Cobalt International Energy, Inc. Announces First Quarter 2017 Results and Provides Operational Update
Cobalt International Energy, Inc. (“Cobalt”) (NYSE:CIE) today announced
a net loss of $306.3 million, or $0.69 per basic and diluted share for
the first quarter of 2017, compared to a net loss of $46.6 million, or
$0.11 per basic and diluted share, for the first quarter of 2016. The
increase in net loss is mainly associated with the write off of
Shenandoah well costs and increased interest expense related to Cobalt’s
December 2016 and January 2017 debt exchanges.
As of March 31, 2017, cash, cash equivalents, short term investments and
restricted cash were approximately $770.4 million. This includes $250
million of Angolan sale proceeds received pursuant to the purchase and
sale agreement with Sonangol, but excludes $159.2 million in receivables
owed to us by Sonangol.
We expect capital expenditures to be approximately $250 million in 2017,
which excludes general and administrative expenses and interest expense.
Of this amount, approximately $119 million has been spent as of March
31, 2017; however, given that drilling activities have been completed at
Shenandoah and Anchor, and are nearing completion at North Platte, cash
outlays are expected to significantly decrease for the remainder of
2017. Total 2017 cash outlays are currently expected to be between $550
million and $600 million, of which approximately $196 million has been
spent as of March 31, 2017.
Operational Update
In the deepwater Gulf of Mexico, drilling operations continued at
Cobalt’s North Platte field. After successfully drilling the North
Platte #4 appraisal well on the eastern flank of the field and
encountering approximately 650 feet of net oil pay, in March 2017,
Cobalt drilled the North Platte #4 first sidetrack wellbore to further
analyze the extent of the eastern flank of the field. The sidetrack
wellbore targeted a down dip location 1.2 miles away from the appraisal
well and encountered thick, continuous Wilcox reservoir sands. The
sidetrack well found both oil-filled and wet sands and was helpful in
building an understanding of the oil water contact on the eastern flank.
A second sidetrack was then drilled approximately one–half mile away and
updip from the first sidetrack wellbore and encountered high quality
Wilcox reservoirs that were oil-filled to base. Cobalt is currently
conducting a bypass for core operation.
Regarding the Anchor Unit, Cobalt previously announced the successful
drilling of the Anchor #4 appraisal well in the first quarter, which
encountered approximately 800 feet of net oil pay and confirmed high
quality reservoir sands high on structure. In addition, Cobalt owns a
100% working interest in two leases that are immediately south of the
current Anchor Unit, with terms currently set to expire in February
2018. Cobalt has reached a verbal understanding in principle with
Chevron and the other owners of the Anchor Unit to petition the
government to expand the Anchor Unit to include these leases, which
Cobalt believes will lead to an optimized development plan and maximize
oil recovery from the Anchor Unit. Subject to definitive documentation
and regulatory approval, Cobalt will have a 20% working interest in a
revised Anchor Unit and thereby preserve the value of the two leases.
As part of its first quarter financials, the operator of Shenandoah
expensed all of its capitalized costs associated with Shenandoah and
disclosed that it had “currently suspended further appraisal
activities.” As a result of this disclosure, Cobalt has determined that
Shenandoah is not making sufficient progress and that accounting
requirements therefore require Cobalt to expense all of its capitalized
costs associated with Shenandoah at this time. This has resulted in the
company expensing $232.8 million of suspended exploratory well costs
related to Shenandoah. The impairment is not associated with, nor is it
indicative of, what Cobalt believes to be the intrinsic or fair market
value of the Shenandoah discovery. Cobalt is currently in the
preliminary stages of working with its partners to understand the
operator’s intentions with respect to Shenandoah and is evaluating
multiple ways to progress efforts at Shenandoah.
With regard to Angola, Cobalt previously announced that, in March 2017,
Cobalt submitted a Notice of Dispute to Sonangol E.P. pursuant to the
Purchase and Sale Agreement executed in August 2015 (“Agreement”) for
the sale by Cobalt to Sonangol E.P. of the entire issued and outstanding
share capital of Cobalt’s indirect wholly–owned subsidiaries, CIE Angola
Block 20 Ltd. and CIE Angola Block 21 Ltd., which respectively hold
Cobalt’s 40% working interest in each of Block 20 and Block 21 offshore
Angola. Subsequently, Cobalt filed a Request for Arbitration (“RFA”)
with the International Chamber of Commerce (“ICC”) against Sonangol E.P.
for breach of the Agreement. Through this arbitration proceeding, Cobalt
is requesting an award against Sonangol E.P. in excess of $2 billion
dollars, plus applicable interest and costs. Cobalt also filed a
separate RFA with the ICC against Sonangol P&P seeking recovery of over
$174 million, plus applicable interest and costs, representing the joint
interest receivable owed to Cobalt for operations on Block 21 offshore
Angola. Unless resolved to Cobalt’s satisfaction, Cobalt intends to
vigorously prosecute these claims in arbitration and seek all available
remedies in law and equity.
Conference Call
A conference call for investors will be held today at 9:00 a.m. Central
Time (10:00 a.m. Eastern Time) to discuss Cobalt’s first quarter 2017
results. Hosting the call will be Timothy J. Cutt, Chief Executive
Officer, and David D. Powell, Chief Financial Officer.
The call can be accessed live over the telephone by dialing (877)
407-9039, or for international callers (201) 689-8470. A replay will be
available shortly after the call and can be accessed by dialing (844)
512-2921 or for international callers (412) 317-6671. The passcode for
the replay is 13661511. The replay will be available until May 22, 2017.
Interested parties may also listen to a simultaneous webcast of the
conference call by accessing the Newsroom-Events & Speeches section of
Cobalt’s website at www.cobaltintl.com.
A replay of the webcast will also be available for approximately 30 days
following the call.
About Cobalt
Cobalt International Energy, Inc. (NYSE: CIE) is an independent
exploration and production company active in the deepwater U.S. Gulf of
Mexico and offshore West Africa. Cobalt was formed in 2005 and is
headquartered in Houston, Texas.
Forward-Looking Statements
This press release includes “forward-looking statements” within the
meaning of the federal securities laws, including the safe harbor
provisions of the Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 — that is, statements related
to future, not past, events. Forward-looking statements are based on
current expectations and include any statement that does not directly
relate to a current or historical fact. In this context, forward-looking
statements often address Cobalt’s expected future business and financial
performance, and often contain words such as “anticipate,” “believe,”
“may,” “will,” “aim,” “estimate,” “continue,” “intend,” “could,”
“expect,” “plan,” and other similar words. These forward-looking
statements involve certain risks and uncertainties that ultimately may
not prove to be accurate. Actual results and future events could differ
materially from those anticipated in such statements. For further
discussion of risks and uncertainties, individuals should refer to
Cobalt’s SEC filings. Cobalt disclaims any obligation or undertaking,
and does not intend, to update these forward-looking statements to
reflect events or circumstances occurring after this press release,
other than as required by law. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the
date of this press release. All forward-looking statements are qualified
in their entirety by this cautionary statement.
Consolidated Statement of Operations Information:
|
|
For Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
2016
|
|
|
|
(In thousands except per share data)
|
|
Oil, natural gas and natural gas liquids revenue
|
|
$
|
9,867
|
|
|
$
|
1,636
|
|
|
Operating costs and expenses
|
|
|
|
|
|
Seismic and exploration
|
|
|
7,019
|
|
|
|
6,063
|
|
|
Lease operating expense
|
|
|
2,698
|
|
|
|
956
|
|
|
Dry hole costs and impairments
|
|
|
237,105
|
|
|
|
(425
|
)
|
|
General and administrative
|
|
|
18,926
|
|
|
|
28,456
|
|
|
Accretion expense
|
|
|
290
|
|
|
|
102
|
|
|
Depreciation and amortization
|
|
|
8,879
|
|
|
|
3,170
|
|
|
Total operating costs and expenses
|
|
|
274,917
|
|
|
|
38,322
|
|
|
Operating loss
|
|
|
(265,050
|
)
|
|
|
(36,686
|
)
|
|
Other (expense) income, net
|
|
|
|
|
|
Other income
|
|
|
1,845
|
|
|
|
4,375
|
|
|
Interest income
|
|
|
1,434
|
|
|
|
1,338
|
|
|
Interest expense
|
|
|
(44,484
|
)
|
|
|
(15,642
|
)
|
|
Total other expense, net
|
|
|
(41,205
|
)
|
|
|
(9,929
|
)
|
|
Net loss
|
|
$
|
(306,255
|
)
|
|
$
|
(46,615
|
)
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.69
|
)
|
|
$
|
(0.11
|
)
|
|
Weighted average common shares outstanding
|
|
|
441,792
|
|
|
|
409,260
|
|
|
Consolidated Balance Sheet Information:
|
|
March 31,
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
|
($ in thousands)
|
|
Cash and cash equivalents
|
|
$
|
118,493
|
|
|
$
|
613,534
|
|
|
Restricted cash
|
|
|
11,274
|
|
|
|
2,517
|
|
|
Short-term investments
|
|
|
640,642
|
|
|
|
340,418
|
|
|
Total current assets
|
|
|
975,920
|
|
|
|
1,147,191
|
|
|
Oil and natural gas properties
|
|
|
952,150
|
|
|
|
1,078,885
|
|
|
Total assets
|
|
|
1,932,110
|
|
|
|
2,230,478
|
|
|
Total current liabilities
|
|
|
520,133
|
|
|
|
533,954
|
|
|
Total long-term liabilities
|
|
|
2,555,902
|
|
|
|
2,537,858
|
|
|
Total stockholders’ equity (442,738,080 and 441,210,817 shares
issued and outstanding as of March 31, 2017 and December 31, 2016,
respectively)
|
|
|
(1,143,925
|
)
|
|
|
(841,334
|
)
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,932,110
|
|
|
$
|
2,230,478
|
|
|
Consolidated Statement of Cash Flows Information:
|
|
Three Months Ended March 31,
|
|
|
2017
|
|
2016
|
|
|
($ in thousands)
|
Net cash (used in) provided by:
|
|
|
|
|
Operating activities
|
|
$
|
(65,448
|
)
|
|
$
|
21,917
|
Investing activities
|
|
|
(420,836
|
)
|
|
|
21,929
|
Financing activities
|
|
|
–
|
|
|
|
–
|
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