Cobalt International Energy, Inc. (“Cobalt”) (NYSE:CIE) today
announced a net loss of $1,872.9 million, or $4.47 per basic and
diluted share for the fourth quarter of 2016, compared to a net
loss of $486.8 million, or $1.19 per basic and diluted share, for
the fourth quarter of 2015. Cobalt reported a net loss of
$2,343.3 million, or $5.69 per basic and diluted share, for the
year ending December 31, 2016 compared to a net loss of $694.4
million, 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 $1,691.8 million, or $4.04 and $4.11,
respectively, per basic and diluted share, related to our Angolan
assets.
As of December 31, 2016, cash, cash equivalents, investments and
restricted cash were approximately $956.5 million. Total cash spend
for 2016 was approximately $840 million, relative to Cobalt’s cash
spend guidance (adjusted to consolidate both continued and
discontinued operations) of approximately $855 million to $915
million in 2016.
We expect capital expenditures to be approximately $275 million
in 2017, which excludes general and administrative expenses and
interest expense. Capital expenditures are primarily attributable
to operated activities at North Platte and non-operated activities
at Shenandoah, Anchor and Heidelberg. Total 2017 cash outlays are
currently expected to be between $550 million and $650 million, net
revenue is expected to be approximately $50 million, leaving Cobalt
with an expected cash balance at year end 2017 of approximately
$350 million to $450 million excluding any Sonangol receipts or
payments.
Operational Update
In the deepwater Gulf of Mexico, as announced earlier this year,
Cobalt’s North Platte #4 appraisal well encountered approximately
650 feet of net oil pay, with initial 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 completed 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 expects to complete 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
approximately 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 commenced 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 currently being sidetracked to locate the oil-water
contacts. Cobalt owns a 20% non-operated working interest in
Shenandoah.
With regard to Angola, of the $1,691.8 million impairment
recorded by Cobalt, $1,629.8 million was impaired in accordance
with Accounting Standards Codification 932, Extractive Activities –
Oil and Gas (“ASC 932”) 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 previously
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
previously 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 submitted
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
impacted 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.”
Conference Call
A conference call for investors will be held today at 10:00 a.m.
Central Time (11:00 a.m. Eastern Time) to discuss Cobalt’s fourth
quarter and year end 2016 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 13655277. The replay will
be available until March 29, 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.
For more information about these announcements, see Cobalt’s
March 2017 Investor Presentation, which will be available on
Cobalt's website at www.cobaltintl.com in the Investor
Center-Publications & Presentations section.
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 December
31,
For Year Ended
December 31,
2016 2015 2016 2015 ($ in
thousands except per share data) Oil, natural gas and natural gas
liquids revenue $ 7,768 $ — $ 16,805 $ — Operating costs and
expenses
Seismic and exploration
21,451 12,945 58,170 61,844 Lease operating expense 2,543 — 7,574 —
Dry hole costs and impairments 1,761,444 422,428 1,967,180 462,234
Loss on amendment of contract — — 95,908 — General and
administrative 45,290 40,696 127,860 110,634 Accretion expense 244
99 550 99 Depreciation and amortization 7,341
278 21,983 3,881 Total operating
costs and expenses 1,838,313 476,446
2,279,225 638,692 Operating loss
(1,830,545 ) (476,446 ) (2,262,420 ) (638,692 ) Other (expense)
income Other (expense) income (6,880 ) (1,077 ) (2,505 ) 1,555
Interest income 880 1,499 4,661 6,087 Interest expense
(36,395 ) (10,811 ) (83,045 ) (63,376 ) Total
other expense (42,395 ) (10,389 ) (80,889 )
(55,734 ) Net loss $ (1,872,940 ) $ (486,835 ) $ (2,343,309
) $ (694,426 ) Basic and diluted loss per share $ (4.47 ) $
(1.19 ) $ (5.69 ) $ (1.70 ) Weighted average common shares
outstanding 418,840 408,564
412,080 408,535
Consolidated Balance Sheet Information:
December 31,
2016
December 31,
2015
($ in thousands) Cash and cash equivalents $ 613,534 $ 80,171
Restricted cash 2,517 58,715 Short-term investments 340,418
1,185,335 Total current assets 1,147,191 1,669,963 Oil and natural
gas properties 1,078,885 2,359,033 Total assets 2,230,478 4,061,219
Total current liabilities 533,954 626,637 Total long-term
liabilities 2,537,858 1,988,445 Total stockholders’ equity
(441,210,817 and 408,740,182 shares issued and outstanding as of
December 31, 2016 and 2015, respectively) (841,334 ) 1,446,137
Total liabilities and stockholders’ equity $ 2,230,478 $ 4,061,219
Consolidated Statement of Cash Flows Information:
Year Ended December 31, 2016
2015 ($ in thousands)
Net cash provided by (used in):
Operating activities $ (165,665 ) $ (1,646 ) Investing activities
152,830 (114,121 ) Financing activities 490,000 (4,068 )
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Cobalt International Energy, Inc.Investor Relations:Rob Cordray,
+1 713-579-9126Director, Investor RelationsorMedia Relations:Lynne
L. Hackedorn, +1 713-579-9115Vice President, Government and Public
Affairs