Why Cobalt International Energy's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of oil and gas explorer Cobalt International Energy (NYSE: CIE  ) fell 14% today after the company updated exploratory well progress.

So what: The biggest news was that the Ardennes #1 exploratory well didn't find any commercial hydrocarbons despite reaching a depth of 36,552 feet. The Gulf of Mexico has offered a number of major discoveries lately, but Cobalt missed out on this well, so it's on to other prospects for the driller.  

Now what: This is the risk with oil explorers: Sometimes you strike it big and sometimes you come up with sand. The company did announce finding hydrocarbons in West Africa at the Diaman #1B well, although full details aren't known yet. The risk used to drill Ardennes #1 will also be moved to Aegean #1 where the company has a 60% working interest. Obviously this isn't good news, but Cobalt has a number of strong developments, so pulling back from near a 52-week high isn't the end of the world.

Explorers can be a risky way to play the oil business, so if you're looking for a little less volatility then you should consider service providers, like the companies Cobalt rents drilling rigs from for hundreds of thousands of dollars per day. These companies still benefit from rising oil prices without the risk of a dry well. Our top analysts prepared a free report that reveals three stocks that are bound to soar as oil prices climb higher. To discover the identities of these stocks instantly, access your free report by clicking here now.


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