Cobalt International Energy IPO Prices Below Range

Dec.16.09 | About: Cobalt International (CIE)

Cobalt International Energy (NYSE:CIE) priced its IPO yesterday at $13.50 per share, below range.The company was hoping for a price range of $15-$17 per share.

Business Overview (from prospectus)

We are an independent, oil-focused exploration and production company with a world-class below salt prospect inventory in the deepwater of the U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa. We were formed in late 2005 by experienced industry executives and private equity investors who believed that a team of veteran explorationists, equipped with industry-leading data, newly available seismic technologies, industry contacts and adequate funding, could acquire a deepwater prospect inventory that would rival the supermajor oil companies. After considering numerous global oil-producing regions in which to focus our exploration and development efforts, we selected the deepwater U.S. Gulf of Mexico and offshore Angola and Gabon due to the largely unrealized hydrocarbon potential offered by below salt horizons within these regions. We believe that we have been successful in assembling such an inventory and that our asset portfolio would be very difficult to replicate. In addition, we believe that we are now well-positioned, through our prospect maturation efforts, commencement of an active drilling program and long-term strategic alliances with key industry participants, to unlock the potential of and de-risk our prospects on an accelerated basis, which we believe will create significant shareholder value. Prior to joining Cobalt, our management and technical teams collectively played a significant role in the exploration and development of approximately 8 billion barrels of oil-equivalent ("Bboe") of proved plus probable reserves in the deepwater U.S. Gulf of Mexico, out of an industry total of approximately 17 Bboe of such reserves developed in the last 28 years.

Offering: 63 million shares at $13.50 per share. Net proceeds of approximately $955.0 million will be used to fund capital expenditures such as drilling and exploration program through 2011, related operating expenses, and for general corporate purposes.

Lead Underwriters: Credit Suisse (NYSE:CS), Goldman Sachs (NYSE:GS), J.P. Morgan (NYSE:JPM)

Financial Highlights:

We have not yet commenced oil production. Therefore, we did not realize any oil and gas revenue during the periods ended June 30, 2008 and 2009, respectively... Our operating costs and expenses consisted of the following during the periods ended September 30, 2008 and 2009: expenditures for seismic data acquisition and processing, leasehold delay rentals, costs to maintain our information technology infrastructure, salaries and related taxes and benefits of personnel employed by us, office space and office-related costs, professional fees for consultants, auditors, tax advisors and legal services, travel costs, fees paid to financial investors and other office related expenses... Seismic and exploration costs decreased by $26.0 million during the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008.

Competitors:

The oil and gas industry is highly competitive. We encounter strong competition from other independent operators and from major oil companies in acquiring properties and securing trained personnel. Many of these competitors have financial and technical resources and staffs substantially larger than ours. As a result, our competitors may be able to pay more for desirable oil and gas properties, or to evaluate, bid for and purchase a greater number of properties than our financial or personnel resources will permit. Furthermore, these companies may also be better able to withstand the financial pressures of unsuccessful drill attempts, sustained periods of volatility in financial markets and generally adverse global and industry-wide economic conditions, and may be better able to absorb the burdens resulting from changes in relevant laws and regulations, which would adversely affect our competitive position.

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