Acquisition of FPSO and Notes Receivable

12 Months Ended

Dec. 31, 2011

Acquisition of FPSO and Notes Receivable

Acquisition of FPSO and Notes Receivable

3. Acquisition of FPSO and Notes Receivable

        On December 29, 2011, Tullow as Unit Operator for and on behalf of the Jubilee Unit partners under the Unitization and Unit Operating Agreement ("Jubilee UUOA"), acquired the FPSO we are using to produce hydrocarbons from the Jubilee Field from MODEC, Inc. ("MODEC") for $754.5 million, or $202.6 million net to Kosmos. At the time of the acquisition of the FPSO, the note receivable under the Advance Payments Agreement was $102.8 million. To fund the purchase, we paid $99.8 million in cash and applied the note receivable due under the Advance Payments Agreement to the purchase. The acquisition was recorded as an increase to oil and gas property. The Jubilee Unit operator will become the operator of the FPSO. Prior to the acquisition of the FPSO, the Jubilee Unit leased the FPSO from MODEC. The lease costs were recorded as oil and gas production costs.

        Effective May 7, 2010, Tullow, as Unit Operator for and on behalf of the Jubilee Unit, entered into an Advance Payments Agreement with MODEC related to partial funding of the construction of the FPSO. The maturity date of the Advance Payments Agreement was extended from September 15, 2011 through the acquisition date of the FPSO. As of December 31, 2011 and 2010, the remaining balance under the Advance Payments Agreement was zero and $113.9 million, respectively. We recognized interest income of $5.7 million, $1.0 million and $0.2 million for the years ended December 31, 2011, 2010 and 2009, respectively.