Cobalt International Energy is setting Angola as its number one priority, as the Houston-based company disclosed a multimillion-dollar loss in Q2 2016 due to a dry well in the Gulf of Mexico.
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The Rowan Reliance drillship, from Cobalt. |
Cobalt’s net loss in Q2 2016 came in at US$200.4 million, compared to a loss of $53.4 million in Q2 2015, in which the company attributed the increased loss to a write off associated with the dry Goodfellow exploration well in the Gulf of Mexico, totaling nearly $150 million.
As the company moves forward in the current climate, Cobalt CEO Tim Cutt said on a conference call that the company’s number one priority will be Angola.
Angola
Last year, Cobalt struck a $1.75 billion deal with Sociedade Nacional de Combustíveis de Angola—Empresa Pública (Sonangol) for stake in Blocks 20 and 21 offshore Angola. However, in a meeting last week between Cutt and Isabel dos Santos, Sonangol chairwoman and Africa’s richest woman, in addition to other Sonangol team members, it was jointly agreed that Cobalt will remarket its 40% stake in both blocks, as it was concluded between the two parties that the deal will most likely not close by its term date of 22 August.
“Although we would prefer the transaction with Sonangol to close, I am pleased that we can remarket these attractive liquid rich assets to third parties. The development cost environment has improved substantially, the fundamentals for medium to long term liquids pricing remains strong and we have delivered two new discoveries on Block 20,” Cutt said.
Cobalt is currently preparing a data room for its Angola assets and will immediately start the marketing and sale process.
“We see this (Angola) as our number one priority,” said Cutt. “I’ll do what we need to do, to meet where we need to meet to progress this in a very timely manner and take the executive ownership of the process.”
Of the two discoveries in Block 20, Cobalt recently discovered oil at its Gonfinho prospect in the southern part of the block, in the Kwanza basin.
According to Jim Farnsworth, Cobalt president of exploration, Gonfinho is on trend and in the similar scale with its Cameia discovery in Block 21, however it seems to be smaller.
“It is not well defined, with only one well. The big difference is oil and the proximity to Cameia,” Farnsworth said.
North America
Cobalt’s operations in North America, particularly in the Gulf of Mexico and in Mexico, have been pushed to the bottom of its priorities list.
“It is clear that we must focus our limited resources on the highest valued opportunities and continue to cut costs,” Cutt said.
Over the past several months, Cutt said that its workforce was reduced by 60%.
“We are also looking closely at our long-term drilling contracts in the Gulf of Mexico,” Cutt said.
The CEO also revealed that Cobalt will not pursue deepwater Gulf of Mexico opportunities at this time, and has closed its Mexico office.
In its Q2 report, Cobalt disclosed its failed efforts at the Goodfellow-1 exploration well, which started in March.
Drilling reached total depth with the Rowan Reliance drillship during the period, and did not encounter hydrocarbons at the well, in addition to a subsequent sidetrack operation.
“Cobalt expensed an aggregate of $149.9 million in Q2 for Goodfellow, consisting of $107.5 million of costs through Q2 associated with the Goodfellow #1 exploration well and sidetrack and $42.4 million for the impairment of the underlying leases,” the company said. “Additional charges with respect to the sidetrack operations will be recognized in Q3.”
Cobalt, as operator of Goodfellow, owns a 72.5% working interest with partner Total (27.5%).
Once operations are completed at Goodfellow, Cobalt plans to move the Rowan Reliance to North Platte to drill its operated North Platte #4 appraisal well, which is designed to further delineate the North Platte Inboard Lower Tertiary reservoir. Drilling is scheduled to start in Q3, with first production anticipated in 2021.
Cobalt holds 60% stake in North Platte, with partner Total holding the remaining 40%.
Following drilling at North Platte, Cobalt said it may terminate the contract for the Rowan Reliance early.
In other non-operated GoM projects, Cobalt reported that the Chevron-operated Anchor-3 deepwater well (20%) in currently being evaluated, after drilling reached a total depth of 34,022ft.
Anadarko’s Shenandoah-5 appraisal well (20%) encountered approximately 1000ft of net pay in multiple high quality Inboard Lower Tertiary sands. This well was the fourth appraisal well at Shenandoah and was drilled to a total depth of 31,100ft. Following drilling operations, approximately 80ft of conventional core was acquired in the upper Wilcox pay interval. Plans are to start drilling the Shenandoah #6 appraisal well prior to year end. This next appraisal well is expected to establish the oil water contact on the eastern flank of the field and quantify the full resource potential, Cobalt confirmed.
Operations also continue at Anadarko’s Heidelberg field, with three wells already brought into production earlier this year.
According to Cobalt, the first of two additional development wells were successfully drilled in Q2 and the second additional development well is currently drilling. Both of these development wells are expected to start producing in Q4 2016, which will result in a total of five producing wells in the field. Cobalt owns a 9.375% non-operated working interest in Heidelberg.
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