Cobalt International Energy, Inc. (CIE)

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Cobalt International Energy, Inc. (CIE)

Q3 2011 Earnings Call

November 1, 2011 11:00 a.m. ET


Joseph Bryant – Chairman, Chief Executive Officer

John Wilkirson – Chief Financial Officer

Van Whitfield – Chief Operating Officer


Evan Calio – Morgan Stanley

Brian Singer – Goldman Sachs

David Heikkinen – Tudor Pickering Holt

Jeb Bachmann – Howard Weil

Edward Westlake – Credit Suisse




Good day everyone and welcome to Cobalt International Energy’s Third Quarter 2011 Conference Call. Just a reminder, today’s call is being recorded. Before we get started, one housekeeping matter.

This conference call includes forward-looking statements, the risks associated with forward-looking statements have been outlined in the earnings release and in Cobalt’s SEC filings and we incorporate these by reference for this call.

At this time for opening remarks and introduction, I would like to turn the call over to the Chairman and CEO of Cobalt, Mr. Joe Bryant. Please go ahead, sir.

Joseph Bryant

Good morning and thank you for joining us on Cobalt’s third quarter 2011 earnings and operational update call. I’m joined on today’s call by John Wilkirson, our Chief Financial Officer and Van Whitfield, who as we recently announced now holds the position of Chief Operating Officer.

I would like to make a few brief comments before I turn the call over to John for a review of our financial results. First, I’m pleased to be able to report that as of last week for the first time in our history, Cobalt is actively participating in drilling wells in both the deep water offshore Angola and in deepwater Gulf of Mexico. These two wells, the Cameia #1 in Angola and Heidelberg #2 in the Gulf of Mexico are literally the leading edge of what we believe will be a continuous drilling program focused on some of the world’s most significant oil prospects.

With Cobalt’s material position in each of our highly perspective basins, I’m confident that we will create significant value as we execute our drilling plans. Much has been achieved over the last quarter. We prioritized our results in three principal areas. One, commencing the drilling of our pre-salt exploration drilling program in Angola with Bicuar and Cameia exploration wells. Two, continuing our tactical evaluation of additional pre-salt prospectivity on blocks 9 and 21 in Angola and Diaba in Gabon.

We also obtained partner in Sonangol agreement to initiate a large 3D seismic acquisition and processing program on block 20 in Angola. And three, ensuring Cobalt’s operational readiness and full compliance of all the rules and regulations incorporation for the return of the ENSCO 8503 drilling rig to the Gulf of Mexico.

I’m happy to report positive results in all three of these areas. On August 29, we commenced drilling the Cameia number one pre-salt exploration well on Block 21 offshore Angola. Drilling operations have gone as expected thus far. Geologically, the well has progressed consistent with our pre-drilling prognosis. We are some 60 days into and we anticipate 80 to 100 day drilling program to reach total depth.

However, the Ocean Confidence drilling rig has experienced approximately two weeks to three weeks of rig downtime due to mechanical issues. We believe these rig issues are essentially behind us and therefore we expect to reach total depth sometime in the next month or so depending upon the actual drilling penetration rate. So, I don’t have any more information that I can share with you today on Cameia but we do expect to announce results in December.

Once we complete our drilling and evaluation operations on the Cameia #1 well, we will commence drilling operations on the Bicuar #1 well to test the Bicuar pre-salt prospect from a surface location different from the one that experienced the shallow water flow last summer.

We anticipate this well to take 80 days to 100 days to drill and an additional 10 to 20 days to evaluate if it's successful. Following the Bicuar #1 well, our plans are to return to Cameia for a pre-salt drilling operations if Cameia number one is successful.

With regard to Block 20 in Angola, we are waiting confirmation from Sonangol as to when we will execute the Production Sharing Agreement. As you know, we have been designated as the operator of Block 20 and we own 40% interest in the Block. As I’ve stated previously, the agreement has been fully negotiated with Sonangol and we remain confident that this agreement will close in the near future.

As I mentioned in anticipating the execution of Block 20 PSA, Cobalt and our partners have executed an agreement with our seismic contractor to acquire and process approximately 4,200 square kilometers of 3D seismic data on Block 20. This data acquisition, which was initiated last week, will allow us to remain on schedule to drill the much anticipated loss of prospect in Block 20, as planned.

In Block 9, we expect to drill – we expect to complete our 3D seismic processing effort in the first quarter of next year, which is approximately two months ahead of schedule. But most significantly, the data quality is exceeding our pre-acquisition expectations. We will begin prospect maturation and well planning next year and we are currently targeting drilling the first pre-salt exploration well in Block 9 by the end of next year.

In order to carry out our multi-year Angola drilling program for Blocks 9, 20, and 21, Cobalt well initiate rig tenders to drilling contractors by the end of this year. In addition, we are tendering for a long-lead items for this exploration drilling program.

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