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What: Shares of oil and gas explorer Cobalt
So what: Morgan Stanley tapped Cobalt as a particularly pure and attractive play on deepwater oil exploration. While the U.S. administration continues to drag its heels on approving domestic drilling permits, Morgan Stanley believes Angola, where Cobalt plans to drill one to two wells next year, sports some of the tastiest offshore exploration potential in the world.
Now what: I wouldn't be so quick to climb aboard today's double-digit increase. Cobalt's West Africa prospects are certainly attractive, but as offshore expert TMFDoodleBugger posted yesterday, the company is "still in cash burn while they drill for new reserves and hope to get production going in a timely manner (3-5 years)." With the company still very much exposed to the Gulf of Mexico, Cobalt's shares, which are now up more than 55% over the past three months alone, might just have too much optimism baked into them.
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