Finally, an Exciting Energy IPO

Following BP's (NYSE:BP) big discovery in the Keathley Canyon section of the Gulf of Mexico last week, I offered up Anadarko Petroleum (NYSE:APC) and Devon Energy (NYSE:DVN) as two seriously happy leaseholders. There's another E&P swimming in the same waters that slipped my mind because it's not publicly traded. That's likely to change soon.

Cobalt International Energy is a company that we've encountered twice before in these pages. First, the private equity-backed firm made a big splash in a gale force lease sale back in 2008. The firm's $389 million in high bids submitted for deepwater Gulf of Mexico exploration blocks came in second only to Hess (NYSE:HES).

This year, Cobalt participated in a pair of deepwater discoveries, both operated by Anadarko. With its highly prospective portfolio highlighted by these back-to-back hits, the firm had no trouble attracting joint venture partner Total SA (NYSE:TOT). Sonangol, Angola's national oil company, hammered out an exploration agreement with Cobalt soon afterward.

As Devon reminded us in May when it announced it would be seeking a deepwater dance partner, the funding requirements in this arena are quite steep. Hence Cobalt's filing of an initial public offering prospectus on Friday. BP's Tiber find certainly set the stage for a potentially powerful IPO.

By going public, Cobalt's backers like Goldman Sachs (NYSE:GS) and First Reserve will get to take a few chips off the table, and the firm will fill its kitty with perhaps a billion dollars or more. Even with gross costs of well over $100 million a pop, that will get quite a few wells drilled considering the minority stakes Cobalt has farmed out to folks like Total.

I could see the institutional appetite for these shares running pretty high given the uniquely focused nature of the firm. While about half of Cobalt's West African prospects lie in shallower water, this firm is pretty close to being a deepwater exploration pure play.

That said, with no proved reserves and no production expected before 2012, this is going to be a tough company to price with any precision. That, of course, invites opportunity for those who think they can ballpark the value of this prospect inventory better than Mr. Market.