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Cobalt International Energy (NYSE:CIE)

Q2 2014 Earnings Call

August 05, 2014 11:00 am ET

Executives

Joseph H. Bryant - Chairman and Chief Executive Officer

John P. Wilkirson - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

James W. Farnsworth - Chief Exploration Officer and Executive Vice President of Exploration & New Ventures

Van P. Whitfield - Chief Operating Officer and Executive Vice President

Analysts

Evan Calio - Morgan Stanley, Research Division

Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division

Joseph D. Allman - JP Morgan Chase & Co, Research Division

Edward Westlake - Crédit Suisse AG, Research Division

Richard M. Tullis - Capital One Securities, Inc., Research Division

Michael S. Scialla - Stifel, Nicolaus & Company, Incorporated, Research Division

Al Stanton - RBC Capital Markets, LLC, Research Division

Curtis Ryan Trimble - Brean Capital LLC, Research Division

Operator

Good day, everyone, and welcome to the Cobalt International Energy Second Quarter 2014 Conference Call. Just a reminder, today's call is being recorded. Before we get started, 1 housekeeping matter. This conference call includes forward-looking statements. The risks associated with forward-looking statements have been outlined in the earnings release and in Cobalt's SEC filings, and we incorporate these by reference in this call. At this time, for opening remarks and introduction, I would like to turn the call over to Chairman and Chief Executive Officer of Cobalt, Mr. Joe Bryant. Please get go ahead, sir.

Joseph H. Bryant

Good morning and thank you for joining us for the Cobalt International Energy second quarter 2014 earnings and operations update call. Joining me on today's call are several members of our executive team, including John Wilkirson, our Chief Financial Officer. I'll start by making a few introductory comments and then I'll turn the call over to John, who'll discuss our second quarter financial results. Of course, then we'll be happy to answer any questions that you may have.

Cobalt has had a very active and impactful second quarter and our operational and financial second quarter results continue to align with our vision and build on our strengths, delivering exceptional long-term shareholder value. I'll begin by discussing our West Africa operations, followed by a discussion on our Gulf of Mexico operations. In addition, I'll briefly touch on our new venture strategy. I'll then summarize the results of our highly successful convertible notes offering, which we finalized in early May, and I'll discuss our successful Analyst Day event, which we held in June. Our West Africa operations continue to deliver extraordinary results. In May, we announced the exceptional results of the drill stem test we performed on our Orca #1 well, which is our largest discovery to date, with a resource range of 400 million to 700 million barrels of oil. Orca is also likely to be one of the largest oil discoveries by the industry worldwide in some time. Orca represented our fifth pre-salt discovery in the deepwater Angola Kwanza Basin. Following our Orca operations, we moved the SSV Catarina rig to drill our Cameia #3 appraisal and development well in Block 21. We have reached total depth and have performed the drill stem test on the Cameia #3 well. I'm very pleased to confirm that the well and the drill stem test were successful and consistent with, if not, have exceeded our pre-drill expectations. As anticipated, we found a very thick, high-quality reservoir, which contains some of the best rock that we have seen or drilled in the Kwanza Basin. The flow test, which was the longest duration test conducted to date in the Kwanza Basin, confirms that this reservoir will flow very high rates once on production, and it goes a long way to confirm the scale of the field's reserves. As we have mentioned, we plan to utilize the Cameia #3 well as a development well in the Cameia field development. We and our Block 21 partners are actively pursuing the sanction of our Cameia field development project and in May, we submitted the integrated field development plan for Cameia to the concessionaire for their approval and we are still targeting sanction by the end of 2014. Based on all conversations that we have had with our partners, the concessionaire and the government of Angola, we're all aligned on achieving first production in 2017. As we shared with you at our Analyst Day presentation, we continue to consider Cameia as a hub development, which could include Mavinga and potentially Bicuar, in addition to Cameia. Our current design basis for the Cameia hub is a nominal 100,000 barrels per day development capable of generating $400 million to $600 million of operating cash per year to Cobalt.

Also in Angola, in early April, the Angola Minister of Petroleum granted Cobalt a 2-year extension of our Block 9 license. Once operations are finalized on the Cameia #3 well, we will move the Catarina rig to drill our large 750 million barrel Loengo pre-salt prospect on Block 9. Loengo is a stratigraphic structure and, if successful, will have broad positive implications for numerous similar prospects that we see in the remainder of our Angola pre-salt exploration inventory. We look forward to sharing the results of our Loengo well by year end. Following the Loengo well, we will drill at either our Mupa exploration well on Block 21 or our first Orca appraisal well on Block 20 or, as I will mention later, we may drill both wells simultaneously.

In addition to our ongoing drilling operations, we are actively pursuing a strategy to accelerate the appraisal and development of the greater Orca Lontra development for the gold project in Block 20. This strategy could include optimizing recovery of hydrocarbons from Orca and Lontra discoveries, which would result in the development of up to 1 billion barrels of oil in this single development. Our objective is to bring the gold project on production as soon as possible after the Cameia project in the 2018, 2019 timeframe. Since we are early in the gold project planning process, it's too early to describe the production capacity of the project but I expect that it will be a phased hub development similar to our Cameia project. As has always been our strategy, we will roll forward many, if not all, of the design parameters utilized in our Cameia project to our gold project. This will reduce both cycle time and cost. Our initial conversations with the concessionaire and the government of Angola indicate complete alignment with Cobalt's current gold strategy. We expect to move ahead with the appraisal of the gold project later this year and will likely include contracting a second rig in Angola for appraisal and development drilling, thus freeing up the Catarina rig for exploration drilling. We are in the initial phases of this project and will keep you all advised on the status of this exciting new development.

We continue to remain active in Gabon. In the second quarter, the Diaba partnership approved the acquisition of a significant 3D seismic survey, which will be instrumental in our continued exploration on the Diaba block. We continue to expect additional exploration drilling in Diaba in late 2015 or 2016. In addition to our Diaba activity, Cobalt remains very active in assessing and participating in recent lease rounds for new exploration blocks in Gabon. As a matter of fact, we were notified in late 2013 that we were the high bidder on an important block in the Gabon lease sale. Since that time, we were informed that 3 blocks were being withheld or frozen from the process, including our high bid block. We remain hopeful that our high bid on our block will ultimately result in our first Cobalt-operated exploration in Gabon.

Moving to the Gulf of Mexico. We and our partners are drilling the Anadarko-operated Shenandoah #3 appraisal well, which will further appraise our Shenandoah Inboard Lower Tertiary discovery. You'll recall that our first Shenandoah appraisal well encountered more than 1,000 feet of oil pay in multiple high-quality Inboard Lower Tertiary-aged reservoirs. We anticipate results from the Shenandoah #3 appraisal well by the end of the year. Development operations continue on our Heidelberg field where Anadarko as operator has commenced drilling the field development wells. In addition, the whole topside and subsea infrastructure remain on schedule for fabrication and installation in support of first oil from the Heidelberg field sometime in 2016. This will represent Cobalt's first production and first revenue and is expected to generate approximately $200 million of operating cash per year to Cobalt. Our exploration activities included participating with a 5.3% interest in the Shell-operated Yucatán appraisal well, which was designed to appraise the Inboard Lower Tertiary horizons found in the initial Yucatán discovery. The well has reached total depth and operations are winding down after a comprehensive open hole logging program. In addition to Yucatán, Cobalt participated in the Chevron-operated Anchor #1 exploration well planned as an Inboard Lower Tertiary test with additional Miocene potential. Unfortunately, the initial Anchor well is in the process of being plugged and abandoned due to a mechanical failure in the wellbore prior to reaching the targeted geologic horizons. A replacement exploration well will be immediately drilled, and we expect results from the Anchor replacement well late this year or during the first quarter of 2015. It is important to mention that the well did not penetrate any geologic zones of interest and so you should not infer that the abandonment has any relation to the prospectivity of Anchor. Cobalt has a 20% interest in the Anchor prospect. We are looking forward to the delivery of our new-build Rowan Reliance drillship, which we continue to expect by the end of the year, as we plan to spud our first North Platte appraisal well in early 2015 with this rig and look forward to the results of the appraisal well next year.

In addition to the ongoing operations associated with our existing portfolio, we continue to evaluate new venture opportunities that play to our strengths. As such, we are focusing on deepwater oil-prone sub-salt and pre-salt basins around the world where we can leverage our expertise in seismic imaging and petroleum systems. Examples of our efforts to grow our portfolio through new ventures include our participation in the Gabon lease round, which I previously described, and our participation in the Central Gulf of Mexico lease sale, where we were the high bidder on 44 blocks in the deepwater Gulf of Mexico. I'm happy to report that Cobalt was awarded leases on all 44 of the high bid blocks and we will now mature the prospects in this exciting new play. We will keep you informed as we further advance this new venture effort. Cobalt's ongoing success, both in West Africa and deepwater Gulf of Mexico, highlights the importance of maintaining a strong balance sheet that supports the exploration, appraisal and development operations required to deliver the full value of our portfolio. Therefore, in May of this year, we announced that we had successfully completed a convertible senior notes offering through which we raised net proceeds of almost $1.3 billion. While John will provide more details about this offering, I want to emphasize that we have the financial strength to fund our exploration, appraisal and development activities at least until the start of initial production expected in 2016. Also importantly, the increased strength of our balance sheet provides positive leverage as we work to prioritize and reposition our portfolio. John will have more to say on both of these topics in a few moments.

I'd like to wrap up with a few comments about our Analyst Day, which we hosted in New York on June 4. Based on the feedback from many of you, our first Analyst Day was a great success. A significant number of you accepted our invitation and joined us at the event and the reports published after the event expressed a consistent excitement about and in support of Cobalt's value proposition. For those of you who did not attend the event, I hope that you had the opportunity to watch the webcast and review the presentation materials from the Analyst Day, where we provided an in-depth review of the value of our portfolio and also provided detailed information about our robust exploration portfolio, our appraisal and execution successes, details about our development activities and our plans for the future of the company. This is our first opportunity to present this level of detail to our investors and we look forward to continuing these events in the future. I'll now turn the call over to John to update you on our financials.

John P. Wilkirson

Thanks, Joe. Our balance sheet remains strong, with liquidity at the end of the second quarter of almost $2.6 billion. This includes the proceeds from our very successful $1.3 billion convertible notes offering in May. This 10-year note provides Cobalt with ample liquidity to pursue portfolio optimization, while continuing our robust operational activity. Additionally, this bond included features that will help us minimize potential future dilution associated with conversion. As of June 30, we had just under $2.5 billion of unrestricted cash investments and approximately $150 million designated for future operations held in collateralizing Letters of Credit. During the second quarter, our restricted cash balance was reduced by $111 million as funds were released for the launch in Orca, which satisfied 2 of the remaining Angolan exploration commitment wells. In addition, and not recorded in our balance sheet, is the drilling promote funds of about $76 million for our Gulf of Mexico program with TOTAL.

As announced this morning, Cobalt's second quarter net loss was $95 million or $0.23 per diluted share. Of this, $42 million or $0.10 per share are impairment charges primarily related to wells drilled in the U.S. Gulf of Mexico. For the quarter, our capital and operating expenditures were approximately $193 million. This is consistent with our spending expectations for the second quarter and in line with full year capital and operating expenditures forecast of $750 million to $850 million. The capital and operating expenditures forecast excludes interest payments, Angola social contributions and items amortized in future years' operations that could total an additional $200 million of cash this year. Our estimate for the third quarter capital and operating expenditures is $200 million to $230 million. As highlighted at our Analyst Day, Cobalt remains focused on maintaining a strong balance sheet to support our operational activities and projected growth. We are now primarily focused on managing our portfolio of 9 discoveries to ensure our investments are directed to the highest-return projects. The convertible offering funds us well into 2016 when we expect to receive our first cash flow from Heidelberg and it also should eliminate any potential concerns about liquidity by potential partners as we seek to enter into and negotiate asset-based ventures. In addition to supporting our project financing, we're reviewing alternatives to obtain asset-secured development financing for our more mature prospects. We look forward to discussing the status of these initiatives with you in the future.

Finally, I will mention our frustration with our share price performance over the past 2 months, given the lack of any significant negative operational news. With the amount of block freight activity during this period, we look forward to reviewing the 13F filings in a couple of weeks to confirm the drivers of this trading activity. I'll now turn the call back to Joe.

Joseph H. Bryant

Thanks, John. Before we get into the Q&A, let me say a few words about our 8-K disclosure from earlier this morning. As it noted, last evening, less than 24 hours ago, we received a Wells Notice from the Securities and Exchange Commission related to the investigation the agency has been conducting relating to Cobalt's operations in Angola and the allegations of Angolan government official ownership of Nazaki Oil and Gas, one of the other working interest owners in Blocks 9 and 21 offshore Angola. In the notice, the staff of the SEC stated that it had made a preliminary and, in our view erroneous, determination to recommend that the SEC move forward with an enforcement action against the company. I think it's important to point out that the Wells Notice is neither a formal allegation nor a finding of wrongdoing. It merely allows Cobalt the opportunity to provide its reasons of law, policy and fact as to why the proposed enforcement action should not be filed before any enforcement decision is made by the SEC. As you know, we have fully cooperated with the SEC and the investigation since it began nearly 3.5 years ago. And we will continue to do so. In the same vein, we will, of course, take this opportunity and respond to the SEC as part of the Wells process. But let me be very clear. This Wells Notice does nothing to change our prior conclusion that our activity in Angola have fully complied with all laws, including the Foreign Corrupt Practices Act, and Cobalt continues to strongly refute any allegation of any wrongdoing. With that said, operator, we'd now like to open the line up to any questions our participants may have.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Evan Calio from Morgan Stanley.

Evan Calio - Morgan Stanley, Research Division

I appreciate your comments on the Wells Notice and underlying FCPA claims. Is there any -- can you comment if there's any potential collateral effect in a negative outcome scenario, meaning other than a potential fine? Could it affect your career or anything in your leases?

Joseph H. Bryant

Well, good question, Evan. We obviously disagree with the staff's position in the Wells Notice and we'll respond to the notice in due course. As we've stated repeatedly over the past several years, Cobalt has and always will conduct all aspects of our business to the highest ethical standards and in full compliance with all laws and regulations in all jurisdictions, not just Angola, where we operate. This is the case of all of our Angolan operations. We fully plan and expect to pursue the exploration, appraisal and development of all of our Angolan assets, including Cameia development in a timely manner as we've previously discussed. And that's about all I can say, Evan.

Evan Calio - Morgan Stanley, Research Division

Okay, that's great. And do you have a hearing date on the Wells Notice? Or is that -- just not at this time?

Joseph H. Bryant

No. There's a process, but to be honest, it's just like some other things, it can just wander on.

Evan Calio - Morgan Stanley, Research Division

No, I appreciate that. Let me shift gears with one other follow-up. In the opening comments, you mentioned another rig in Angola. Just any -- more color on the potential timing there and kind of where you are in that tender process. And I'll leave it there.

Joseph H. Bryant

Yes. James is here, I'll let him handle that.

James W. Farnsworth

Yes. Evan, as far as it goes for rig and rig days, there's a lot of options available for us. There's a lot of rig capacity in-country and we're looking at the different operators and looking at do we take 1 in-country or do we go tender and look for a new rig that we would bring in-country? So we're looking at all of those options. And you'd be looking for us to do something early next year, if we were going to go to a second rig.

Evan Calio - Morgan Stanley, Research Division

Great. Can I just sneak one last one in? On Loengo, specifically the spud date and what we're looking at [ph] for drilling days?

James W. Farnsworth

I think the drilling days, you could look at what we gave you at the Investor Conference. We gave you that range and I think those things are still in there and we'd be looking to spud Loengo very quickly, I guess, is the right way, certainly, by next month.

Joseph H. Bryant

Yes, a couple of weeks.

James W. Farnsworth

In a few weeks.

Joseph H. Bryant

Yes. Evan, one thing I would say in addition to what James said was that our dialogue with Sonangol and others in Angola, they're very supportive of accelerating appraisal and development, at this point, on several things. So we -- it gives us a lot of confidence that what we need to do is prioritize the highest value projects and get those underway as quickly as we can and that's created the reason for the second rig.

Operator

Our next question comes from Bob Brackett from Bernstein Research.

Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division

Yes, a quick one. Could you give some detail on that asset-secured development funding, how you think about that, whether that would be separate from your balance sheet and where you are in that process?

John P. Wilkirson

Bob, this is John Wilkirson. We're in early-stage discussions, but we're seeing a lot of interest in being able to create basically development financing which will have the potential to evolve into what would be reserve-based development financing. So I think this is an opportunity where we could have both in the Gulf of Mexico and potentially in Angola as well. So it'll appear just as -- it would be, it would show up on the balance sheet from that standpoint.

Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division

Okay, great. And then a follow-up, a little more color on the Cameia #3 drill stem test. Any rate information you're releasing or kind of oil/gas mix?

Van P. Whitfield

Bob, this is Van Whitfield. And as it relates to just the test -- one, thanks for asking. We're really excited about the results on that well. It's done a lot to build our confidence in our resource range that we've already stated, the 300 million to 500 million barrel recovery, and it's definitely made us feel really good about our plans to go forward with it as a commercial well. As far as the rates and all, what I'll tell you is that it was every bit, if not better, than what we've seen on Cameia #1. We were able to recover core and log data that says the reservoir rock property is every bit as good, if not better. We've confirmed that our seismic model is working and the only disappointment, which wasn't a disappointment, we picked up an extra 20 meters of pace [ph], so that was a good deal. And the performance on the reservoir gives us what I think is most important and that was that we got a continuity in the reservoir that gives us not only confidence that we can drain a bigger area per well but that all of our assumptions to date are really good. The last thing I'd point out is the constrain rate, we were in the 5,000-barrel a day range because we're constrained and -- but the productivity is such that we know it can produce significantly more than that, well in excess of 20,000 barrels a day.

Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division

And what about pressure drawdown?

Van P. Whitfield

Very little, if any, and that's why we were really excited about the demonstration of continuity. We produced -- this is the longest test we've ever done, as Joe mentioned, and we saw essentially very minimal drawdown after that period. And so it's telling us that we can drain a really sizable area.

Operator

Our next question comes from Joe Allman from JPMorgan.

Joseph D. Allman - JP Morgan Chase & Co, Research Division

So just back to the Wells Notice for a few minutes, John. Are you planning on taking a reserve? I assume it's not estimable at this point if there is any fine, so I assume the answer is no. And then just -- could you just describe the next steps a little bit? I think you guys have to write a response. If I'm not mistaken, you've got about 2 weeks to file that response. Is that correct? Could you just give us some more details on that?

John P. Wilkirson

We are not planning on taking a reserve.

Joseph H. Bryant

And yes, there is a formal process that we respond to. Our view of the facts -- and of course, we know the facts incredibly well since we've been investigating this for a very long time, and so we will submit our facts to the SEC here in the next several weeks.

Joseph D. Allman - JP Morgan Chase & Co, Research Division

Okay, got you. And then on the new ventures program, could you just give us some details on the full extent of your new ventures activities now?

James W. Farnsworth

This is Jim Farnsworth, Joe. We've had a team working now for some time looking at the opportunities that we think we can really bring our technical know-how to. So as you know, they tend to be -- they're all in deepwater and tend to be the areas that require or would benefit from the ability to image better than most other companies. So in terms of specific areas, I'm not going to go into specifics, but they clearly have a similar scale. The areas we've narrowed down to have similar scale to what we've encountered both in the Gulf of Mexico and West Africa. And probably you won't hear anything more about that this year, but perhaps early next year.

Operator

Our next question comes from Ed Westlake from Crédit Suisse.

Edward Westlake - Crédit Suisse AG, Research Division

Obviously, a great flow rates on Cameia. Any -- I mean, maybe too early, but any change in capital cost updates for the Cameia development? Just remind us where you stand on that as you move towards FID..

Joseph H. Bryant

No, this is Joe. We haven't updated our cost dec. We will, here, during the fall as we get firm bids on each piece of equipment and each scope of work. But we don't have any changes right now. I would say that the resource range confirmation is a huge step for us. It's going to be hard for this project not to go forward on an economic basis.

Edward Westlake - Crédit Suisse AG, Research Division

Great. Okay. Let's then get into the Wells Notice as well. So I mean, my understanding, which may be incorrect, of the FCPA is that one aspect of it is doing due diligence, which is the standard of reasonable inquiries, and then the other aspect of it is if some exchange took place in order to get access to the block. It seems from the outside to me that perhaps some disagreements with you and the SEC on how much due diligence was needed could be a civil sort of issue whereas if there was some exchange, that seem to me would be more criminal. So I'm just trying to get a sense of what it is that the SEC, if you know, disagree with you on in terms of their assessment as to why they'd want to go towards an enforcement.

Joseph H. Bryant

Well, the way the process works is it's somewhat opaque, to be honest with you, on one side, but it's fully transparent on our side. So we know all the facts, we know them very well. And I've said many times that we built Cobalt the right way from day 1 before we ever considered leases in Angola. All of our FCPA, all of our compliance, all of our due diligence systems were built into the company from day 1. I didn't fall off the turnip truck yesterday and neither did any of these guys around the table. We know all about FCPA and we weren't about to wander into anything there unknowingly. So all I can say for sure is we know what we've done. We know what compliance is required. We've gone above and beyond that and we'll stand firm on our actions.

Edward Westlake - Crédit Suisse AG, Research Division

Okay. And all of the due diligence which I've done also suggests that your staff has done a very good job in terms of doing their due diligence. But maybe a different way of asking the question, do you think it's just the level of due diligence which the SEC disagree with you on? Or do you think that there has been some exchange? I understand that Nazaki is a full paying member of the consortium, in fact, was imposed on you rather than something that you chose. But I'm just trying to get some understanding as to what it is you think they disagree with you on.

Joseph H. Bryant

Ed, I appreciate your probing nature, but I really can't answer that. Again, what I can tell you is, again, we understand the requirements. We understand the law, we understand compliance, we understand due diligence. And we have gone above and beyond in every case. And we sit here today confident in our position, and I cannot and will not speculate on what the SEC's views are.

Edward Westlake - Crédit Suisse AG, Research Division

Okay. And then have there been any inquiries from the DOJ?

Joseph H. Bryant

We have -- at every step of the last 3.5 years, we have managed both the SEC and the DOJ simultaneously to make sure that both of those federal agencies are fully up to speed on what we've done and what we know about. So I would say constant communication with both agencies has been a routine over the past 3 years.

Operator

[Operator Instructions] Our next question comes from Richard Tullis from Capital One.

Richard M. Tullis - Capital One Securities, Inc., Research Division

Joe, going back to the Anchor well, what are the cost expectations on that well now, including the P&A well? And is there any potential for any cost recoupment from the drill side of the operation?

James W. Farnsworth

We're still getting all the costs in, and I don't -- what we've seen, of course, is that we've had a mechanical problem. And the well, of course, did not reach anywhere close to the objective depth. So we're still excited about the prospect, we're getting after it.

Richard M. Tullis - Capital One Securities, Inc., Research Division

Okay. Any potential cost recoupment or it's just kind of...

James W. Farnsworth

I don't think so. It's a junked and abandoned well.

Richard M. Tullis - Capital One Securities, Inc., Research Division

Okay. And then this is for John. At this point, what projects are you looking at most likely to fall into that monetization basket or asset-based financing? Is that mainly Heidelberg and Cameia?

John P. Wilkirson

Yes. At this point, Heidelberg would be a prime candidate for that because it is a sanctioned project with a very well-known operator and we have contributed significant capital already into its development. So that would be a prime mechanism. And I think the other thing, which you point out, is once we can establish this, then it gives us the ability to replicate it in the Gulf of Mexico going forward and provide, say, an attractive source of funding in addition to having to go back to use equity or the balance sheet cash to provide a significant part of the development funding.

Operator

Our next question comes from Mike Scialla from Stifel.

Michael S. Scialla - Stifel, Nicolaus & Company, Incorporated, Research Division

Just a follow-up to the last question. The reserve-based development financing, does the level of interest there, does that replace now the JV process you talked about at the Analyst Day or is there still an ongoing JV marketing effort?

John P. Wilkirson

No. It does not replace the ongoing efforts we have to continuously look at high-grading our portfolio. Those efforts are underway and look forward to being able to provide more information on the status of that once we get further down the road. But as we said in the analysts meeting that there's situations that we have that we feel like it would be advantageous to have other parties involved in with us in those developments.

Michael S. Scialla - Stifel, Nicolaus & Company, Incorporated, Research Division

Got it, okay. And then, Joe, you mentioned, with Loengo, you've got additional prospects that look similar, I guess, that have a stratigraphic element to the trap. Can you talk a little bit more about maybe how many, what kind of size are those? And do those get drilled, say, if Loengo does not work?

James W. Farnsworth

This is Jim Farnsworth. I'll handle that. Yes, there's a number of prospects that sit up on that same trend, which has a combination of stratigraphic and structural traps and have an appearance in terms of the reservoir potential similar to what we've seen in either Cameia or Orca. They're all independent structures, however, so while we may learn something from drilling one or the other, it doesn't either confirm or discount the other structures. Unfortunately, it's not that simple. And what we have found at every structure we've drilled and thus far in Angola has been obviously successful, but in each way it's independent and slightly different. I guess, just following up on that, another prospect we have upcoming is Mupa, which is also Block 21, and that's clearly independent from the Block 9 and it's also something that looks quite sizable and robust and high quality.

Michael S. Scialla - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. And are most of these prospects on Block 20 and 21 or are there others on Block 9 like Loengo?

Joseph H. Bryant

Block 9 really has 1 very large prospect, Loengo. There may be others that are much smaller, but it's Loengo that we're really after in Block 9.

Michael S. Scialla - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. And then last one for me. Jim, can you talk at all about what the objective is in the central Gulf of Mexico?

James W. Farnsworth

Not really. What we're -- what I can say is that we've learned a lot from our exploration, both in the Gulf of Mexico and West Africa. And so we can look at the Gulf of Mexico perhaps in a different way than we would've if we only worked the Gulf of Mexico. So without going into any specifics, we do see the opportunities for some different types of plays from the Inboard Lower Tertiary but we're still in the process of maturing those. And so pretty excited about it, but still maturing.

Michael S. Scialla - Stifel, Nicolaus & Company, Incorporated, Research Division

Is it something brand new that the industry has not looked at before?

James W. Farnsworth

I really am not going to say anything more, plus I don't know what everyone has looked at in the industry.

Operator

Our next question is a follow-up from Ed Westlake.

Edward Westlake - Crédit Suisse AG, Research Division

Yes, just coming back to more operational things. On North Platte, obviously, that's a large resource range and that's probably a big chunk of the discovered value in the Gulf for you guys, I mean not diminishing Shenandoah and the other stuff. But maybe any updates on the seismic reprocessing or when you might get the appraisal down next year.

James W. Farnsworth

Well, let me address the second question first. Our current plans are to spud North Platte #2 well, essentially the first appraisal well, in the first quarter of 2015 with the new rig, the rolling rig. In terms of what we're seeing on the seismic and everything we've seen thus far has continued to encourage us. The structure appears to be larger than what we saw essentially while we were drilling the first well or soon afterwards. Equally important is the seismic data thus far seems to be indicating that it's a large simple structure, perhaps less complicated than we would have expected a couple of years ago, which -- that's all good news. So it's also given us more confidence in our ability to properly locate the initial appraisal wells.

Edward Westlake - Crédit Suisse AG, Research Division

And so I might kind of read into that, that it would be towards the upper end of that predrilled 400 million to 850 million that you were hoping for. I know you said the first well exceeded expectations.

Joseph H. Bryant

I think, certainly, the data is implying that the potential there exists. Of course, we need to drill a well to confirm that.

Edward Westlake - Crédit Suisse AG, Research Division

Right. And maybe just a follow-up on the Wells Notice. Will we ever see the actual SEC letter? Is that a public domain or is it private in terms of their allegations, when eventually they make them.

Joseph H. Bryant

It's currently private, and we'll -- I hope we're demonstrating how transparent we are. When we know something, we'll tell you. And when we have something we can release, we'll release it. That's about all really I can say about it.

Edward Westlake - Crédit Suisse AG, Research Division

I mean, it would be helpful, I think, for investors to see what the allegation specifics are to be able to make a judgment call but, obviously, I leave that up to you.

Joseph H. Bryant

Got it.

Operator

Our next question comes from Al Stanton from RBC Capital Markets.

Al Stanton - RBC Capital Markets, LLC, Research Division

Most of my questions have just been answered, but just back to the Wells notice. Can I ask whether the letters are addressed to the company or do they actually name specific individuals?

Joseph H. Bryant

The company.

Operator

Our next question comes from Curtis Trimble from Brean Capital.

Curtis Ryan Trimble - Brean Capital LLC, Research Division

Just coming back to the Gulf of Mexico, wondered if you had an update on potential spud date for good sellout [ph]?

Joseph H. Bryant

I don't -- I'll see if Jim has heard anything in the last week or so.

James W. Farnsworth

No, we don't have any updates beyond later this year at the earliest or sometime in the first half of 2015. So nothing definitive yet.

Curtis Ryan Trimble - Brean Capital LLC, Research Division

Good deal. And just to clarify, with respect to the Wells Notice and sanctioning of Cameia, these are completely independent events. There's nothing on the Wells Notice investigation, et cetera, that would potentially delay sanctioning of Cameia or anything of that nature, correct?

Joseph H. Bryant

Well, I answered that, I think, when I said that we disagree with the basis for any violation and we're absolutely confident in our ownership and the access that we've had to the assets we have in Angola. So we're proceeding..

Operator

Our next question comes from Bob Brackett from Bernstein Research.

Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division

Just intrigued, a follow-up on what you're chasing in the Central Gulf of Mexico. You mentioned that you learned something from Angola that you're bringing back. Does that mean there -- it's a carbonate target? Does that mean it's a pre-salt target? Or am I stretching too far?

James W. Farnsworth

I think we're looking at a variety of plays there. And when I said we're learning -- taking what we've learned in West Africa back is that there are ways to explore in West Africa that are somewhat different than the Gulf of Mexico. There are different types of targets and different types of structures. So I wouldn't go on beyond -- I wouldn't read too much beyond that.

Joseph H. Bryant

Let me close now by saying that, as you might have sensed, we're excited about the successes we've had. We've certainly had more than our fair share. We've enjoyed a lot of success for the past couple of years. We got a lot of exciting milestones in front of us here in the next year or so. We've got a great team on the ground who's motivated to deliver great success and great value for our shareholders and which ultimately will deliver huge production growth in the years ahead. I can't thank you all enough for your continued interest and support over these past few years and look forward to having many more successes in the future. Thank you all. Stay safe and we'll talk to you again.

Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Source: Cobalt International Energy's (CIE) CEO Joseph Bryant on Q2 2014 Results - Earnings Call Transcript

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