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What happened
Shares of Cobalt International Energy (NYSE: CIE) plunged more than 11% by 10:45 a.m. EDT on Tuesday after reporting lackluster third-quarter results.
So what
Cobalt reported a loss of $213 million, or $0.52 per share, for the third quarter, which was much deeper than the $49.7 million, or $0.12 per share, loss it reported in the year-ago quarter. Driving that deepening loss was a $95.9 million contract amendment with drilling contractor Rowan (RDC) and a $42 million write-off associated with its Goodfellow exploration project, which combined to cut $0.34 per share from its bottom line.
Cobalt also increased its full-year capex guidance in the Gulf of Mexico to between $525 million and $575 million, up from its prior forecast of $500 million to $550 million. Likewise, the company increased its total uses for cash to between $725 million and $775 million, up from $650 million to $700 million. Driving this expansion is the cash outlay attributable to the early termination of the Rowan rig contract.
Finally, the company noted that it has opened the data room and has been actively marketing its 40% interests in Angola blocks 20 and 21. While it is pleased with the level of interest in the properties, it does not have a buyer. Quickly finding a taker for these assets is critical for the company after its $1.75 billion deal fell through earlier this year. While Cobalt currently has $683 million in cash, it could burn through that in no time given its current spending level.
Now what
Cobalt International Energy did not have much good news for investors this quarter. It continues to report steep losses due to rig expenses and dry holes, which are causing it to burn through its cash. Meanwhile, it had to start from scratch on a major asset sale, which isn't likely to fetch anywhere near the previous price. Given its current financial situation, Cobalt needs to get a buyer for those assets in place soon so that it does not sink any deeper.
