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 June 30, 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 June 30, 2012: 410,595,026 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	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	38

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;

•

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 June 30, 2012 and December 31, 2011	6
Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2012 and 2011, and for the period November 10, 2005 (Inception) through June 30, 2012	7
Condensed Consolidated Statements of Changes in Partners' Capital and Stockholders' Equity for the Six Months Ended June 30, 2012 and for the period November 10, 2005 (Inception) through June 30, 2012	8
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011, and for the period November 10, 2005 (Inception) through June 30, 2012	9
Notes to Condensed Consolidated Financial Statements	10

5

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

Condensed Consolidated Balance Sheets

	June 30, 2012			December 31, 2011
	(Unaudited)
	($ in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	242,070		$	292,546
Joint interest and other receivables		50,964			56,983
Prepaid expenses and other current assets		24,841			22,214
Inventory		38,823			36,049
Short-term restricted funds		118,796			69,009
Short-term investments		842,198			858,293
Total current assets		1,317,692			1,335,094
Property, plant, and equipment:
Oil and gas properties, successful efforts method of accounting, net of accumulated depletion of $-0-		928,185			861,955
Other property and equipment, net of accumulated depreciation and amortization of $4,068 and $3,555, as of June 30, 2012 and December 31, 2011, respectively		3,142			1,371
Total property, plant, and equipment, net		931,327			863,326
Long-term restricted funds		395,003			270,235
Long-term investments		81,854			47,232
Other assets		5,735			12,057
Total assets	$	2,731,611		$	2,527,944
Liabilities and Stockholders' Equity
Current liabilities:
Trade and other accounts payable	$	24,512		$	71,186
Accrued liabilities		86,708			34,418
Short-term contractual obligations		49,019			132,465
Total current liabilities		160,239			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, 406,488,531 and 387,531,630 issued and outstanding as of June 30, 2012 and December 31, 2011, respectively		4,065			3,875
Additional paid-in capital		3,221,159			2,719,875
Deficit accumulated during the development stage		(822,090	)		(644,836	)
Total stockholders' equity		2,403,134			2,078,914
Total liabilities and stockholders' equity	$	2,731,611		$	2,527,944

See accompanying notes.

6

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

Condensed Consolidated Statements of Operations

(Unaudited)

													For the Period November 10, 2005 (Inception) Through June 30, 2012
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	($ in thousands except per share data)
Oil and gas revenue	$	—		$	—		$	—		$	—		$	—
Operating costs and expenses:
Seismic and exploration		12,006			4,813			29,355			7,253			357,945
Dry hole expense and impairment		111,355			2,506			116,679			5,019			221,326
General and administrative		18,482			13,038			33,322			24,656			251,301
Depreciation and amortization		312			179			513			363			4,068
Total operating costs and expenses		142,155			20,536			179,869			37,291			834,640
Operating income (loss)		(142,155	)		(20,536	)		(179,869	)		(37,291	)		(834,640	)
Other income:
Interest income		1,432			1,058			2,615			1,755			12,550
Total other income		1,432			1,058			2,615			1,755			12,550
Net income (loss) before income tax		(140,723	)		(19,478	)		(177,254	)		(35,536	)		(822,090	)
Income tax expense		—			—			—			—			—
Net income (loss)	$	(140,723	)	$	(19,478	)	$	(177,254	)	$	(35,536	)	$	(822,090	)
Basic and diluted income (loss) per share	$	(0.35	)	$	(0.05	)	$	(0.44	)	$	(0.10	)
Basic and diluted weighted average common shares outstanding		406,122,827			386,731,150			400,113,132			366,127,558

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		—		—			—			—			9			(9	)		—			—
Equity based compensation		—		—			—			—			—			11,988			—			11,988
Exercise of stock options		—		—			—			—			—			168			—			168
Common stock withheld for taxes on equity based compensation		—		—			—			—			—			(170	)		—			(170	)
Net income (loss)		—		—			—			—			—			—			(177,254	)		(177,254	)
Balance, June 30, 2012	$	—	$	—		$	—		$	—		$	4,065		$	3,221,159		$	(822,090	)	$	2,403,134

        See accompanying notes.

8

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

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,						For the Period November 10, 2005 (Inception) Through June 30, 2012
	2012			2011
	($ in thousands)
Cash flows provided from operating activities
Net income (loss)	$	(177,254	)	$	(35,536	)	$	(822,090	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		513			363			4,068
Dry hole expense and impairment of unproved properties		116,679			5,019			221,326
Equity based compensation		11,988			7,507			50,284
Amortization of premium (accretion of discount) on investment securities		8,956			4,276			25,147
Other		—			—			558
Changes in operating assets and liabilities:
Joint interest and other receivables		15,633			(6,420	)		(42,968	)
Inventory		(2,774	)		(5,581	)		(38,823	)
Prepaid expense and other assets		(3,695	)		1,522			(30,576	)
Trade and other accounts payable		(46,673	)		(6,638	)		24,512
Accrued liabilities and other		(5,927	)		(3,516	)		34,793
Net cash provided by (used in) operating activities		(75,164	)		(39,004	)		(573,769	)
Cash flows from investing activities
Capital expenditures for oil and gas properties		(122,851	)		—			(826,957	)
Capital expenditures for other property and equipment		(2,284	)		(489	)		(7,210	)
Exploratory wells drilling in process		(128,012	)		(6,237	)		(392,383	)
Proceeds from sale of oil and gas properties		—			—			339,001
Change in restricted cash		3,228			(609	)		(336,903	)
Proceeds from maturity of investment securities		536,595			726,799			2,051,425
Purchase of investment securities		(751,474	)		(1,270,381	)		(3,185,515	)
Net cash provided by (used in) investing activities		(464,798	)		(550,917	)		(2,358,542	)
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 offering, net of costs		489,488			478,317			967,692
Payments for common stock withheld for taxes on equity based compensation		(170	)		—			(361	)
Proceeds from stock option exercise		168			—			168
Net cash provided by (used in) financing activities		489,486			478,317			3,174,381
Net increase (decrease) in cash and cash equivalents		(50,476	)		(111,604	)		242,070
Cash and cash equivalents, beginning of period		292,546			302,720			—
Cash and cash equivalents, end of period	$	242,070		$	191,116		$	242,070
Non-Cash Disclosures
Capital expenditures in liabilities	$	269,172		$	—		$	269,172
Transfer of investment securities to and from restricted funds	$	179,310		$	—		$	179,310

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 the Company's prospects are oil-focused. 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, and the Cameia #2 appraisal well. In the U.S. Gulf of Mexico, the Company has drilled as operator three exploratory wells (Ligurian #1 and #2 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 Heidelberg and Shenandoah oil discoveries. The Company is currently drilling as operator the North Platte #1 exploratory well and participating as a non-operator in the Shenandoah #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. In addition, the Company will progress its existing discoveries toward development and production through follow-on appraisal drilling and pre-development planning activities.

        As of June 30, 2012, the Company had no proved oil and gas reserves.

10

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

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 unaudited 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 condensed unaudited 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 has 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

11

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (Continued)

period, unless their effect is anti-dilutive. For the three months and six months ended June 30, 2012, 5,693,908 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. For the three months and six months ended June 30, 2011, 6,609,478 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. 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 June 30, 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 June 30, 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:

	June 30, 2012		December 31, 2011
	(in thousands)
Cash at banks	$	31,785	$	2,992
Money market funds		99,782		104,805
Held-to-maturity securities(1)		110,503		184,749
	$	242,070	$	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:

	June 30, 2012		December 31, 2011
	(in thousands)
Short-term:
Ocean Confidence escrow account	$	10,808	$	10,804
Collateral on letters of credit for Angola		17,656		53,322
Ensco 8503 escrow account		90,332		4,883
	$	118,796	$	69,009
Long-term:
Ensco 8503 escrow account	$	90,332	$	181,159
Collateral on letters of credit for Angola		303,952		88,358
Other vendor restricted funds		719		718
	$	395,003	$	270,235

5. Investments

        The Company's investments in held-to-maturity securities, which are stated at amortized cost, were as follows as of June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
	(in thousands)
U.S. Treasury securities	$	350,500	$	379,618
Corporate bonds		738,307		535,846
Commercial paper		390,216		369,432
U.S. government agency securities		28,718		71,856
Municipal bonds		22,057		42,193
Certificates of deposit		7,005		12,500
Total	$	1,536,803	$	1,411,445

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

	June 30, 2012		December 31, 2011
	(in thousands)
Cash and cash equivalents	$	110,503	$	184,749
Short-term investments		842,198		858,293
Short-term restricted funds		107,988		53,322
Long-term restricted funds		394,260		267,849
Long-term investments		81,854		47,232
	$	1,536,803	$	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 June 30, 2012 and December 31, 2011 were as follows:

	June 30, 2012				December 31, 2011
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,454,949	$	1,454,949	$	1,364,213	$	1,364,213
After 1 year		81,854		81,854		47,232		47,232
	$	1,536,803	$	1,536,803	$	1,411,445	$	1,411,445

6. Fair Value Measurements

        The fair values of the Company's cash and cash equivalents, joint interest and other receivables, 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 June 30, 2012
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	31,785	$	31,785	$	—	$	—	$	31,785
Money market funds		99,782		99,782		—		—		99,782
Commercial paper		—		—		110,503		110,503		110,503
Subtotal		131,567		131,567		110,503		110,503		242,070
Short-term restricted funds:
Money market funds		10,808		10,808		—		—		10,808
U.S. Treasury bills		—		—		17,656		17,656		17,656
U.S. Treasury notes		—		—		90,332		90,332		90,332
Subtotal		10,808		10,808		107,988		107,988		118,796
Short-term investments:
U.S. government agency securities		—		—		28,718		28,718		28,718
Corporate bonds		—		—		504,705		504,705		504,705
Municipal bonds		—		—		22,057		22,057		22,057
Commercial paper		—		—		279,713		279,713		279,713
Certificate of deposits		—		—		7,005		7,005		7,005
Subtotal		—		—		842,198		842,198		842,198
Long-term restricted funds:
Cash		719		719		—		—		719
Money market Funds		24		24		—		—		24
U.S. Treasury bills		—		—		89,677		89,677		89,677
U.S. Treasury notes		—		—		152,835		152,835		152,835
Corporate bonds		—		—		151,748		151,748		151,748
Subtotal		743		743		394,260		394,260		395,003
Long-term investments:
Corporate bonds		—		—		81,854		81,854		81,854
Subtotal		—		—		81,854		81,854		81,854
Total	$	143,118	$	143,118	$	1,536,803	$	1,536,803	$	1,679,921

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 June 30, 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 June 30, 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 $43.8 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 $7.2 million and $10.3 million as of June 30, 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)		June 30, 2012			December 31, 2011
			($ in Thousands)
Oil and Gas Properties:
Unproved oil and gas properties			$	701,892		$	701,892
Less: accumulated allowance for impairment				(73,751	)		(18,275	)
				628,141			683,617
Exploratory wells in process				300,044			178,338
Total oil and gas properties, net				928,185			861,955
Other Property and Equipment:
Computer equipment and software		3		3,542			2,847
Office equipment and furniture		3 - 5		1,221			1,114
Vehicles		3		194			129
Leasehold improvements		3 - 10		2,253			836
				7,210			4,926
Less: accumulated depreciation and amortization				(4,068	)		(3,555	)
Total other property and equipment, net				3,142			1,371
Property, plant, and equipment, net			$	931,327		$	863,326

        The Company recorded $0.3 million, $0.2 million, $0.5 million, $0.4 million and $4.1 million of depreciation and amortization expense for the three months ended June 30, 2012 and 2011, the six months ended June 30, 2012 and 2011, and for the period November 10, 2005 (inception) through June 30, 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 its 40% interests in Blocks 9 and 21 offshore Angola and its 21.25% interest in the Diaba block offshore Gabon. The Company also has $270.2 million of unproved property acquisition costs, net of allowance for impairment, relating to its U.S. Gulf of Mexico properties. As of June 30, 2012 and December 31, 2011, the Company has a net total of $628.1 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. There are no impairment indicators to date that would require the Company to impair the unproved properties in Blocks 9 and 21 offshore Angola and in the Diaba block offshore Gabon. 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 an allowance for impairment is provided, 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 June 30, 2012 and December 31, 2011, the balance for unproved leaseholds that were subject to amortization before impairment provision was $64.8 million and $65.1 million, respectively. For the three and six months ended June 30, 2012 and 2011, and for the period November 10, 2005 (inception) through June 30, 2012, the Company recorded $52.5 million, $2.5 million, $55.5 million, $5 million, and $73.8 million, respectively, as an allowance for impairment 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) for the six months ended June 30, 2012 and for the year ended December 31, 2011:

	June 30, 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		210			(53	)
Shenandoah #2 Appraisal Well		1,195			—
Heidelberg #1 Exploratory Well		(422	)		—
Heidelberg #2 Appraisal Well		—			5,999
Heidelberg #3 Appraisal Well		7,985			4,056
Heidelberg #3 Appraisal Well Side Track		4,108			—
Heidelberg Pre-Feed Study		1,000			—
Ligurian #2 Exploratory Well		46,961			2,034
Criollo #1 Exploratory Well		—			(822	)
North Platte #1 Exploratory Well		3,688			—
West Africa:
Bicuar #1 Exploratory Well pre-spud costs(1)		(3,035	)		25,444
Cameia #1 Exploratory Well		33,958			71,405
Cameia #2 Appraisal Well		86,223			—
Cameia Early Development		1,038			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(2)		(61,203	)		(36,606	)
End of period	$	300,044		$	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.

19

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Property, Plant, and Equipment (Continued)

(2)

These amounts represent impairment charges on exploratory wells, including $4.1 million for the Heidelberg #3 sidetrack well, $8.1 million for the Ligurian #1 exploratory well and $49.0 million for the Ligurian #2 exploratory well.

	Spud Year		June 30, 2012		December 31, 2011
			($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Shenandoah #1 Exploratory Well		2008	$	69,678	$	69,468
Shenandoah #2 Appraisal Well		2012		1,195		—
Heidelberg #1 Exploratory Well		2008		19,818		20,240
Heidelberg #3 Appraisal Well		2011		12,041		4,056
Heidelberg Pre-Feed Study		2012		1,000		—
Ligurian #1 Exploratory Well		2009		—		8,100
Ligurian #2 Exploratory Well		2011		—		2,034
North Platte #1 Exploratory Well		2012		3,688		—
West Africa:
Bicuar #1 Exploratory Well		2011		—		3,035
Cameia #1 Exploratory Well		2011		105,363		71,405
Cameia #2 Appraisal Well		2012		86,223		—
Cameia Early Development		2012		1,038		—
			$	300,044	$	178,338
Exploratory Well costs capitalized for a period greater than one year after completion of drilling (included in table above)			$	89,496	$	97,861

        As of June 30, 2012, capitalized exploratory well costs that have been suspended longer than one year are associated with the Shenandoah #1 and Heidelberg #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 June 30, 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 and six months ended June 30, 2012, the costs capitalized to oil and gas properties totaled $2.9 million and

20

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

10. Other Assets (Continued)

$5.9 million, respectively. As of June 30, 2012 and December 31, 2011, the remaining costs associated with the Ensco 8503 drilling rig and subsea containment in other assets were $5.7 million and $12.1 million, respectively.

11. Contractual Obligations

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

	June 30, 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 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 June 30,				Six Months Ended June 30,				For the Period November 10, 2005 (Inception) through June 30, 2012
	2012		2011		2012		2011
	($ in Thousands)
Seismic data costs(1)	$	10,128	$	2,935	$	25,341	$	3,691	$	299,815
Leasehold delay rentals		1,469		1,815		2,878		2,850		29,398
Drilling rig acceptance and other expense(2)		409		63		1,136		712		28,732
	$	12,006	$	4,813	$	29,355	$	7,253	$	357,945

(1)

These amounts for the period November 10, 2005 (inception) through June 30, 2012 reflect a recovery of $25.1 million of past seismic costs incurred by the Company from its joint venture partners.

(2)

The amounts for the period November 10, 2005 (inception) through June 30, 2012 includes approximately $13.5 million in force majeure expenses resulting from suspension of drilling activities in the U.S. Gulf of Mexico during 2010 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.

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 restricted stock units (RSUs) 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 RSU 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 RSU awards. For RSU 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 RSU 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.

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 June 30, 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		335,310		$	28.42		—			—
Vested		(646,054	)	$	12.70		(74,537	)	$	30.50
Forfeited or expired		(182,546	)	$	12.08		(12,836	)	$	30.50
Non-vested at June 30, 2012		4,106,493		$	12.40		111,465		$	30.50
Weighted-average period remaining		2.3 years					1.5 years
Unrecognized compensation ($ in thousands)	$	29,303				$	**

**

The 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 six months ended June 30, 2012, the Company recognized $2.7 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.

        A total of 33,204 restricted stock unit awards were granted to non-employee directors during the six months ended June 30, 2012 for annual retainers. As of June 30, 2012, the Company has granted a cumulative total of 137,945 restricted stock units to non-employee directors. During the three and six months ended June 30, 2012, the Company also granted 2,249 and 6,417 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 at year end over the four year 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.

        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

23

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

14. Equity Based Compensation (Continued)

based on the grants issued during the six months ended June 30, 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		0.46	%

        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 period ended June 30, 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		8.4
Granted		457,704		$	30.50		9.7
Exercised		(13,518	)	$	12.45		—
Forfeited or expired		(102,196	)	$	14.99		—
Outstanding at June 30, 2012		1,475,950		$	17.87		9.0	$	34,685
Vested as of June 30, 2012		283,490		$	12.45		9.0	$	3,133
Exercisable at June 30, 2012		269,972		$	12.45		9.0	$	2,983

        The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2012 was $17.92 per option, using the Black-Scholes option-pricing model. As of June 30, 2012, $11.6 million of total unrecognized compensation cost related to stock option is expected to be recognized over a weighted-average period of 2.5 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 and six months ended June 30, 2012 and 2011, and for the period November 10, 2005 (inception) through June 30, 2012:

	Three Months Ended June 30,					Six Months Ended June 30,				For the Period November 10, 2005 (Inception) through June 30, 2012
	2012			2011		2012		2011
	($ in thousands)
Restricted stock:
Employees	$	4,155		$	3,138	$	7,152	$	6,268	$	40,367
Non-employee directors		243			176		485		319		1,796
Stock options:
Employees		1,089			307		1,658		920		3,600
Restricted stock units (performance-based)		(134	)		—		2,693		—		2,693
Deferred stock compensation(1)		—			—		—		—		1,828
	$	5,353		$	3,621	$	11,988	$	7,507	$	50,284

(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.

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 United

25

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

15. Segment Information (Continued)

States and offshore West Africa. The following tables provide the geographic operating segment information for the three and six months ended June 30, 2012 and 2011:

	United States			West Africa			Total
	($ in thousands)
Three months ended June 30, 2012
Operating costs and expense	$	(135,531	)	$	(6,624	)	$	(142,155	)
Interest income		1,430			2			1,432
Net income (loss)	$	(134,101	)	$	(6,622	)	$	(140,723	)
Additions to Property and Equipment, net(1)	$	(72,635	)	$	61,403		$	(11,232	)
Three months ended June 30, 2011
Operating costs and expense	$	(14,778	)	$	(5,758	)	$	(20,536	)
Interest income		1,056			2			1,058
Net income (loss)	$	(13,722	)	$	(5,756	)	$	(19,478	)
Additions to Property and Equipment, net(1)	$	(1,750	)	$	5,585		$	3,835

	United States			West Africa			Total
	($ in thousands)
Six months ended June 30, 2012
Operating costs and expense	$	(156,578	)	$	(23,291	)	$	(179,869	)
Interest income		2,612			3			2,615
Net income (loss)	$	(153,966	)	$	(23,288	)	$	(177,254	)
Additions to Property and Equipment, net(1)	$	(49,979	)	$	118,290		$	68,311
Six months ended June 30, 2011
Operating costs and expense	$	(28,390	)	$	(8,901	)	$	(37,291	)
Interest income		1,753			2			1,755
Net income (loss)	$	(26,637	)	$	(8,899	)	$	(35,536	)
Additions to Property and Equipment, net(1)	$	(4,086	)	$	5,640		$	1,554

(1)

These amounts are net of accumulated allowance for impairment on oil and gas properties and accumulated depreciation and amortization on other property and equipment

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

26

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

16. Contingencies (Continued)

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.

17. Subsequent Events

        On July 30, 2012, the Company executed a drilling contract, which is subject to formal Sonangol approval, with an affiliate of Petroserv S.A. for the SSV Catarina, a new-build, sixth-generation semi-submersible drilling rig that will support the Company's Angolan pre-salt drilling campaign. The drilling contract provides for a firm three-year commitment, beginning in the first quarter of 2013, at a day rate of approximately $600,000 and two one-year extension options at day rates to be mutually agreed. Such rates are subject to standard reimbursement and escalation contractual provisions. The drilling contract further requires the Company to pay up to approximately $45 million for mobilization, demobilization and certain rig modifications.

27

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. Offshore Angola, we have drilled as operator the Cameia #1 exploratory well on Block 21 which resulted in the Cameia pre-salt oil discovery, and the Cameia #2 appraisal well. In the U.S. Gulf of Mexico, we have drilled as operator three exploratory wells (Ligurian #1 and #2 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 Heidelberg and Shenandoah oil discoveries. We are currently drilling as operator the North Platte #1 exploratory well and participating as a non-operator in the Shenandoah #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.

Second Quarter 2012 Operational Highlights

•

On July 31, 2012, we provided an update on the status of our Cameia #2 appraisal well located in Block 21 offshore Angola. The objectives of the Cameia #2 appraisal well were to (i) better define the areal extent of the Cameia discovered resources, (ii) determine an oil-water contact deeper on the Cameia structure than the lowest known oil observed in the Cameia #1 exploratory well and (iii) test deeper oil potential in untested zones in the Cameia field. Based on our preliminary wireline logging results, our Cameia #2 well was successful on the first and second objectives and evaluation is ongoing to determine the potential of the deeper reservoir target. The well was drilled approximately 3.5 kilometers (2.2 miles) south from the Cameia #1 exploratory well to the total depth of 5,475 meters (17,963 feet). Logging results have (i) confirmed the presence of a large hydrocarbon accumulation in what is a high quality reservoir and (ii) confirmed lowest known oil to be at least 135 meters (440 feet) deeper than that which was observed in the Cameia #1 exploratory well. In pursuit of the third objective, analysis of data obtained from drilling operations and wireline logging indicates hydrocarbon charge and pressure separation from the uphole reservoir section in the deepest reservoir target. We are currently preparing for a production drill stem test to be performed in August. We will evaluate the results of all data collected to determine the reservoir potential, if any, of this new zone.

•

On July 30, 2012, we executed a drilling contract, which is subject to formal Sonangol approval, with an affiliate of Petroserv S.A. for the SSV Catarina, a new-build, sixth-generation semi-submersible drilling rig that will support our Angolan pre-salt drilling campaign. The drilling contract provides for a firm three-year commitment, beginning in the first quarter of 2013, at a day rate of approximately $600,000 and two one-year extension options at day rates to be mutually agreed. Such rates are subject to standard reimbursement and escalation contractual

28

provisions. The drilling contract further requires us to pay up to approximately $45 million for mobilization, demobilization and certain rig modifications.

•

On July 3, 2012, we spud the North Platte #1 exploratory well in the U.S. Gulf of Mexico. The North Platte #1 exploratory well is located in the heart of the emerging inboard Lower Tertiary play in which we believe we hold a dominant position with numerous follow-on inboard Lower Tertiary exploratory prospects. We expect well results in late 2012. We are the operator of the North Platte #1 exploratory well and have a 60% working interest in the prospect.

•

On June 29, 2012, the Shenandoah #2 appraisal well was spud by its operator. This well will appraise the Shenandoah inboard Lower Tertiary oil discovery, made in 2009, where more than 300 feet of net oil pay was discovered. We expect well results in late 2012. We have a 20% working interest in the Shenandoah prospect.

•

On June 20, 2012, we participated in the U.S. Gulf of Mexico Central Lease Sale and were the high bidder on ten blocks, which represented a total net bid amount of approximately $17 million. Through these acquisitions, we will expand our U.S. Gulf of Mexico asset inventory by adding two new prospects and by adding adjacent blocks to two of our existing prospects.

•

On June 12, 2012, we announced that our Ligurian #2 exploratory well had reached total objective depth after having drilled through all the targeted Miocene formations. The well did not encounter commercial hydrocarbons and it was subsequently plugged and abandoned.

•

In early May 2012, we completed the acquisition of approximately 4,200 square kilometers of 3-D seismic data on Block 20 offshore Angola and are currently processing this data. We plan to spud the Lontra #1 exploratory well on Block 20 in 2013.

•

On April 27, 2012, we executed a letter agreement with a subsidiary of Diamond Offshore Company 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 are able to use the Ocean Confidence to drill two more wells offshore Angola. In return for this additional well slot, we agreed to release the Ocean Confidence to another operator to drill one well offshore Congo following operations on our Cameia #2 appraisal well. We expect this offshore Congo well, including mobilization and demobilization, will take approximately 120 days to drill, after which the Ocean Confidence will return to Angola to drill two wells for us. Our first 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.

Second Quarter 2012 Financial Highlights

•

We recorded a net loss of approximately $140.7 million, a 622.5% increase from the second quarter of 2011. Total operating expenses were approximately $142.2 million, a 592.2% increase from the second quarter of 2011. The increase of $121.2 million in net loss for the second quarter was primarily attributed to the increase of $58.9 million in dry hole expense charge recorded for the Heidelberg #3 sidetrack, Ligurian #1 and #2 exploratory wells, an increase in allowance for impairment of unproved leasehold properties of $50.0 million for our Ligurian prospect, and certain other prospects, an increase of $7.2 million for the purchase of seismic data over prospects in the U.S. Gulf of Mexico and an increase of $5.1 million in general and administrative expenses.

•

Total expenditures, excluding changes in working capital, were approximately $124 million and $358 million, respectively, for the three and six months ended June 30, 2012.

•

Including our existing cash and investments on hand and restricted cash as of June 30, 2012, we have approximately $1.7 billion of liquidity.

Results of Operations

        We operate our business in two geographic segments: the United States 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 June 30, 2012 Compared to the Three Months Ended June 30, 2011

	Three Months Ended June 30,
	2012			2011			Increase (Decrease)			%
	($ in thousands)
United States Segment:
Oil and gas revenue	$	—		$	—		$	—			—
Operating costs and expenses:
Seismic and exploration		10,570			2,666			7,904			296.5	%
Dry hole expense and impairment		111,355			2,506			108,849			4345.5	%
General and administrative		13,336			9,443			3,893			41.2	%
Depreciation and amortization		270			163			107			65.6	%
Total operating costs and expenses		135,531			14,778			120,753			817.1	%
Operating income (loss)		(135,531	)		(14,778	)		120,753			817.1	%
Other income:
Interest income		1,430			1,056			374			35.4	%
Total other income		1,430			1,056			374			35.4	%
Net income (loss) before income tax		(134,101	)		(13,722	)		120,379			877.3	%
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	(134,101	)	$	(13,722	)	$	120,379			877.3	%
West Africa Segment:
Oil and gas revenue	$	—		$	—		$	—			—
Operating costs and expenses:
Seismic and exploration		1,436			2,147			(711	)		(33.1	)%
Dry hole expense and impairment		—			—			—			—
General and administrative		5,146			3,595			1,551			43.1	%
Depreciation and amortization		42			16			26			162.5	%
Total operating costs and expenses		6,624			5,758			866			15.0	%
Operating income (loss)		(6,624	)		(5,758	)		866			15.0	%
Other income:
Interest income		2			2			—			—
Total other income		2			2			—			—
Net income (loss) before income tax		(6,622	)		(5,756	)		866			15.0	%
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	(6,622	)	$	(5,756	)	$	866			15.0	%
Consolidated Operations:
Oil and gas revenue	$	—		$	—		$	—			—
Operating costs and expenses:
Seismic and exploration		12,006			4,813			7,193			149.5	%
Dry hole expense and impairment		111,355			2,506			108,849			4343.5	%
General and administrative		18,482			13,038			5,444			41.8	%
Depreciation and amortization		312			179			133			74.3	%
Total operating costs and expenses		142,155			20,536			121,619			592.2	%
Operating income (loss)		(142,155	)		(20,536	)		121,619			592.2	%
Other income:
Interest income		1,432			1,058			374			35.4	%
Total other income		1,432			1,058			374			35.4	%
Net income (loss) before income tax		(140,723	)		(19,478	)		121,245			622.5	%
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	(140,723	)	$	(19,478	)	$	121,245			622.5	%

30

United States 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 June 30, 2012 and 2011, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the three months ended June 30, 2012 and 2011:

        Seismic and exploration.    Seismic and exploration costs increased by $7.9 million during the three months ended June 30, 2012, as compared to the three months ended June 30, 2011. The increase was primarily due to an increase of $8.6 million for the purchase of seismic data over certain of our prospects in the U.S. Gulf of Mexico, a decrease of $0.3 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 June 30, 2012 consisted of (i) $8.9 million incurred for seismic data acquisition for the U.S. Gulf of Mexico, (ii) $1.5 million incurred for leasehold delay rentals and (iii) $0.2 million of other exploration costs.

        Dry hole expense and impairment.    Dry hole expense and impairment increased by $108.8 million during the three months ended June 30, 2012, as compared to the three months ended June 30, 2011. The increase is due to impairment of unproved leasehold properties and dry hole expense written off against exploratory wells as reflected in the following table:

	Three Months Ended June 30,
	2012		2011		Increase (Decrease)
	($ in thousands)
Impairment of Unproved Leasehold:
Ligurian prospect	$	41,861	$	—	$	41,861
Other leasehold(1)		8,298		—		8,298
Amortization of leasehold with carrying value under $1 million		2,303		2,506		(203	)
Dry hole Expense:
Ligurian #1 exploratory well		8,100		—		8,100
Ligurian #2 exploratory well		48,994		—		48,994
Heidelberg #3 Appraisal Well Side Track		1,799		—		1,799
	$	111,355	$	2,506	$	108,849

(1)

Other leasehold includes certain unproved oil and gas leases for properties in the U.S. Gulf of Mexico with carrying value greater than $1 million that we have no exploration activity planned, based on our three-year exploration plan, during the remaining term of the leases.

        General and administrative.    General and administrative costs increased by $3.9 million during the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. The increase in general and administrative costs during this period was primarily attributed to a $3.6 million increase in staff related expenses which includes equity compensation, a $1.9 million increase in legal and other consulting fees, a $1.7 million increase in office related expenses, offset by an increase of $3.3 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 June 30, 2012 as compared to the three months ended June 30, 2011.

31

        Other income.    Other income increased by $0.4 million for the three months ended June 30, 2012 as compared to the three months ended June 30, 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 June 30, 2012 and 2011, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the three months ended June 30, 2012 and 2011:

        Seismic and exploration.    Seismic and exploration costs decreased by $0.7 million during the three months ended June 30, 2012, as compared to the three months ended June 30, 2011. The decrease was primarily due to a $0.9 million decrease in seismic data costs for the Diaba Block offshore Gabon and other technical studies incurred during the three months ended June 30, 2011 offset by a $0.2 million increase in other exploration costs. The seismic and exploration costs incurred for the three months ended June 30, 2012 consisted of (i) $1.2 million incurred for seismic data acquisition and processing for offshore West Africa, and (ii) $0.2 million for other exploration costs.

        Dry hole expense and impairment.    No dry hole or impairment charges were incurred during the periods ending June 30, 2012 or June 30, 2011.

        General and administrative.    General and administrative costs increased by $1.6 million for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. The increase is primarily attributed to a $2.6 million increase in office support costs, offset by a decrease of $1.0 million in rotation personnel costs.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the three months ended June 30, 2012 as compared to the three months ended June 30, 2011.

        Other income.    Other income did not change during the three months ended June 30, 2012 as compared to the three months ended June 30, 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.

32

Six Months Ended June 30, 2012 Compared to the Six Months Ended June 30, 2011

	Six Months Ended June 30,
	2012			2011			Increase (Decrease)		%
	($ in thousands)
United States Segment:
Oil and gas revenue	$	—		$	—		$	—		—
Operating costs and expenses:
Seismic and exploration		16,733			4,653			12,080		259.6	%
Dry hole expense and impairment		116,679			5,019			111,660		2224.8	%
General and administrative		22,730			18,380			4,350		23.7	%
Depreciation and amortization		436			338			98		29.0	%
Total operating costs and expenses		156,578			28,390			128,188		451.5	%
Operating income (loss)		(156,578	)		(28,390	)		128,188		451.5	%
Other income:
Interest income		2,613			1,753			860		49.1	%
Total other income		2,613			1,753			860		49.1	%
Net income (loss) before income tax		(153,965	)		(26,637	)		127,328		478.0	%
Income tax expense (benefit)		—			—			—		—
Net income (loss)	$	(153,965	)	$	(26,637	)	$	127,328		478.0	%
West Africa Segment:
Oil and gas revenue	$	—		$	—		$	—		—
Operating costs and expenses:
Seismic and exploration		12,622			2,600			10,022		385.5	%
Dry hole expense and impairment		—			—			—		—
General and administrative		10,592			6,276			4,316		68.8	%
Depreciation and amortization		77			25			52		208.0	%
Total operating costs and expenses		23,291			8,901			14,390		161.7	%
Operating income (loss)		(23,291	)		(8,901	)		14,390		161.7	%
Other income:
Interest income		2			2			—		—
Total other income		2			2			—		—
Net income (loss) before income tax		(23,289	)		(8,899	)		14,390		161.7	%
Income tax expense (benefit)		—			—			—		—
Net income (loss)	$	(23,289	)	$	(8,899	)	$	14,390		161.7	%
Consolidated Operations:
Oil and gas revenue	$	—		$	—		$	—		—
Operating costs and expenses:
Seismic and exploration		29,355			7,253			22,102		304.7	%
Dry hole expense and impairment		116,679			5,019			111,660		2224.8	%
General and administrative		33,322			24,656			8,666		35.2	%
Depreciation and amortization		513			363			150		41.3	%
Total operating costs and expenses		179,869			37,291			142,578		382.3	%
Operating income (loss)		(179,869	)		(37,291	)		142,578		382.3	%
Other income:
Interest income		2,615			1,755			860		49.0	%
Total other income		2,615			1,755			860		49.0	%
Net income (loss) before income tax		(177,254	)		(35,536	)		141,718		398.8	%
Income tax expense (benefit)		—			—			—		—
Net income (loss)	$	(177,254	)	$	(35,536	)		141,718		398.80	%

33

United States Segment:

        Oil and gas revenue.    We have not yet commenced oil production. Therefore, we did not realize any oil and gas revenue during the six months ended June 30, 2012 and 2011, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the six months ended June 30, 2012 and 2011:

        Seismic and exploration.    Seismic and exploration costs increased by $12.1 million during the six months ended June 30, 2012, as compared to the six months ended June 30, 2011. The increase was primarily due to an increase of $12.8 million for the purchase of seismic data over certain of our prospects in the U.S. Gulf of Mexico, and a decrease of $0.7 million in rig related charges. The seismic and exploration costs incurred for the six months ended June 30, 2012 consisted of (i) $13.3 million incurred for seismic data acquisition in the U.S. Gulf of Mexico, (ii) $2.9 million for leasehold delay rentals and (iii) $0.5 million of other technical study costs.

        Dry hole expense and impairment.    Dry hole expense and impairment increased by $111.7 million during the six months ended June 30, 2012, as compared to the six months ended June 30, 2011. The increase is due to impairment of unproved leasehold properties and dry hole expense written off against exploratory wells as reflected in the following table:

	Six Months Ended June 30,
	2012		2011		Increase (Decrease)
	($ in thousands)
Impairment of Unproved Leasehold:
Ligurian prospect	$	41,861	$	—	$	41,861
Other leasehold(1)		8,298		—		8,298
Amortization of leasehold with carrying value under $1 million		5,317		5,019		298
Dry hole Expense:
Ligurian #1 exploratory well		8,100		—		8,100
Ligurian #2 exploratory well		48,994		—		48,994
Heidelberg #3 Appraisal Well Side Track		4,109		—		4,109
	$	116,679	$	5,019	$	111,660

(1)

Other leasehold includes certain unproved oil and gas leases for properties in the U.S. Gulf of Mexico with carrying value greater than $1 million that we have no exploration activity planned, based on our three-year exploration plan, during the remaining term of the leases.

        General and administrative.    General and administrative costs increased by $4.4 million during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. The increase in general and administrative costs during this period was primarily attributed to a $7.1 million increase in staff related expenses which includes equity compensation, a $2.6 million increase in legal and other consulting fees, a $2.8 million increase in office related expenses, offset by an increase of $8.1 million in recoveries from partners due to the increase in operating activity.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the six months ended June 30, 2012 as compared to the six months ended June 30, 2011.

        Other income.    Other income increased by $0.9 million for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. The increase was due to an increase in interest recognized on investment securities.

34

        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 six months ended June 30, 2012 and 2011, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the six months ended June 30, 2012 and 2011:

        Seismic and exploration.    Seismic and exploration costs increased by $10.0 million during the six months ended June 30, 2012, as compared to the six months ended June 30, 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 six months ended June 30, 2012 consisted of (i) $12.1 million 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 six months ended June 30, 2012 and 2011.

        General and administrative.    General and administrative costs increased by $4.3 million for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. The increase was attributed primarily to a $5.5 million increase in office support costs, offset by a $1.2 million decrease in rotation personnel costs.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the six months ended June 30, 2012 as compared to the six months ended June 30, 2011.

        Other income.    Other income did not change during the six months ended June 30, 2012 as compared to the six months ended June 30, 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. With respect to our Cameia pre-salt oil discovery, we are currently preparing a phased development approach and we estimate first oil and cash flow from Cameia during 2016, assuming continued alignment with our partners and the concessionaire, among other things. With respect to our non-operated U.S. Gulf of Mexico discoveries, the operator has publicly indicated that it expects first production from the Heidelberg field in 2016 and first production for the Shenandoah field, assuming appraisal success, in 2017. 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.

35

        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 June 30, 2012, we had approximately $1.7 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 $151 million 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. Total expenditures, excluding changes in working capital, were approximately $124 million and $358 million, respectively, for the three and six months ended June 30, 2012. 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

	Six Months Ended June 30,
	2012			2011
	($ in thousands)
Net cash provided by (used in):
Operating Activities	$	(75,164	)	$	(39,004	)
Investing Activities		(464,798	)		(550,917	)
Financing Activities		489,486			478,317

36

        Operating activities.    Net cash used in operating activities for the six months ended June 30, 2012 was $75.2 million compared with net cash used in operating activities of $39.0 million for the six months ended June 30, 2011. The increase was attributed primarily to increased drilling activities in both the U.S. Gulf of Mexico and West Africa.

        Investing activities.    Net cash used in investing activities for the six months ended June 30, 2012 was $464.8 million compared with net cash used in investing activities of $550.9 million for the six months ended June 30, 2011. The net cash used in investing activities for the six months ended June 30, 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 and capital expenditures relating to the Ligurian #2 exploratory well in the U.S. Gulf of Mexico and the Cameia #2 appraisal well offshore Angola.

        Financing activities.    Net cash provided by financing activities for the six months ended June 30, 2012 was $489.5 million compared with $478.3 million for the six months ended June 30, 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.

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 June 30, 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

37

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

        On July 30, 2012, we executed a drilling contract, which is subject to formal Sonangol approval, with an affiliate of Petroserv S.A. for the SSV Catarina, a new-build, sixth-generation semi-submersible drilling rig that will support our Angolan pre-salt drilling campaign. The drilling contract provides for a firm three-year commitment, beginning in the first quarter of 2013, at a day rate of approximately $600,000 and two one-year extension options at day rates to be mutually agreed. Such rates are subject to standard reimbursement and escalation contractual provisions. The drilling contract further requires us to pay up to approximately $45 million for mobilization, demobilization and certain rig modifications.

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.

38

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

Dated: July 31, 2012

39

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: July 31, 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: July 31, 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 June 30, 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: July 31, 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 June 30, 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: July 31, 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

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	$ 1,536,803	$ 1,411,445
Fair Value	1,536,803	1,411,445
Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	1,679,921	1,537,315
Cash and cash equivalents
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	110,503	184,749
Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	242,070	292,546
Cash and cash equivalents | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	31,785	2,992
Cash and cash equivalents | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	99,782	104,805
Cash and cash equivalents | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	110,503	172,249
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	107,988	53,322
Short-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	118,796	69,009
Short-term restricted funds | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total		4,883
Short-term restricted funds | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	10,808	10,804
Short-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	17,656	53,322
Short-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	90,332
Short-term investments
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	842,198	858,293
Short-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	842,198	858,293
Short-term investments | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	279,713	197,182
Short-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	504,705	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	28,718	40,000
Short-term investments | Municipal bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	22,057	42,193
Short-term investments | Certificates of deposit | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	7,005
Long-term restricted funds
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	394,260	267,849
Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	395,003	270,235
Long-term restricted funds | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	719	718
Long-term restricted funds | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	24	1,668
Long-term restricted funds | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	151,748	54,060
Long-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	89,677	40,597
Long-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	152,835	173,192
Long-term investments
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	81,854	47,232
Long-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	81,854	47,232
Long-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	81,854	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	143,118	125,870
Fair Value	143,118	125,870
Level 1 | Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	131,567	107,797
Fair Value	131,567	107,797
Level 1 | Cash and cash equivalents | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	31,785	2,992
Fair Value	31,785	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	99,782	104,805
Fair Value	99,782	104,805
Level 1 | Short-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	10,808	15,687
Fair Value	10,808	15,687
Level 1 | Short-term restricted funds | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost		4,883
Fair Value		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	10,808	10,804
Fair Value	10,808	10,804
Level 1 | Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	743	2,386
Fair Value	743	2,386
Level 1 | Long-term restricted funds | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	719	718
Fair Value	719	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	24	1,668
Fair Value	24	1,668
Level 2 | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	1,536,803	1,411,445
Fair Value	1,536,803	1,411,445
Level 2 | Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	110,503	184,749
Fair Value	110,503	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	110,503	172,249
Fair Value	110,503	172,249
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	107,988	53,322
Fair Value	107,988	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	17,656	53,322
Fair Value	17,656	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	90,332
Fair Value	90,332
Level 2 | Short-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	842,198	858,293
Fair Value	842,198	858,293
Level 2 | Short-term investments | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	279,713	197,182
Fair Value	279,713	197,182
Level 2 | Short-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	504,705	466,411
Fair Value	504,705	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	28,718	40,000
Fair Value	28,718	40,000
Level 2 | Short-term investments | Municipal bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	22,057	42,193
Fair Value	22,057	42,193
Level 2 | Short-term investments | Certificates of deposit | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	7,005
Fair Value	7,005
Level 2 | Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	394,260	267,849
Fair Value	394,260	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	151,748	54,060
Fair Value	151,748	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	89,677	40,597
Fair Value	89,677	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	152,835	173,192
Fair Value	152,835	173,192
Level 2 | Long-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	81,854	47,232
Fair Value	81,854	47,232
Level 2 | Long-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Amortized Cost	81,854	15,376
Fair Value	81,854	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 (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 Y
Non-Qualified Stock Options
Assumptions used to determine the fair value of each stock option granted using the Black-Scholes-Merton option-pricing model
Expected Term in Years	6.50
Expected Volatility (as a percent)	54.92%
Expected Dividends (as a percent)	0.00%
Risk-Free Interest Rate (as a percent)	0.46%
Number of Stock Options
Outstanding at the beginning of the period (in shares)	1,133,960
Granted (in shares)	457,704
Exercised (in shares)	(13,518)
Forfeited or expired (in shares)	(102,196)
Outstanding at the end of the period (in shares)	1,475,950
Vested or expected to vest at the end of the period (in shares)	283,490
Exercisable at the end of the period	269,972
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
Forfeited or expired (in dollars per share)	$ 14.99
Outstanding at the end of the period (in dollars per share)	$ 17.87
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)	8.4
Granted (in years)	9.7
Outstanding at the end of the period (in years)	9.0
Vested or expected to vest at the end of the period (in years)	9.0
Exercisable at the end of the period (in years)	9.0
Aggregate Intrinsic Value
Outstanding at the end of the period	$ 34,685
Vested or expected to vest at the end of the period	3,133
Exercisable at the end of the period	2,983
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	$ 11,600
Period for recognition of unrecognized compensation cost (in years)	2.5
Employee stock option awards granted in December 2010
Equity based Compensation
Contractual term for options granted (in years)	10
Vesting period (in years)	4 years
Employee stock option awards granted in February 2012
Equity based Compensation
Contractual term for options granted (in years)	10
Vesting period (in years)	2 years 9 months

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Seismic and Exploration Expenses (Details) (USD $)	3 Months Ended		6 Months Ended		80 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012
Seismic and Exploration Expenses
Seismic costs	$ 10,128,000	$ 2,935,000	$ 25,341,000	$ 3,691,000	$ 299,815,000
Leasehold delay rentals	1,469,000	1,815,000	2,878,000	2,850,000	29,398,000
Drilling rig acceptance and other expense	409,000	63,000	1,136,000	712,000	28,732,000
Total seismic and exploration expenses	12,006,000	4,813,000	29,355,000	7,253,000	357,945,000
Seismic cost recovery					25,100,000
Force Majeure expenses					$ 13,500,000

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Information

Schedule of segment information by geographic operating segment

	United States			West Africa			Total
	($ in thousands)
Three months ended June 30, 2012
Operating costs and expense	$	(135,531	)	$	(6,624	)	$	(142,155	)
Interest income		1,430			2			1,432
Net income (loss)	$	(134,101	)	$	(6,622	)	$	(140,723	)
Additions to Property and Equipment, net(1)	$	(72,635	)	$	61,403		$	(11,232	)
Three months ended June 30, 2011
Operating costs and expense	$	(14,778	)	$	(5,758	)	$	(20,536	)
Interest income		1,056			2			1,058
Net income (loss)	$	(13,722	)	$	(5,756	)	$	(19,478	)
Additions to Property and Equipment, net(1)	$	(1,750	)	$	5,585		$	3,835

	United States			West Africa			Total
	($ in thousands)
Six months ended June 30, 2012
Operating costs and expense	$	(156,578	)	$	(23,291	)	$	(179,869	)
Interest income		2,612			3			2,615
Net income (loss)	$	(153,966	)	$	(23,288	)	$	(177,254	)
Additions to Property and Equipment, net(1)	$	(49,979	)	$	118,290		$	68,311
Six months ended June 30, 2011
Operating costs and expense	$	(28,390	)	$	(8,901	)	$	(37,291	)
Interest income		1,753			2			1,755
Net income (loss)	$	(26,637	)	$	(8,899	)	$	(35,536	)
Additions to Property and Equipment, net(1)	$	(4,086	)	$	5,640		$	1,554

(1)

These amounts are net of accumulated allowance for impairment on oil and gas properties and accumulated depreciation and amortization on other property and equipment

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Cash and Cash Equivalents (Tables)

6 Months Ended

Jun. 30, 2012

Cash and Cash Equivalents

Cash and Cash Equivalents

	June 30, 2012		December 31, 2011
	(in thousands)
Cash at banks	$	31,785	$	2,992
Money market funds		99,782		104,805
Held-to-maturity securities(1)		110,503		184,749
	$	242,070	$	292,546

(1)

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

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		74 Months Ended	80 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 Segment	Jun. 30, 2011	Dec. 31, 2011	Jun. 30, 2012
Segment Information
Number of geographic operating segments			2
Segment Information
Operating costs and expense	$ (142,155)	$ (20,536)	$ (179,869)	$ (37,291)		$ (834,640)
Interest income	1,432	1,058	2,615	1,755		12,550
Net income (loss)	(140,723)	(19,478)	(177,254)	(35,536)	(644,836)	(822,090)
Additions to Property and Equipment, net	(11,232)	3,835	68,311	1,554
United States
Segment Information
Operating costs and expense	(135,531)	(14,778)	(156,578)	(28,390)
Interest income	1,430	1,056	2,612	1,753
Net income (loss)	(134,101)	(13,722)	(153,966)	(26,637)
Additions to Property and Equipment, net	(72,635)	(1,750)	(49,979)	(4,086)
West Africa
Segment Information
Operating costs and expense	(6,624)	(5,758)	(23,291)	(8,901)
Interest income	2	2	3	2
Net income (loss)	(6,622)	(5,756)	(23,288)	(8,899)
Additions to Property and Equipment, net	$ 61,403	$ 5,585	$ 118,290	$ 5,640

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Property, Plant, and Equipment (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended	6 Months Ended				12 Months Ended	6 Months Ended		12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended			6 Months Ended	12 Months Ended		6 Months Ended	1 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Heidelberg #3 Appraisal Well Side Track	Jun. 30, 2012 Ligurian #1 Exploratory Well	Jun. 30, 2012 Ligurian #2 Exploratory Well	Jun. 30, 2012 U.S. Gulf of Mexico Shenandoah #1 Exploratory Well	Dec. 31, 2011 U.S. Gulf of Mexico Shenandoah #1 Exploratory Well	Jun. 30, 2012 U.S. Gulf of Mexico Shenandoah #2 Appraisal Well	Jun. 30, 2012 U.S. Gulf of Mexico Heidelberg #1 Exploratory Well	Dec. 31, 2011 U.S. Gulf of Mexico Heidelberg #2 Appraisal Well	Jun. 30, 2012 U.S. Gulf of Mexico Heidelberg #3 Appraisal Well	Dec. 31, 2011 U.S. Gulf of Mexico Heidelberg #3 Appraisal Well	Jun. 30, 2012 U.S. Gulf of Mexico Heidelberg #3 Appraisal Well Side Track	Jun. 30, 2012 U.S. Gulf of Mexico Heidelberg Pre-Feed Study	Dec. 31, 2011 U.S. Gulf of Mexico Ligurian #1 Exploratory Well	Jun. 30, 2012 U.S. Gulf of Mexico Ligurian #2 Exploratory Well	Dec. 31, 2011 U.S. Gulf of Mexico Ligurian #2 Exploratory Well	Dec. 31, 2011 U.S. Gulf of Mexico Criollo #1 Exploratory Well	Jun. 30, 2012 U.S. Gulf of Mexico North Platte #1 Exploratory Well	Jun. 30, 2012 West Africa item	Jun. 30, 2012 West Africa Bicuar #1 Exploratory Well costs	Dec. 31, 2011 West Africa Bicuar #1 Exploratory Well costs	Jun. 30, 2012 West Africa Cameia #1 Exploratory Well costs	Dec. 31, 2011 West Africa Cameia #1 Exploratory Well costs	Jun. 30, 2012 West Africa Cameia #2 Appraisal Well	Jun. 30, 2012 West Africa Cameia Early Development
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	$ 178,338	$ 106,881				$ 69,468			$ 20,240		$ 4,056				$ 8,100	$ 2,034					$ 3,035		$ 71,405
Addition to capitalized exploratory well cost pending determination of proved reserves						210	(53)	1,195	(422)	5,999	7,985	4,056	4,108	1,000		46,961	2,034	(822)	3,688		(3,035)	25,444	33,958	71,405	86,223	1,038
Amounts charged to expense	(61,203)	(36,606)	(4,100)	(8,100)	(49,000)
End of period	300,044	178,338				69,678	69,468	1,195	19,818		12,041	4,056		1,000	8,100		2,034		3,688			3,035	105,363	71,405	86,223	1,038
Total number of exploratory wells initially scheduled to be drilled offshore Angola																				2
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	300,044	178,338				69,678	69,468	1,195	19,818		12,041	4,056		1,000	8,100		2,034		3,688			3,035	105,363	71,405	86,223	1,038
Exploratory Well costs capitalized for a period greater than one year after completion of drilling	$ 89,496	$ 97,861

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Restricted Funds (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Restricted Funds
Short-term restricted funds	$ 118,796	$ 69,009
Long-term restricted funds	395,003	270,235
Ocean Confidence escrow account
Restricted Funds
Short-term restricted funds	10,808	10,804
Collateral on letters of credit for Angola
Restricted Funds
Short-term restricted funds	17,656	53,322
Long-term restricted funds	303,952	88,358
Ensco 8503 escrow account
Restricted Funds
Short-term restricted funds	90,332	4,883
Long-term restricted funds	90,332	181,159
Other vendor restricted funds
Restricted Funds
Long-term restricted funds	$ 719	$ 718

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Equity Based Compensation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended		80 Months Ended	6 Months Ended		3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2012 Restricted Stock Y	Jun. 30, 2012 Restricted Stock Non-employee directors	Jun. 30, 2012 Retainer awards Non-employee directors	Jun. 30, 2012 Retainer awards Non-employee directors	Jun. 30, 2012 Restricted stock units Y	Jun. 30, 2012 Restricted stock units Non-employee directors
Restricted stock activity
Non-vested shares at beginning of year				4,599,783				198,838
Granted (in shares)				335,310	33,204	2,249	6,417		137,945
Vested (in shares)				(646,054)				(74,537)
Forfeited or expired (in shares)				(182,546)				(12,836)
Non-vested shares at end of year				4,106,493				111,465
Weighted Average Grant Date Fair Value Per Share
Non-vested shares at beginning of year (in dollars per share)				$ 11.27				$ 12.45
Granted (in dollars per share)				$ 28.42
Vested (in dollars per share)				$ 12.70				$ 30.50
Forfeited or expired (in dollars per share)				$ 12.08				$ 30.50
Non-vested shares at end of year (in dollars per share)				$ 12.40				$ 30.50
Weighted-average period remaining (in years)				2.3				1.5
Unrecognized compensation				$ 29,303
Awards granted (in shares)				335,310	33,204	2,249	6,417		137,945
Weighted average fair value of shares at grant date (in dollars per share)				$ 28.42
Vesting range, maximum (as a percent)								200.00%
Equity based compensation	$ 11,988	$ 7,507	$ 50,284					$ 2,700

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Cash and Cash Equivalents

6 Months Ended

Jun. 30, 2012

Cash and Cash Equivalents

Cash and Cash Equivalents

3. Cash and Cash Equivalents

        Cash and cash equivalents consisted of the following:

	June 30, 2012		December 31, 2011
	(in thousands)
Cash at banks	$	31,785	$	2,992
Money market funds		99,782		104,805
Held-to-maturity securities(1)		110,503		184,749
	$	242,070	$	292,546

(1)

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

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Other Assets (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Other Assets
Costs capitalized to oil and gas properties	$ 2.9
Accumulated cost associated with the Ensco 8503 drilling rig included in other assets	$ 5.7	$ 12.1

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Property, Plant, and Equipment (Tables)

6 Months Ended

Jun. 30, 2012

Property, Plant, and Equipment

Schedule of Property, Plant, and Equipment

	Estimated Useful Life (Years)		June 30, 2012			December 31, 2011
			($ in Thousands)
Oil and Gas Properties:
Unproved oil and gas properties			$	701,892		$	701,892
Less: accumulated allowance for impairment				(73,751	)		(18,275	)
				628,141			683,617
Exploratory wells in process				300,044			178,338
Total oil and gas properties, net				928,185			861,955
Other Property and Equipment:
Computer equipment and software		3		3,542			2,847
Office equipment and furniture		3 - 5		1,221			1,114
Vehicles		3		194			129
Leasehold improvements		3 - 10		2,253			836
				7,210			4,926
Less: accumulated depreciation and amortization				(4,068	)		(3,555	)
Total other property and equipment, net				3,142			1,371
Property, plant, and equipment, net			$	931,327		$	863,326

Schedule of net changes in capitalized exploratory well costs

	June 30, 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		210			(53	)
Shenandoah #2 Appraisal Well		1,195			—
Heidelberg #1 Exploratory Well		(422	)		—
Heidelberg #2 Appraisal Well		—			5,999
Heidelberg #3 Appraisal Well		7,985			4,056
Heidelberg #3 Appraisal Well Side Track		4,108			—
Heidelberg Pre-Feed Study		1,000			—
Ligurian #2 Exploratory Well		46,961			2,034
Criollo #1 Exploratory Well		—			(822	)
North Platte #1 Exploratory Well		3,688			—
West Africa:
Bicuar #1 Exploratory Well pre-spud costs(1)		(3,035	)		25,444
Cameia #1 Exploratory Well		33,958			71,405
Cameia #2 Appraisal Well		86,223			—
Cameia Early Development		1,038			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(2)		(61,203	)		(36,606	)
End of period	$	300,044		$	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, including $4.1 million for the Heidelberg #3 sidetrack well, $8.1 million for the Ligurian #1 exploratory well and $49.0 million for the Ligurian #2 exploratory well.

Schedule of cumulative costs of capitalized exploratory well costs

	Spud Year		June 30, 2012		December 31, 2011
			($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Shenandoah #1 Exploratory Well		2008	$	69,678	$	69,468
Shenandoah #2 Appraisal Well		2012		1,195		—
Heidelberg #1 Exploratory Well		2008		19,818		20,240
Heidelberg #3 Appraisal Well		2011		12,041		4,056
Heidelberg Pre-Feed Study		2012		1,000		—
Ligurian #1 Exploratory Well		2009		—		8,100
Ligurian #2 Exploratory Well		2011		—		2,034
North Platte #1 Exploratory Well		2012		3,688		—
West Africa:
Bicuar #1 Exploratory Well		2011		—		3,035
Cameia #1 Exploratory Well		2011		105,363		71,405
Cameia #2 Appraisal Well		2012		86,223		—
Cameia Early Development		2012		1,038		—
			$	300,044	$	178,338
Exploratory Well costs capitalized for a period greater than one year after completion of drilling (included in table above)			$	89,496	$	97,861

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Measurements

Significant financial instruments as categorized by the fair value measurement hierarchy

	Level 1				Level 2
									Balance as of June 30, 2012
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	31,785	$	31,785	$	—	$	—	$	31,785
Money market funds		99,782		99,782		—		—		99,782
Commercial paper		—		—		110,503		110,503		110,503
Subtotal		131,567		131,567		110,503		110,503		242,070
Short-term restricted funds:
Money market funds		10,808		10,808		—		—		10,808
U.S. Treasury bills		—		—		17,656		17,656		17,656
U.S. Treasury notes		—		—		90,332		90,332		90,332
Subtotal		10,808		10,808		107,988		107,988		118,796
Short-term investments:
U.S. government agency securities		—		—		28,718		28,718		28,718
Corporate bonds		—		—		504,705		504,705		504,705
Municipal bonds		—		—		22,057		22,057		22,057
Commercial paper		—		—		279,713		279,713		279,713
Certificate of deposits		—		—		7,005		7,005		7,005
Subtotal		—		—		842,198		842,198		842,198
Long-term restricted funds:
Cash		719		719		—		—		719
Money market Funds		24		24		—		—		24
U.S. Treasury bills		—		—		89,677		89,677		89,677
U.S. Treasury notes		—		—		152,835		152,835		152,835
Corporate bonds		—		—		151,748		151,748		151,748
Subtotal		743		743		394,260		394,260		395,003
Long-term investments:
Corporate bonds		—		—		81,854		81,854		81,854
Subtotal		—		—		81,854		81,854		81,854
Total	$	143,118	$	143,118	$	1,536,803	$	1,536,803	$	1,679,921

	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 June 30, 2012 and December 31, 2011, the Company did not record any OTTI on these assets.

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Contractual Obligations (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 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)

6 Months Ended

Jun. 30, 2012

Contractual Obligations

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

	June 30, 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 payments for Block 20, offshore Angola		165,706		208,561
	$	168,238	$	210,961

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Seismic and Exploration Expenses (Tables)

6 Months Ended

Jun. 30, 2012

Seismic and Exploration Expenses

Schedule of seismic and exploration expenses

	Three Months Ended June 30,				Six Months Ended June 30,				For the Period November 10, 2005 (Inception) through June 30, 2012
	2012		2011		2012		2011
	($ in Thousands)
Seismic data costs(1)	$	10,128	$	2,935	$	25,341	$	3,691	$	299,815
Leasehold delay rentals		1,469		1,815		2,878		2,850		29,398
Drilling rig acceptance and other expense(2)		409		63		1,136		712		28,732
	$	12,006	$	4,813	$	29,355	$	7,253	$	357,945

(1)

These amounts for the period November 10, 2005 (inception) through June 30, 2012 reflect a recovery of $25.1 million of past seismic costs incurred by the Company from its joint venture partners.

(2)

The amounts for the period November 10, 2005 (inception) through June 30, 2012 includes approximately $13.5 million in force majeure expenses resulting from suspension of drilling activities in the U.S. Gulf of Mexico during 2010 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.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 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 unaudited 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 condensed unaudited 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 has 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 and six months ended June 30, 2012, 5,693,908 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. For the three months and six months ended June 30, 2011, 6,609,478 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. 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 June 30, 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 June 30, 2012 and December 31, 2011, the Company has no OTTI in its debt securities.

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Equity Based Compensation (Tables)

6 Months Ended

Jun. 30, 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		335,310		$	28.42		—			—
Vested		(646,054	)	$	12.70		(74,537	)	$	30.50
Forfeited or expired		(182,546	)	$	12.08		(12,836	)	$	30.50
Non-vested at June 30, 2012		4,106,493		$	12.40		111,465		$	30.50
Weighted-average period remaining		2.3 years					1.5 years
Unrecognized compensation ($ in thousands)	$	29,303				$	**

**

The 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 six months ended June 30, 2012, the Company recognized $2.7 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.

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		0.46	%

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		8.4
Granted		457,704		$	30.50		9.7
Exercised		(13,518	)	$	12.45		—
Forfeited or expired		(102,196	)	$	14.99		—
Outstanding at June 30, 2012		1,475,950		$	17.87		9.0	$	34,685
Vested as of June 30, 2012		283,490		$	12.45		9.0	$	3,133
Exercisable at June 30, 2012		269,972		$	12.45		9.0	$	2,983

Schedule of recognized equity-based compensation costs

	Three Months Ended June 30,					Six Months Ended June 30,				For the Period November 10, 2005 (Inception) through June 30, 2012
	2012			2011		2012		2011
	($ in thousands)
Restricted stock:
Employees	$	4,155		$	3,138	$	7,152	$	6,268	$	40,367
Non-employee directors		243			176		485		319		1,796
Stock options:
Employees		1,089			307		1,658		920		3,600
Restricted stock units (performance-based)		(134	)		—		2,693		—		2,693
Deferred stock compensation(1)		—			—		—		—		1,828
	$	5,353		$	3,621	$	11,988	$	7,507	$	50,284

(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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Joint Interests and Other Receivables (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012 D	Dec. 31, 2011
Joint Interests Receivables
Receivable attributable to joint interest partners	$ 43.8	$ 46.7
Settlement period for bills under operating agreements (in days)	30
Other receivables	$ 7.2	$ 10.3

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 242,070	$ 292,546
Joint interest and other receivables	50,964	56,983
Prepaid expenses and other current assets	24,841	22,214
Inventory	38,823	36,049
Short-term restricted funds	118,796	69,009
Short-term investments	842,198	858,293
Total current assets	1,317,692	1,335,094
Property, plant, and equipment:
Oil and gas properties, successful efforts method of accounting, net of accumulated depletion of $-0-	928,185	861,955
Other property and equipment, net of accumulated depreciation and amortization of $4,068 and $3,555, as of June 30, 2012 and December 31, 2011, respectively	3,142	1,371
Total property, plant, and equipment, net	931,327	863,326
Long-term restricted funds	395,003	270,235
Long-term investments	81,854	47,232
Other assets	5,735	12,057
Total assets	2,731,611	2,527,944
Current liabilities:
Trade and other accounts payable	24,512	71,186
Accrued liabilities	86,708	34,418
Short-term contractual obligations	49,019	132,465
Total current liabilities	160,239	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, 406,488,531 and 387,531,630 issued and outstanding as of June 30, 2012 and December 31, 2011, respectively	4,065	3,875
Additional paid-in capital	3,221,159	2,719,875
Deficit accumulated during the development stage	(822,090)	(644,836)
Total stockholders' equity	2,403,134	2,078,914
Total liabilities and stockholders' equity	$ 2,731,611	$ 2,527,944

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Stockholders' Equity (Details) (USD $)	1 Months Ended				1 Months Ended
	Feb. 29, 2012	Jun. 30, 2012	Dec. 31, 2011	Apr. 15, 2011	Dec. 31, 2011 Restricted Stock	Jan. 31, 2012 Deferred Compensation Plan
Stockholders' Equity
Common stock, shares issued		406,488,531	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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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended		80 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012
Cash flows provided from operating activities
Net income (loss)	$ (177,254)	$ (35,536)	$ (822,090)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	513	363	4,068
Dry hole expense and impairment of unproved properties	116,679	5,019	221,326
Equity based compensation	11,988	7,507	50,284
Amortization of premium (accretion of discount) on investment securities	8,956	4,276	25,147
Other			558
Changes in operating assets and liabilities:
Joint interest and other receivables	15,633	(6,420)	(42,968)
Inventory	(2,774)	(5,581)	(38,823)
Prepaid expense and other assets	3,695	1,522	(30,576)
Trade and other accounts payable	(46,673)	(6,638)	24,512
Accrued liabilities and other	(5,927)	(3,516)	34,793
Net cash provided by (used in) operating activities	(75,164)	(39,004)	(573,769)
Cash flows from investing activities
Capital expenditures for oil and gas properties	(122,851)		(826,957)
Capital expenditures for other property and equipment	(2,284)	(489)	(7,210)
Exploratory wells drilling in process	(128,012)	(6,237)	(392,383)
Proceeds from sale of oil and gas properties			339,001
Change in restricted cash	3,228	(609)	(336,903)
Proceeds from maturity of investment securities	536,595	726,799	2,051,425
Purchase of investment securities	(751,474)	(1,270,381)	(3,185,515)
Net cash provided by (used in) investing activities	(464,798)	(550,917)	(2,358,542)
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 offering, net of costs	489,488	478,317	967,692
Payments for common stock withheld for taxes on equity based compensation	(170)		(361)
Proceeds from stock option exercise	168		168
Net cash provided by (used in) financing activities	489,486	478,317	3,174,381
Net increase (decrease) in cash and cash equivalents	(50,476)	(111,604)	242,070
Cash and cash equivalents, beginning of period	292,546	302,720
Cash and cash equivalents, end of period	242,070	191,116	242,070
Non-Cash Disclosures
Capital expenditures in liabilities	269,172		269,172
Transfer of investment securities to and from restricted funds	$ 179,310		$ 179,310

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Summary of Significant Accounting Policies (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 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	5,693,908	6,609,478	5,693,908	6,609,478

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Contingencies

6 Months Ended

Jun. 30, 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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Cash and Cash Equivalents (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 M	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Cash and Cash Equivalents
Cash at banks	$ 31,785	$ 2,992
Money market funds	99,782	104,805
Held-to-maturity securities	110,503	184,749
Total	$ 242,070	$ 292,546	$ 191,116	$ 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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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 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 unaudited 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 condensed unaudited 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. 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 June 30, 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 June 30, 2012 and December 31, 2011, the Company has no OTTI in its debt securities.

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Organization and Operations

6 Months Ended

Jun. 30, 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 the Company's prospects are oil-focused. 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, and the Cameia #2 appraisal well. In the U.S. Gulf of Mexico, the Company has drilled as operator three exploratory wells (Ligurian #1 and #2 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 Heidelberg and Shenandoah oil discoveries. The Company is currently drilling as operator the North Platte #1 exploratory well and participating as a non-operator in the Shenandoah #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. In addition, the Company will progress its existing discoveries toward development and production through follow-on appraisal drilling and pre-development planning activities.

        As of June 30, 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	Jun. 30, 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)	$ 4,068	$ 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	406,488,531	387,531,630
Common stock, shares outstanding	406,488,531	387,531,630

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Contractual Obligations

6 Months Ended

Jun. 30, 2012

Contractual Obligations

Contractual Obligations

11. Contractual Obligations

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

	June 30, 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 payments for Block 20, offshore Angola		165,706		208,561
	$	168,238	$	210,961

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Document and Entity Information	6 Months Ended
	Jun. 30, 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	Jun. 30, 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	410,595,026
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

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Stockholders' Equity

6 Months Ended

Jun. 30, 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		6 Months Ended		80 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012
Oil and gas revenue	$ 0	$ 0	$ 0	$ 0	$ 0
Operating costs and expenses:
Seismic and exploration	12,006	4,813	29,355	7,253	357,945
Dry hole expense and impairment	111,355	2,506	116,679	5,019	221,326
General and administrative	18,482	13,038	33,322	24,656	251,301
Depreciation and amortization	312	179	513	363	4,068
Total operating costs and expenses	142,155	20,536	179,869	37,291	834,640
Operating income (loss)	(142,155)	(20,536)	(179,869)	(37,291)	(834,640)
Other income:
Interest income	1,432	1,058	2,615	1,755	12,550
Total other income	1,432	1,058	2,615	1,755	12,550
Net income (loss) before income tax	(140,723)	(19,478)	(177,254)	(35,536)	(822,090)
Income tax expense	0		0
Net income (loss)	$ (140,723)	$ (19,478)	$ (177,254)	$ (35,536)	$ (822,090)
Basic and diluted income (loss) per share (in dollars per share)	$ (0.35)	$ (0.05)	$ (0.44)	$ (0.10)
Basic weighted average common shares outstanding (in shares)	406,122,827	386,731,150	400,113,132	366,127,558
Diluted weighted average common shares outstanding (in shares)	406,122,827	386,731,150	400,113,132	366,127,558

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements

Fair Value Measurements

6. Fair Value Measurements

        The fair values of the Company's cash and cash equivalents, joint interest and other receivables, 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 June 30, 2012
	Amortized Cost		Fair Value(1)		Amortized Cost		Fair Value(1)
	($ in Thousands)
Cash and cash equivalents:
Cash	$	31,785	$	31,785	$	—	$	—	$	31,785
Money market funds		99,782		99,782		—		—		99,782
Commercial paper		—		—		110,503		110,503		110,503
Subtotal		131,567		131,567		110,503		110,503		242,070
Short-term restricted funds:
Money market funds		10,808		10,808		—		—		10,808
U.S. Treasury bills		—		—		17,656		17,656		17,656
U.S. Treasury notes		—		—		90,332		90,332		90,332
Subtotal		10,808		10,808		107,988		107,988		118,796
Short-term investments:
U.S. government agency securities		—		—		28,718		28,718		28,718
Corporate bonds		—		—		504,705		504,705		504,705
Municipal bonds		—		—		22,057		22,057		22,057
Commercial paper		—		—		279,713		279,713		279,713
Certificate of deposits		—		—		7,005		7,005		7,005
Subtotal		—		—		842,198		842,198		842,198
Long-term restricted funds:
Cash		719		719		—		—		719
Money market Funds		24		24		—		—		24
U.S. Treasury bills		—		—		89,677		89,677		89,677
U.S. Treasury notes		—		—		152,835		152,835		152,835
Corporate bonds		—		—		151,748		151,748		151,748
Subtotal		743		743		394,260		394,260		395,003
Long-term investments:
Corporate bonds		—		—		81,854		81,854		81,854
Subtotal		—		—		81,854		81,854		81,854
Total	$	143,118	$	143,118	$	1,536,803	$	1,536,803	$	1,679,921

	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 June 30, 2012 and December 31, 2011, the Company did not record any OTTI on these assets.

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Investments

6 Months Ended

Jun. 30, 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 June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
	(in thousands)
U.S. Treasury securities	$	350,500	$	379,618
Corporate bonds		738,307		535,846
Commercial paper		390,216		369,432
U.S. government agency securities		28,718		71,856
Municipal bonds		22,057		42,193
Certificates of deposit		7,005		12,500
Total	$	1,536,803	$	1,411,445

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

	June 30, 2012		December 31, 2011
	(in thousands)
Cash and cash equivalents	$	110,503	$	184,749
Short-term investments		842,198		858,293
Short-term restricted funds		107,988		53,322
Long-term restricted funds		394,260		267,849
Long-term investments		81,854		47,232
	$	1,536,803	$	1,411,445

        The contractual maturities of these held-to-maturity securities as of June 30, 2012 and December 31, 2011 were as follows:

	June 30, 2012				December 31, 2011
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,454,949	$	1,454,949	$	1,364,213	$	1,364,213
After 1 year		81,854		81,854		47,232		47,232
	$	1,536,803	$	1,536,803	$	1,411,445	$	1,411,445

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Subsequent Events

6 Months Ended

Jun. 30, 2012

Subsequent Events

Subsequent Events

17. Subsequent Events

        On July 30, 2012, the Company executed a drilling contract, which is subject to formal Sonangol approval, with an affiliate of Petroserv S.A. for the SSV Catarina, a new-build, sixth-generation semi-submersible drilling rig that will support the Company's Angolan pre-salt drilling campaign. The drilling contract provides for a firm three-year commitment, beginning in the first quarter of 2013, at a day rate of approximately $600,000 and two one-year extension options at day rates to be mutually agreed. Such rates are subject to standard reimbursement and escalation contractual provisions. The drilling contract further requires the Company to pay up to approximately $45 million for mobilization, demobilization and certain rig modifications.

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Seismic and Exploration Expenses

6 Months Ended

Jun. 30, 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 June 30,				Six Months Ended June 30,				For the Period November 10, 2005 (Inception) through June 30, 2012
	2012		2011		2012		2011
	($ in Thousands)
Seismic data costs(1)	$	10,128	$	2,935	$	25,341	$	3,691	$	299,815
Leasehold delay rentals		1,469		1,815		2,878		2,850		29,398
Drilling rig acceptance and other expense(2)		409		63		1,136		712		28,732
	$	12,006	$	4,813	$	29,355	$	7,253	$	357,945

(1)

These amounts for the period November 10, 2005 (inception) through June 30, 2012 reflect a recovery of $25.1 million of past seismic costs incurred by the Company from its joint venture partners.

(2)

The amounts for the period November 10, 2005 (inception) through June 30, 2012 includes approximately $13.5 million in force majeure expenses resulting from suspension of drilling activities in the U.S. Gulf of Mexico during 2010 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.

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Property, Plant, and Equipment

6 Months Ended

Jun. 30, 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)		June 30, 2012			December 31, 2011
			($ in Thousands)
Oil and Gas Properties:
Unproved oil and gas properties			$	701,892		$	701,892
Less: accumulated allowance for impairment				(73,751	)		(18,275	)
				628,141			683,617
Exploratory wells in process				300,044			178,338
Total oil and gas properties, net				928,185			861,955
Other Property and Equipment:
Computer equipment and software		3		3,542			2,847
Office equipment and furniture		3 - 5		1,221			1,114
Vehicles		3		194			129
Leasehold improvements		3 - 10		2,253			836
				7,210			4,926
Less: accumulated depreciation and amortization				(4,068	)		(3,555	)
Total other property and equipment, net				3,142			1,371
Property, plant, and equipment, net			$	931,327		$	863,326

        The Company recorded $0.3 million, $0.2 million, $0.5 million, $0.4 million and $4.1 million of depreciation and amortization expense for the three months ended June 30, 2012 and 2011, the six months ended June 30, 2012 and 2011, and for the period November 10, 2005 (inception) through June 30, 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 its 40% interests in Blocks 9 and 21 offshore Angola and its 21.25% interest in the Diaba block offshore Gabon. The Company also has $270.2 million of unproved property acquisition costs, net of allowance for impairment, relating to its U.S. Gulf of Mexico properties. As of June 30, 2012 and December 31, 2011, the Company has a net total of $628.1 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. There are no impairment indicators to date that would require the Company to impair the unproved properties in Blocks 9 and 21 offshore Angola and in the Diaba block offshore Gabon. 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 an allowance for impairment is provided, 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 June 30, 2012 and December 31, 2011, the balance for unproved leaseholds that were subject to amortization before impairment provision was $64.8 million and $65.1 million, respectively. For the three and six months ended June 30, 2012 and 2011, and for the period November 10, 2005 (inception) through June 30, 2012, the Company recorded $52.5 million, $2.5 million, $55.5 million, $5 million, and $73.8 million, respectively, as an allowance for impairment 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) for the six months ended June 30, 2012 and for the year ended December 31, 2011:

	June 30, 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		210			(53	)
Shenandoah #2 Appraisal Well		1,195			—
Heidelberg #1 Exploratory Well		(422	)		—
Heidelberg #2 Appraisal Well		—			5,999
Heidelberg #3 Appraisal Well		7,985			4,056
Heidelberg #3 Appraisal Well Side Track		4,108			—
Heidelberg Pre-Feed Study		1,000			—
Ligurian #2 Exploratory Well		46,961			2,034
Criollo #1 Exploratory Well		—			(822	)
North Platte #1 Exploratory Well		3,688			—
West Africa:
Bicuar #1 Exploratory Well pre-spud costs(1)		(3,035	)		25,444
Cameia #1 Exploratory Well		33,958			71,405
Cameia #2 Appraisal Well		86,223			—
Cameia Early Development		1,038			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(2)		(61,203	)		(36,606	)
End of period	$	300,044		$	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, including $4.1 million for the Heidelberg #3 sidetrack well, $8.1 million for the Ligurian #1 exploratory well and $49.0 million for the Ligurian #2 exploratory well.

	Spud Year		June 30, 2012		December 31, 2011
			($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Shenandoah #1 Exploratory Well		2008	$	69,678	$	69,468
Shenandoah #2 Appraisal Well		2012		1,195		—
Heidelberg #1 Exploratory Well		2008		19,818		20,240
Heidelberg #3 Appraisal Well		2011		12,041		4,056
Heidelberg Pre-Feed Study		2012		1,000		—
Ligurian #1 Exploratory Well		2009		—		8,100
Ligurian #2 Exploratory Well		2011		—		2,034
North Platte #1 Exploratory Well		2012		3,688		—
West Africa:
Bicuar #1 Exploratory Well		2011		—		3,035
Cameia #1 Exploratory Well		2011		105,363		71,405
Cameia #2 Appraisal Well		2012		86,223		—
Cameia Early Development		2012		1,038		—
			$	300,044	$	178,338
Exploratory Well costs capitalized for a period greater than one year after completion of drilling (included in table above)			$	89,496	$	97,861

        As of June 30, 2012, capitalized exploratory well costs that have been suspended longer than one year are associated with the Shenandoah #1 and Heidelberg #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 June 30, 2012, no exploratory wells have been drilled by the Company offshore Gabon.

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Joint Interest and Other Receivables

6 Months Ended

Jun. 30, 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 June 30, 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 $43.8 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 $7.2 million and $10.3 million as of June 30, 2012 and December 31, 2011, respectively.

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Inventory

6 Months Ended

Jun. 30, 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

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2012, the costs capitalized to oil and gas properties totaled $2.9 million and $5.9 million, respectively. As of June 30, 2012 and December 31, 2011, the remaining costs associated with the Ensco 8503 drilling rig and subsea containment in other assets were $5.7 million and $12.1 million, respectively.

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Organization and Operations (Details)	1 Months Ended	6 Months Ended
	Dec. 31, 2009	Jun. 30, 2012 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		3
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

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Subsequent Events (Details) (Drilling contract for the SSV Catarina, USD $)	1 Months Ended
	Jul. 31, 2012 Y
Drilling contract for the SSV Catarina
Subsequent Event
Time period of purchase commitment at day rate	3 years
Mutual agreement, day rate	$ 600,000
Number of one-year mutually agreed day rate options	2
Term of mutually agreed options	1
Mobilization, demobilization and rig modifications	$ 45,000,000

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Segment Information

6 Months Ended

Jun. 30, 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 United States and offshore West Africa. The following tables provide the geographic operating segment information for the three and six months ended June 30, 2012 and 2011:

	United States			West Africa			Total
	($ in thousands)
Three months ended June 30, 2012
Operating costs and expense	$	(135,531	)	$	(6,624	)	$	(142,155	)
Interest income		1,430			2			1,432
Net income (loss)	$	(134,101	)	$	(6,622	)	$	(140,723	)
Additions to Property and Equipment, net(1)	$	(72,635	)	$	61,403		$	(11,232	)
Three months ended June 30, 2011
Operating costs and expense	$	(14,778	)	$	(5,758	)	$	(20,536	)
Interest income		1,056			2			1,058
Net income (loss)	$	(13,722	)	$	(5,756	)	$	(19,478	)
Additions to Property and Equipment, net(1)	$	(1,750	)	$	5,585		$	3,835

	United States			West Africa			Total
	($ in thousands)
Six months ended June 30, 2012
Operating costs and expense	$	(156,578	)	$	(23,291	)	$	(179,869	)
Interest income		2,612			3			2,615
Net income (loss)	$	(153,966	)	$	(23,288	)	$	(177,254	)
Additions to Property and Equipment, net(1)	$	(49,979	)	$	118,290		$	68,311
Six months ended June 30, 2011
Operating costs and expense	$	(28,390	)	$	(8,901	)	$	(37,291	)
Interest income		1,753			2			1,755
Net income (loss)	$	(26,637	)	$	(8,899	)	$	(35,536	)
Additions to Property and Equipment, net(1)	$	(4,086	)	$	5,640		$	1,554

(1)

These amounts are net of accumulated allowance for impairment on oil and gas properties and accumulated depreciation and amortization on other property and equipment

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Restricted Funds (Tables)

6 Months Ended

Jun. 30, 2012

Restricted Funds

Schedule of restricted funds

	June 30, 2012		December 31, 2011
	(in thousands)
Short-term:
Ocean Confidence escrow account	$	10,808	$	10,804
Collateral on letters of credit for Angola		17,656		53,322
Ensco 8503 escrow account		90,332		4,883
	$	118,796	$	69,009
Long-term:
Ensco 8503 escrow account	$	90,332	$	181,159
Collateral on letters of credit for Angola		303,952		88,358
Other vendor restricted funds		719		718
	$	395,003	$	270,235

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Equity Based Compensation (Details 3) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended		80 Months Ended			3 Months Ended		6 Months Ended		80 Months Ended	3 Months Ended		6 Months Ended		80 Months Ended	3 Months Ended		6 Months Ended		80 Months Ended	3 Months Ended	6 Months Ended	80 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2012 Deferred stock compensation	Jan. 15, 2012 Executive officers Deferred stock compensation	Jun. 30, 2012 Restricted Stock Employees	Jun. 30, 2011 Restricted Stock Employees	Jun. 30, 2012 Restricted Stock Employees	Jun. 30, 2011 Restricted Stock Employees	Jun. 30, 2012 Restricted Stock Employees	Jun. 30, 2012 Restricted Stock Non-employee directors	Jun. 30, 2011 Restricted Stock Non-employee directors	Jun. 30, 2012 Restricted Stock Non-employee directors	Jun. 30, 2011 Restricted Stock Non-employee directors	Jun. 30, 2012 Restricted Stock Non-employee directors	Jun. 30, 2012 Stock options Employees	Jun. 30, 2011 Stock options Employees	Jun. 30, 2012 Stock options Employees	Jun. 30, 2011 Stock options Employees	Jun. 30, 2012 Stock options Employees	Jun. 30, 2012 Restricted stock units (performance-based)	Jun. 30, 2012 Restricted stock units (performance-based)	Jun. 30, 2012 Restricted stock units (performance-based)
Equity based Compensation
Equity-based compensation costs	$ 5,353	$ 3,621	$ 11,988	$ 7,507	$ 50,284	$ 1,828		$ 4,155	$ 3,138	$ 7,152	$ 6,268	$ 40,367	$ 243	$ 176	$ 485	$ 319	$ 1,796	$ 1,089	$ 307	$ 1,658	$ 920	$ 3,600	$ (134)	$ 2,693	$ 2,693
Shares distributed to these executives							121,637

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Property, Plant, and Equipment (Details) (USD $)	3 Months Ended		6 Months Ended		80 Months Ended			3 Months Ended		6 Months Ended		80 Months Ended		1 Months Ended								6 Months Ended				6 Months Ended						6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Diaba block offshore Gabon	Jun. 30, 2012 Unproved oil and gas properties, net	Jun. 30, 2011 Unproved oil and gas properties, net	Jun. 30, 2012 Unproved oil and gas properties, net	Jun. 30, 2011 Unproved oil and gas properties, net	Jun. 30, 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	Jun. 30, 2012 Unproved oil and gas properties, net Block 20 offshore Angola	Dec. 20, 2011 Unproved oil and gas properties, net Block 20 offshore Angola	Jun. 30, 2012 Unproved oil and gas properties, net Blocks 9 and 21 offshore Angola and Gabon	Dec. 20, 2011 Unproved oil and gas properties, net Blocks 9 and 21 offshore Angola and Gabon	Jun. 30, 2012 Unproved oil and gas properties, net U.S. Gulf of Mexico	Jun. 30, 2012 Exploratory wells in process	Dec. 31, 2011 Exploratory wells in process	Jun. 30, 2012 Computer equipment and software	Dec. 31, 2011 Computer equipment and software	Jun. 30, 2012 Office equipment and furniture	Dec. 31, 2011 Office equipment and furniture	Jun. 30, 2012 Office equipment and furniture Minimum	Jun. 30, 2012 Office equipment and furniture Maximum	Jun. 30, 2012 Vehicles	Dec. 31, 2011 Vehicles	Jun. 30, 2012 Leasehold improvements	Dec. 31, 2011 Leasehold improvements	Jun. 30, 2012 Leasehold improvements Minimum	Jun. 30, 2012 Leasehold improvements Maximum
Property, Plant, and Equipment
Estimated Useful Life (in years)																						3				3	5	3				3	10
Unproved oil and gas properties, net	$ 701,892,000		$ 701,892,000		$ 701,892,000	$ 701,892,000
Less: accumulated allowance for impairment	(73,751,000)		(73,751,000)		(73,751,000)	(18,275,000)
Total oil and gas properties, net	928,185,000		928,185,000		928,185,000	861,955,000		628,141,000		628,141,000		628,141,000	683,617,000							300,044,000	178,338,000
Property, plant, and equipment, gross	7,210,000		7,210,000		7,210,000	4,926,000																3,542,000	2,847,000	1,221,000	1,114,000			194,000	129,000	2,253,000	836,000
Less: accumulated depreciation and amortization	(4,068,000)		(4,068,000)		(4,068,000)	(3,555,000)
Total other property and equipment	3,142,000		3,142,000		3,142,000	1,371,000
Property, plant, and equipment, net	931,327,000		931,327,000		931,327,000	863,326,000
Depreciation and amortization expense	312,000	179,000	513,000	363,000	4,068,000
Percentage of working interest acquired							21.25%								40.00%	40.00%	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																			270,200,000
Lower limit of unproved leasehold costs assessed individually for impairment								1,000,000		1,000,000		1,000,000
Upper limit of unproved leasehold costs on individual properties included in group amortization								1,000,000		1,000,000		1,000,000
Carrying amount of unproved leaseholds subject to amortization before impairment provision								64,800,000		64,800,000		64,800,000	65,100,000
Amortization expense								$ 52,500,000	$ 2,500,000	$ 55,500,000	$ 5,000,000	$ 73,800,000

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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						9	(9)
Equity based compensation	11,988						11,988
Exercise of stock options	168						168
Common stock withheld for taxes on equity based compensation	(170)						(170)
Net income (loss)	(177,254)							(177,254)
Balance at Jun. 30, 2012	$ 2,403,134					$ 4,065	$ 3,221,159	$ (822,090)

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Restricted Funds

6 Months Ended

Jun. 30, 2012

Restricted Funds

Restricted Funds

4. Restricted Funds

        Restricted funds consisted of the following:

	June 30, 2012		December 31, 2011
	(in thousands)
Short-term:
Ocean Confidence escrow account	$	10,808	$	10,804
Collateral on letters of credit for Angola		17,656		53,322
Ensco 8503 escrow account		90,332		4,883
	$	118,796	$	69,009
Long-term:
Ensco 8503 escrow account	$	90,332	$	181,159
Collateral on letters of credit for Angola		303,952		88,358
Other vendor restricted funds		719		718
	$	395,003	$	270,235

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Investments (Tables)

6 Months Ended

Jun. 30, 2012

Investments

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

	June 30, 2012		December 31, 2011
	(in thousands)
U.S. Treasury securities	$	350,500	$	379,618
Corporate bonds		738,307		535,846
Commercial paper		390,216		369,432
U.S. government agency securities		28,718		71,856
Municipal bonds		22,057		42,193
Certificates of deposit		7,005		12,500
Total	$	1,536,803	$	1,411,445

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

	June 30, 2012		December 31, 2011
	(in thousands)
Cash and cash equivalents	$	110,503	$	184,749
Short-term investments		842,198		858,293
Short-term restricted funds		107,988		53,322
Long-term restricted funds		394,260		267,849
Long-term investments		81,854		47,232
	$	1,536,803	$	1,411,445

Schedule of contractual maturities of held-to-maturity securities

	June 30, 2012				December 31, 2011
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,454,949	$	1,454,949	$	1,364,213	$	1,364,213
After 1 year		81,854		81,854		47,232		47,232
	$	1,536,803	$	1,536,803	$	1,411,445	$	1,411,445

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Investments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Investments
Fair market value	$ 1,536,803	$ 1,411,445
Held-to-maturities, Amortized Cost
Within 1 year	1,454,949	1,364,213
After 1 year	81,854	47,232
Total	1,536,803	1,411,445
Held-to-maturity securities, Estimated fair value
Within 1 year	1,454,949	1,364,213
After 1 year	81,854	47,232
Total	1,536,803	1,411,445
Cash and cash equivalents
Investments
Fair market value	110,503	184,749
Short-term investments
Investments
Fair market value	842,198	858,293
Short-term restricted funds
Investments
Fair market value	107,988	53,322
Long-term restricted funds
Investments
Fair market value	394,260	267,849
Long-term investments
Investments
Fair market value	81,854	47,232
U.S. Treasury securities
Investments
Fair market value	350,500	379,618
Corporate bonds
Investments
Fair market value	738,307	535,846
Commercial paper
Investments
Fair market value	390,216	369,432
U.S. government agency securities
Investments
Fair market value	28,718	71,856
Municipal bonds
Investments
Fair market value	22,057	42,193
Certificates of deposit
Investments
Fair market value	$ 7,005	$ 12,500

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Equity Based Compensation

6 Months Ended

Jun. 30, 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 restricted stock units (RSUs) 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 RSU 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 RSU awards. For RSU 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 RSU 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.

        The following table summarizes grant, vesting and forfeiture information about the Company's restricted stock and restricted stock units from December 31, 2011 to June 30, 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		335,310		$	28.42		—			—
Vested		(646,054	)	$	12.70		(74,537	)	$	30.50
Forfeited or expired		(182,546	)	$	12.08		(12,836	)	$	30.50
Non-vested at June 30, 2012		4,106,493		$	12.40		111,465		$	30.50
Weighted-average period remaining		2.3 years					1.5 years
Unrecognized compensation ($ in thousands)	$	29,303				$	**

**

The 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 six months ended June 30, 2012, the Company recognized $2.7 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.

        A total of 33,204 restricted stock unit awards were granted to non-employee directors during the six months ended June 30, 2012 for annual retainers. As of June 30, 2012, the Company has granted a cumulative total of 137,945 restricted stock units to non-employee directors. During the three and six months ended June 30, 2012, the Company also granted 2,249 and 6,417 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 at year end over the four year 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.

        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 six months ended June 30, 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		0.46	%

        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 period ended June 30, 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		8.4
Granted		457,704		$	30.50		9.7
Exercised		(13,518	)	$	12.45		—
Forfeited or expired		(102,196	)	$	14.99		—
Outstanding at June 30, 2012		1,475,950		$	17.87		9.0	$	34,685
Vested as of June 30, 2012		283,490		$	12.45		9.0	$	3,133
Exercisable at June 30, 2012		269,972		$	12.45		9.0	$	2,983

        The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2012 was $17.92 per option, using the Black-Scholes option-pricing model. As of June 30, 2012, $11.6 million of total unrecognized compensation cost related to stock option is expected to be recognized over a weighted-average period of 2.5 years.

        The table below summarizes the equity-based compensation costs, net of forfeitures, recognized for the three and six months ended June 30, 2012 and 2011, and for the period November 10, 2005 (inception) through June 30, 2012:

	Three Months Ended June 30,					Six Months Ended June 30,				For the Period November 10, 2005 (Inception) through June 30, 2012
	2012			2011		2012		2011
	($ in thousands)
Restricted stock:
Employees	$	4,155		$	3,138	$	7,152	$	6,268	$	40,367
Non-employee directors		243			176		485		319		1,796
Stock options:
Employees		1,089			307		1,658		920		3,600
Restricted stock units (performance-based)		(134	)		—		2,693		—		2,693
Deferred stock compensation(1)		—			—		—		—		1,828
	$	5,353		$	3,621	$	11,988	$	7,507	$	50,284

(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.