"The best thing that I can say about the second quarter is that it's over."
-- Joe Bryant, CEO of Cobalt International Energy
It's tough being Cobalt these days. Not only does the exploration and production outfit have a large focus on the deepwater Gulf of Mexico, but the relatively young Cobalt has no production. Drilling is this company's sole ticket to value creation.
Cobalt has spent years amassing a highly prospective portfolio of offshore leases both in the U.S. Gulf and in western Africa. This year was supposed to be the one in which Cobalt would make some high-impact discoveries, but it managed to drill only a few dusters before the Macondo disaster. (The company has participated in some discoveries by Anadarko Petroleum
Assuming that smaller, independent E&Ps like Cobalt and Newfield Exploration
Consider that only a quarter of Cobalt's leases expire by 2015. The delay in Cobalt's drilling program is unfortunate, but not a deal-breaker -- especially since the firm has no debt and can afford to wait. You might even argue that the moratorium has improved Cobalt's odds of drilling successful wells. During the forced "time-out," the company is assessing and reworking all of its top prospects with the use of seismic reprocessing technology and other geological and geophysical tools. The exit of rigs from the Gulf is also pushing down global dayrates, which is positive for Cobalt's contracting requirements in Angola.
With around 9 billion barrels of unrisked potential resources, this firm still has a shot at making a big splash in 2011 and beyond. The best time to get positioned is before those drill bits start turning again.
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool owns shares of Ensco and has a disclosure policy.