Why Cobalt International Energy, Inc.'s Shares Sank Today

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 Cobalt International Energy, (NYSE: CIE  ) dropped as much as 12% today after providing an operational update.

So what: Aegean No. 1 exploratory well in the Gulf of Mexico has reached objective depth of 34,701 feet, but did not encounter commercial hydrocarbons in targeted zones. The well will be plugged and abandoned. 

Now what: This is a big blow for Cobalt and, with a 60% interest in the Aegean property, this will be a big financial loss, as well. But that's the risk for investors who buy into exploration companies like this. It's also why I'll be staying away from Cobalt International -- because it's just too speculative for me as an investor.

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