Energy Stock on the Move – Cobalt International Energy, Inc (NYSE:CIE)

On Tuesday, Shares of Cobalt International Energy, Inc (NYSE:CIE) lost -12.96% to $0.470. Trading volume recorded for this company was about 7.78M shares as contrast to its average volume of 8.67M shares. The stock’s intraday range was $0.39 to $0.49. The company has the total of 410.32M outstanding shares, while its market capitalization is about $204.88M.

Cobalt International Energy, Inc. (CIE) today declared a net loss of $1,872.90M, or $4.47 per basic and diluted share for the fourth quarter of 2016, contrast to a net loss of $486.80M, or $1.19 per basic and diluted share, for the fourth quarter of 2015. Cobalt stated a net loss of $2,343.30M, or $5.69 per basic and diluted share, for the year ending December 31, 2016 contrast to a net loss of $694.40M, or $1.70 per basic and diluted share, for the same period in 2015. Included in the current quarter and full year results is an impairment charge of $1,691.80M, or $4.04 and $4.11, respectively, per basic and diluted share, related to company’s Angolan assets.

As of December 31, 2016, cash, cash equivalents, investments and restricted cash were about $956.50M. Total cash spend for 2016 was about $840.0M, relative to Cobalt’s cash spend guidance (adjusted to consolidate both continued and suspended operations) of about $855.0M to $915.0M in 2016.

The company expects capital expenditures to be about $275.0M in 2017, which excludes general and administrative expenses and interest expense. Capital expenditures are mainly attributable to operated activities at North Platte and non-operated activities at Shenandoah, Anchor and Heidelberg. Total 2017 cash outlays are presently predictable to be between $550.0M and $650.0M, net revenue is predictable to be about $50.0M, leaving Cobalt with an predictable cash balance at year end 2017 of about $350.0M to $450.0M apart from any Sonangol receipts or payments.

Operational Update:

In the deepwater Gulf of Mexico, as declared earlier this year, Cobalt’s North Platte #4 appraisal well encountered about 650 feet of net oil pay, with preliminary results indicating high quality Inboard Lower Tertiary Wilcox reservoirs on the eastern flank of the field. Appraisal operations continue at North Platte, where Cobalt has recently accomplished the drilling of the North Platte #4 sidetrack well to further analyze the extent of the eastern flank. The well encountered oil and has confirmed that reservoir quality sands are present across the entirety of the eastern flank. Cobalt now plans to drill a second sidetrack to core and gather fluid samples, and anticipates completing these operations in the second quarter. Reservoir characterization, fluid analysis and modeling studies are ongoing to better understand reservoir continuity, productivity and the potential resource range in order to optimize the development of the North Platte field. The current estimate of recoverable hydrocarbons at North Platte is greater than 500 Million BOE with the potential to grow larger once water contacts have been established across the entirety of the field. Cobalt, as operator, owns a 60% working interest in North Platte, and TOTAL E&P USA, Inc. owns the remaining 40% working interest.

Appraisal operations also continued at Anchor, where the Anchor #4 appraisal well was drilled to total depth and encountered about 800 feet of net oil pay in multiple Inboard Lower Tertiary reservoirs. Cobalt owns a 20% non-operated working interest in the Anchor discovery unit. In addition, Cobalt owns a 100% working interest in two leases on the south flank of Anchor, but outside of the Anchor unit. The Anchor reservoir extends onto these leases and reservoir simulation suggests that additional wells on these two leases are required to maximize recovery from the field. Cobalt has engaged with the operator and the Bureau of Safety and Environmental Enforcement regarding options to bring these two leases into the Anchor unit in order to optimize the development of the field.

At Shenandoah, drilling operations started in late 2016 on the Shenandoah #6 appraisal well on the eastern flank of the field. The well was drilled to total depth and encountered wet Wilcox sands. The well is presently being sidetracked to locate the oil-water contacts. Cobalt owns a 20% non-operated working interest in Shenandoah.

With regard to Angola, of the $1,691.80M impairment recorded by Cobalt, $1,629.80M was impaired in accordance with Accounting Standards Codification 932, Extractive Activities – Oil and Gas which requires, among other things, that “sufficient progress” be made with respect to oil and natural gas projects in order to avoid the requirement to expense formerly capitalized exploratory or appraisal well costs. Given Sonangol’s failure to date to grant the extensions of certain exploration and development milestones that Cobalt believes Sonangol is required to grant Cobalt under the Purchase and Sale Agreement executed in August 2015 (the “Agreement”), the procedures of ASC 932 require Cobalt to record a full impairment of its Angolan assets at this time. It is important to note that this impairment represents formerly capitalized exploratory and appraisal well and other costs. The impairment is not associated with, nor is it indicative of, what Cobalt believes to be the intrinsic or fair market value of its Angolan assets. Given Sonangol’s failure to date to grant the extensions described above, on March 8, 2017, Cobalt presented a Notice of Dispute to Sonangol under the Agreement. If Sonangol does not timely resolve this matter to Cobalt’s satisfaction, Cobalt intends to move forward with arbitration. While Cobalt will continue to fulfill its obligations as operator of Blocks 20 and 21, Cobalt does not plan to make any material investments in Angola until this matter is resolved to its satisfaction.

Timothy J. Cutt, Cobalt’s Chief Executive Officer said, “The accounting rules are mechanical and required us to impair our Angolan assets at this time. This is an accounting result and not a reflection of what we believe these assets are worth to Cobalt. While it is clear that our sale process has been negatively influenced by the uncertainty surrounding the extensions, it is also clear that Sonangol’s preference is for Cobalt to present potential buyers to Sonangol to finalize and grant the extensions. While we continue to work the sales process, we must also continue to work to protect our rights and thus have formally notified Sonangol of our dispute. We hope to resolve things amicably with Sonangol but will be ready for arbitration as well.”

Technical Analysis:

The stock price is going up to its 52-week low with 4.78% and lower from its 52-week high with -87.35%. The stock has shown its weekly performance of -3.57% and monthly performance stands at -34.15%. The stock price is moving down from its 200 days moving average with -60.73% and downward from 50 days moving average with -47.97%.

Analyst recommendation for this stock stands at 2.30.

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