		2011		107,689		71,405
Cameia #2 Appraisal Well		2012		23,667		—
			$	259,950	$	178,338
Exploratory Well costs capitalized for a period greater than one year after completion of drilling at March 31, 2012 (included in table above)			$	97,539	$	97,808

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Stockholders' Equity (Details) (USD $)	1 Months Ended				1 Months Ended
	Feb. 29, 2012	Mar. 31, 2012	Dec. 31, 2011	Apr. 15, 2011	Dec. 31, 2011 Restricted Stock	Jan. 31, 2012 Deferred Compensation Plan
Stockholders' Equity
Common stock, shares issued		405,867,734	387,531,630	35,650,000
Common stock, par value (in dollars per share)		$ 0.01	$ 0.01	$ 14.00
Sale of additional shares of common stock at the closing of the over-allotment portion of initial public offering	18,050,000
Public offering price of sale of additional shares of common stock (in dollars per share)	$ 28.00
Equity based Compensation
Aggregate number of shares withheld to satisfy tax withholding obligations of employees relating to equity based compensation					13,763	9,127
Stock price of shares withheld to satisfy tax withholding obligations of employees relating to equity based compensation					$ 13.85	$ 18.74

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Seismic and Exploration Expenses (Tables)

3 Months Ended

Mar. 31, 2012

Seismic and Exploration Expenses

Schedule of seismic and exploration expenses

	Three Months Ended March 31,				For the Period November 10, 2005 (Inception) through March 31, 2012
	2012		2011
	($ in Thousands)
Seismic data costs(1)	$	15,214	$	756	$	289,688
Leasehold delay rentals		1,409		1,035		27,929
Force Majeure expense(2)		—		—		13,549
Drilling rig acceptance expense		727		649		14,774
	$	17,350	$	2,440	$	345,940

(1)

These amounts for the period November 10, 2005 (inception) through March 31, 2012 reflect a recovery of $25,126 of past seismic costs incurred by the Company from its joint venture partners.

(2)

These amounts represent expenditures resulting from suspension of drilling activities in the U.S. Gulf of Mexico as a result of the explosion and sinking of the Deepwater Horizon drilling rig in the U.S. Gulf of Mexico, the resulting oil spill and the regulatory response thereto and other exploratory expenses.

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Equity Based Compensation (Tables)

3 Months Ended

Mar. 31, 2012

Equity Based Compensation

Schedule of restricted stock awarded to employees

	Number of shares relating to Restricted Stock			Weighted Average Grant Date Fair Value Per Share		Number of shares relating Restricted Stock Units			Weighted Average Grant Date Fair Value Per Unit
Non-vested at December 31, 2011		4,599,783		$	11.27		198,838		$	12.45
Granted		272,810		$	29.77		—			—
Vested		(93,594	)	$	19.73		(74,537	)	$	30.50
Forfeited or expired		—			—		—			—
Non-vested at March 31, 2012		4,778,999		$	12.15		124,301		$	30.50
Weighted-average period remaining		2.5 years					1.71 years
Unrecognized compensation ($ in thousands)	$	34,385				$	**

**

The Restricted Stock Units ("RSUs") will vest in amounts of up to 200% of the target amount of shares of common stock, on the applicable vesting dates and contingent upon the recipient's continued service at such vesting dates and based upon the achievement of successful drilling results as defined in the RSU award agreement. Compensation cost will be recognized as and when the performance conditions are satisfied or when the Company determines that the achievement of the performance condition is probable. For the three months ended March 31, 2012, the Company recognized $2.8 million of stock compensation for the RSUs based on the performance targets achieved from the success of the Cameia #1 exploratory well and approved by the Compensation Committee during the first quarter of 2012, and the probable achievement of performance targets during the remainder of 2012.

Schedule of assumptions used to determine the fair value of each stock option granted using the Black-Scholes-Merton option-pricing model

	2012
Expected Term in Years		6.50
Expected Volatility		54.92	%
Expected Dividends		0	%
Risk-Free Interest Rate		4.61	%

Schedule of stock options activity

	Number of Stock Options			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ($ in thousands)
Outstanding at January 1, 2012		1,133,960		$	12.45		8.9	$	3,481
Granted		457,704		$	30.50		9.9	$	—
Exercised		(3,919	)	$	12.45		—	$	(71	)
Forfeited or expired		—			—		—	$	—
Outstanding at March 31, 2012		1,587,745		$	17.65		9.3	$	19,651
Vested as of March 31, 2012		283,490		$	12.45		9.3	$	4,984
Exercisable at March 31, 2012		279,571		$	12.45		9.3	$	4,915

Schedule of recognized equity-based compensation costs

	Three Months Ended March 31,				For the Period November 10, 2005 (Inception) through March 31, 2012
	2012		2011
	($ in thousands)
Restricted stock:
Employees	$	2,998	$	3,131	$	36,213
Non-employee directors		242		143		1,554
Stock options:
Employees		569		613		2,511
Restricted stock units (performance-based)		2,827		—		2,827
Deferred stock compensation(1)		—		—		1,828
	$	6,636	$	3,887	$	44,933

(1)

In December 2008, the Company adopted a deferred compensation plan and provided certain executive officers the opportunity to defer under the Plan all or a portion of their salary and/or annual bonus for 2009. Amounts deferred under the Plan generally are deemed to be invested in a money market account prior to the IPO and shares of the Company's common stock following the IPO. The deferred amounts were distributed to these executive officers on January 15, 2012 in the form of 121,637 shares of the Company's common stock.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

        The accompanying condensed unaudited 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. Because the Company is a development stage enterprise, it has presented its financial statements in accordance with FASB Accounting Standards Codification (ASC) No. 915 "Development Stage Entities."

        The accompanying condensed unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the condensed consolidated financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be presented for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

Use of Estimates

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

Recently Adopted Accounting Standards

        Effective January 1, 2012, the Company adopted the accounting standards update that required hierarchy classification for items whose fair value is only disclosed in the footnotes, additional disclosure about fair value measurements that involve significant unobservable inputs, including additional quantitative information about the unobservable inputs, a description of valuation techniques used, and a qualitative evaluation of the sensitivity of these measurements. The adoption of these standards have no material impact to the Company's financial statements.

Income (Loss) Per Share

        Basic income (loss) per share was calculated by dividing net income or loss applicable to common shares by the weighted average number of common shares outstanding during the periods presented. The calculation of diluted income (loss) per share should include the potential dilutive impact of non-vested restricted shares, non-vested restricted stock units and outstanding stock options during the period, unless their effect is anti-dilutive. For the three months ended March 31, 2012 and 2011, 6,595,786 and 6,719,961 shares of non-vested restricted stock, non-vested restricted stock units and outstanding stock options, respectively, were excluded from the diluted income (loss) per share because they are anti-dilutive.

Investments

        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 costs and classified as held-to-maturity securities 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. Held-to-maturity securities are stated at amortized cost, which approximates fair market value as of March 31, 2012 and December 31, 2011. 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 March 31, 2012 and December 31, 2011, the Company has no OTTI in its debt securities.

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2012

Segment Information

Schedule of segment information by geographic operating segment

	U.S. Gulf of Mexico			West Africa			Total
	($ in thousands)
Three months ended March 31, 2012
Operating costs and expense	$	24,671		$	13,044		$	37,715
Interest income		(1,184	)		—			(1,184	)
Net income (loss)	$	(23,487	)	$	(13,044	)	$	(36,531	)
Net properties and equipment	$	453,046		$	489,513		$	942,559
Three months ended March 31, 2011
Operating costs and expense	$	14,472		$	2,283		$	16,755
Interest income		(697	)		—			(697	)
Net income (loss)	$	(13,775	)	$	(2,283	)	$	(16,058	)
Net properties and equipment	$	440,584		$	20,903		$	461,487

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Property, Plant, and Equipment (Details) (USD $)	3 Months Ended		77 Months Ended		3 Months Ended		77 Months Ended		1 Months Ended							3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 Unproved oil and gas properties, net	Mar. 31, 2011 Unproved oil and gas properties, net	Mar. 31, 2012 Unproved oil and gas properties, net	Dec. 31, 2011 Unproved oil and gas properties, net	Dec. 31, 2011 Unproved oil and gas properties, net Block 20 offshore Angola Y	Mar. 31, 2012 Unproved oil and gas properties, net Block 20 offshore Angola	Dec. 20, 2011 Unproved oil and gas properties, net Block 20 offshore Angola	Mar. 31, 2012 Unproved oil and gas properties, net Blocks 9 and 21 offshore Angola and Gabon	Mar. 31, 2012 Unproved oil and gas properties, net U.S. Gulf of Mexico	Mar. 31, 2012 Exploratory wells in process	Dec. 31, 2011 Exploratory wells in process	Mar. 31, 2012 Computer equipment and software	Dec. 31, 2011 Computer equipment and software	Mar. 31, 2012 Office equipment and furniture	Dec. 31, 2011 Office equipment and furniture	Mar. 31, 2012 Vehicles	Dec. 31, 2011 Vehicles	Mar. 31, 2012 Leasehold improvements	Dec. 31, 2011 Leasehold improvements
Property, Plant, and Equipment
Estimated Useful Life (in years)																3		3		3		3
Unproved oil and gas properties, net	$ 701,892,000		$ 701,892,000	$ 701,892,000
Less: accumulated valuation allowance	(21,289,000)		(21,289,000)	(18,275,000)
Total oil and gas properties, net	940,553,000		940,553,000	861,955,000	680,603,000		680,603,000	683,617,000						259,950,000	178,338,000
Property, plant, and equipment, gross	5,762,000		5,762,000	4,926,000												2,891,000	2,847,000	1,134,000	1,114,000	129,000	129,000	1,608,000	836,000
Less: accumulated depreciation and amortization	(3,756,000)		(3,756,000)	(3,555,000)
Total other property and equipment	2,006,000		2,006,000	1,371,000
Property, plant, and equipment, net	942,559,000		942,559,000	863,326,000
Depreciation and amortization expense	201,000	183,000	3,756,000
Percentage of working interest acquired										40.00%	40.00%
Consideration for the acquisition									347,100,000
Consideration payable over five years on acquisition											337,100,000
Period over which consideration is payable (in years)									5
Unproved property acquisition costs												10,800,000
Unproved property acquisition costs, net of valuation allowance, relating to properties offshore													322,700,000
Upper limit of unproved leasehold costs on individual properties included in group amortization					1,000,000		1,000,000
Carrying amount of properties that were included in group amortization					73,900,000		73,900,000	65,100,000
Amortization expense					$ 3,000,000	$ 2,500,000	$ 21,400,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 280,008	$ 292,546
Joint interest and other receivables	46,230	56,983
Prepaid expenses and other current assets	20,112	22,214
Inventory	33,579	36,049
Short-term restricted funds	150,780	69,009
Short-term investments	795,016	858,293
Total current assets	1,325,725	1,335,094
Property, plant, and equipment:
Oil and gas properties, successful efforts method of accounting, net of accumulated depletion of $-0-	940,553	861,955
Other property and equipment, net of accumulated depreciation and amortization of $3,756 and $3,555, as of March 31, 2012 and December 31, 2011, respectively	2,006	1,371
Total property, plant, and equipment, net	942,559	863,326
Long-term restricted funds	395,034	270,235
Long-term investments	181,003	47,232
Other assets	8,768	12,057
Total assets	2,853,089	2,527,944
Current liabilities:
Trade and other accounts payable	35,932	71,186
Accrued liabilities	61,564	34,418
Short-term contractual obligations	49,019	132,465
Total current liabilities	146,515	238,069
Long-term contractual obligations	168,238	210,961
Stockholders' Equity:
Common stock, $0.01 par value per share; 2,000,000,000 shares authorized, 405,867,734 and 387,531,630 issued and outstanding as of March 31, 2012 and December 31, 2011, respectively	4,059	3,875
Additional paid-in capital	3,215,644	2,719,875
Deficit accumulated during the development stage	(681,367)	(644,836)
Total stockholders' equity	2,538,336	2,078,914
Total liabilities and stockholders' equity	$ 2,853,089	$ 2,527,944

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Seismic and Exploration Expenses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		77 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012	Mar. 31, 2012
Seismic and Exploration Expenses
Seismic costs	$ 15,214	$ 756	$ 289,688
Leasehold delay rentals	1,409	1,035	27,929
Force Majeure expense			13,549
Drilling rig expense	727	649	14,774
Total seismic and exploration expenses	17,350	2,440	345,940
Seismic cost recovery				$ 25,126

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended		77 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
Cash flows provided from operating activities
Net income (loss)	$ (36,531)	$ (16,058)	$ (681,367)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	201	183	3,756
Dry hole expense and impairment of unproved properties	5,324	2,514	109,971
Equity based compensation	6,636	3,887	44,933
Amortization of premium (accretion of discount) on investment securities	4,203	1,435	19,006
Other			558
Changes in operating assets and liabilities:
Joint interest and other receivables	7,694	(5,084)	(50,906)
Inventory	2,471	(4,296)	(33,578)
Prepaid expense and other assets	5,390	(999)	(28,881)
Trade and other accounts payable	(35,253)	(6,061)	35,568
Accrued liabilities and other	(17,579)	2,282	23,505
Net cash provided by (used in) operating activities	(57,444)	(22,197)	(557,435)
Cash flows from investing activities
Capital expenditures for oil and gas properties	(122,851)		(826,957)
Capital expenditures for other property and equipment	(472)	(119)	(5,398)
Exploratory wells drilling in process	(42,880)	(296)	(307,252)
Proceeds from sale of oil and gas properties			339,001
Change in restricted funds	4,451	(10,772)	(334,293)
Proceeds from maturity of investment securities	307,582	374,885	1,822,412
Purchase of investment securities	(590,241)	(459,021)	(3,024,282)
Net cash provided by (used in) investing activities	(444,411)	(95,323)	(2,336,769)
Cash flows from financing activities
Capital contributions prior to IPO-Class A limited partners			1,256,180
Proceeds from initial public offering, net of costs			950,702
Proceeds from public offerings, net of costs	489,488		967,692
Payments for common stock withheld for taxes on equity based compensation	(171)		(362)
Net cash provided by (used in) financing activities	489,317		3,174,212
Net increase (decrease) in cash and cash equivalents	(12,538)	(117,520)	280,008
Cash and cash equivalents, beginning of period	292,546	302,720
Cash and cash equivalents, end of period	280,008	185,200	280,008
Non-Cash Disclosures
Capital expenditures in liabilities	255,681	25,100	255,681
Transfer of investment securities to and from restricted funds	$ 211,796		$ 211,631

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Cash and Cash Equivalents (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012 M	Dec. 31, 2011	Mar. 31, 2011	Dec. 31, 2010
Cash and Cash Equivalents
Cash at banks	$ 2,451	$ 2,992
Money market funds	199,583	104,805
Held-to-maturity securities	77,974	184,749
Total	$ 280,008	$ 292,546	$ 185,200	$ 302,720
Maximum term of original maturity to classify held-to-maturity securities as cash and cash equivalents (in months)	3

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Contingencies

3 Months Ended

Mar. 31, 2012

Contingencies

Contingencies

16. Contingencies

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

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Restricted Funds (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Restricted Funds
Short-term restricted funds	$ 150,780	$ 69,009
Long-term restricted funds	395,034	270,235
Ocean Confidence escrow account
Restricted Funds
Short-term restricted funds	10,806	10,804
Collateral on Letters of Credit for Angola
Restricted Funds
Short-term restricted funds	50,056	53,322
Long-term restricted funds	304,398	88,358
Ensco 8503 escrow account
Restricted Funds
Short-term restricted funds	89,918	4,883
Long-term restricted funds	89,918	181,159
Other vendor restricted funds
Restricted Funds
Long-term restricted funds	$ 718	$ 718

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Cash and Cash Equivalents (Tables)

3 Months Ended

Mar. 31, 2012

Cash and Cash Equivalents

Cash and Cash Equivalents

	March 31, 2012		December 31, 2011
	(in thousands)
Cash at banks	$	2,451	$	2,992
Money market funds		199,583		104,805
Held-to-maturity securities(1)		77,974		184,749
	$	280,008	$	292,546

(1)

These securities mature three months or less from the date of purchase.

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Organization and Operations

3 Months Ended

Mar. 31, 2012

Organization and Operations

Organization and Operations

1. Organization and Operations

Organization

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

        A corporate reorganization occurred concurrently with the completion of the initial public offering ("IPO") on December 21, 2009. All the outstanding interests of the Partnership were exchanged for 283,200,000 shares of the Company's common stock and as a result the Partnership became wholly-owned by the Company. The shares of CIP GP Corp., the general partner of the Partnership were contributed by certain of the Class A limited partners holding such shares to the Company for no consideration. Prior to reorganization, the Company was not subject to federal or state income taxes. Upon completion of the corporate reorganization, the Company became subject to federal and state income taxes.

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

Operations

        The Company is an independent, oil-focused exploration and production company with a world-class below salt prospect inventory in the deepwater of the U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa. All of its prospects are oil-focused. In the U.S. Gulf of Mexico, the Company has drilled as operator two exploratory wells (Ligurian #1 and Criollo #1) and participated as non-operator in three exploratory wells (Heidelberg #1, Shenandoah #1 and Firefox #1) and two appraisal wells (Heidelberg #2 and Heidelberg #3). These drilling efforts have resulted in the discovery of oil at Shenandoah and the discovery and successful appraisal of an oil accumulation at Heidelberg. The Company is currently drilling as operator the Ligurian #2 exploratory well. Offshore Angola, the Company has drilled as operator the Cameia #1 exploratory well on Block 21 which resulted in the Cameia pre-salt oil discovery. The Company is currently drilling as operator the Cameia #2 appraisal well. The Company continues to mature high impact prospects in its portfolio for upcoming exploratory drilling in both the deepwater of the U.S. Gulf of Mexico and the deepwater offshore Angola and Gabon. The Company has two geographic operating segments: the U.S. Gulf of Mexico and West Africa.

        As of March 31, 2012, the Company had no proved oil and gas reserves.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets
Oil and gas properties, successful efforts method of accounting, accumulated depletion (in dollars)	$ 0	$ 0
Other property and equipment, accumulated depreciation and amortization (in dollars)	$ 3,756	$ 3,555
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	2,000,000,000	2,000,000,000
Common stock, shares issued	405,867,734	387,531,630
Common stock, shares outstanding	405,867,734	387,531,630

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Contractual Obligations

3 Months Ended

Mar. 31, 2012

Contractual Obligations

Contractual Obligations

11. Contractual Obligations

        The short-term and long-term contractual obligations consist of the following:

	March 31, 2012		December 31, 2011
	($ in thousands)
Short-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	150	$	1,300
Social obligation payments for Block 21, offshore Angola		300		2,600
Social obligation and bonus payments for Block 20, offshore Angola		48,569		128,565
	$	49,019	$	132,465
Long-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	848	$	800
Social obligation payments for Block 21, offshore Angola		1,684		1,600
Social obligation and bonus payments for Block 20, offshore Angola		165,706		208,561
	$	168,238	$	210,961

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012
Document and Entity Information
Entity Registrant Name	Cobalt International Energy, Inc.
Entity Central Index Key	0001471261
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	410,691,735
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1

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Stockholders' Equity

3 Months Ended

Mar. 31, 2012

Stockholders' Equity

Stockholders' Equity

12. Stockholders' Equity

        On April 15, 2011, the Company issued 35,650,000 shares of its common stock at a public offering price of $14.00 per share.

        On December 21, 2011, the Company withheld and cancelled an aggregate amount of 13,763 shares of its common stock, at a price of $13.85 per share, to satisfy tax withholding obligations of certain of its employees that arose upon the lapse of restrictions on restricted stock.

        On January 15, 2012, the Company withheld the issuance of an aggregate amount of 9,127 shares of its common stock, at a price of $18.74 per share, to satisfy tax withholding obligations of certain of its officers that arose upon the distribution of deferred stock compensation.

        On February 29, 2012, the Company issued 18,050,000 shares of common stock at a public offering price of $28.00 per share.

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		77 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
Oil and gas revenue	$ 0	$ 0	$ 0
Operating costs and expenses:
Seismic and exploration	17,350	2,440	345,940
Dry hole expense and impairment	5,324	2,514	109,971
General and administrative	14,840	11,618	232,819
Depreciation and amortization	201	183	3,756
Total operating costs and expenses	37,715	16,755	692,486
Operating income (loss)	(37,715)	(16,755)	(692,486)
Other income:
Interest income	1,184	697	11,119
Total other income	1,184	697	11,119
Net loss before income tax	(36,531)	(16,058)	(681,367)
Income tax expense	0
Net income (loss)	$ (36,531)	$ (16,058)	$ (681,367)
Basic and diluted income (loss) per share (in dollars per share)	$ (0.09)	$ (0.05)
Basic weighted average common shares outstanding	394,058,437	350,848,559
Diluted weighted average common shares outstanding	394,058,437	350,848,559

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Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements

Fair Value Measurements

6. Fair Value Measurements

        The fair values of the Company's cash and cash equivalents, accounts receivable, 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.

        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, U.S. Government agency securities, commercial paper, corporate bonds, municipal 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 as categorized by the fair value measurement hierarchy:

	Level 1				Level 2
									Balance as of March 31, 2012
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	2,451	$	2,451	$	—	$	—	$	2,451
Money market funds		199,583		199,583		—		—		199,583
Commercial paper		—		—		74,383		74,383		74,383
Corporate bonds		—		—		3,591		3,591		3,591
Subtotal		202,034		202,034		77,974		77,974		280,008
Short-term restricted funds:
Cash		10,806		10,806		—		—		10,806
Money market funds		7,219		7,219		—		—		7,219
U.S. Treasury bills		—		—		50,056		50,056		50,056
U.S. Treasury notes		—		—		82,699		82,699		82,699
Subtotal		18,025		18,025		132,755		132,755		150,780
Short-term investments:
U.S. government agency securities		—		—		28,721		28,721		28,721
Corporate bonds		—		—		346,034		346,034		346,034
Municipal bonds		—		—		22,084		22,084		22,084
Commercial paper		—		—		398,177		398,177		398,177
Subtotal		—		—		795,016		795,016		795,016
Long-term restricted funds:
Cash		718		718		—		—		718
U.S. Treasury bills		—		—		87,485		87,485		87,485
U.S. Treasury notes		—		—		152,506		152,506		152,506
Corporate bonds		—		—		154,325		154,325		154,325
Subtotal		718		718		394,316		394,316		395,034
Long-term investments:
Corporate bonds		—		—		181,003		181,003		181,003
Subtotal		—		—		181,003		181,003		181,003
Total	$	220,777	$	220,777	$	1,581,064	$	1,581,064	$	1,801,841

	Level 1				Level 2
									Balance as of December 31, 2011
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	2,992	$	2,992	$	—	$	—	$	2,992
Money market funds		104,805		104,805		—		—		104,805
Commercial paper		—		—		172,249		172,249		172,249
Certificate of deposits		—		—		12,500		12,500		12,500
Subtotal		107,797		107,797		184,749		184,749		292,546
Short-term restricted funds:
Cash		4,883		4,883		—		—		4,883
Money market funds		10,804		10,804		—		—		10,804
U.S. Treasury bills		—		—		53,322		53,322		53,322
Subtotal		15,687		15,687		53,322		53,322		69,009
Short-term investments:
U.S. Treasury bills		—		—		112,507		112,507		112,507
U.S. Government agency securities		—		—		40,000		40,000		40,000
Corporate bonds		—		—		466,411		466,411		466,411
Municipal bonds		—		—		42,193		42,193		42,193
Commercial paper		—		—		197,182		197,182		197,182
Subtotal		—		—		858,293		858,293		858,293
Long-term restricted funds:
Cash		718		718		—		—		718
Money market funds		1,668		1,668		—		—		1,668
U.S. Treasury bills		—		—		40,597		40,597		40,597
U.S. Treasury notes		—		—		173,192		173,192		173,192
Corporate bonds		—		—		54,060		54,060		54,060
Subtotal		2,386		2,386		267,849		267,849		270,235
Long-term investments:
U.S. Government agency securities		—		—		31,856		31,856		31,856
Corporate bonds		—		—		15,376		15,376		15,376
Subtotal		—		—		47,232		47,232		47,232
Total	$	125,870	$	125,870	$	1,411,445	$	1,411,445	$	1,537,315

(1)

As of March 31, 2012 and December 31, 2011, the Company did not record any OTTI on these assets.

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Investments

3 Months Ended

Mar. 31, 2012

Investments

Investments

5. Investments

        The Company's investments in held-to-maturity securities, which are stated at amortized cost, were as follows as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
	(in thousands)
U.S. Treasury securities	$	372,746	$	379,618
Corporate securities		684,953		535,846
Commercial paper		472,560		369,432
U.S. government agency securities		28,721		71,856
Municipal bonds		22,084		42,193
Certificates of deposit		—		12,500
Total	$	1,581,064	$	1,411,445

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

	March 31, 2012		December 31, 2011
	(in thousands)
Cash and cash equivalents	$	77,974	$	184,749
Short-term investments		795,016		858,293
Short-term restricted funds		132,755		53,322
Long-term restricted funds		394,316		267,849
Long-term investments		181,003		47,232
	$	1,581,064	$	1,411,445

        The contractual maturities of these held-to-maturity securities as of March 31, 2012 and December 31, 2011 were as follows:

	March 31, 2012				December 31, 2011
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,400,061	$	1,400,061	$	1,364,213	$	1,364,213
After 1 year		181,003		181,003		47,232		47,232
	$	1,581,064	$	1,581,064	$	1,411,445	$	1,411,445

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2012

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

        The accompanying condensed unaudited 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. Because the Company is a development stage enterprise, it has presented its financial statements in accordance with FASB Accounting Standards Codification (ASC) No. 915 "Development Stage Entities."

        The accompanying condensed unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the condensed consolidated financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be presented for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

Use of Estimates

Use of Estimates

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

Investments

Investments

        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 costs and classified as held-to-maturity securities 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. Held-to-maturity securities are stated at amortized cost, which approximates fair market value as of March 31, 2012 and December 31, 2011. 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 March 31, 2012 and December 31, 2011, the Company has no OTTI in its debt securities.

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Seismic and Exploration Expenses

3 Months Ended

Mar. 31, 2012

Seismic and Exploration Expenses

Seismic and Exploration Expenses

13. Seismic and Exploration Expenses

        Seismic and exploration expenses consisted of the following:

	Three Months Ended March 31,				For the Period November 10, 2005 (Inception) through March 31, 2012
	2012		2011
	($ in Thousands)
Seismic data costs(1)	$	15,214	$	756	$	289,688
Leasehold delay rentals		1,409		1,035		27,929
Force Majeure expense(2)		—		—		13,549
Drilling rig acceptance expense		727		649		14,774
	$	17,350	$	2,440	$	345,940

(1)

These amounts for the period November 10, 2005 (inception) through March 31, 2012 reflect a recovery of $25,126 of past seismic costs incurred by the Company from its joint venture partners.

(2)

These amounts represent expenditures resulting from suspension of drilling activities in the U.S. Gulf of Mexico as a result of the explosion and sinking of the Deepwater Horizon drilling rig in the U.S. Gulf of Mexico, the resulting oil spill and the regulatory response thereto and other exploratory expenses.

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Property, Plant, and Equipment

3 Months Ended

Mar. 31, 2012

Property, Plant, and Equipment

Property, Plant, and Equipment

9. Property, Plant, and Equipment

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

	Estimated Useful Life (Years)		March 31, 2012			December 31, 2011
			($ in Thousands)
Oil and Gas Properties:
Unproved oil and gas properties			$	701,892		$	701,892
Less: accumulated valuation allowance				(21,289	)		(18,275	)
				680,603			683,617
Exploratory wells in process				259,950			178,338
Total oil and gas properties, net				940,553			861,955
Other Property and Equipment:
Computer equipment and software		3		2,891			2,847
Office equipment and furniture		3		1,134			1,114
Vehicles		3		129			129
Leasehold improvements		3		1,608			836
				5,762			4,926
Less: accumulated depreciation and amortization				(3,756	)		(3,555	)
Total other property and equipment, net				2,006			1,371
Property, plant, and equipment, net			$	942,559		$	863,326

        The Company recorded $0.2 million, $0.2 million and $3.8 million of depreciation and amortization expense for the three months ended March 31, 2012 and 2011, and for the period November 10, 2005 (inception) through March 31, 2012, respectively.

Unproved Oil and Gas Properties

        On December 20, 2011, the Company acquired a 40% working interest in Block 20 offshore Angola for a total consideration of $347.1 million, of which $337.1 million is contractually scheduled to be paid over five years commencing in January 2012. In addition to the Block 20 interests, the Company has $10.8 million of unproved property acquisition costs relating to 40% interests in Blocks 9 and 21 offshore Angola and Gabon. No significant impairment of these properties has been recognized since the Company intends to continue exploration and development of these properties. The Company also has $322.7 million of unproved property acquisition costs, net of valuation allowance, relating to its U.S. Gulf of Mexico properties. As of March 31, 2012 and December 31, 2011, the Company has a net total of $680.6 million and $683.6 million, respectively, of unproved property acquisition costs on the condensed consolidated balance sheets.

        Acquisition costs of unproved leasehold properties are assessed for impairment during the holding period and transferred to proved oil and gas properties to the extent associated with successful exploration activities. Significant unproved leases are assessed individually for impairment based on the Company's current exploration plans and an allowance is provided if impairment is indicated. Unproved oil and gas leases for properties in the U.S. Gulf of Mexico with carrying value greater than $1 million are assessed individually for impairment, based on the Company's current exploration plans, and amortized, if impairment is indicated. Leases that are individually less than $1.0 million in carrying value or are near expiration are amortized on a group basis over the average terms of the leases, at rates that provide for full amortization of leases upon lease expiration. These leases have expiration dates ranging from 2012 through 2020. As of March 31, 2012 and December 31, 2011, the balance for unproved leaseholds that were subject to amortization before impairment provision was $73.9 million and $65.1 million, respectively. For the three months ended March 31, 2012 and 2011, and for the period November 10, 2005 (inception) through March 31, 2012, the Company recorded $3.0 million, $2.5 million, and $21.4 million, respectively, as an allowance on its unproved leasehold properties which are reflected in dry hole expense and impairment in accompanying condensed consolidated statements of operations.

Capitalized Exploratory Well Costs

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

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

	March 31, 2012			December 31, 2011
	($ in thousands)
Beginning of period	$	178,338		$	106,881
Addition to capitalized exploratory well cost pending determination of proved reserves
U.S. Gulf of Mexico:
Shenandoah #1 Exploratory Well		198			(53	)
Heidelberg #1 Exploratory Well		(468	)		—
Heidelberg #2 Appraisal Well		—			5,999
Heidelberg #3 Appraisal Well		7,583			4,056
Heidelberg #3 Appraisal Well Side Track		2,310			—
Ligurian #2 Exploratory Well		17,383			2,034
Criollo #1 Exploratory Well		—			(822	)
West Africa:
Bicuar #1 Exploratory Well pre-spud costs(1)		(3,035	)		25,444
Cameia #1 Exploratory Well		36,284			71,405
Cameia #2 Appraisal Well		23,667			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(2)		(2,310	)		(36,606	)
End of period	$	259,950		$	178,338

(1)

The amount of $3,035 represents pre-spud mobilization and insurance costs allocated to the Bicuar #1 pre-salt exploratory well planned as one of two exploratory wells initially scheduled to be drilled offshore Angola. With the success of the Cameia #1 exploratory well, the drilling of the Cameia #2 appraisal well was substituted for the Bicuar #1 pre-salt exploratory well. Hence these costs were reallocated to the Cameia #2 appraisal well.

(2)

These amounts represent impairment charges on exploratory wells.

	Spud Year		March 31, 2012		December 31, 2011
			($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Shenandoah #1 Exploratory Well		2008	$	69,667	$	69,468
Heidelberg #1 Exploratory Well		2008		19,772		20,240
Ligurian #1 Exploratory Well		2009		8,100		8,100
Ligurian #2 Exploratory Well		2011		19,416		2,034
Heidelberg #3 Appraisal Well		2011		11,639		4,056
West Africa:
Bicuar #1 Exploratory Well		2011		—		3,035
Cameia #1 Exploratory Well		2011		107,689		71,405
Cameia #2 Appraisal Well		2012		23,667		—
			$	259,950	$	178,338
Exploratory Well costs capitalized for a period greater than one year after completion of drilling at March 31, 2012 (included in table above)			$	97,539	$	97,808

        Capitalized exploratory well costs that have been suspended longer than one year are associated with the Shenandoah #1, Heidelberg #1 and Ligurian #1 projects. These exploratory 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 projects 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 projects, the associated costs will be expensed at that time.

        As of March 31, 2012, no exploratory wells have been drilled by the Company offshore Gabon.

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Joint Interest and Other Receivables

3 Months Ended

Mar. 31, 2012

Joint Interest and Other Receivables

Joint Interest and Other Receivables

7. 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. As of March 31, 2012 and December 31, 2011, the balance due primarily from the Company's partners in the U.S. Gulf of Mexico and West Africa totaled $37.1 million and $46.7 million, respectively. These are usually settled within 30 days of the invoice date. In addition, other receivables which primarily include accrued interest on investment securities were $9.1 million and $10.3 million as of March 31, 2012 and December 31, 2011, respectively.

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Inventory

3 Months Ended

Mar. 31, 2012

Inventory

Inventory

8. Inventory

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

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Other Assets

3 Months Ended

Mar. 31, 2012

Other Assets

Other Assets

10. Other Assets

        Costs associated with the mobilization and equipment upgrades of the Ensco 8503 drilling rig and subsea containment were deferred in other assets. In January 2012, the Company started amortizing these costs to the respective exploratory wells over the term of the Ensco 8503 drilling contract. These costs are capitalized to oil and gas properties as exploratory drilling costs. For the three months ended March 31, 2012, the costs capitalized to oil and gas properties totaled $3.0 million. As of March 31, 2012 and December 31, 2011, the accumulated costs, net of amortization, associated with the Ensco 8503 drilling rig and subsea containment in other assets were $8.8 million and $12.1 million, respectively.

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Summary of Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2012 M Y	Mar. 31, 2011
Income (Loss) Per Share
Shares of non-vested restricted stock, stock options and performance based awards excluded from the diluted income (loss) per share calculation	6,595,786	6,719,961
Investments
Maximum term of maturity to classify highly liquid interest earning investments as cash equivalent (in months)	3
Minimum term of maturity to classify an investment as short-term investment (in months)	3
Maximum term of maturity to classify an investment as short-term investment (in years)	1

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Segment Information

3 Months Ended

Mar. 31, 2012

Segment Information

Segment Information

15. Segment Information

        As described in Note 1, "Organization and Operations", the Company currently has two geographic operating segments for its exploratory operations. The operating segments are focused in the deepwater U.S. Gulf of Mexico and offshore West Africa. The following tables provide the geographic operating segment information for the three months ended March 31, 2012 and 2011:

	U.S. Gulf of Mexico			West Africa			Total
	($ in thousands)
Three months ended March 31, 2012
Operating costs and expense	$	24,671		$	13,044		$	37,715
Interest income		(1,184	)		—			(1,184	)
Net income (loss)	$	(23,487	)	$	(13,044	)	$	(36,531	)
Net properties and equipment	$	453,046		$	489,513		$	942,559
Three months ended March 31, 2011
Operating costs and expense	$	14,472		$	2,283		$	16,755
Interest income		(697	)		—			(697	)
Net income (loss)	$	(13,775	)	$	(2,283	)	$	(16,058	)
Net properties and equipment	$	440,584		$	20,903		$	461,487

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Investments (Tables)

3 Months Ended

Mar. 31, 2012

Investments

Schedule of fair value of held-to-maturity securities stated at amortized cost

	March 31, 2012		December 31, 2011
	(in thousands)
U.S. Treasury securities	$	372,746	$	379,618
Corporate securities		684,953		535,846
Commercial paper		472,560		369,432
U.S. government agency securities		28,721		71,856
Municipal bonds		22,084		42,193
Certificates of deposit		—		12,500
Total	$	1,581,064	$	1,411,445

Schedule of held-to-maturity securities included in the company's balance sheets

	March 31, 2012		December 31, 2011
	(in thousands)
Cash and cash equivalents	$	77,974	$	184,749
Short-term investments		795,016		858,293
Short-term restricted funds		132,755		53,322
Long-term restricted funds		394,316		267,849
Long-term investments		181,003		47,232
	$	1,581,064	$	1,411,445

Schedule of contractual maturities of held-to-maturity securities

	March 31, 2012				December 31, 2011
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,400,061	$	1,400,061	$	1,364,213	$	1,364,213
After 1 year		181,003		181,003		47,232		47,232
	$	1,581,064	$	1,581,064	$	1,411,445	$	1,411,445

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		74 Months Ended	77 Months Ended
	Mar. 31, 2012 Segment	Mar. 31, 2011	Dec. 31, 2011	Mar. 31, 2012
Segment Information
Number of geographic operating segments	2
Segment Information
Operating costs and expense	$ 37,715	$ 16,755		$ 692,486
Interest income	(1,184)	(697)		(11,119)
Net income (loss)	(36,531)	(16,058)	(644,836)	(681,367)
Net properties and equipment	942,559	461,487		942,559
U.S. Gulf of Mexico
Segment Information
Operating costs and expense	24,671	14,472
Interest income	(1,184)	(697)
Net income (loss)	(23,487)	(13,775)
Net properties and equipment	453,046	440,584		453,046
West Africa
Segment Information
Operating costs and expense	13,044	2,283
Net income (loss)	(13,044)	(2,283)
Net properties and equipment	$ 489,513	$ 20,903		$ 489,513

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Property, Plant, and Equipment (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	$ 178,338	$ 106,881
Amounts charged to expense	(2,310)	(36,606)
End of period	259,950	178,338
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	259,950	178,338
Exploratory Well costs capitalized for a period greater than one year after completion of drilling	97,539	97,808
U.S. Gulf of Mexico | Shenandoah #1 Exploratory Well
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	69,468
Addition to capitalized exploratory well cost pending determination of proved reserves	198	(53)
End of period	69,667	69,468
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	69,667	69,468
U.S. Gulf of Mexico | Heidelberg #1 Exploratory Well
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	20,240
Addition to capitalized exploratory well cost pending determination of proved reserves	(468)
End of period	19,772
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	19,772
U.S. Gulf of Mexico | Heidelberg #2 Appraisal Well
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Addition to capitalized exploratory well cost pending determination of proved reserves		5,999
U.S. Gulf of Mexico | Heidelberg #3 Appraisal Well
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	4,056
Addition to capitalized exploratory well cost pending determination of proved reserves	7,583	4,056
End of period	11,639	4,056
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	11,639	4,056
U.S. Gulf of Mexico | Heidelberg #3 Appraisal Well Side Track
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Addition to capitalized exploratory well cost pending determination of proved reserves	2,310
U.S. Gulf of Mexico | Ligurian #1 Exploratory Well
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
End of period	8,100	8,100
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	8,100	8,100
U.S. Gulf of Mexico | Ligurian #2 Exploratory Well
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	2,034
Addition to capitalized exploratory well cost pending determination of proved reserves	17,383	2,034
End of period	19,416	2,034
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	19,416	2,034
U.S. Gulf of Mexico | Criollo #1 Exploratory Well
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Addition to capitalized exploratory well cost pending determination of proved reserves		(822)
West Africa | Bicuar #1 Exploratory Well costs
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	3,035
Addition to capitalized exploratory well cost pending determination of proved reserves	(3,035)	25,444
End of period		3,035
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs		3,035
West Africa | Cameia #1 Exploratory Well costs
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	71,405
Addition to capitalized exploratory well cost pending determination of proved reserves	36,284	71,405
End of period	107,689	71,405
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	107,689	71,405
West Africa | Cameia #2 Appraisal Well
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Addition to capitalized exploratory well cost pending determination of proved reserves	$ 23,667

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Condensed Consolidated Statements of Changes in Partners' Capital and Stockholders' Equity (USD $) In Thousands	Total	General Partner	Class A Limited Partners	Class B Limited Partners	Class C Limited Partners	Common Stock	Additional Paid-in Capital	Accumulated Deficit During Development Stage
Balance (Inception) at Nov. 09, 2005		$ 0
Class A limited partners' contributions	1,256,738		1,256,738
Class B & C limited partners' equity compensation	7,718			6,984	734
Common stock issued upon corporate reorganization			(1,256,738)	(6,984)	(734)	2,743	1,261,713
Common stock issued at initial public offering, net of offering costs	807,259					630	806,629
Common stock issued at private placement	42,188					32	42,156
Common stock issued at the closing of the over-allotment portion of initial public offering, net of offering costs	101,256					80	101,176
Common stock issued at public offering, net of costs	478,203					357	477,846
Common stock issued for restricted stock and stock options						34	(34)
Equity based compensation	30,579						30,579
Common stock withheld for taxes on equity based compensation	(191)					(1)	(190)
Net income (loss)	(644,836)							(644,836)
Balance at Dec. 31, 2011	2,078,914					3,875	2,719,875	(644,836)
Common stock issued at public offering, net of costs	489,488					181	489,307
Common stock issued for restricted stock and stock options						3	(3)
Equity based compensation	6,636						6,636
Common stock withheld for taxes on equity based compensation	(171)						(171)
Net income (loss)	(36,531)							(36,531)
Balance at Mar. 31, 2012	$ 2,538,336					$ 4,059	$ 3,215,644	$ (681,367)

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Restricted Funds

3 Months Ended

Mar. 31, 2012

Restricted Funds

Restricted Funds

4. Restricted Funds

        Restricted funds consisted of the following:

	March 31, 2012		December 31, 2011
	(in thousands)
Short-term:
Ocean Confidence escrow account	$	10,806	$	10,804
Collateral on Letters of Credit for Angola		50,056		53,322
Ensco 8503 escrow account		89,918		4,883
	$	150,780	$	69,009
Long-term:
Ensco 8503 escrow account	$	89,918	$	181,159
Collateral on letters of credit for Angola		304,398		88,358
Other vendor restricted funds		718		718
	$	395,034	$	270,235

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2012

Fair Value Measurements

Significant financial instruments as categorized by the fair value measurement hierarchy

	Level 1				Level 2
									Balance as of March 31, 2012
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	2,451	$	2,451	$	—	$	—	$	2,451
Money market funds		199,583		199,583		—		—		199,583
Commercial paper		—		—		74,383		74,383		74,383
Corporate bonds		—		—		3,591		3,591		3,591
Subtotal		202,034		202,034		77,974		77,974		280,008
Short-term restricted funds:
Cash		10,806		10,806		—		—		10,806
Money market funds		7,219		7,219		—		—		7,219
U.S. Treasury bills		—		—		50,056		50,056		50,056
U.S. Treasury notes		—		—		82,699		82,699		82,699
Subtotal		18,025		18,025		132,755		132,755		150,780
Short-term investments:
U.S. government agency securities		—		—		28,721		28,721		28,721
Corporate bonds		—		—		346,034		346,034		346,034
Municipal bonds		—		—		22,084		22,084		22,084
Commercial paper		—		—		398,177		398,177		398,177
Subtotal		—		—		795,016		795,016		795,016
Long-term restricted funds:
Cash		718		718		—		—		718
U.S. Treasury bills		—		—		87,485		87,485		87,485
U.S. Treasury notes		—		—		152,506		152,506		152,506
Corporate bonds		—		—		154,325		154,325		154,325
Subtotal		718		718		394,316		394,316		395,034
Long-term investments:
Corporate bonds		—		—		181,003		181,003		181,003
Subtotal		—		—		181,003		181,003		181,003
Total	$	220,777	$	220,777	$	1,581,064	$	1,581,064	$	1,801,841

	Level 1				Level 2
									Balance as of December 31, 2011
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	2,992	$	2,992	$	—	$	—	$	2,992
Money market funds		104,805		104,805		—		—		104,805
Commercial paper		—		—		172,249		172,249		172,249
Certificate of deposits		—		—		12,500		12,500		12,500
Subtotal		107,797		107,797		184,749		184,749		292,546
Short-term restricted funds:
Cash		4,883		4,883		—		—		4,883
Money market funds		10,804		10,804		—		—		10,804
U.S. Treasury bills		—		—		53,322		53,322		53,322
Subtotal		15,687		15,687		53,322		53,322		69,009
Short-term investments:
U.S. Treasury bills		—		—		112,507		112,507		112,507
U.S. Government agency securities		—		—		40,000		40,000		40,000
Corporate bonds		—		—		466,411		466,411		466,411
Municipal bonds		—		—		42,193		42,193		42,193
Commercial paper		—		—		197,182		197,182		197,182
Subtotal		—		—		858,293		858,293		858,293
Long-term restricted funds:
Cash		718		718		—		—		718
Money market funds		1,668		1,668		—		—		1,668
U.S. Treasury bills		—		—		40,597		40,597		40,597
U.S. Treasury notes		—		—		173,192		173,192		173,192
Corporate bonds		—		—		54,060		54,060		54,060
Subtotal		2,386		2,386		267,849		267,849		270,235
Long-term investments:
U.S. Government agency securities		—		—		31,856		31,856		31,856
Corporate bonds		—		—		15,376		15,376		15,376
Subtotal		—		—		47,232		47,232		47,232
Total	$	125,870	$	125,870	$	1,411,445	$	1,411,445	$	1,537,315

(1)

As of March 31, 2012 and December 31, 2011, the Company did not record any OTTI on these assets.

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	$ 1,581,064	$ 1,411,445
Fair Value	1,581,064	1,411,445
Total	1,801,841	1,537,315
Cash and cash equivalents
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	77,974	184,749
Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	280,008	292,546
Cash and cash equivalents | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	2,451	2,992
Cash and cash equivalents | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	199,583	104,805
Cash and cash equivalents | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	74,383	172,249
Cash and cash equivalents | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	3,591
Cash and cash equivalents | Certificates of deposit | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total		12,500
Short-term restricted funds
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	132,755	53,322
Short-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	150,780	69,009
Short-term restricted funds | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	10,806	4,883
Short-term restricted funds | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	7,219	10,804
Short-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	50,056	53,322
Short-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	82,699
Short-term investments
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	795,016	858,293
Short-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	795,016	858,293
Short-term investments | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	398,177	197,182
Short-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	346,034	466,411
Short-term investments | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total		112,507
Short-term investments | U.S. government agency securities | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	28,721	40,000
Short-term investments | State municipal bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	22,084	42,193
Long-term restricted funds
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	394,316	267,849
Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	395,034	270,235
Long-term restricted funds | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	718	718
Long-term restricted funds | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total		1,668
Long-term restricted funds | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	154,325	54,060
Long-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	87,485	40,597
Long-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	152,506	173,192
Long-term investments
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	181,003	47,232
Long-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	181,003	47,232
Long-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	181,003	15,376
Long-term investments | U.S. government agency securities | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total		31,856
Level 1 | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	220,777	125,870
Fair Value	220,777	125,870
Level 1 | Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	202,034	107,797
Fair Value	202,034	107,797
Level 1 | Cash and cash equivalents | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	2,451	2,992
Fair Value	2,451	2,992
Level 1 | Cash and cash equivalents | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	199,583	104,805
Fair Value	199,583	104,805
Level 1 | Short-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	18,025	15,687
Fair Value	18,025	15,687
Level 1 | Short-term restricted funds | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	10,806	4,883
Fair Value	10,806	4,883
Level 1 | Short-term restricted funds | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	7,219	10,804
Fair Value	7,219	10,804
Level 1 | Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	718	2,386
Fair Value	718	2,386
Level 1 | Long-term restricted funds | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	718	718
Fair Value	718	718
Level 1 | Long-term restricted funds | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost		1,668
Fair Value		1,668
Level 2 | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	1,581,064	1,411,445
Fair Value	1,581,064	1,411,445
Level 2 | Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	77,974	184,749
Fair Value	77,974	184,749
Level 2 | Cash and cash equivalents | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	74,383	172,249
Fair Value	74,383	172,249
Level 2 | Cash and cash equivalents | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	3,591
Fair Value	3,591
Level 2 | Cash and cash equivalents | Certificates of deposit | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost		12,500
Fair Value		12,500
Level 2 | Short-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	132,755	53,322
Fair Value	132,755	53,322
Level 2 | Short-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	50,056	53,322
Fair Value	50,056	53,322
Level 2 | Short-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	82,699
Fair Value	82,699
Level 2 | Short-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	795,016	858,293
Fair Value	795,016	858,293
Level 2 | Short-term investments | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	398,177	197,182
Fair Value	398,177	197,182
Level 2 | Short-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	346,034	466,411
Fair Value	346,034	466,411
Level 2 | Short-term investments | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost		112,507
Fair Value		112,507
Level 2 | Short-term investments | U.S. government agency securities | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	28,721	40,000
Fair Value	28,721	40,000
Level 2 | Short-term investments | State municipal bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	22,084	42,193
Fair Value	22,084	42,193
Level 2 | Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	394,316	267,849
Fair Value	394,316	267,849
Level 2 | Long-term restricted funds | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	154,325	54,060
Fair Value	154,325	54,060
Level 2 | Long-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	87,485	40,597
Fair Value	87,485	40,597
Level 2 | Long-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	152,506	173,192
Fair Value	152,506	173,192
Level 2 | Long-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	181,003	47,232
Fair Value	181,003	47,232
Level 2 | Long-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	181,003	15,376
Fair Value	181,003	15,376
Level 2 | Long-term investments | U.S. government agency securities | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost		31,856
Fair Value		$ 31,856

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Equity Based Compensation

3 Months Ended

Mar. 31, 2012

Equity Based Compensation

Equity Based Compensation

14. 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 asset-or-nothing option pricing model. Restricted stock awards without market conditions and the performance-based awards 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. For performance-based awards, compensation cost is recognized over the requisite service period as and when the Company determines that the achievement of the performance condition is probable, using the per-share fair value measured at grant date.

        On February 24, 2012, the Company amended certain terms and conditions of its restricted stock units (RSUs) award agreement which resulted in the Company using the fair value of its common stock as of the date of such amendments to recognize the equity based compensation expense for the RSUs that vested during the first quarter of 2012 as well as the RSUs that are expected to vest during the remainder of 2012. The Company also amended certain terms and conditions of its non-qualified stock option (NQSO) Agreement. These amendments have no impact on the equity-based stock compensation expense relating to the NQSOs.

        The following table summarizes grant, vesting and forfeiture information about the Company's restricted stock and restricted stock units from December 31, 2011 to March 31, 2012:

	Number of shares relating to Restricted Stock			Weighted Average Grant Date Fair Value Per Share		Number of shares relating Restricted Stock Units			Weighted Average Grant Date Fair Value Per Unit
Non-vested at December 31, 2011		4,599,783		$	11.27		198,838		$	12.45
Granted		272,810		$	29.77		—			—
Vested		(93,594	)	$	19.73		(74,537	)	$	30.50
Forfeited or expired		—			—		—			—
Non-vested at March 31, 2012		4,778,999		$	12.15		124,301		$	30.50
Weighted-average period remaining		2.5 years					1.71 years
Unrecognized compensation ($ in thousands)	$	34,385				$	**

**

The Restricted Stock Units ("RSUs") will vest in amounts of up to 200% of the target amount of shares of common stock, on the applicable vesting dates and contingent upon the recipient's continued service at such vesting dates and based upon the achievement of successful drilling results as defined in the RSU award agreement. Compensation cost will be recognized as and when the performance conditions are satisfied or when the Company determines that the achievement of the performance condition is probable. For the three months ended March 31, 2012, the Company recognized $2.8 million of stock compensation for the RSUs based on the performance targets achieved from the success of the Cameia #1 exploratory well and approved by the Compensation Committee during the first quarter of 2012, and the probable achievement of performance targets during the remainder of 2012.

        There were no restricted stock unit awards granted to non-employee directors during the three months ended March 31, 2012. As of March 31, 2012, the Company has granted a cumulative total of 104,741 restricted stock units to non-employee directors. During the three months ended March 31, 2012 and 2011, the Company also granted 4,169 and 5,163 shares of common stock, respectively, as retainer awards to non-employee directors who elected to be compensated by stock in lieu of cash payments.

        Non-Qualified Stock Options.    The Company grants non-qualified stock options to employees at an exercise price equal to the market value of the Company's common stock on the grant date. The non-qualified stock option awards granted in December 2010 have contractual terms of 10 years and vest ratably over the requisite service period from date of grant. The non-qualified stock option awards granted in February 2012 have contractual terms of 10 years and are scheduled to vest on December 31, 2014. There were no non-qualified stock options granted prior to December 3, 2010.

        The fair value of each stock option granted is determined using the Black-Scholes-Merton option-pricing model based on several assumptions. These assumptions are based on management's best estimate at the time of grant. The Company used the following weighted average of each assumption based on the grants issued during the three months ended March 31, 2012 (there were no new stock options granted in 2011):

	2012
Expected Term in Years		6.50
Expected Volatility		54.92	%
Expected Dividends		0	%
Risk-Free Interest Rate		4.61	%

        The Company estimates expected volatility based on its historical stock price since the IPO in December 2009. The Company estimates the expected term of its option awards based on the vesting period and average remaining contractual term, referred to as the "simplified method". The Company uses this method to provide a reasonable basis for estimating its expected term based on a lack of sufficient historical employee exercise data on stock option awards.

        A summary of the stock options activities for the year ended March 31, 2012 is presented below:

	Number of Stock Options			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ($ in thousands)
Outstanding at January 1, 2012		1,133,960		$	12.45		8.9	$	3,481
Granted		457,704		$	30.50		9.9	$	—
Exercised		(3,919	)	$	12.45		—	$	(71	)
Forfeited or expired		—			—		—	$	—
Outstanding at March 31, 2012		1,587,745		$	17.65		9.3	$	19,651
Vested as of March 31, 2012		283,490		$	12.45		9.3	$	4,984
Exercisable at March 31, 2012		279,571		$	12.45		9.3	$	4,915

        The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2012 was $17.92 per option, using the Black-Scholes option-pricing model. As of March 31, 2012, $12.8 million of total unrecognized compensation cost related to stock option is expected to be recognized over a weighted-average period of 2.71 years.

        The table below summarizes the equity-based compensation costs, net of forfeitures, recognized for the three months ended March 31, 2012 and 2011, and for the period November 10, 2005 (inception) through March 31, 2012:

	Three Months Ended March 31,				For the Period November 10, 2005 (Inception) through March 31, 2012
	2012		2011
	($ in thousands)
Restricted stock:
Employees	$	2,998	$	3,131	$	36,213
Non-employee directors		242		143		1,554
Stock options:
Employees		569		613		2,511
Restricted stock units (performance-based)		2,827		—		2,827
Deferred stock compensation(1)		—		—		1,828
	$	6,636	$	3,887	$	44,933

(1)

In December 2008, the Company adopted a deferred compensation plan and provided certain executive officers the opportunity to defer under the Plan all or a portion of their salary and/or annual bonus for 2009. Amounts deferred under the Plan generally are deemed to be invested in a money market account prior to the IPO and shares of the Company's common stock following the IPO. The deferred amounts were distributed to these executive officers on January 15, 2012 in the form of 121,637 shares of the Company's common stock.