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, 2013
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, 2013: 411,236,517 shares.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
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 2012 Annual Report on Form 10-K filed on February 26, 2013, 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 our and our partners' prospect development and drilling plans are successful;

•

the timing and success of our appraisal and development activities;

•

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;

•

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;

•

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;

•

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

•

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

•

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 find, acquire or gain access to new 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 2012 Annual Report on Form 10-K filed on February 26, 2013.

        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, 2013 and December 31, 2012	6
Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2013 and 2012, and for the period November 10, 2005 (Inception) through June 30, 2013	7
Condensed Consolidated Statements of Changes in Partners' Capital and Stockholders' Equity for the Six Months Ended June 30, 2013 and for the period November 10, 2005 (Inception) through June 30, 2013	8
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012, and for the period November 10, 2005 (Inception) through June 30, 2013	9
Notes to Condensed Consolidated Financial Statements	10

5

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

Condensed Consolidated Balance Sheets

(Unaudited)

	June 30, 2013			December 31, 2012
	($ in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	291,348		$	1,425,815
Joint interest and other receivables		109,023			61,592
Prepaid expenses and other current assets		43,601			23,941
Inventory		64,398			65,286
Short-term restricted funds		181,971			90,440
Short-term investments		1,289,193			789,668
Total current assets		1,979,534			2,456,742
Property, plant, and equipment:
Oil and gas properties, successful efforts method of accounting, net of accumulated depletion of $-0-		1,268,894			1,094,464
Other property and equipment, net of accumulated depreciation and amortization of $3,425 and $2,533, as of June 30, 2013 and December 31, 2012, respectively		5,141			5,292
Total property, plant, and equipment, net		1,274,035			1,099,756
Long-term restricted funds		213,293			395,652
Long-term investments		295,222			36,267
Other assets		37,458			23,042
Total assets	$	3,799,542		$	4,011,459
Liabilities and Stockholders' Equity
Current liabilities:
Trade and other accounts payable	$	1,153		$	67,876
Accrued liabilities		113,966			44,061
Short-term contractual obligations		49,019			49,019
Total current liabilities		164,138			160,956
Long-term debt		1,013,139			991,191
Long-term contractual obligations		124,901			168,238
Other long-term liabilities		2,711			1,856
Total long-term liabilities		1,140,751			1,161,285
Stockholders' Equity:
Common stock, $0.01 par value per share; 2,000,000,000 shares authorized, 406,920,372 and 406,596,884 issued and outstanding as of June 30, 2013 and December 31, 2012, respectively		4,069			4,066
Additional paid-in capital		3,625,324			3,612,987
Accumulated deficit during the development stage		(1,134,740	)		(927,835	)
Total stockholders' equity		2,494,653			2,689,218
Total liabilities and stockholders' equity	$	3,799,542		$	4,011,459

See accompanying notes.

6

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

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,						For the Period November 10, 2005 (Inception) Through June 30, 2013
	2013			2012			2013			2012
	($ in thousands except per share data)
Oil and gas revenue	$	—		$	—		$	—		$	—		$	—
Operating costs and expenses:
Seismic and exploration		4,557			12,006			26,875			29,355			417,048
Dry hole expense and impairment		35,709			111,355			103,877			116,679			342,609
General and administrative		24,652			18,482			46,159			33,322			352,102
Depreciation and amortization		447			312			906			513			5,657
Total operating costs and expenses		65,365			142,155			177,817			179,869			1,117,416
Operating income (loss)		(65,365	)		(142,155	)		(177,817	)		(179,869	)		(1,117,416	)
Other income (expense):
Gain on sale of assets		1,496			—			2,993			—			2,993
Interest income		1,619			1,432			3,144			2,615			18,188
Interest expense		(16,568	)		—			(35,225	)		—			(38,505	)
Total other income (expense)		(13,453	)		1,432			(29,088	)		2,615			(17,324	)
Net income (loss) before income tax		(78,818	)		(140,723	)		(206,905	)		(177,254	)		(1,134,740	)
Income tax expense		—			—			—			—			—
Net income (loss)	$	(78,818	)	$	(140,723	)	$	(206,905	)	$	(177,254	)	$	(1,134,740	)
Basic and diluted income (loss) per share	$	(0.19	)	$	(0.35	)	$	(0.51	)	$	(0.44	)
Basic and diluted weighted average common shares outstanding		406,916,569			406,122,827			406,733,954			400,113,132

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		—		—			—			—			538			966,974			—			967,512
Common stock issued for restricted stock and stock options		—		—			—			—			44			(44	)		—			—
Equity based compensation		—		—			—			—			—			52,989			—			52,989
Common stock withheld for taxes on equity based compensation		—		—			—			—			(1	)		(360	)		—			(361	)
Exercise of stock options		—		—			—			—			—			338			—			338
Conversion option relating to 2.625% convertible senior notes, net of allocated costs		—		—			—			—			—			381,416			—			381,416
Net income (loss)		—		—			—			—			—			—			(927,835	)		(927,835	)
Balance, December 31, 2012		—		—			—			—			4,066			3,612,987			(927,835	)		2,689,218
Common stock issued for restricted stock and stock options		—		—			—			—			3			(3	)		—			—
Equity based compensation		—		—			—			—			—			12,245			—			12,245
Exercise of stock options		—		—			—			—			—			95			—			95
Net income (loss)		—		—			—			—			—			—			(206,905	)		(206,905	)
Balance, June 30, 2013	$	—	$	—		$	—		$	—		$	4,069		$	3,625,324		$	(1,134,740	)	$	2,494,653

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, 2013
	2013			2012
	($ in thousands)
Cash flows provided from operating activities
Net income (loss)	$	(206,905	)	$	(177,254	)	$	(1,134,740	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		906			513			5,657
Dry hole expense and impairment of unproved properties		103,877			116,679			342,609
Gain on sale of assets		(2,993	)		—			(2,993	)
Equity based compensation		12,245			11,988			72,951
Amortization of premium (accretion of discount) on investments		11,232			8,956			45,772
Amortization of debt discount		22,905			—			24,654
Other		—			—			558
Changes in operating assets and liabilities:
Joint interest and other receivables		(47,432	)		15,633			(111,306	)
Inventory		888			(2,774	)		(64,398	)
Prepaid expense and other current assets		(19,660	)		3,695			(43,601	)
Deferred charges		(15,375	)		—			(15,375	)
Trade and other accounts payable		(66,724	)		(46,673	)		1,153
Accrued liabilities and other		(26,088	)		(5,927	)		21,702
Net cash provided by (used in) operating activities		(233,124	)		(75,164	)		(857,357	)
Cash flows from investing activities
Capital expenditures for oil and gas properties		(51,477	)		(122,851	)		(898,424	)
Capital expenditures for other property and equipment		(763	)		(2,284	)		(10,829	)
Exploratory wells drilling in process		(172,132	)		(128,012	)		(783,107	)
Proceeds from sale of oil and gas properties		3,006			—			342,007
Change in restricted funds		90,612			3,228			(221,470	)
Proceeds from maturity of investment securities		706,575			536,595			3,304,281
Purchase of investment securities		(1,476,069	)		(751,474	)		(5,105,979	)
Net cash provided by (used in) investing activities		(900,248	)		(464,798	)		(3,373,521	)
Cash flows from financing activities
Capital contributions prior to IPO—Class A limited partners		—			—			1,256,180
Proceeds from initial public offering, net of costs		—			—			950,702
Proceeds from public offerings, net of costs		—			489,488			967,513
Proceeds from debt offering, net of costs		(1,190	)		—			1,347,760
Proceeds from stock option exercises		95			168			433
Payments for common stock withheld for taxes on equity based compensation		—			(170	)		(362	)
Net cash provided by (used in) financing activities		(1,095	)		489,486			4,522,226
Net increase (decrease) in cash and cash equivalents		(1,134,467	)		(50,476	)		291,348
Cash and cash equivalents, beginning of period		1,425,815			292,546			—
Cash and cash equivalents, end of period	$	291,348		$	242,070		$	291,348
Cash paid for interest	$	16,502		$	—		$	16,502
Non-Cash Disclosures
Changes in accrued capital expenditures	$	(54,702	)	$	269,172		$	97,557
Transfer of investment securities to and from restricted funds	$	26		$	179,310		$	178,804

See accompanying notes.

9

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

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

General

        Cobalt International Energy, Inc. (the "Company") is incorporated in the state of Delaware. The Company is an independent, oil-focused exploration and production company with an extensive 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. To date, the Company's drilling efforts have resulted in discoveries in both the U.S. Gulf of Mexico at North Platte, Heidelberg and Shenandoah and offshore Angola at Cameia. The Company's plan is to continue to mature and drill what it believes are its most promising exploration prospects in the deepwater U.S. Gulf of Mexico and the deepwater offshore Angola and Gabon as it further appraises, evaluates and progresses its existing discoveries toward potential project sanction and development. The Company operates its business in two geographic segments: the U.S. Gulf of Mexico and West Africa.

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

Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements include the financial statements of Cobalt International Energy, Inc. and all of its wholly-owned subsidiaries. All significant intercompany transactions and amounts have been eliminated for all years presented. Because the Company is a development stage enterprise, it has presented its financial statements in accordance with accounting guidance related to "Development Stage Entities."

        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the condensed consolidated financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be presented for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

Reclassifications

        Certain reclassifications have been made to prior periods' financial statements to conform to the current presentation in the unaudited condensed consolidated statements of cash flows.

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

10

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)

revenues and expenses during the reporting period. Significant estimates made by the Company include (i) accruals related to expenses, (ii) assumptions used in estimating fair value of equity based awards and the fair value of the liability component of the convertible senior notes and (iii) assumptions used in impairment testing. Although the Company believes these estimates are reasonable, actual results could differ from these estimates.

Investments

        The Company's policy on accounting for its investments, which consist entirely of debt securities, is based on the accounting guidance relating to "Accounting for Certain Investments in Debt and Equity Securities." The Company considers all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year are classified as long-term investments. The debt securities are carried at amortized 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, 2013 and December 31, 2012. 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, 2013 and December 31, 2012, the Company has no OTTI in its debt securities.

Capitalized Interest

        For exploration and development projects that have not commenced production, interest is capitalized as part of the historical cost of developing and constructing assets. Capitalized interest is determined by multiplying the Company's weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation or impairment. See Note 7—Property, Plant, and Equipment and Note 8—Long-term Debt.

Earnings (Loss) Per Share

        Basic income (loss) per share was calculated by dividing net income or loss applicable to common shares by the weighted average number of common shares outstanding during the periods presented. The calculation of diluted income (loss) per share should include the potential dilutive impact of

11

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)

non-vested restricted shares, non-vested restricted stock units, outstanding stock options and 2.625% convertible senior notes due 2019, during the period, unless their effect is anti-dilutive. For the three months and six months ended June 30, 2013, 4,316,143 shares of non-vested restricted stock, non-vested restricted stock units, outstanding stock options and 2.625% convertible senior notes due 2019, were excluded from the diluted income (loss) per share because they are 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 were excluded from the diluted income (loss) per share because they are anti-dilutive.

2. Cash and Cash Equivalents

        Cash and cash equivalents consisted of the following:

	June 30, 2013		December 31, 2012
	($ in thousands)
Cash at banks	$	24,585	$	65,935
Money market funds		98,289		1,105,148
Held-to-maturity securities(1)		168,474		254,732
	$	291,348	$	1,425,815

(1)

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

3. Restricted Funds

        Restricted funds consisted of the following:

	June 30, 2013		December 31, 2012
	($ in thousands)
Short-term:
Ensco 8503 escrow account	$	90,424	$	90,440
Collateral on letters of credit for Angola		91,547		—
	$	181,971	$	90,440
Long-term:
Ensco 8503 escrow account		—		90,440
Collateral on letters of credit for Angola		213,121		304,492
Other vendor restricted deposits		172		720
	$	213,293	$	395,652

12

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

4. Joint Interest and Other Receivables

        Joint interest and other receivables result primarily from billing shared costs under the respective operating agreements to the Company's partners. These are usually settled within 30 days of the invoice date.

	June 30, 2013		December 31, 2012
	($ in thousands)
Partners in the U.S. Gulf of Mexico	$	54,795	$	52,439
Partners in West Africa		45,882		2,185
Accrued interest on investment securities		7,203		3,647
Vendors' receivables		1,076		1,526
Other		67		1,795
Total(1)	$	109,023	$	61,592

(1)

The amount of $109.0 million as of June 30, 2013 includes $15.9 million which became past due subsequent to June 30, 2013. We are working to resolve this issue. We have not reserved against this amount as we believe it should be favorably resolved under our relevant agreements.

5. Investments

        The Company's investments in held-to-maturity securities which are recorded at amortized cost and approximate fair market value as of June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013		December 31, 2012
	($ in thousands)
U.S. Treasury securities	$	393,047	$	483,775
Corporate securities		1,034,615		510,691
Commercial paper		693,274		562,975
Certificates of deposit		25,000		7,000
Total	$	2,145,936	$	1,564,441

13

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

5. Investments (Continued)

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

	June 30, 2013		December 31, 2012
	($ in thousands)
Cash and cash equivalents	$	168,474	$	254,732
Short-term restricted funds		181,971		90,440
Short-term investments		1,289,193		789,668
Long-term restricted funds		211,076		393,334
Long-term investments		295,222		36,267
	$	2,145,936	$	1,564,441

        The contractual maturities of these held-to-maturity securities as of June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013				December 31, 2012
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,850,714	$	1,850,714	$	1,528,174	$	1,528,174
After 1 year		295,222		295,222		36,267		36,267
	$	2,145,936	$	2,145,936	$	1,564,441	$	1,564,441

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, 2013
	Carrying Value		Fair Value(1)		Carrying Value		Fair Value(1)
	($ in thousands)
Cash and cash equivalents:
Cash	$	24,585	$	24,585	$	—	$	—	$	24,585
Money market funds		98,289		98,289		—		—		98,289
Commercial paper		—		—		168,474		168,474		168,474
Subtotal		122,874		122,874		168,474		168,474		291,348
Short-term restricted funds:
U.S. Treasury bills		—		—		90,424		90,424		90,424
U.S. Treasury notes		—		—		91,547		91,547		91,547
Subtotal		—		—		181,971		181,971		181,971
Short-term investments:
Corporate bonds		—		—		739,394		739,394		739,394
Commercial paper		—		—		524,799		524,799		524,799
Certificates of deposits		—		—		25,000		25,000		25,000
Subtotal		—		—		1,289,193		1,289,193		1,289,193
Long-term restricted funds:
Money market funds		2,217		2,217		—		—		2,217
U.S. Treasury notes		—		—		211,076		211,076		211,076
Subtotal		2,217		2,217		211,076		211,076		213,293
Long-term investments:
Corporate bonds		—		—		295,222		295,222		295,222
Subtotal		—		—		295,222		295,222		295,222
Total	$	125,091	$	125,091	$	2,145,936	$	2,145,936	$	2,271,027

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, 2012
	Carrying Value		Fair Value(1)		Carrying Value		Fair Value(1)
	($ in thousands)
Cash and cash equivalents:
Cash	$	65,935	$	65,935	$	—	$	—	$	65,935
Money market funds		1,105,148		1,105,148		—		—		1,105,148
Commercial paper		—		—		247,206		247,206		247,206
Corporate bonds		—		—		7,526		7,526		7,526
Subtotal		1,171,083		1,171,083		254,732		254,732		1,425,815
Short-term restricted funds:
U.S. Treasury bills		—		—		90,440		90,440		90,440
Subtotal		—		—		90,440		90,440		90,440
Short-term investments:
Corporate bonds		—		—		466,898		466,898		466,898
Commercial paper		—		—		315,769		315,769		315,769
Certificates of deposits		—		—		7,001		7,001		7,001
Subtotal		—		—		789,668		789,668		789,668
Long-term restricted funds:
Money market funds		2,318		2,318		—		—		2,318
U.S. Treasury bills		—		—		178,216		178,216		178,216
U.S. Treasury notes		—		—		215,118		215,118		215,118
Subtotal		2,318		2,318		393,334		393,334		395,652
Long-term investments:
Corporate bonds		—		—		36,267		36,267		36,267
Subtotal		—		—		36,267		36,267		36,267
Total	$	1,173,401	$	1,173,401	$	1,564,441	$	1,564,441	$	2,737,842

(1)

As of June 30, 2013 and December 31, 2012, 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. 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, 2013			December 31, 2012
		($ in thousands)
Oil and Gas Properties:
Unproved oil and gas properties		$	730,077		$	721,853
Less: accumulated valuation allowance			(82,847	)		(78,413	)
			647,230			643,440
Exploratory wells in process			621,664			451,024
Total oil and gas properties, net			1,268,894			1,094,464
Other Property and Equipment:
Computer equipment and software	3		3,765			3,166
Office equipment and furniture	3 - 5		2,132			2,093
Vehicles	3		265			268
Leasehold improvements	3 - 10		2,404			2,298
			8,566			7,825
Less: accumulated depreciation and amortization(1)			(3,425	)		(2,533	)
Total other property and equipment, net			5,141			5,292
Property, plant, and equipment, net		$	1,274,035		$	1,099,756

(1)

During the year ended December 31, 2012, the Company wrote off $2.2 million of old computer equipment and leasehold improvements which were fully depreciated and which had no impact on the consolidated statements of operations and consolidated statements of cash flow.

        The Company recorded $0.4 million and $0.3 million for the three months ended June 30, 2013 and 2012, respectively, $0.9 million and $0.5 million for the six months ended June 30, 2013 and 2012, respectively, and $5.7 million of depreciation and amortization for the period November 10, 2005 (inception) through June 30, 2013, 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. As of June 30, 2013, out of the $337.1 million, $165.7 million has been paid and the remaining $171.4 million was accrued in short-term and long-term contractual obligations. See Note 9—Contractual Obligations. In addition to the Block 20 interests, the Company has $10.8 million of unproved property acquisition costs relating to its 40% interests in

17

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. Property, Plant, and Equipment (Continued)

Blocks 9 and 21 offshore Angola and its 21.25% working interest in the Diaba block offshore Gabon. As of June 30, 2013, the Company also has $289.3 million of unproved property acquisition costs, net of valuation allowance for impairment, relating to its U.S. Gulf of Mexico properties. This $289.3 million includes $8.6 million incurred on various working interests in unproved properties located in the U.S. Gulf of Mexico acquired by the Company in 2013. As of June 30, 2013 and December 31, 2012, the Company has a net total of $647.2 million and $643.4 million, respectively, of unproved property acquisition costs on the condensed consolidated balance sheets.

        On February 26, 2013, the Company executed a Purchase and Sale agreement (the "PSA") to sell its ownership interests on an unproved oil and gas property on Mississippi Canyon Block 209 for a total consideration of $5.6 million. The Company received $1.5 million at closing and an additional $1.5 million in June 2013 when the buyer commenced operations on the property. Pursuant to the terms and conditions of the PSA, the Company will receive the remaining $2.6 million contingent upon the purchaser's commencement of production on this property in the future. For the six months ended June 30, 2013, the Company recognized a gain of $3.0 million on the sale of assets as a result of this transaction.

        Acquisition costs of unproved 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, 20, and 21 offshore Angola and in the Diaba block offshore Gabon. Oil and gas leases for unproved properties in the U.S. Gulf of Mexico with carrying value greater than $1.0 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 2013 through 2022. As of June 30, 2013 and December 31, 2012, the balance for unproved properties that were subject to amortization before impairment provision was $69.4 million and $69.1 million, respectively. The Company recorded a lease impairment allowance of $2.4 million and $52.5 million for the three months ended June 30, 2013 and 2012, respectively, $4.8 million and $55.5 million for the six months ended June 30, 2013 and 2012, respectively, and $83.4 million for the period November 10, 2005 (inception) through June 30, 2013.

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)

7. Property, Plant, and Equipment (Continued)

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

	June 30, 2013			December 31, 2012
	($ in thousands)
Beginning of period	$	451,024		$	178,338
Addition to capitalized exploratory and development costs:
U.S. Gulf of Mexico:
Exploratory well costs		63,376			178,295
Development and pre-development well costs		21,094			—
Capitalized interest		4,053			—
West Africa:
Exploratory well costs		175,052			168,309
Pre-development well costs		4,378			—
Capitalized interest		1,735			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(1)		(99,048	)		(73,918	)
End of period	$	621,664		$	451,024

(1)

The amount of $99.0 million for the six months ended June 30, 2013 represents $82.0 million impairment charges related to the lowest drilled interval evaluated by the Cameia #2 drill stem test, which failed to flow measurable hydrocarbons and $17.0 million impairment charges on the Diaman #1 exploratory well which needed to be re-spud due to mechanical problems with the wellbore. The Company wrote off $65.8 million impairment charges related to the Cameia #2 drill stem test during the three months ended March 31, 2013 and an additional $16.2 million during the three months ended June 30, 2013. The amount of $73.9 million for the year ended December 31, 2012 represents impairment charges on exploratory wells, including $4.1 million for the Heidelberg #3 sidetrack well, $8.1 million for the Ligurian #1 exploratory well, $49.0 million for the Ligurian #2 exploratory well and $12.7 million for the Shenandoah #2 appraisal well.

19

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. Property, Plant, and Equipment (Continued)

	June 30, 2013		December 31, 2012
	($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Exploratory well costs	$	263,666	$	208,275
Development and pre-development well costs		29,078		—
Capitalized interest		4,053		—
West Africa:
Exploratory well costs		314,770		242,749
Pre-development well costs		8,362		—
Capitalized interest		1,735		—
	$	621,664	$	451,024
Exploratory Well costs capitalized for a period greater than one year after completion of drilling (included in table above)	$	321,223	$	194,853

        As of June 30, 2013, capitalized exploratory well costs that have been suspended longer than one year are associated with the Shenandoah #1, Heidelberg #1, North Platte #1 and Cameia #1 discoveries. 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 discoveries exhibit sufficient indications of hydrocarbons to justify potential development and is actively pursuing efforts to fully assess them. If additional information becomes available that raises substantial doubt as to the economic or operational viability of these discoveries, the associated costs will be expensed at that time.

8. Long-term Debt

        On December 17, 2012, the Company issued $1.38 billion aggregate principal amount of its 2.625% convertible senior notes due 2019 (the "Notes"). The Notes are the Company's senior unsecured obligations and interest is payable semi-annually in arrears on June 1 and December 1 of each year. For the three and six months ended June 30, 2013, the Company paid $16.5 million in interest on the notes. The Notes will mature on December 1, 2019, unless earlier repurchased or converted in accordance with the terms of the Notes. The Notes may be converted at the option of the holder at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, in multiples of $1,000 principal amount. The Notes are convertible at an initial conversion rate of 28.023 shares of common stock per $1,000 principal amount, representing an initial conversion price of approximately $35.68 per share for a total of approximately 38.7 million underlying shares. The conversion rate is subject to adjustment upon the occurrence of certain events, as defined in the indenture governing the Notes, but will not be adjusted for any accrued and unpaid interest except in limited circumstances. Upon conversion, the Company's conversion obligation may be satisfied, at the Company's option, in cash, shares of common stock or a combination of cash and shares of common stock.

20

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

8. Long-term Debt (Continued)

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

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

        In accordance with accounting guidance relating to, "Debt with Conversion and Other Options", the Company separately accounts for the liability and equity conversion components of the Notes due to the Company's option to settle the conversion obligation in cash. The fair value of the debt excluding the conversion feature at the date of issuance was estimated to be approximately $989.5 million and was calculated based on the fair value of similar non-convertible debt instruments. The resulting value of the conversion option of $390.5 million was recognized as a debt discount and recorded as additional paid-in capital on the Company's consolidated balance sheets. Total debt issue cost on the Notes was $32.2 million of which $23.1 million was allocated to the liability component of the Notes and $9.1 million to the equity component of the Notes. The debt discount and the liability component of the debt issue costs are amortized over the term of the Notes. The effective interest rate used to amortize the debt discount and the liability component of the debt issue costs was approximately 8.40% based on the Company's estimated non-convertible borrowing rate as of the date the Notes were issued. Since the Company incurred losses for all periods, the impact of the conversion option would be anti-dilutive to the earnings per share and therefore was not included in the calculation.

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

	June 30, 2013							December 31, 2012
	Principal Amount		Unamortized discount(1)			Carrying Amount		Principal Amount		Unamortized discount			Carrying Amount
	($ in thousands)
Carrying amount of liability component
2.625% convertible senior notes	$	1,380,000	$	(366,861	)	$	1,013,139	$	1,380,000	$	(388,809	)	$	991,191

(1)

Unamortized discount will be amortized over the remaining life of the Notes which is 6.5 years.

21

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

8. Long-term Debt (Continued)

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

	June 30, 2013			December 31, 2012
	($ in thousands)
Debt discount relating to value of conversion option	$	390,540		$	390,540
Debt issue costs		(9,124	)		(9,124	)
Total	$	381,416		$	381,416

        Fair Value    The fair value of the Notes excluding the conversion feature was $983.5 million and $989.5 million as of June 30, 2013 and December 31, 2012, respectively, and was calculated based on the fair value of similar non-convertible debt instruments (level 2) since an observable quoted price of the Notes or a similar asset or liability is not readily available.

        Interest expense was as follows:

									For the Period November 10, 2005 (Inception) through June 30, 2013
	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	($ in thousands)
Interest expense associated with accrued interest(1)	$	4,968	$	—	$	12,319	$	—	$	13,728
Interest expense associated with accretion of debt discount		11,083		—		21,948		—		23,743
Interest expense associated with amortization of debt issue costs		517		—		958		—		1,034
Total	$	16,568	$	—	$	35,225	$	—	$	38,505

(1)

The $5.0 million and $12.3 million for the three and six months ended June 30, 2013, respectively, represent interest expense net of capitalized amount of $1.7 million and $4.1 million, respectively.

22

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Contractual Obligations

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

	June 30, 2013		December 31, 2012
	($ in thousands)
Short-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	150	$	150
Social obligation payments for Block 21, offshore Angola		300		300
Social obligation and bonus payments for Block 20, offshore Angola(1)		48,569		48,569
	$	49,019	$	49,019
Long-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	668	$	848
Social obligation payments for Block 21, offshore Angola		1,382		1,684
Social obligation and bonus payments for Block 20, offshore Angola(1)		122,851		165,706
	$	124,901	$	168,238

(1)

The total amount of social obligation payments for Block 20 has been capitalized. See Note 7—Property, Plant, and Equipment.

10. 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, 2013
	2013			2012		2013		2012
	($ in Thousands)
Seismic costs	$	2,978		$	10,128	$	21,087	$	25,341	$	363,135
Seismic cost recovery(1)		—			—		—		—		(25,126	)
Leasehold delay rentals		1,719			1,469		3,106		2,878		36,008
Force Majeure expense(2)		—			—		—		—		13,549
Drilling rig expense		(140	)		409		2,682		1,136		29,482
	$	4,557		$	12,006	$	26,875	$	29,355	$	417,048

(1)

These amounts represent reimbursement from partners of past seismic costs incurred by the Company.

(2)

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

23

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

11. Equity Based Compensation

        The Company accounts for stock-based compensation at fair value. The Company grants various types of stock-based awards including stock options, restricted stock and performance-based awards. The fair value of stock option awards is determined using the Black-Scholes-Merton option-pricing model. For restricted stock awards with market conditions, the fair value of the awards is measured using the asset-or-nothing option pricing model. Restricted stock awards without market conditions and the performance-based awards are valued using the market price of the Company's common stock on the grant date. The Company records compensation cost, net of estimated forfeitures, for stock-based compensation awards over the requisite service period except for performance-based awards. For performance-based awards, compensation cost is recognized over the requisite service period as and when the Company determines that the achievement of the performance condition is probable, using the per-share fair value measured at grant date.

        During the six months ended June 30, 2013, the Company granted a total of 516,290 shares of restricted stock and 959,023 stock options to employees. During the six months ended June 30, 2013, the Company also granted 7,223 shares of common stock as retainer awards to non-employee directors who elected to be compensated by stock in lieu of cash payments. In addition, the Company granted a total of 33,329 restricted stock units to non-employee directors during the six months ended June 30, 2013.

        The Company recorded equity based compensation expense, net of forfeitures, of $6.0 million and $5.4 million for the three months ended June 30, 2013 and 2012, respectively, $12.2 million and $12.0 million for the six months ended June 30, 2013 and 2012, respectively, and $73.0 million for the period November 10, 2005 (inception) through June 30, 2013.

12. Segment Information

        The Company currently has two geographic operating segments for its exploratory operations. The operating segments are focused in the deepwater U.S. Gulf of Mexico and offshore West Africa. The

24

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

12. Segment Information (Continued)

following tables provide the geographic operating segment information for the three and six months ended June 30, 2013 and 2012:

	United States			West Africa			Total
	($ in thousands)
Three months ended June 30, 2013
Operating costs and expense	$	21,715		$	43,650		$	65,365
Operating income (loss)		(21,715	)		(43,650	)		(65,365	)
Other (income) expense								13,453
Net income (loss)							$	(78,818	)
Additions to Property and Equipment, net(1)	$	37,469		$	106,852		$	144,321
Three months ended June 30, 2012
Operating costs and expense	$	135,531		$	6,624		$	142,155
Operating income (loss)		(135,531	)		(6,624	)		(142,155	)
Other (income) expense								(1,432	)
Net income (loss)							$	(140,723	)
Additions to Property and Equipment, net(1)	$	(72,635	)	$	61,403		$	(11,232	)

	United States			West Africa			Total
	($ in thousands)
Six months ended June 30, 2013
Operating costs and expense	$	44,821		$	132,996		$	177,817
Operating income (loss)		(44,821	)		(132,996	)		(177,817	)
Other (income) expense								29,088
Net income (loss)							$	(206,905	)
Additions to Property and Equipment, net(1)	$	92,328		$	81,950		$	174,278
Six months ended June 30, 2012
Operating costs and expense	$	156,578		$	23,291		$	179,869
Operating income (loss)		(156,578	)		(23,291	)		(179,869	)
Other (income) expense								(2,615	)
Net income (loss)							$	(177,254	)
Additions to Property and Equipment, net(1)	$	(49,979	)	$	118,290		$	68,311

(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.

25

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

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

13. Contingencies

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

26

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" and the other matters set forth in this Quarterly Report on Form 10-Q. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2012.

Overview

        We are an independent, oil-focused exploration and production company with an extensive below salt prospect inventory in the deepwater U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa. All of our prospects are oil-focused. To date, our drilling efforts have resulted in discoveries in both the U.S. Gulf of Mexico at North Platte, Heidelberg and Shenandoah and offshore Angola at Cameia. Our plan is to continue to mature and drill what we believe are our most promising exploration prospects in the deepwater U.S. Gulf of Mexico and the deepwater offshore Angola and Gabon as we further appraise, evaluate and progress our existing discoveries toward potential project sanction and development. We operate our business in two geographic segments: the U.S. Gulf of Mexico and West Africa.

Second Quarter 2013 Operational Highlights

        We continued drilling operations on four exploratory wells as set forth below:

•

Ardennes.  On February 6, 2013, we spud the Ardennes #1 exploratory well, which will target both Miocene and Inboard Lower Tertiary horizons in the deepwater U.S. Gulf of Mexico. We expect results from the Ardennes #1 exploratory well in the third quarter of 2013. We are the operator of Ardennes and own a 42% working interest.

•

Diaman.  On April 17, 2013, Total Gabon, as operator, spud the Diaman #1 exploratory well, which will target pre-salt horizons on the Diaba block offshore Gabon. During the quarter, the Diaman #1 exploratory well was re-spud due to mechanical problems with the wellbore. We expect results from the Diaman #1 exploratory replacement well in the third quarter of 2013. We own a 21.25% working interest in the Diaba block.

•

Mavinga.  On May 3, 2013, we spud the Mavinga #1 exploratory well, which will target pre-salt horizons on Block 21 offshore Angola. We expect results from the Mavinga #1 exploratory well in the second half of 2013. We are the operator of Mavinga and own a 40% working interest.

•

Lontra.  On May 21, 2013, we spud the Lontra #1 exploratory well, which will target pre-salt horizons on Block 20 offshore Angola. We expect results from the Lontra #1 exploratory well in the second half of 2013. We are the operator of Lontra and own a 40% working interest.

        We also continued development efforts with respect to our Heidelberg, Cameia and North Platte discoveries as set forth below:

•

We, along with Anadarko, as operator, and our other partners in the Heidelberg discovery in the U.S. Gulf of Mexico, formally sanctioned the development project for Heidelberg in May. In connection with the formal project sanction, we and our partners approved the fabrication AFE to fund the hull, topsides and subsea equipment and the export system through to first production. Work has begun on hull fabrication and procurement of the long-lead equipment for the topsides, subsea and export system. Anadarko has publicly indicated that it expects first production from the Heidelberg field in 2016. We own a 9.375% working interest in the Heidelberg discovery.

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•

During the second quarter, we conducted a variety of subsurface evaluations on our Cameia discovery on Block 21 offshore Angola, including simulations, to help refine and mature potential well locations for a variety of development scenarios. We have acquired a new 3D seismic survey over our Cameia discovery which we are using to optimize our phase one development well locations. We have continued to mature our development approach, including potential subsea architecture and equipment, subsurface and reservoir information, and drilling and completions plans. We expect formal sanction of Cameia in 2014 and first production from Cameia in 2017, assuming continued alignment with our partners and Sonangol, among other things. We are the operator of and own a 40% working interest in the Cameia discovery.

•

With respect to our appraisal and pre-development efforts on our North Platte discovery, we are in the process of acquiring a 5,200 square mile 3D seismic survey over the greater North Platte area and have already begun the initial processing of this data. This 3D seismic survey is designed to further improve the sub-salt imaging over our North Platte discovery as well as several other Inboard Lower Tertiary prospects in which we have working interests. We will use this newly acquired and re-processed 3D seismic data to optimize potential appraisal and development well locations on North Platte. We are also currently conducting a number of studies to support our appraisal and pre-development efforts on North Platte, including reservoir fluids analyses and geo-mechanical and subsea studies. We plan to begin reservoir characterization and geo-cellular modeling studies during the third quarter in order to better understand reservoir flow, productivity and recovery characteristics of the North Platte field. These studies will help us define and evaluate our development options for North Platte. We are the operator of and own a 60% working interest in the North Platte discovery.

Second Quarter 2013 Financial Highlights

•

We recorded a net loss of approximately $78.8 million, a 44% decrease from the second quarter of 2012. Total operating expenses were approximately $65.4 million, a 54% decrease from the second quarter of 2012. The decrease in operating expenses for the three months ended June 30, 2013 was attributed primarily to lower impairment charge and dry hole expense of $35.7 million during the three months ended June 30, 2013 as compared to $111.4 million of impairment charge and dry hole expense during the three months ended June 30, 2012.

•

Total expenditures were approximately $204 million for the three months ended June 30, 2013.

•

Including our existing cash and investments on hand and restricted cash as of June 30, 2013, we have approximately $2.3 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.

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Three Months Ended June 30, 2013 Compared to the Three Months Ended June 30, 2012

	Three Months Ended June 30,
	2013			2012			Increase (Decrease)			%
	($ in thousands)
United States Segment:
Oil and gas revenue	$	—		$	—		$	—			—	%
Operating costs and expenses:
Seismic and exploration		3,495			10,570			(7,075	)		(67	)%
Dry hole expense and impairment		2,412			111,355			(108,943	)		(98	)%
General and administrative		15,499			13,336			2,163			16	%
Depreciation and amortization		309			270			39			14	%
Total operating costs and expenses		21,715			135,531			(113,816	)		(84	)%
Operating income (loss)		(21,715	)		(135,531	)		(113,816	)		(84	)%
West Africa Segment:
Oil and gas revenue	$	—		$	—		$	—			—	%
Operating costs and expenses:
Seismic and exploration		1,062			1,436			(374	)		(26	)%
Dry hole expense and impairment		33,297			—			33,297			—
General and administrative		9,153			5,146			4,007			78	%
Depreciation and amortization		138			42			96			229	%
Total operating costs and expenses		43,650			6,624			37,026			559	%
Operating income (loss)		(43,650	)		(6,624	)		37,026			559	%
Consolidated Operations:
Oil and gas revenue	$	—		$	—		$	—			—	%
Operating costs and expenses:
Seismic and exploration		4,557			12,006			(7,449	)		(62	)%
Dry hole expense and impairment		35,709			111,355			(75,646	)		(68	)%
General and administrative		24,652			18,482			6,170			33	%
Depreciation and amortization		447			312			135			43	%
Total operating costs and expenses		65,365			142,155			(76,790	)		(54	)%
Operating income (loss)		(65,365	)		(142,155	)		(76,790	)		(54	)%
Other income (expense):
Gain on sale of assets		1,496			—			(1,496	)		—
Interest income		1,619			1,432			(187	)		13	%
Interest expense		(16,568	)		—			16,568			—
Total other income (expense)		(13,453	)		1,432			14,885			1039	%
Net income (loss) before income tax		(78,818	)		(140,723	)		(61,905	)		(44	)%
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	(78,818	)	$	(140,723	)	$	(61,905	)		(44	)%

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, 2013 and 2012, respectively.

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        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the three months ended June 30, 2013 and 2012:

        Seismic and exploration.    Seismic and exploration costs decreased by $7.1 million during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012. The decrease was due to reduced seismic data acquisition costs over certain of our prospects in the U.S. Gulf of Mexico.

        Dry hole expense and impairment.    Dry hole expense and impairment decreased by $108.9 million during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012. The decrease is due to no exploratory well costs in the U.S. Gulf of Mexico being charged to dry hole expense during the three months ended June 30, 2013, as reflected in the following table:

	Three Months Ended June 30,
	2013		2012		Increase (Decrease)
	($ in thousands)
Impairment of Unproved Leasehold:
Ligurian prospect	$	—	$	41,861	$	(41,861	)
Other leasehold		—		8,298		(8,298	)
Amortization of leasehold with carrying value under $1 million		2,412		2,303		109
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	)
	$	2,412	$	111,355	$	(108,943	)

        General and administrative.    General and administrative costs increased by $2.2 million during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012. The increase in general and administrative costs during this period was attributed to increase of $2.1 million in staff related expenses which includes equity compensation, a $3.9 million increase in contractors and consulting fees, and a $1.5 million increase in legal fees and increase of $1.2 million in office support costs, offset by an increase of $6.5 million in recoveries from partners due to increased operating activities.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the three months ended June 30, 2013, as compared to the three months ended June 30, 2012.

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, 2013 and 2012, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the three months ended June 30, 2013 and 2012:

        Seismic and exploration.    Seismic and exploration costs did not materially change during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012.

        Dry hole expense and impairment.    Dry hole expense and impairment increased by $33.3 million during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012.

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The increase is due to dry hole expense during the three months ended June 30, 2013 as reflected in the following table:

	Three Months Ended June 30,
	2013		2012		Increase (Decrease)
	($ in thousands)
Dry hole Expense:
Cameia #2 Drill Stem Test	$	16,231		—	$	16,231
Diaman #1 exploratory well		17,066		—		17,066
	$	33,297	$	—	$	33,297

        General and administrative.    General and administrative costs increased by $4.0 million for the three months ended June 30, 2013, as compared to the three months ended June 30, 2012. The increase is attributed primarily to increase of $2.7 million in office support costs and a $1.3 million increase in staff related costs, contractors, consulting fees and insurance, all due to increased operating activities offshore Angola and Gabon during the three months ended June 30, 2013.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the three months ended June 30, 2013, as compared to the three months ended June 30, 2012.

Consolidated:

        Other income (expense).    Other income (expense) increased by $14.9 million during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012. The increase was due primarily to $16.6 million in interest expense associated with our 2.625% convertible senior notes due 2019 that were issued in December 2012, offset by an increase of $0.2 million in interest income and a $1.5 million gain on sale of assets during the three months ended June 30, 2013.

        Income tax expense/benefit.    No income tax benefit has been reflected since a full valuation allowance has been established against the deferred tax asset that would have been generated as a result of the operating results.

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Six Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012

	Six Months Ended June 30,
	2013			2012			Increase (Decrease)			%
	($ in thousands)
United States Segment:
Oil and gas revenue	$	—		$	—		$	—			—	%
Operating costs and expenses:
Seismic and exploration		10,163			16,733			(6,570	)		(39	)%
Dry hole expense and impairment		4,829			116,679			(111,850	)		(96	)%
General and administrative		29,195			22,730			6,465			28	%
Depreciation and amortization		634			436			198			45	%
Total operating costs and expenses		44,821			156,578			(111,757	)		(71	)%
Operating income (loss)		(44,821	)		(156,578	)		(111,757	)		(71	)%
West Africa Segment:
Oil and gas revenue	$	—		$	—		$	—			—	%
Operating costs and expenses:
Seismic and exploration		16,712			12,622			4,090			32	%
Dry hole expense and impairment		99,048			—			99,048			—
General and administrative		16,964			10,592			6,372			60	%
Depreciation and amortization		272			77			195			253	%
Total operating costs and expenses		132,996			23,291			109,705			471	%
Operating income (loss)		(132,996	)		(23,291	)		109,705			471	%
Consolidated Operations:
Oil and gas revenue	$	—		$	—		$	—			—	%
Operating costs and expenses:
Seismic and exploration		26,875			29,355			(2,480	)		(8	)%
Dry hole expense and impairment		103,877			116,679			(12,802	)		(11	)%
General and administrative		46,159			33,322			12,837			39	%
Depreciation and amortization		906			513			393			77	%
Total operating costs and expenses		177,817			179,869			(2,052	)		(1	)%
Operating income (loss)		(177,817	)		(179,869	)		(2,052	)		(1	)%
Other income (expense):
Gain on sale of assets		2,993			—			2,993			—
Interest income		3,144			2,615			529			20	%
Interest expense		(35,225	)		—			35,225			—
Total other income (expense)		(29,088	)		2,615			31,703			1212	%
Net income (loss) before income tax		(206,905	)		(177,254	)		29,651			17	%
Income tax expense (benefit)		—			—			—			—
Net income (loss)	$	(206,905	)	$	(177,254	)	$	29,651			17	%

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, 2013 and 2012, respectively.

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        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the six months ended June 30, 2013 and 2012:

        Seismic and exploration.    Seismic and exploration costs decreased by $6.6 million during the six months ended June 30, 2013, as compared to the six months ended June 30, 2012. The decrease is due to a $6.3 million decrease in seismic data costs and a $0.5 million decrease in other exploration expenses, offset by an increase of $0.2 million in delay rentals during the six months ended June 30, 2013. During the six months ended June 30, 2013, we incurred $7.0 million in seismic data acquisition costs as compared to $13.3 million incurred during the six months ended June 30, 2012.

        Dry hole expense and impairment.    Dry hole expense and impairment decreased by $111.9 million during the six months ended June 30, 2013, as compared to the six months ended June 30, 2012. The decrease is due primarily to no exploratory well costs in the U.S. Gulf of Mexico being charged to dry hole expense during the six months ended June 30, 2013, as reflected in the following table:

	Six Months Ended June 30,
	2013		2012		Increase (Decrease)
	($ in thousands)
Impairment of Unproved Leasehold:
Ligurian prospect	$	—	$	41,861	$	(41,861	)
Other leasehold		—		8,298		(8,298	)
Amortization of leasehold with carrying value under $1 million		4,829		5,317		(488	)
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	)
	$	4,829	$	116,679	$	(111,850	)

        General and administrative.    General and administrative costs increased by $6.5 million during the six months ended June 30, 2013, as compared to the six months ended June 30, 2012. The increase in general and administrative costs is attributed to an increase of $3.6 million in staff related costs including equity compensation, a $5.2 million increase in contractors and consulting fees, a $3.0 million increase in legal fees, and a $3.2 million increase in office support costs, offset by an increase of $8.5 million in recoveries from partners and technical services charge-out due to the increase in operating activities.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the six months ended June 30, 2013, as compared to the six months ended June 30, 2012.

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, 2013 and 2012, respectively.

        Operating costs and expenses.    Our operating costs and expenses consisted of the following during the six months ended June 30, 2013 and 2012:

        Seismic and exploration.    Seismic and exploration costs increased by $4.1 million during the six months ended June 30, 2013, as compared to the six months ended June 30, 2012. The increase was due primarily to a $2.0 million increase in trend seismic data costs for Block 21 offshore Angola and

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$2.1 million for standby costs of certain contractors and Shorebase equipment and personnel associated with Block 20 offshore Angola charged to other exploration expenses.

        Dry hole expense and impairment.    Dry hole expense and impairment increased by $99.0 million during the six months ended June 30, 2013, as compared to the six months ended June 30, 2012. The increase is due to dry hole expense during the six months ended June 30, 2013 as reflected in the following table:

	Six Months Ended June 30,
	2013		2012		Increase (Decrease)
	($ in thousands)
Dry hole Expense:
Cameia #2 Drill Stem Test	$	81,982		—	$	81,982
Diaman #1 exploratory well		17,066		—		17,066
	$	99,048	$	—	$	99,048

        General and administrative.    General and administrative costs increased by $6.4 million for the six months ended June 30, 2013, as compared to the six months ended June 30, 2012. The increase is attributed to a $1.6 million increase in staff related costs, a $1.6 million increase in contractors and consulting fees, a $2.1 million increase in technical support from corporate office and a $5.2 million increase in other office support costs, offset by an increase of $4.1 million in recoveries from partners.

        Depreciation and amortization.    Depreciation and amortization did not materially change from the six months ended June 30, 2013, as compared to the six months ended June 30, 2012.

Consolidated:

        Other income (expense).    Other income (expense) increased by $31.7 million during the six months ended June 30, 2013, as compared to the six months ended June 30, 2012. The increase was due primarily to $35.2 million in interest expense associated with our 2.625% convertible senior notes due 2019 that were issued in December 2012, offset by an increase of $0.5 million in interest income and a $3.0 million gain on sale of assets during the six months ended June 30, 2013.

        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 non-operated U.S. Gulf of Mexico discoveries, the Heidelberg development has been formally sanctioned, and Anadarko, as operator, has publicly indicated that it expects first production from the Heidelberg field in 2016. With respect to our Cameia pre-salt discovery, we are currently conducting pre-development activities and planning for a phased development approach. We currently estimate first production and cash flow from Cameia in 2017, assuming continued alignment with our partners and the concessionaire, among other things. Our confidence in conducting pre-development activities and progressing our Cameia discovery toward development is based on the fact that the drilling results from our Cameia #1 exploratory well far exceeded our pre-drill estimates on feet of pay, reservoir rock properties, flow characteristics and fluid properties. Furthermore, our Cameia #2 appraisal well demonstrated lateral continuity within the reservoir originally encountered by our Cameia #1

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exploratory well and provided additional assurance of sufficient areal extent to support our plans to proceed with the evaluation of development options.

        Until substantial production is achieved, our primary sources of liquidity are expected to be cash on hand, amounts paid pursuant to the terms of our Total alliance and funds from future equity and debt financings, asset sales and farm-out arrangements.

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

•

conduct our current exploration and appraisal drilling program in the U.S. Gulf of Mexico and offshore Angola and Gabon;

•

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; 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, (i) the success of our exploration and appraisal drilling program, (ii) the number of commercially viable hydrocarbon discoveries made and the quantities of hydrocarbons discovered, (iii) the speed with which we can bring such discoveries to production, which for our Cameia discovery will depend upon continued alignment with our partners and the concessionaire, among other things, (iv) whether and to what extent we invest in additional oil leases and concessional licenses, and (v) the actual cost of exploration, appraisal and development of our prospects.

        As of June 30, 2013, we had approximately $2.3 billion in liquidity, which includes cash and cash equivalents, short-term restricted cash, short-term investments, long-term restricted cash and long-term investments. This amount does not include the Total carry or any additional success payments Total is obligated to pay us pursuant to the terms of our U.S. Gulf of Mexico alliance. We expect to expend approximately $750 to $900 million for our ongoing operations and general corporate purposes in 2013. Our total expenditures, excluding changes in working capital but including the payment of accrued contractual obligations for Block 20, offshore Angola, were approximately $204 million and $383 million for the three and six months ended June 30, 2013, respectively. We expect that our existing cash on hand will be sufficient to fund our planned exploration and appraisal drilling program and development activities at least through the end of 2014. 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 future 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.

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Cash Flows

	Six Months Ended June 30,
	2013			2012
	($ in thousands)
Net cash provided by (used in):
Operating Activities	$	(233,124	)	$	(75,164	)
Investing Activities		(900,248	)		(464,798	)
Financing Activities		(1,095	)		489,486

        Operating activities.    Net cash used in operating activities for the six months ended June 30, 2013 was $233.1 million, compared with net cash used in operating activities of $75.2 million for six months ended June 30, 2012. The increase was attributed primarily to increased drilling activities in the U.S. Gulf of Mexico and offshore Angola and Gabon during the three months ended June 30, 2013.

        Investing activities.    Net cash used in investing activities for the six months ended June 30, 2013 was $900.2 million, compared with net cash used in investing activities of $464.8 million for the six months ended June 30, 2012. The increase in net cash used in investing activities for the six months ended June 30, 2013 was primarily attributed to the investment of the net proceeds of $1.35 billion from the issuance of 2.625% convertible senior notes due 2019 that were issued in December 2012.

        Financing activities.    Net cash used in financing activities for the six months ended June 30, 2013 was $1.1 million, compared with $489.5 million provided by financing activities for the six months ended June 30, 2012. The $1.1 million used in financing activities for the six months ended June 30, 2013 relates to payments of debt issue costs associated with the 2.625% convertible senior notes due 2019. The $489.5 million provided by financing activities for the six months ended June 30, 2012 represents the net proceeds from our public offering of our common stock that closed on February 29, 2012.

Critical Accounting Policies

        Our significant accounting policies are summarized in Note 1 of Notes to Consolidated Financial Statements included in our 2012 Annual Report on Form 10-K for the year ended December 31, 2012. Also refer to the Notes to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Report.

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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 2012 Annual Report on Form 10-K for the year ended December 31, 2012.

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, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

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

Item 1A.    Risk Factors

        There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012.

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

        None.

Item 3.    Defaults Upon Senior Securities

        None.

Item 4.    Mine Safety Disclosures

        Not applicable.

Item 5.    Other Information

        None.

37

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 30, 2013

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.

40

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 30, 2013 /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 30, 2013 /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, 2013 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 30, 2013

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, 2013 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 30, 2013

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

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Exhibit 32.2

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

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Seismic and Exploration Expenses

6 Months Ended

Jun. 30, 2013

Seismic and Exploration Expenses

Seismic and Exploration Expenses

10. 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, 2013
	2013			2012		2013		2012
	($ in Thousands)
Seismic costs	$	2,978		$	10,128	$	21,087	$	25,341	$	363,135
Seismic cost recovery(1)		—			—		—		—		(25,126	)
Leasehold delay rentals		1,719			1,469		3,106		2,878		36,008
Force Majeure expense(2)		—			—		—		—		13,549
Drilling rig expense		(140	)		409		2,682		1,136		29,482
	$	4,557		$	12,006	$	26,875	$	29,355	$	417,048

(1)

These amounts represent reimbursement from partners of past seismic costs incurred by the Company.

(2)

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

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended		92 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Condensed Consolidated Statements of Operations
Oil and gas revenue	$ 0		$ 0
Operating costs and expenses:
Seismic and exploration	4,557	12,006	26,875	29,355	417,048
Dry hole expense and impairment	35,709	111,355	103,877	116,679	342,609
General and administrative	24,652	18,482	46,159	33,322	352,102
Depreciation and amortization	447	312	906	513	5,657
Total operating costs and expenses	65,365	142,155	177,817	179,869	1,117,416
Operating income (loss)	(65,365)	(142,155)	(177,817)	(179,869)	(1,117,416)
Other income (expense):
Gain on sale of assets	1,496		2,993		2,993
Interest income	1,619	1,432	3,144	2,615	18,188
Interest expense	(16,568)		(35,225)		(38,505)
Total other income (expense)	(13,453)	1,432	(29,088)	2,615	(17,324)
Net income (loss) before income tax	(78,818)	(140,723)	(206,905)	(177,254)	(1,134,740)
Net income (loss)	$ (78,818)	$ (140,723)	$ (206,905)	$ (177,254)	$ (1,134,740)
Basic and diluted income (loss) per share (in dollars per share)	$ (0.19)	$ (0.35)	$ (0.51)	$ (0.44)
Basic and diluted weighted average common shares outstanding (in shares)	406,916,569	406,122,827	406,733,954	400,113,132

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Restricted Funds

6 Months Ended

Jun. 30, 2013

Restricted Funds

Restricted Funds

3. Restricted Funds

        Restricted funds consisted of the following:

	June 30, 2013		December 31, 2012
	($ in thousands)
Short-term:
Ensco 8503 escrow account	$	90,424	$	90,440
Collateral on letters of credit for Angola		91,547		—
	$	181,971	$	90,440
Long-term:
Ensco 8503 escrow account		—		90,440
Collateral on letters of credit for Angola		213,121		304,492
Other vendor restricted deposits		172		720
	$	213,293	$	395,652

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Joint Interest and Other Receivables (Tables)

6 Months Ended

Jun. 30, 2013

Joint Interest and Other Receivables

Schedule of joint interest and other receivables

	June 30, 2013		December 31, 2012
	($ in thousands)
Partners in the U.S. Gulf of Mexico	$	54,795	$	52,439
Partners in West Africa		45,882		2,185
Accrued interest on investment securities		7,203		3,647
Vendors' receivables		1,076		1,526
Other		67		1,795
Total(1)	$	109,023	$	61,592

(1)

The amount of $109.0 million as of June 30, 2013 includes $15.9 million which became past due subsequent to June 30, 2013. We are working to resolve this issue. We have not reserved against this amount as we believe it should be favorably resolved under our relevant agreements.

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Equity Based Compensation

6 Months Ended

Jun. 30, 2013

Equity Based Compensation

Equity Based Compensation

11. Equity Based Compensation

        The Company accounts for stock-based compensation at fair value. The Company grants various types of stock-based awards including stock options, restricted stock and performance-based awards. The fair value of stock option awards is determined using the Black-Scholes-Merton option-pricing model. For restricted stock awards with market conditions, the fair value of the awards is measured using the asset-or-nothing option pricing model. Restricted stock awards without market conditions and the performance-based awards are valued using the market price of the Company's common stock on the grant date. The Company records compensation cost, net of estimated forfeitures, for stock-based compensation awards over the requisite service period except for performance-based awards. For performance-based awards, compensation cost is recognized over the requisite service period as and when the Company determines that the achievement of the performance condition is probable, using the per-share fair value measured at grant date.

        During the six months ended June 30, 2013, the Company granted a total of 516,290 shares of restricted stock and 959,023 stock options to employees. During the six months ended June 30, 2013, the Company also granted 7,223 shares of common stock as retainer awards to non-employee directors who elected to be compensated by stock in lieu of cash payments. In addition, the Company granted a total of 33,329 restricted stock units to non-employee directors during the six months ended June 30, 2013.

        The Company recorded equity based compensation expense, net of forfeitures, of $6.0 million and $5.4 million for the three months ended June 30, 2013 and 2012, respectively, $12.2 million and $12.0 million for the six months ended June 30, 2013 and 2012, respectively, and $73.0 million for the period November 10, 2005 (inception) through June 30, 2013.

XML

Property, Plant, and Equipment (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended	92 Months Ended	0 Months Ended	1 Months Ended	3 Months Ended		6 Months Ended		92 Months Ended		0 Months Ended		6 Months Ended			6 Months Ended			6 Months Ended				6 Months Ended						6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Jun. 30, 2013	Feb. 26, 2013 Unproved oil and gas properties, net	Jun. 30, 2013 Unproved oil and gas properties, net	Jun. 30, 2013 Unproved oil and gas properties, net	Jun. 30, 2012 Unproved oil and gas properties, net	Jun. 30, 2013 Unproved oil and gas properties, net	Jun. 30, 2012 Unproved oil and gas properties, net	Jun. 30, 2013 Unproved oil and gas properties, net	Dec. 31, 2012 Unproved oil and gas properties, net	Dec. 20, 2011 Unproved oil and gas properties, net Block 20 offshore Angola	Jun. 30, 2013 Unproved oil and gas properties, net Block 20 offshore Angola	Jun. 30, 2013 Unproved oil and gas properties, net Blocks 9 and 21 offshore Angola and Gabon	Jun. 30, 2013 Unproved oil and gas properties, net Blocks 9 and 21 offshore Angola	Jun. 30, 2013 Unproved oil and gas properties, net Diaba block offshore Gabon	Jun. 30, 2013 Unproved oil and gas properties, net U.S. Gulf of Mexico	Jun. 30, 2013 Exploratory wells in process	Dec. 31, 2012 Exploratory wells in process	Jun. 30, 2013 Computer equipment and software	Dec. 31, 2012 Computer equipment and software	Jun. 30, 2013 Office equipment and furniture	Dec. 31, 2012 Office equipment and furniture	Jun. 30, 2013 Office equipment and furniture Minimum	Jun. 30, 2013 Office equipment and furniture Maximum	Jun. 30, 2013 Vehicles	Dec. 31, 2012 Vehicles	Jun. 30, 2013 Leasehold improvements	Dec. 31, 2012 Leasehold improvements	Jun. 30, 2013 Leasehold improvements Minimum	Jun. 30, 2013 Leasehold improvements Maximum
Property, Plant, and Equipment
Estimated Useful Life																							3 years				3 years	5 years	3 years				3 years	10 years
Unproved oil and gas properties	$ 730,077,000		$ 730,077,000		$ 721,853,000	$ 730,077,000
Less: accumulated valuation allowance	(82,847,000)		(82,847,000)		(78,413,000)	(82,847,000)
Total oil and gas properties, net	1,268,894,000		1,268,894,000		1,094,464,000	1,268,894,000		647,230,000	647,230,000		647,230,000		647,230,000	643,440,000							621,664,000	451,024,000
Property, plant, and equipment, gross	8,566,000		8,566,000		7,825,000	8,566,000																	3,765,000	3,166,000	2,132,000	2,093,000			265,000	268,000	2,404,000	2,298,000
Less: accumulated depreciation and amortization	(3,425,000)		(3,425,000)		(2,533,000)	(3,425,000)
Total other property and equipment	5,141,000		5,141,000		5,292,000	5,141,000
Total property, plant, and equipment, net	1,274,035,000		1,274,035,000		1,099,756,000	1,274,035,000
Old computer equipment and leasehold improvements written off during the period					2,200,000
Depreciation and amortization	447,000	312,000	906,000	513,000		5,657,000
Percentage of working interest acquired															40.00%			40.00%	21.25%
Consideration for the acquisition															347,100,000
Consideration payable over five years on acquisition															337,100,000
Period over which consideration is payable															5 years
Consideration paid on acquisition																165,700,000
Short-term and long-term contractual obligations																171,400,000
Unproved																	10,800,000			8,600,000
Unproved property acquisition costs, net of valuation allowance, relating to properties offshore																				289,300,000
Total consideration for the sale							5,600,000
Consideration for the sale received at closing date							1,500,000
Additional consideration for the sale receivable on commencement of operations								1,500,000
Contingent consideration for the sale to be receivable on commencement of production							2,600,000
Gain on sale of assets	1,496,000		2,993,000			2,993,000					3,000,000
Lower limit of unproved leasehold costs assessed individually for impairment																				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		1,000,000
Carrying amount of unproved properties subject to amortization before impairment provision								69,400,000	69,400,000		69,400,000		69,400,000	69,100,000
Lease impairment allowance									$ 2,400,000	$ 52,500,000	$ 4,800,000	$ 55,500,000	$ 83,400,000

XML

Property, Plant, and Equipment (Tables)

6 Months Ended

Jun. 30, 2013

Property, Plant, and Equipment

Schedule of Property, Plant, and Equipment

	Estimated Useful Life (Years)	June 30, 2013			December 31, 2012
		($ in thousands)
Oil and Gas Properties:
Unproved oil and gas properties		$	730,077		$	721,853
Less: accumulated valuation allowance			(82,847	)		(78,413	)
			647,230			643,440
Exploratory wells in process			621,664			451,024
Total oil and gas properties, net			1,268,894			1,094,464
Other Property and Equipment:
Computer equipment and software	3		3,765			3,166
Office equipment and furniture	3 - 5		2,132			2,093
Vehicles	3		265			268
Leasehold improvements	3 - 10		2,404			2,298
			8,566			7,825
Less: accumulated depreciation and amortization(1)			(3,425	)		(2,533	)
Total other property and equipment, net			5,141			5,292
Property, plant, and equipment, net		$	1,274,035		$	1,099,756

(1)

During the year ended December 31, 2012, the Company wrote off $2.2 million of old computer equipment and leasehold improvements which were fully depreciated and which had no impact on the consolidated statements of operations and consolidated statements of cash flow.

Schedule of net changes in capitalized exploratory well costs

	June 30, 2013			December 31, 2012
	($ in thousands)
Beginning of period	$	451,024		$	178,338
Addition to capitalized exploratory and development costs:
U.S. Gulf of Mexico:
Exploratory well costs		63,376			178,295
Development and pre-development well costs		21,094			—
Capitalized interest		4,053			—
West Africa:
Exploratory well costs		175,052			168,309
Pre-development well costs		4,378			—
Capitalized interest		1,735			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(1)		(99,048	)		(73,918	)
End of period	$	621,664		$	451,024

(1)

The amount of $99.0 million for the six months ended June 30, 2013 represents $82.0 million impairment charges related to the lowest drilled interval evaluated by the Cameia #2 drill stem test, which failed to flow measurable hydrocarbons and $17.0 million impairment charges on the Diaman #1 exploratory well which needed to be re-spud due to mechanical problems with the wellbore. The Company wrote off $65.8 million impairment charges related to the Cameia #2 drill stem test during the three months ended March 31, 2013 and an additional $16.2 million during the three months ended June 30, 2013. The amount of $73.9 million for the year ended December 31, 2012 represents impairment charges on exploratory wells, including $4.1 million for the Heidelberg #3 sidetrack well, $8.1 million for the Ligurian #1 exploratory well, $49.0 million for the Ligurian #2 exploratory well and $12.7 million for the Shenandoah #2 appraisal well.

Schedule of cumulative costs of capitalized exploratory well costs

	June 30, 2013		December 31, 2012
	($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Exploratory well costs	$	263,666	$	208,275
Development and pre-development well costs		29,078		—
Capitalized interest		4,053		—
West Africa:
Exploratory well costs		314,770		242,749
Pre-development well costs		8,362		—
Capitalized interest		1,735		—
	$	621,664	$	451,024
Exploratory Well costs capitalized for a period greater than one year after completion of drilling (included in table above)	$	321,223	$	194,853

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Measurements

Significant financial instruments as categorized by the fair value measurement hierarchy

	Level 1				Level 2
									Balance as of June 30, 2013
	Carrying Value		Fair Value(1)		Carrying Value		Fair Value(1)
	($ in thousands)
Cash and cash equivalents:
Cash	$	24,585	$	24,585	$	—	$	—	$	24,585
Money market funds		98,289		98,289		—		—		98,289
Commercial paper		—		—		168,474		168,474		168,474
Subtotal		122,874		122,874		168,474		168,474		291,348
Short-term restricted funds:
U.S. Treasury bills		—		—		90,424		90,424		90,424
U.S. Treasury notes		—		—		91,547		91,547		91,547
Subtotal		—		—		181,971		181,971		181,971
Short-term investments:
Corporate bonds		—		—		739,394		739,394		739,394
Commercial paper		—		—		524,799		524,799		524,799
Certificates of deposits		—		—		25,000		25,000		25,000
Subtotal		—		—		1,289,193		1,289,193		1,289,193
Long-term restricted funds:
Money market funds		2,217		2,217		—		—		2,217
U.S. Treasury notes		—		—		211,076		211,076		211,076
Subtotal		2,217		2,217		211,076		211,076		213,293
Long-term investments:
Corporate bonds		—		—		295,222		295,222		295,222
Subtotal		—		—		295,222		295,222		295,222
Total	$	125,091	$	125,091	$	2,145,936	$	2,145,936	$	2,271,027

	Level 1				Level 2
									Balance as of December 31, 2012
	Carrying Value		Fair Value(1)		Carrying Value		Fair Value(1)
	($ in thousands)
Cash and cash equivalents:
Cash	$	65,935	$	65,935	$	—	$	—	$	65,935
Money market funds		1,105,148		1,105,148		—		—		1,105,148
Commercial paper		—		—		247,206		247,206		247,206
Corporate bonds		—		—		7,526		7,526		7,526
Subtotal		1,171,083		1,171,083		254,732		254,732		1,425,815
Short-term restricted funds:
U.S. Treasury bills		—		—		90,440		90,440		90,440
Subtotal		—		—		90,440		90,440		90,440
Short-term investments:
Corporate bonds		—		—		466,898		466,898		466,898
Commercial paper		—		—		315,769		315,769		315,769
Certificates of deposits		—		—		7,001		7,001		7,001
Subtotal		—		—		789,668		789,668		789,668
Long-term restricted funds:
Money market funds		2,318		2,318		—		—		2,318
U.S. Treasury bills		—		—		178,216		178,216		178,216
U.S. Treasury notes		—		—		215,118		215,118		215,118
Subtotal		2,318		2,318		393,334		393,334		395,652
Long-term investments:
Corporate bonds		—		—		36,267		36,267		36,267
Subtotal		—		—		36,267		36,267		36,267
Total	$	1,173,401	$	1,173,401	$	1,564,441	$	1,564,441	$	2,737,842

(1)

As of June 30, 2013 and December 31, 2012, the Company did not record any OTTI on these assets.

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Restricted Funds (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Restricted Funds
Short-term restricted funds	$ 181,971	$ 90,440
Long-term restricted funds	213,293	395,652
Ensco 8503 escrow account
Restricted Funds
Short-term restricted funds	90,424	90,440
Long-term restricted funds		90,440
Collateral on letters of credit for Angola
Restricted Funds
Short-term restricted funds	91,547
Long-term restricted funds	213,121	304,492
Other vendor restricted deposits
Restricted Funds
Long-term restricted funds	$ 172	$ 720

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Long-term Debt (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	6 Months Ended	92 Months Ended		0 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Dec. 17, 2012 Notes	Jun. 30, 2013 Notes	Jun. 30, 2013 Notes	Dec. 31, 2012 Notes
Debt instrument
Aggregate principal amount of notes issued				$ 1,380,000,000
Interest rate (as a percent)			2.625%	2.625%	2.625%	2.625%	2.625%
Interest paid	16,502,000	16,502,000			16,500,000	16,500,000
Initial conversion rate of common stock				28.023
Initial conversion price per share of common stock (in dollars per share)				$ 35.68
Number of underlying shares that the holder of the debt instrument would receive upon conversion				38.7
Repurchase price as a percentage of principal amount of debt instrument				100.00%
Specified minimum percentage of principal amount, the holders of which may declare all principal, accrued and unpaid interest to be due and payable immediately, upon the occurrence of an Event of Default				25.00%
Percentage of principal amount, which may be declared by holders of a specified principal amount to be due and payable immediately upon occurrence of an Event of Default				100.00%
Fair value of the notes excluding conversion feature at the date of issuance				989,500,000
Effective interest rate used to amortize liability component of debt issue costs (as a percent)				8.40%
Debt issue cost				32,200,000
Debt issue cost allocated to the liability component				23,100,000
Debt issue cost allocated to the equity component				9,100,000		9,124,000	9,124,000
Carrying amounts of the liability components
Principal Amount					1,380,000,000	1,380,000,000	1,380,000,000
Unamortized discount					(366,861,000)	(366,861,000)	(388,809,000)
Carrying amount of the liability components	1,013,139,000	1,013,139,000	991,191,000		1,013,139,000	1,013,139,000	991,191,000
Remaining term of debt						6 years 6 months
Carrying amounts of the equity components
Debt discount relating to value of conversion option					390,540,000	390,540,000	390,540,000
Debt issue costs				(9,100,000)		(9,124,000)	(9,124,000)
Carrying amount of the equity components					381,416,000	381,416,000	381,416,000
Fair value of the notes excluding conversion feature					$ 983,500,000	$ 983,500,000	$ 989,500,000

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Information

Schedule of segment information by geographic operating segment

	United States			West Africa			Total
	($ in thousands)
Three months ended June 30, 2013
Operating costs and expense	$	21,715		$	43,650		$	65,365
Operating income (loss)		(21,715	)		(43,650	)		(65,365	)
Other (income) expense								13,453
Net income (loss)							$	(78,818	)
Additions to Property and Equipment, net(1)	$	37,469		$	106,852		$	144,321
Three months ended June 30, 2012
Operating costs and expense	$	135,531		$	6,624		$	142,155
Operating income (loss)		(135,531	)		(6,624	)		(142,155	)
Other (income) expense								(1,432	)
Net income (loss)							$	(140,723	)
Additions to Property and Equipment, net(1)	$	(72,635	)	$	61,403		$	(11,232	)

	United States			West Africa			Total
	($ in thousands)
Six months ended June 30, 2013
Operating costs and expense	$	44,821		$	132,996		$	177,817
Operating income (loss)		(44,821	)		(132,996	)		(177,817	)
Other (income) expense								29,088
Net income (loss)							$	(206,905	)
Additions to Property and Equipment, net(1)	$	92,328		$	81,950		$	174,278
Six months ended June 30, 2012
Operating costs and expense	$	156,578		$	23,291		$	179,869
Operating income (loss)		(156,578	)		(23,291	)		(179,869	)
Other (income) expense								(2,615	)
Net income (loss)							$	(177,254	)
Additions to Property and Equipment, net(1)	$	(49,979	)	$	118,290		$	68,311

(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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Seismic and Exploration Expenses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		92 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Seismic and Exploration Expenses
Seismic costs	$ 2,978	$ 10,128	$ 21,087	$ 25,341	$ 363,135
Seismic cost recovery					(25,126)
Leasehold delay rentals	1,719	1,469	3,106	2,878	36,008
Force Majeure expense					13,549
Drilling rig expense	(140)	409	2,682	1,136	29,482
Total seismic and exploration expenses	$ 4,557	$ 12,006	$ 26,875	$ 29,355	$ 417,048

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Investments (Tables)

6 Months Ended

Jun. 30, 2013

Investments

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

	June 30, 2013		December 31, 2012
	($ in thousands)
U.S. Treasury securities	$	393,047	$	483,775
Corporate securities		1,034,615		510,691
Commercial paper		693,274		562,975
Certificates of deposit		25,000		7,000
Total	$	2,145,936	$	1,564,441

Schedule of held-to-maturity securities included in the entity's condensed consolidated balance sheets

	June 30, 2013		December 31, 2012
	($ in thousands)
Cash and cash equivalents	$	168,474	$	254,732
Short-term restricted funds		181,971		90,440
Short-term investments		1,289,193		789,668
Long-term restricted funds		211,076		393,334
Long-term investments		295,222		36,267
	$	2,145,936	$	1,564,441

Schedule of contractual maturities of held-to-maturity securities

	June 30, 2013				December 31, 2012
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,850,714	$	1,850,714	$	1,528,174	$	1,528,174
After 1 year		295,222		295,222		36,267		36,267
	$	2,145,936	$	2,145,936	$	1,564,441	$	1,564,441

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Condensed Consolidated Statements of Changes in Partners' Capital and Stockholders' Equity (Parenthetical)	Dec. 31, 2012
Condensed Consolidated Statements of Changes in Partners' Capital and Stockholders' Equity
Interest rate (as a percent)	2.625%

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

General

        Cobalt International Energy, Inc. (the "Company") is incorporated in the state of Delaware. The Company is an independent, oil-focused exploration and production company with an extensive 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. To date, the Company's drilling efforts have resulted in discoveries in both the U.S. Gulf of Mexico at North Platte, Heidelberg and Shenandoah and offshore Angola at Cameia. The Company's plan is to continue to mature and drill what it believes are its most promising exploration prospects in the deepwater U.S. Gulf of Mexico and the deepwater offshore Angola and Gabon as it further appraises, evaluates and progresses its existing discoveries toward potential project sanction and development. The Company operates its business in two geographic segments: the U.S. Gulf of Mexico and West Africa.

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

Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements include the financial statements of Cobalt International Energy, Inc. and all of its wholly-owned subsidiaries. All significant intercompany transactions and amounts have been eliminated for all years presented. Because the Company is a development stage enterprise, it has presented its financial statements in accordance with accounting guidance related to "Development Stage Entities."

        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the condensed consolidated financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be presented for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

Reclassifications

        Certain reclassifications have been made to prior periods' financial statements to conform to the current presentation in the unaudited condensed consolidated statements of cash flows.

Use of Estimates

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

Investments

        The Company's policy on accounting for its investments, which consist entirely of debt securities, is based on the accounting guidance relating to "Accounting for Certain Investments in Debt and Equity Securities." The Company considers all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year are classified as long-term investments. The debt securities are carried at amortized 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, 2013 and December 31, 2012. 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, 2013 and December 31, 2012, the Company has no OTTI in its debt securities.

Capitalized Interest

        For exploration and development projects that have not commenced production, interest is capitalized as part of the historical cost of developing and constructing assets. Capitalized interest is determined by multiplying the Company's weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation or impairment. See Note 7—Property, Plant, and Equipment and Note 8—Long-term Debt.

Earnings (Loss) Per Share

        Basic income (loss) per share was calculated by dividing net income or loss applicable to common shares by the weighted average number of common shares outstanding during the periods presented. The calculation of diluted income (loss) per share should include the potential dilutive impact of non-vested restricted shares, non-vested restricted stock units, outstanding stock options and 2.625% convertible senior notes due 2019, during the period, unless their effect is anti-dilutive. For the three months and six months ended June 30, 2013, 4,316,143 shares of non-vested restricted stock, non-vested restricted stock units, outstanding stock options and 2.625% convertible senior notes due 2019, were excluded from the diluted income (loss) per share because they are 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 were excluded from the diluted income (loss) per share because they are anti-dilutive.

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Joint Interest and Other Receivables

6 Months Ended

Jun. 30, 2013

Joint Interest and Other Receivables

Joint Interest and Other Receivables

4. Joint Interest and Other Receivables

        Joint interest and other receivables result primarily from billing shared costs under the respective operating agreements to the Company's partners. These are usually settled within 30 days of the invoice date.

	June 30, 2013		December 31, 2012
	($ in thousands)
Partners in the U.S. Gulf of Mexico	$	54,795	$	52,439
Partners in West Africa		45,882		2,185
Accrued interest on investment securities		7,203		3,647
Vendors' receivables		1,076		1,526
Other		67		1,795
Total(1)	$	109,023	$	61,592

(1)

The amount of $109.0 million as of June 30, 2013 includes $15.9 million which became past due subsequent to June 30, 2013. We are working to resolve this issue. We have not reserved against this amount as we believe it should be favorably resolved under our relevant agreements.

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Cash and Cash Equivalents

6 Months Ended

Jun. 30, 2013

Cash and Cash Equivalents

Cash and Cash Equivalents

2. Cash and Cash Equivalents

        Cash and cash equivalents consisted of the following:

	June 30, 2013		December 31, 2012
	($ in thousands)
Cash at banks	$	24,585	$	65,935
Money market funds		98,289		1,105,148
Held-to-maturity securities(1)		168,474		254,732
	$	291,348	$	1,425,815

(1)

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

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Long-term Debt (Details 2) (USD $)	3 Months Ended	6 Months Ended	92 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Jun. 30, 2013
Long-term Debt
Interest expense associated with accrued interest	$ 4,968,000	$ 12,319,000	$ 13,728,000
Interest expense associated with accretion of debt discount	11,083,000	21,948,000	23,743,000
Interest expense associated with amortization of debt issue costs	517,000	958,000	1,034,000
Total	16,568,000	35,225,000	38,505,000
Capitalized interest costs	$ 1,700,000	$ 4,100,000

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Long-term Debt (Tables)

6 Months Ended

Jun. 30, 2013

Long-term Debt

Schedule of the carrying amounts of the liability components of the Notes

	June 30, 2013							December 31, 2012
	Principal Amount		Unamortized discount(1)			Carrying Amount		Principal Amount		Unamortized discount			Carrying Amount
	($ in thousands)
Carrying amount of liability component
2.625% convertible senior notes	$	1,380,000	$	(366,861	)	$	1,013,139	$	1,380,000	$	(388,809	)	$	991,191

(1)

Unamortized discount will be amortized over the remaining life of the Notes which is 6.5 years.

Schedule of carrying amounts of the equity components of the Notes

	June 30, 2013			December 31, 2012
	($ in thousands)
Debt discount relating to value of conversion option	$	390,540		$	390,540
Debt issue costs		(9,124	)		(9,124	)
Total	$	381,416		$	381,416

Schedule of interest expense

									For the Period November 10, 2005 (Inception) through June 30, 2013
	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	($ in thousands)
Interest expense associated with accrued interest(1)	$	4,968	$	—	$	12,319	$	—	$	13,728
Interest expense associated with accretion of debt discount		11,083		—		21,948		—		23,743
Interest expense associated with amortization of debt issue costs		517		—		958		—		1,034
Total	$	16,568	$	—	$	35,225	$	—	$	38,505

(1)

The $5.0 million and $12.3 million for the three and six months ended June 30, 2013, respectively, represent interest expense net of capitalized amount of $1.7 million and $4.1 million, respectively.

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Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Segment	Jun. 30, 2012	Dec. 31, 2012	Jun. 30, 2013 2.625% convertible senior notes due 2019	Dec. 31, 2012 2.625% convertible senior notes due 2019	Dec. 17, 2012 2.625% convertible senior notes due 2019
Summary of Significant Accounting Policies
Number of geographic segments			2
Investments
Maximum term of maturity to classify highly liquid interest earning investments as cash equivalent			3 months
Minimum term of maturity to classify an investment as short-term investment			3 months
Maximum term of maturity to classify an investment as short-term investment			1 year
OTTI in debt securities	$ 0		$ 0		$ 0
Earnings (Loss) Per Share
Shares of non-vested restricted stock, non vested restricted stock units, outstanding stock options and 2.625% convertible senior notes due 2019 excluded from the diluted income (loss) per share calculation	4,316,143		4,316,143
Shares of non-vested restricted stock, non-vested restricted stock units and outstanding stock excluded from the diluted income (loss) per share calculation		5,693,908		5,693,908
Earnings (Loss) Per Share
Interest rate (as a percent)					2.625%	2.625%	2.625%	2.625%

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	$ 2,145,936	$ 1,564,441
Fair Value	2,145,936	1,564,441
Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	2,271,027	2,737,842
Cash and cash equivalents
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	168,474	254,732
Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	291,348	1,425,815
Cash and cash equivalents | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	24,585	65,935
Cash and cash equivalents | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	98,289	1,105,148
Cash and cash equivalents | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	168,474	247,206
Cash and cash equivalents | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total		7,526
Short-term restricted funds
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	181,971	90,440
Short-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	181,971	90,440
Short-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	90,424	90,440
Short-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	91,547
Short-term investments
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	1,289,193	789,668
Short-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	1,289,193	789,668
Short-term investments | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	524,799	315,769
Short-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	739,394	466,898
Short-term investments | Certificates of deposits | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	25,000	7,001
Long-term restricted funds
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	211,076	393,334
Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	213,293	395,652
Long-term restricted funds | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	2,217	2,318
Long-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total		178,216
Long-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	211,076	215,118
Long-term investments
Significant financial instruments as categorized by the fair value measurement hierarchy
Fair Value	295,222	36,267
Long-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	295,222	36,267
Long-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Total	295,222	36,267
Level 1 | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	125,091	1,173,401
Fair Value	125,091	1,173,401
Level 1 | Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	122,874	1,171,083
Fair Value	122,874	1,171,083
Level 1 | Cash and cash equivalents | Cash | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	24,585	65,935
Fair Value	24,585	65,935
Level 1 | Cash and cash equivalents | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	98,289	1,105,148
Fair Value	98,289	1,105,148
Level 1 | Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	2,217	2,318
Fair Value	2,217	2,318
Level 1 | Long-term restricted funds | Money market funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	2,217	2,318
Fair Value	2,217	2,318
Level 2 | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	2,145,936	1,564,441
Fair Value	2,145,936	1,564,441
Level 2 | Cash and cash equivalents | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	168,474	254,732
Fair Value	168,474	254,732
Level 2 | Cash and cash equivalents | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	168,474	247,206
Fair Value	168,474	247,206
Level 2 | Cash and cash equivalents | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value		7,526
Fair Value		7,526
Level 2 | Short-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	181,971	90,440
Fair Value	181,971	90,440
Level 2 | Short-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	90,424	90,440
Fair Value	90,424	90,440
Level 2 | Short-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	91,547
Fair Value	91,547
Level 2 | Short-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	1,289,193	789,668
Fair Value	1,289,193	789,668
Level 2 | Short-term investments | Commercial paper | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	524,799	315,769
Fair Value	524,799	315,769
Level 2 | Short-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	739,394	466,898
Fair Value	739,394	466,898
Level 2 | Short-term investments | Certificates of deposits | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	25,000	7,001
Fair Value	25,000	7,001
Level 2 | Long-term restricted funds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	211,076	393,334
Fair Value	211,076	393,334
Level 2 | Long-term restricted funds | U.S. Treasury bills | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value		178,216
Fair Value		178,216
Level 2 | Long-term restricted funds | U.S. Treasury notes | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	211,076	215,118
Fair Value	211,076	215,118
Level 2 | Long-term investments | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	295,222	36,267
Fair Value	295,222	36,267
Level 2 | Long-term investments | Corporate bonds | Recurring basis
Significant financial instruments as categorized by the fair value measurement hierarchy
Carrying Value	295,222	36,267
Fair Value	$ 295,222	$ 36,267

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		86 Months Ended	92 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 item	Jun. 30, 2012	Dec. 31, 2012	Jun. 30, 2013
Segment Information
Number of geographic operating segments			2
Segment Information
Operating costs and expense	$ 65,365	$ 142,155	$ 177,817	$ 179,869		$ 1,117,416
Operating income (loss)	(65,365)	(142,155)	(177,817)	(179,869)		(1,117,416)
Other (income) expense	13,453	(1,432)	29,088	(2,615)		17,324
Net income (loss)	(78,818)	(140,723)	(206,905)	(177,254)	(927,835)	(1,134,740)
Additions to Property and Equipment, net	144,321	(11,232)	174,278	68,311
United States
Segment Information
Operating costs and expense	21,715	135,531	44,821	156,578
Operating income (loss)	(21,715)	(135,531)	(44,821)	(156,578)
Additions to Property and Equipment, net	37,469	(72,635)	92,328	(49,979)
West Africa
Segment Information
Operating costs and expense	43,650	6,624	132,996	23,291
Operating income (loss)	(43,650)	(6,624)	(132,996)	(23,291)
Additions to Property and Equipment, net	$ 106,852	$ 61,403	$ 81,950	$ 118,290

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Condensed Consolidated Balance Sheets
Oil and gas properties, successful efforts method of accounting, accumulated depletion (in dollars)	$ 0	$ 0
Other property and equipment, accumulated depreciation and amortization (in dollars)	$ 3,425	$ 2,533
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	406,920,372	406,596,884
Common stock, shares outstanding	406,920,372	406,596,884

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Property, Plant, and Equipment

6 Months Ended

Jun. 30, 2013

Property, Plant, and Equipment

Property, Plant, and Equipment

7. 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, 2013			December 31, 2012
		($ in thousands)
Oil and Gas Properties:
Unproved oil and gas properties		$	730,077		$	721,853
Less: accumulated valuation allowance			(82,847	)		(78,413	)
			647,230			643,440
Exploratory wells in process			621,664			451,024
Total oil and gas properties, net			1,268,894			1,094,464
Other Property and Equipment:
Computer equipment and software	3		3,765			3,166
Office equipment and furniture	3 - 5		2,132			2,093
Vehicles	3		265			268
Leasehold improvements	3 - 10		2,404			2,298
			8,566			7,825
Less: accumulated depreciation and amortization(1)			(3,425	)		(2,533	)
Total other property and equipment, net			5,141			5,292
Property, plant, and equipment, net		$	1,274,035		$	1,099,756

(1)

During the year ended December 31, 2012, the Company wrote off $2.2 million of old computer equipment and leasehold improvements which were fully depreciated and which had no impact on the consolidated statements of operations and consolidated statements of cash flow.

        The Company recorded $0.4 million and $0.3 million for the three months ended June 30, 2013 and 2012, respectively, $0.9 million and $0.5 million for the six months ended June 30, 2013 and 2012, respectively, and $5.7 million of depreciation and amortization for the period November 10, 2005 (inception) through June 30, 2013, 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. As of June 30, 2013, out of the $337.1 million, $165.7 million has been paid and the remaining $171.4 million was accrued in short-term and long-term contractual obligations. See Note 9—Contractual Obligations. 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% working interest in the Diaba block offshore Gabon. As of June 30, 2013, the Company also has $289.3 million of unproved property acquisition costs, net of valuation allowance for impairment, relating to its U.S. Gulf of Mexico properties. This $289.3 million includes $8.6 million incurred on various working interests in unproved properties located in the U.S. Gulf of Mexico acquired by the Company in 2013. As of June 30, 2013 and December 31, 2012, the Company has a net total of $647.2 million and $643.4 million, respectively, of unproved property acquisition costs on the condensed consolidated balance sheets.

        On February 26, 2013, the Company executed a Purchase and Sale agreement (the "PSA") to sell its ownership interests on an unproved oil and gas property on Mississippi Canyon Block 209 for a total consideration of $5.6 million. The Company received $1.5 million at closing and an additional $1.5 million in June 2013 when the buyer commenced operations on the property. Pursuant to the terms and conditions of the PSA, the Company will receive the remaining $2.6 million contingent upon the purchaser's commencement of production on this property in the future. For the six months ended June 30, 2013, the Company recognized a gain of $3.0 million on the sale of assets as a result of this transaction.

        Acquisition costs of unproved 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, 20, and 21 offshore Angola and in the Diaba block offshore Gabon. Oil and gas leases for unproved properties in the U.S. Gulf of Mexico with carrying value greater than $1.0 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 2013 through 2022. As of June 30, 2013 and December 31, 2012, the balance for unproved properties that were subject to amortization before impairment provision was $69.4 million and $69.1 million, respectively. The Company recorded a lease impairment allowance of $2.4 million and $52.5 million for the three months ended June 30, 2013 and 2012, respectively, $4.8 million and $55.5 million for the six months ended June 30, 2013 and 2012, respectively, and $83.4 million for the period November 10, 2005 (inception) through June 30, 2013.

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

	June 30, 2013			December 31, 2012
	($ in thousands)
Beginning of period	$	451,024		$	178,338
Addition to capitalized exploratory and development costs:
U.S. Gulf of Mexico:
Exploratory well costs		63,376			178,295
Development and pre-development well costs		21,094			—
Capitalized interest		4,053			—
West Africa:
Exploratory well costs		175,052			168,309
Pre-development well costs		4,378			—
Capitalized interest		1,735			—
Reclassifications to wells, facilities, and equipment based on determination of proved reserves		—			—
Amounts charged to expense(1)		(99,048	)		(73,918	)
End of period	$	621,664		$	451,024

(1)

The amount of $99.0 million for the six months ended June 30, 2013 represents $82.0 million impairment charges related to the lowest drilled interval evaluated by the Cameia #2 drill stem test, which failed to flow measurable hydrocarbons and $17.0 million impairment charges on the Diaman #1 exploratory well which needed to be re-spud due to mechanical problems with the wellbore. The Company wrote off $65.8 million impairment charges related to the Cameia #2 drill stem test during the three months ended March 31, 2013 and an additional $16.2 million during the three months ended June 30, 2013. The amount of $73.9 million for the year ended December 31, 2012 represents impairment charges on exploratory wells, including $4.1 million for the Heidelberg #3 sidetrack well, $8.1 million for the Ligurian #1 exploratory well, $49.0 million for the Ligurian #2 exploratory well and $12.7 million for the Shenandoah #2 appraisal well.

	June 30, 2013		December 31, 2012
	($ in thousands)
Cumulative costs:
U.S. Gulf of Mexico
Exploratory well costs	$	263,666	$	208,275
Development and pre-development well costs		29,078		—
Capitalized interest		4,053		—
West Africa:
Exploratory well costs		314,770		242,749
Pre-development well costs		8,362		—
Capitalized interest		1,735		—
	$	621,664	$	451,024
Exploratory Well costs capitalized for a period greater than one year after completion of drilling (included in table above)	$	321,223	$	194,853

        As of June 30, 2013, capitalized exploratory well costs that have been suspended longer than one year are associated with the Shenandoah #1, Heidelberg #1, North Platte #1 and Cameia #1 discoveries. 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 discoveries exhibit sufficient indications of hydrocarbons to justify potential development and is actively pursuing efforts to fully assess them. If additional information becomes available that raises substantial doubt as to the economic or operational viability of these discoveries, the associated costs will be expensed at that time.

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Condensed Consolidated Statements of Changes in Partners' Capital and Stockholders' Equity (USD $) In Thousands	Total	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. 10, 2005
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	967,512				538	966,974
Common stock issued for restricted stock and stock options					44	(44)
Equity based compensation	52,989					52,989
Common stock withheld for taxes on equity based compensation	(361)				(1)	(360)
Exercise of stock options	338					338
Conversion option relating to 2.625% convertible senior notes, net of allocated costs	381,416					381,416
Net income (loss)	(927,835)						(927,835)
Balance at Dec. 31, 2012	2,689,218				4,066	3,612,987	(927,835)
Common stock issued for restricted stock and stock options					3	(3)
Equity based compensation	12,245					12,245
Exercise of stock options	95					95
Net income (loss)	(206,905)						(206,905)
Balance at Jun. 30, 2013	$ 2,494,653				$ 4,069	$ 3,625,324	$ (1,134,740)

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 291,348	$ 1,425,815
Joint interest and other receivables	109,023	61,592
Prepaid expenses and other current assets	43,601	23,941
Inventory	64,398	65,286
Short-term restricted funds	181,971	90,440
Short-term investments	1,289,193	789,668
Total current assets	1,979,534	2,456,742
Property, plant, and equipment:
Oil and gas properties, successful efforts method of accounting, net of accumulated depletion of $-0-	1,268,894	1,094,464
Other property and equipment, net of accumulated depreciation and amortization of $3,425 and $2,533, as of June 30, 2013 and December 31, 2012, respectively	5,141	5,292
Total property, plant, and equipment, net	1,274,035	1,099,756
Long-term restricted funds	213,293	395,652
Long-term investments	295,222	36,267
Other assets	37,458	23,042
Total assets	3,799,542	4,011,459
Current liabilities:
Trade and other accounts payable	1,153	67,876
Accrued liabilities	113,966	44,061
Short-term contractual obligations	49,019	49,019
Total current liabilities	164,138	160,956
Long-term debt	1,013,139	991,191
Long-term contractual obligations	124,901	168,238
Other long-term liabilities	2,711	1,856
Total long-term liabilities	1,140,751	1,161,285
Stockholders' Equity:
Common stock, $0.01 par value per share; 2,000,000,000 shares authorized, 406,920,372 and 406,596,884 issued and outstanding as of June 30, 2013 and December 31, 2012, respectively	4,069	4,066
Additional paid-in capital	3,625,324	3,612,987
Accumulated deficit during the development stage	(1,134,740)	(927,835)
Total stockholders' equity	2,494,653	2,689,218
Total liabilities and stockholders' equity	$ 3,799,542	$ 4,011,459

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Contractual Obligations (Tables)

6 Months Ended

Jun. 30, 2013

Contractual Obligations

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

	June 30, 2013		December 31, 2012
	($ in thousands)
Short-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	150	$	150
Social obligation payments for Block 21, offshore Angola		300		300
Social obligation and bonus payments for Block 20, offshore Angola(1)		48,569		48,569
	$	49,019	$	49,019
Long-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	668	$	848
Social obligation payments for Block 21, offshore Angola		1,382		1,684
Social obligation and bonus payments for Block 20, offshore Angola(1)		122,851		165,706
	$	124,901	$	168,238

(1)

The total amount of social obligation payments for Block 20 has been capitalized. See Note 7—Property, Plant, and Equipment.

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Restricted Funds (Tables)

6 Months Ended

Jun. 30, 2013

Restricted Funds

Schedule of restricted funds

	June 30, 2013		December 31, 2012
	($ in thousands)
Short-term:
Ensco 8503 escrow account	$	90,424	$	90,440
Collateral on letters of credit for Angola		91,547		—
	$	181,971	$	90,440
Long-term:
Ensco 8503 escrow account		—		90,440
Collateral on letters of credit for Angola		213,121		304,492
Other vendor restricted deposits		172		720
	$	213,293	$	395,652

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Equity Based Compensation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended		92 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Number of Stock Options
Stock compensation expense recognized	$ 6,000	$ 5,400	$ 12,245	$ 11,988	$ 72,951
Restricted Stock
Number of shares relating to award
Granted (in shares)			516,290
Restricted Stock | Non-employee directors
Number of shares relating to award
Granted (in shares)			33,329
Retainer awards | Non-employee directors | Common Stock
Number of shares relating to award
Granted (in shares)			7,223
Stock options
Number of Stock Options
Granted (in shares)			959,023

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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	3 Months Ended		6 Months Ended	12 Months Ended				6 Months Ended	12 Months Ended	6 Months Ended			12 Months Ended	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Diaman #1 Exploratory Well	Jun. 30, 2013 Cameia #2 Drill Stem Test	Mar. 31, 2013 Cameia #2 Drill Stem Test	Jun. 30, 2013 Cameia #2 Drill Stem Test	Dec. 31, 2012 Ligurian #1 Exploratory Well	Dec. 31, 2012 Shenandoah #2 Appraisal Well	Dec. 31, 2012 Ligurian #2 Exploratory Well	Dec. 31, 2012 Heidelberg #3 Appraisal Well Side Track	Jun. 30, 2013 U.S. Gulf of Mexico Exploratory well costs	Dec. 31, 2012 U.S. Gulf of Mexico Exploratory well costs	Jun. 30, 2013 U.S. Gulf of Mexico Development and pre-development well costs	Jun. 30, 2013 U.S. Gulf of Mexico Capitalized interest	Jun. 30, 2013 West Africa Exploratory well costs	Dec. 31, 2012 West Africa Exploratory well costs	Jun. 30, 2013 West Africa Capitalized interest	Jun. 30, 2013 West Africa Pre-development well costs
Net changes in capitalized exploratory well costs (excluding any related leasehold costs)
Beginning of period	$ 451,024	$ 178,338									$ 208,275				$ 242,749
Addition to capitalized exploratory and development costs											63,376	178,295	21,094	4,053	175,052	168,309	1,735	4,378
Amounts charged to expense	(99,048)	(73,918)	17,000	16,200	65,800	82,000	8,100	12,700	49,000	4,100
End of period	621,664	451,024									263,666	208,275	29,078	4,053	314,770	242,749	1,735	8,362
Cumulative costs of capitalized exploratory well costs (excluding any related leasehold costs)
Cumulative costs	621,664	451,024									263,666	208,275	29,078	4,053	314,770	242,749	1,735	8,362
Exploratory Well costs capitalized for a period greater than one year after completion of drilling	$ 321,223	$ 194,853

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Joint Interest and Other Receivables (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Joint Interest Receivables
Settlement period for bills under operating agreements	30 days
Accrued interest on investment securities	$ 7,203,000	$ 3,647,000
Vendors' receivables	1,076,000	1,526,000
Other	67,000	1,795,000
Total	109,023,000	61,592,000
Subsequent Event
Joint Interest Receivables
Joint interest and other receivables which became past due	15,900,000
Partners in the U.S. Gulf of Mexico
Joint Interest Receivables
Receivable attributable to joint interest partners	54,795,000	52,439,000
Partners in West Africa
Joint Interest Receivables
Receivable attributable to joint interest partners	$ 45,882,000	$ 2,185,000

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Investments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Investments
Fair market value	$ 2,145,936	$ 1,564,441
Held-to-maturities, Carrying value
Within 1 year	1,850,714	1,528,174
After 1 year	295,222	36,267
Total	2,145,936	1,564,441
Held-to-maturity securities, Estimated fair value
Within 1 year	1,850,714	1,528,174
After 1 year	295,222	36,267
Total	2,145,936	1,564,441
Cash and cash equivalents
Investments
Fair market value	168,474	254,732
Short-term restricted funds
Investments
Fair market value	181,971	90,440
Short-term investments
Investments
Fair market value	1,289,193	789,668
Long-term restricted funds
Investments
Fair market value	211,076	393,334
Long-term investments
Investments
Fair market value	295,222	36,267
U.S. Treasury securities
Investments
Fair market value	393,047	483,775
Corporate securities
Investments
Fair market value	1,034,615	510,691
Commercial paper
Investments
Fair market value	693,274	562,975
Certificates of deposit
Investments
Fair market value	$ 25,000	$ 7,000

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Fair Value Measurements

6 Months Ended

Jun. 30, 2013

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, 2013
	Carrying Value		Fair Value(1)		Carrying Value		Fair Value(1)
	($ in thousands)
Cash and cash equivalents:
Cash	$	24,585	$	24,585	$	—	$	—	$	24,585
Money market funds		98,289		98,289		—		—		98,289
Commercial paper		—		—		168,474		168,474		168,474
Subtotal		122,874		122,874		168,474		168,474		291,348
Short-term restricted funds:
U.S. Treasury bills		—		—		90,424		90,424		90,424
U.S. Treasury notes		—		—		91,547		91,547		91,547
Subtotal		—		—		181,971		181,971		181,971
Short-term investments:
Corporate bonds		—		—		739,394		739,394		739,394
Commercial paper		—		—		524,799		524,799		524,799
Certificates of deposits		—		—		25,000		25,000		25,000
Subtotal		—		—		1,289,193		1,289,193		1,289,193
Long-term restricted funds:
Money market funds		2,217		2,217		—		—		2,217
U.S. Treasury notes		—		—		211,076		211,076		211,076
Subtotal		2,217		2,217		211,076		211,076		213,293
Long-term investments:
Corporate bonds		—		—		295,222		295,222		295,222
Subtotal		—		—		295,222		295,222		295,222
Total	$	125,091	$	125,091	$	2,145,936	$	2,145,936	$	2,271,027

	Level 1				Level 2
									Balance as of December 31, 2012
	Carrying Value		Fair Value(1)		Carrying Value		Fair Value(1)
	($ in thousands)
Cash and cash equivalents:
Cash	$	65,935	$	65,935	$	—	$	—	$	65,935
Money market funds		1,105,148		1,105,148		—		—		1,105,148
Commercial paper		—		—		247,206		247,206		247,206
Corporate bonds		—		—		7,526		7,526		7,526
Subtotal		1,171,083		1,171,083		254,732		254,732		1,425,815
Short-term restricted funds:
U.S. Treasury bills		—		—		90,440		90,440		90,440
Subtotal		—		—		90,440		90,440		90,440
Short-term investments:
Corporate bonds		—		—		466,898		466,898		466,898
Commercial paper		—		—		315,769		315,769		315,769
Certificates of deposits		—		—		7,001		7,001		7,001
Subtotal		—		—		789,668		789,668		789,668
Long-term restricted funds:
Money market funds		2,318		2,318		—		—		2,318
U.S. Treasury bills		—		—		178,216		178,216		178,216
U.S. Treasury notes		—		—		215,118		215,118		215,118
Subtotal		2,318		2,318		393,334		393,334		395,652
Long-term investments:
Corporate bonds		—		—		36,267		36,267		36,267
Subtotal		—		—		36,267		36,267		36,267
Total	$	1,173,401	$	1,173,401	$	1,564,441	$	1,564,441	$	2,737,842

(1)

As of June 30, 2013 and December 31, 2012, the Company did not record any OTTI on these assets.

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Seismic and Exploration Expenses (Tables)

6 Months Ended

Jun. 30, 2013

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, 2013
	2013			2012		2013		2012
	($ in Thousands)
Seismic costs	$	2,978		$	10,128	$	21,087	$	25,341	$	363,135
Seismic cost recovery(1)		—			—		—		—		(25,126	)
Leasehold delay rentals		1,719			1,469		3,106		2,878		36,008
Force Majeure expense(2)		—			—		—		—		13,549
Drilling rig expense		(140	)		409		2,682		1,136		29,482
	$	4,557		$	12,006	$	26,875	$	29,355	$	417,048

(1)

These amounts represent reimbursement from partners of past seismic costs incurred by the Company.

(2)

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

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Contractual Obligations (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Contractual obligations
Short-term Contractual Obligations: Social obligation payments	$ 49,019	$ 49,019
Long-term Contractual Obligations: Social obligation payments	124,901	168,238
Block 9, offshore Angola
Contractual obligations
Short-term Contractual Obligations: Social obligation payments	150	150
Long-term Contractual Obligations: Social obligation payments	668	848
Block 21, offshore Angola
Contractual obligations
Short-term Contractual Obligations: Social obligation payments	300	300
Long-term Contractual Obligations: Social obligation payments	1,382	1,684
Block 20, offshore Angola
Contractual obligations
Short-term Contractual Obligations: Social obligation payments	48,569	48,569
Long-term Contractual Obligations: Social obligation payments	$ 122,851	$ 165,706

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Contractual Obligations

6 Months Ended

Jun. 30, 2013

Contractual Obligations

Contractual Obligations

9. Contractual Obligations

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

	June 30, 2013		December 31, 2012
	($ in thousands)
Short-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	150	$	150
Social obligation payments for Block 21, offshore Angola		300		300
Social obligation and bonus payments for Block 20, offshore Angola(1)		48,569		48,569
	$	49,019	$	49,019
Long-term Contractual Obligations:
Social obligation payments for Block 9, offshore Angola	$	668	$	848
Social obligation payments for Block 21, offshore Angola		1,382		1,684
Social obligation and bonus payments for Block 20, offshore Angola(1)		122,851		165,706
	$	124,901	$	168,238

(1)

The total amount of social obligation payments for Block 20 has been capitalized. See Note 7—Property, Plant, and Equipment.

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Investments

6 Months Ended

Jun. 30, 2013

Investments

Investments

5. Investments

        The Company's investments in held-to-maturity securities which are recorded at amortized cost and approximate fair market value as of June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013		December 31, 2012
	($ in thousands)
U.S. Treasury securities	$	393,047	$	483,775
Corporate securities		1,034,615		510,691
Commercial paper		693,274		562,975
Certificates of deposit		25,000		7,000
Total	$	2,145,936	$	1,564,441

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

	June 30, 2013		December 31, 2012
	($ in thousands)
Cash and cash equivalents	$	168,474	$	254,732
Short-term restricted funds		181,971		90,440
Short-term investments		1,289,193		789,668
Long-term restricted funds		211,076		393,334
Long-term investments		295,222		36,267
	$	2,145,936	$	1,564,441

        The contractual maturities of these held-to-maturity securities as of June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013				December 31, 2012
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	($ in thousands)
Within 1 year	$	1,850,714	$	1,850,714	$	1,528,174	$	1,528,174
After 1 year		295,222		295,222		36,267		36,267
	$	2,145,936	$	2,145,936	$	1,564,441	$	1,564,441

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended		92 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Cash flows provided from operating activities
Net income (loss)	$ (206,905)	$ (177,254)	$ (1,134,740)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	906	513	5,657
Dry hole expense and impairment of unproved properties	103,877	116,679	342,609
Gain on sale of assets	(2,993)		(2,993)
Equity based compensation	12,245	11,988	72,951
Amortization of premium (accretion of discount) on investments	11,232	8,956	45,772
Amortization of debt discount	22,905		24,654
Other			558
Changes in operating assets and liabilities:
Joint interest and other receivables	(47,432)	15,633	(111,306)
Inventory	888	(2,774)	(64,398)
Prepaid expense and other current assets	(19,660)	3,695	(43,601)
Deferred charges	(15,375)		(15,375)
Trade and other accounts payable	(66,724)	(46,673)	1,153
Accrued liabilities and other	(26,088)	(5,927)	21,702
Net cash provided by (used in) operating activities	(233,124)	(75,164)	(857,357)
Cash flows from investing activities
Capital expenditures for oil and gas properties	(51,477)	(122,851)	(898,424)
Capital expenditures for other property and equipment	(763)	(2,284)	(10,829)
Exploratory wells drilling in process	(172,132)	(128,012)	(783,107)
Proceeds from sale of oil and gas properties	3,006		342,007
Change in restricted funds	90,612	3,228	(221,470)
Proceeds from maturity of investment securities	706,575	536,595	3,304,281
Purchase of investment securities	(1,476,069)	(751,474)	(5,105,979)
Net cash provided by (used in) investing activities	(900,248)	(464,798)	(3,373,521)
Cash flows from financing activities
Capital contributions prior to IPO-Class A limited partners			1,256,180
Proceeds from initial public offering, net of costs			950,702
Proceeds from public offerings, net of costs		489,488	967,513
Proceeds from debt offering, net of costs	(1,190)		1,347,760
Proceeds from stock option exercises	95	168	433
Payments for common stock withheld for taxes on equity based compensation		(170)	(362)
Net cash provided by (used in) financing activities	(1,095)	489,486	4,522,226
Net increase (decrease) in cash and cash equivalents	(1,134,467)	(50,476)	291,348
Cash and cash equivalents, beginning of period	1,425,815	292,546
Cash and cash equivalents, end of period	291,348	242,070	291,348
Cash paid for interest	16,502		16,502
Non-Cash Disclosures
Changes in accrued capital expenditures	(54,702)	269,172	97,557
Transfer of investment securities to and from restricted funds	$ 26	$ 179,310	$ 178,804

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Cash and Cash Equivalents (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Cash and Cash Equivalents
Cash at banks	$ 24,585	$ 65,935
Money market funds	98,289	1,105,148
Held-to-maturity securities	168,474	254,732
Total	$ 291,348	$ 1,425,815	$ 242,070	$ 292,546
Maturity period of held-to-maturity securities	3 months	3 months

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Segment Information

6 Months Ended

Jun. 30, 2013

Segment Information

Segment Information

12. Segment Information

        The Company currently has two geographic operating segments for its exploratory operations. The operating segments are focused in the deepwater U.S. Gulf of Mexico and offshore West Africa. The following tables provide the geographic operating segment information for the three and six months ended June 30, 2013 and 2012:

	United States			West Africa			Total
	($ in thousands)
Three months ended June 30, 2013
Operating costs and expense	$	21,715		$	43,650		$	65,365
Operating income (loss)		(21,715	)		(43,650	)		(65,365	)
Other (income) expense								13,453
Net income (loss)							$	(78,818	)
Additions to Property and Equipment, net(1)	$	37,469		$	106,852		$	144,321
Three months ended June 30, 2012
Operating costs and expense	$	135,531		$	6,624		$	142,155
Operating income (loss)		(135,531	)		(6,624	)		(142,155	)
Other (income) expense								(1,432	)
Net income (loss)							$	(140,723	)
Additions to Property and Equipment, net(1)	$	(72,635	)	$	61,403		$	(11,232	)

	United States			West Africa			Total
	($ in thousands)
Six months ended June 30, 2013
Operating costs and expense	$	44,821		$	132,996		$	177,817
Operating income (loss)		(44,821	)		(132,996	)		(177,817	)
Other (income) expense								29,088
Net income (loss)							$	(206,905	)
Additions to Property and Equipment, net(1)	$	92,328		$	81,950		$	174,278
Six months ended June 30, 2012
Operating costs and expense	$	156,578		$	23,291		$	179,869
Operating income (loss)		(156,578	)		(23,291	)		(179,869	)
Other (income) expense								(2,615	)
Net income (loss)							$	(177,254	)
Additions to Property and Equipment, net(1)	$	(49,979	)	$	118,290		$	68,311

(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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Long-term Debt

6 Months Ended

Jun. 30, 2013

Long-term Debt

Long-term Debt

8. Long-term Debt

        On December 17, 2012, the Company issued $1.38 billion aggregate principal amount of its 2.625% convertible senior notes due 2019 (the "Notes"). The Notes are the Company's senior unsecured obligations and interest is payable semi-annually in arrears on June 1 and December 1 of each year. For the three and six months ended June 30, 2013, the Company paid $16.5 million in interest on the notes. The Notes will mature on December 1, 2019, unless earlier repurchased or converted in accordance with the terms of the Notes. The Notes may be converted at the option of the holder at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, in multiples of $1,000 principal amount. The Notes are convertible at an initial conversion rate of 28.023 shares of common stock per $1,000 principal amount, representing an initial conversion price of approximately $35.68 per share for a total of approximately 38.7 million underlying shares. The conversion rate is subject to adjustment upon the occurrence of certain events, as defined in the indenture governing the Notes, but will not be adjusted for any accrued and unpaid interest except in limited circumstances. Upon conversion, the Company's conversion obligation may be satisfied, at the Company's option, in cash, shares of common stock or a combination of cash and shares of common stock.

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

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

        In accordance with accounting guidance relating to, "Debt with Conversion and Other Options", the Company separately accounts for the liability and equity conversion components of the Notes due to the Company's option to settle the conversion obligation in cash. The fair value of the debt excluding the conversion feature at the date of issuance was estimated to be approximately $989.5 million and was calculated based on the fair value of similar non-convertible debt instruments. The resulting value of the conversion option of $390.5 million was recognized as a debt discount and recorded as additional paid-in capital on the Company's consolidated balance sheets. Total debt issue cost on the Notes was $32.2 million of which $23.1 million was allocated to the liability component of the Notes and $9.1 million to the equity component of the Notes. The debt discount and the liability component of the debt issue costs are amortized over the term of the Notes. The effective interest rate used to amortize the debt discount and the liability component of the debt issue costs was approximately 8.40% based on the Company's estimated non-convertible borrowing rate as of the date the Notes were issued. Since the Company incurred losses for all periods, the impact of the conversion option would be anti-dilutive to the earnings per share and therefore was not included in the calculation.

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

	June 30, 2013							December 31, 2012
	Principal Amount		Unamortized discount(1)			Carrying Amount		Principal Amount		Unamortized discount			Carrying Amount
	($ in thousands)
Carrying amount of liability component
2.625% convertible senior notes	$	1,380,000	$	(366,861	)	$	1,013,139	$	1,380,000	$	(388,809	)	$	991,191

(1)

Unamortized discount will be amortized over the remaining life of the Notes which is 6.5 years.

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

	June 30, 2013			December 31, 2012
	($ in thousands)
Debt discount relating to value of conversion option	$	390,540		$	390,540
Debt issue costs		(9,124	)		(9,124	)
Total	$	381,416		$	381,416

        Fair Value    The fair value of the Notes excluding the conversion feature was $983.5 million and $989.5 million as of June 30, 2013 and December 31, 2012, respectively, and was calculated based on the fair value of similar non-convertible debt instruments (level 2) since an observable quoted price of the Notes or a similar asset or liability is not readily available.

        Interest expense was as follows:

									For the Period November 10, 2005 (Inception) through June 30, 2013
	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	($ in thousands)
Interest expense associated with accrued interest(1)	$	4,968	$	—	$	12,319	$	—	$	13,728
Interest expense associated with accretion of debt discount		11,083		—		21,948		—		23,743
Interest expense associated with amortization of debt issue costs		517		—		958		—		1,034
Total	$	16,568	$	—	$	35,225	$	—	$	38,505

(1)

The $5.0 million and $12.3 million for the three and six months ended June 30, 2013, respectively, represent interest expense net of capitalized amount of $1.7 million and $4.1 million, respectively.

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Cash and Cash Equivalents (Tables)

6 Months Ended

Jun. 30, 2013

Cash and Cash Equivalents

Cash and Cash Equivalents

	June 30, 2013		December 31, 2012
	($ in thousands)
Cash at banks	$	24,585	$	65,935
Money market funds		98,289		1,105,148
Held-to-maturity securities(1)		168,474		254,732
	$	291,348	$	1,425,815

(1)

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

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Contingencies

6 Months Ended

Jun. 30, 2013

Contingencies

Contingencies

13. 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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Document and Entity Information	6 Months Ended
	Jun. 30, 2013
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, 2013
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	411,236,517
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements include the financial statements of Cobalt International Energy, Inc. and all of its wholly-owned subsidiaries. All significant intercompany transactions and amounts have been eliminated for all years presented. Because the Company is a development stage enterprise, it has presented its financial statements in accordance with accounting guidance related to "Development Stage Entities."

        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the condensed consolidated financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be presented for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

Reclassifications

Reclassifications

        Certain reclassifications have been made to prior periods' financial statements to conform to the current presentation in the unaudited condensed consolidated statements of cash flows.

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

Investments

Investments

        The Company's policy on accounting for its investments, which consist entirely of debt securities, is based on the accounting guidance relating to "Accounting for Certain Investments in Debt and Equity Securities." The Company considers all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year are classified as long-term investments. The debt securities are carried at amortized 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, 2013 and December 31, 2012. 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, 2013 and December 31, 2012, the Company has no OTTI in its debt securities.

Capitalized Interest

Capitalized Interest

        For exploration and development projects that have not commenced production, interest is capitalized as part of the historical cost of developing and constructing assets. Capitalized interest is determined by multiplying the Company's weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation or impairment. See Note 7—Property, Plant, and Equipment and Note 8—Long-term Debt.

Earnings (Loss) Per Share

Earnings (Loss) Per Share

        Basic income (loss) per share was calculated by dividing net income or loss applicable to common shares by the weighted average number of common shares outstanding during the periods presented. The calculation of diluted income (loss) per share should include the potential dilutive impact of non-vested restricted shares, non-vested restricted stock units, outstanding stock options and 2.625% convertible senior notes due 2019, during the period, unless their effect is anti-dilutive. For the three months and six months ended June 30, 2013, 4,316,143 shares of non-vested restricted stock, non-vested restricted stock units, outstanding stock options and 2.625% convertible senior notes due 2019, were excluded from the diluted income (loss) per share because they are 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 were excluded from the diluted income (loss) per share because they are anti-dilutive.