Cobalt International Energy Management Discusses Q3 2012 Results - Earnings Call Transcript

Oct.30.12 | About: Cobalt International (CIE)

Cobalt International Energy (NYSE:CIE)

Q3 2012 Earnings Call

October 30, 2012 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

Analysts

Brian Singer - Goldman Sachs Group Inc., Research Division

Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division

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

Al Stanton - RBC Capital Markets, LLC, Research Division

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

Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Edward Westlake - Crédit Suisse AG, Research Division

Operator

Good day, everyone, and welcome to Cobalt International Energy's Third Quarter 2012 Conference Call. Just a reminder, today's call is being recorded. Before we get started, one 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 for this call. At this time, for opening remarks and introduction, I would like to turn the call over to the Chairman and CEO of Cobalt, Mr. Joe Bryant. Please go ahead, sir.

Joseph H. Bryant

Good morning, and thank you for joining us on Cobalt's Third Quarter 2012 Earnings Call. I'm joined on today's call by John Wilkirson, our Chief Financial Officer.

Before I get into my prepared comments this morning, I would like to say that our thoughts are with all of our fellow Americans and shareholders who are affected by Sandy. Having gone through numerous similar storms, all of us at Cobalt understand and empathize with their current circumstances. At this time, we wish for nothing more than your safety and the safety of your family.

I'll begin by discussing our third quarter operational activities and a few plans for the near term. I will then turn the call over to John for a discussion of our financial results. Our overall objective in the third quarter was and continues to be to move all of our catalytic events closer to value realization for our shareholders. While I'm disappointed that we had to delay the production test in the Cameia #2 well from the third quarter, I am pleased to report that we continue on track to deliver results in the near term for our North Platt and Shenandoah wells in the Gulf of Mexico and have made significant progress moving our previously-discovered Cameia and Heidelberg fields to first production. The progress that we continue to make is setting a stage for a very exciting fourth quarter and a catalyst-rich 2013. All of our current and near-term activities have the potential to deliver immense shareholder value in the coming year.

As I announced in our second quarter earnings call, the Cameia #2 appraisal well offshore Angola reached its total depth on July 4. After obtaining encouraging logging results, we planned to perform a production test in the lowest interval to provide further insights into a new, potentially productive deeper zone in the field. However, we were delayed due to numerous mechanical malfunctions of the Ocean Confidence drilling rig, causing us to release the rig to Diamond Offshore Drilling for repairs before we could perform the production test. Since the rig release, we have evaluated other rigs, which may be available to perform the production test while closely monitoring the status of the Ocean Confidence rig and when it may be able to return to conduct the test. As of today, we believe that the most likely option is to use the Ocean Confidence, which is expected to return before year end, allowing us to conduct the production test sometime in the next 45 to 60 days. Based on this timing, the earliest that we will be able to report results is late in the fourth quarter.

Moving to the deepwater Gulf of Mexico. We spud the North Platte #1 exploratory well on Garden Banks Block 959 on July 3, with the Ensco 8503 drilling rig. The Cobalt-operated North Platte prospect is a 4-way inboard lower tertiary structure that lies in the heart of the emerging inboard lower tertiary plate. Cobalt holds a dominant position in this exciting play with numerous follow-on inboard lower tertiary exploratory prospects. Drilling on this well is proceeding as planned and we continue to expect that we will announce the results of this well by year end.

Appraisal drilling operations continue in the Anadarko-operated Shenandoah field. We and our partners are drilling a well that will appraise the Shenandoah inboard lower tertiary oil discovery announced in 2009, where more than 300 feet of net oil pay was discovered. Progress on the appraisal operations has been slower than anticipated but we are hopeful that we will have well results in the next few months.

Back in Angola, we continue to work closely with our Cameia partners and the concessionaire to advance our Cameia super pay development, planning efforts in order to help us achieve production from the Cameia field in a timely manner. We anticipate employing a phased development approach and are currently pursuing the ordering of critical long-lead subsidy equipment and evaluating FPSO options for this development project. We are anticipating a final investment decision on the first phase of this development project to be made sometime in 2013. If we maintain this schedule, I continue to believe that we will begin production at Cameia in early 2016.

In the Gulf of Mexico, the Heidelberg partnership is continuing the pre-FEED work and is evaluating development solutions with the objective of advancing commercialization of Heidelberg as a standalone development. First production for this development is also anticipated to be in 2016. As I announced in our second quarter earnings call, Cobalt was the high bidder on 10 Gulf of Mexico blocks in the Central Gulf of Mexico lease sale held on June 20. I'm pleased to report that Cobalt has been awarded leases on all 10 of these high bid blocks, which has added 2 new prospects to our inventory and added adjacent blocks to 2 of our existing prospects.

Turning our attention towards 2013, there's no doubt that the next 12 to 14 months will be the most exciting time in our history. In the Gulf of Mexico, we will follow the North Platte well by drilling both Ardennes and Aegean. Ardennes has both Miocene and lower tertiary potential and Aegean is another of our numerous inboard lower tertiary prospects in the greater North Platte area. Cobalt operates both of these prospects. We also anticipate that at least 1 outside-operated exploration well will be drilled in the Gulf of Mexico next year.

In Angola, we will have 2 Cobalt-operated drilling rigs running for the better part of 2013. We have several prospects that we intend to drill next year in this exciting new exploration project. In Block 20, we have recently completed our new 3D Seismic over the Lontra prospect and I'm happy to tell you that the prospect appears to be a very large pre-salt structure, significantly larger than Cameia, for example. Lontra results are a bit shallower than in Cameia, which implies shorter drilling times and lower drilling costs. It now looks like we will be prepared to spud Lontra late in the first quarter or early in the second quarter, with results sometime midyear. We also have numerous additional prospects in Block 20 that appear to have excellent follow-on potential after Lontra. In Block 21, we have the Mabinga and Bicuar prospects approved and ready to drill. We're also aggressively maturing additional prospects on Block 21.

In Gabon, we expect that TOTAL as operator will spud our much anticipated Mango prospect on the Diaba block sometime in the first quarter. Again, our new seismic data over Diaba has revealed significant follow-on potential on the block. So put all of that together, in 2013, we plan to drill Ardennes, Aegean, Lontra, Mabinga, Bicuar, Mango and at least one more outside-operated Gulf of Mexico well. That is absolutely an all-star lineup of top-tier global exploration prospects by -- as measured by any standard or in any portfolio.

I will now turn the call over to John, who will review our financial results.

John P. Wilkirson

As reported in this morning's release, for the third quarter of 2012, Cobalt's net loss was $39 million or $0.10 per basic and diluted share. Our net loss for the quarter was in line with the current first call consensus and consistent with recent quarters after adjusting for impairment. Our cash expenditures, excluding working capital, chart [ph] changes for the quarter, were $129 million. Of this, over $90 million was associated for drilling activities in Angola and the Gulf of Mexico and about $19 million for leased acquisitions, mainly for the leases awarded from the 2012 Central Gulf lease sale. For the full year, our cash expenditure forecast, excluding working capital changes, remains unchanged at $550 million to $650 million. We plan to release our 2013 cash expenditure estimate early next year.

Our balance sheet remains strong, with approximately $1.5 billion, consisting of $1 billion of unrestricted cash and investment plus about $485 million of cash and investment designated for future operations held in escrow and collateralized letters of credit. I'd like to point out that our unrestricted cash balance will increase and our restricted cash balance will decrease by about $90 billion in January of next year when that amount of money is released per the terms of our infield letter of credit. In addition and not reported on our balance sheet are the drilling promote funds of $110 million for our Gulf of Mexico program with TOTAL. We continue to have no debt.

We expect our fourth quarter 2012 earnings will align with our cash expenditures. The primary earnings uncertainty will be either a capitalization or expensing of the cost following the results of individual exploration wells. In addition, we anticipate having approximately $4 million to $6 million of non-drilling, non-cash related earnings item in the quarter.

I'll now turn the call back over to Joe.

Joseph H. Bryant

Thanks, John. I'll wrap up the prepared portion of today's call by saying that while we didn't see new well results in the third quarter, we're making great progress towards delivering a near constant stream of results for our significant prospects and activities later this year and all through to 2013, both in West Africa and in the Gulf of Mexico. And as we've always done, we will communicate any results that we have to you all on a timely basis.

I now look forward to any questions that you may have. Operator?.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Brian Singer with Goldman Sachs.

Brian Singer - Goldman Sachs Group Inc., Research Division

In Angola, I believe you had always thought of Lontra as a bigger size prospect than is in Cameia. Was it the shallower nature of the reservoir that was the key conclusion from the 3D Seismic results? And can you talk to any new learnings from data processing in recent months that you may have on the main Cameia reservoir where you're planning development?

Joseph H. Bryant

As I understand, I think you had 2 questions there, Brian. One was any key learnings on the seismic on Lontra, is that right? And then any key learnings on Cameia? I wanted to make sure I heard you right.

Brian Singer - Goldman Sachs Group Inc., Research Division

That's right.

Joseph H. Bryant

Yes, I think the -- while we may have suspected Lontra would have been a bit shallower, our current seismic interpretation confirms that it is shallower, so it's good news all the way around that it is both shallower and it is large, so very good news on Lontra. As far as the Cameia goes, I guess I would say that it's probably in 3 parts to answer that question. One is all of our development planning work is proceeding apace with no surprises there. I think the reservoir analysis of the super pay zone has yielded no surprises and certainly, we believe we have enough resource there for a partial development. Thirdly, we have seen nothing in our reanalysis of the deeper zone to tell us that we should be discouraged about the upcoming test. But as we've said, we've just got to get some perforations in that pipe and test it to see what it will produce, so no bad news in any of that.

Brian Singer - Goldman Sachs Group Inc., Research Division

Great. And then as we look ahead to what could be a couple of announcements coming up at the end of the year, North Platte and then hopefully the flow test at Cameia 2, could you just remind us of your expectations going in, so when we hear your comments, we know how to put it in perspective?

Joseph H. Bryant

Can you help me with the question? I'm not sure I understood exactly what you're looking for there, Brian.

Brian Singer - Goldman Sachs Group Inc., Research Division

Can you just talk to the -- your pre-drill expectations for what we think we were going to learn both from the flow test of the deep reservoir and how to put that into context with the rest of Cameia and then expectations for North Platte? That way, when we read -- potentially read a Christmas Eve type press release, we know how to put it into context.

Joseph H. Bryant

Yes, I think the real question -- we have a couple of questions on North Platte that need to be answered, one is our geologic model correct, so the stratigraphic sequences were where we would've expected them to be? And then 2, do we encounter reservoir rocket depth? So that's -- what I would be looking for is that, did we drill the well we thought we'd wanted to drill? And do we think we have hydrocarbon column in reservoir rock at North Platte, and as of today, I can't answer either one of those. At Cameia, as I've said many times to a lot of you, the real issue there is can it flow it all and what kind of oil does it flow? we're not so much concerned about the rate, at least I'm not, I'm more concerned about, does it have flow potential at all? And because of -- as we talked of problems we had or the hole conditions when we drilled that deep zone, we weren't sure what our logging results were telling us. We're encouraged by what they say, but we just don't know for sure. So I'm hopeful that we get any flow rate. Of course larger flow rates will make us a lot happier on Christmas Eve than lower flow rates, but we just don't know yet.

Operator

Our next question comes from Michael Scialla with Stifel, Nicolaus.

Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division

It looks like Anadarko reported yesterday that they're participating in a couple of additional inboard lower tertiary exploration prospects. Wondering if you're familiar with those and if those might have any bearing on either Ardennes or Aegean.

Joseph H. Bryant

I didn't listen in on their conference call, so I don't know which they're talking about. But no, I think they're drilling an offset or there is an offset well to the south of Shenandoah that we're watching. That's interesting, I believe. The name of that well is Yucatan. It doesn't necessarily have any impact one way or the other on any of our prospects. And really, in North Platte, that well is a long way from any prospects at this point, so it's a key well for the industry as well as Cobalt.

Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then, switching over to Angola, you've laid out what you plan to drill on the exploration side next year. Any plans to drill any development at Cameia?

Joseph H. Bryant

No. Not next year and the reason for that, of course, is that it doesn't make any sense to drill development wells until you can time the completion of those wells to a facility that's in the field. So assuming end of 2015, early 2016, before we would be ready to go, we would time the development drilling wells to coincide with first production.

Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division

No need for any additional appraisal there?

Joseph H. Bryant

Not at all.

Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And I think in the D&M report for Cameia, they had estimated 25,000 acres for a mean case. Was that based on the sag only or did that include some of the syn-rift as well?

Joseph H. Bryant

That would include the syn-rift and we're still not able to confirm or refute that larger reservoir size based on what we've seen to date. This next test result will help us form a judgment around that, but as of today, we can't have a good opinion one way or the other about that larger footprint of Cameia.

Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And just one last one. It looks like when I look at a lot of the discoveries in the Santos and Campos basins at -- like Ulla [ph] and Franco and some others that looks like the sag and the syn-rift may be in pressure communication where that doesn't seem to be the case at Cameia. I just wonder if there's any other discoveries in Brazil that you think might be better analog for what you have at Cameia.

Joseph H. Bryant

We don't have a perfect data set for all of the data in Brazil. And of course, we're in the very, very early stages of analysis of Kwanza Basin. So that's a conversation that I think we'll be able to have with you say a year from now or 18 months from now, but anything I say today would just be conjecture.

Operator

Our next question comes from Joe Allman with JPMorgan.

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

So I missed your comments at the beginning of the call. So it appears that you're looking at the Ocean Confidence as the most likely option, where you're conducting the Cameia 2 flow test and if that's the case, can you just give us some details around that? Do you expect to get that back within the next few weeks or when? And then, will you have the results by year end? Or is it possible it bleeds into early 2013?

Joseph H. Bryant

What I said, Joe, was we've looked for several alternatives for that flow test and as of today, it looks like the Ocean Confidence is the most likely scenario. And we're anticipating, sometime in the next 45 to 60 days, that the rig will be headed back or be back to Angola and that we'll get the test off and report results -- kind of the earliest, in my opinion, is going to be right at the end of the year.

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

Okay. But is it -- there's also a chance that it will be early next year, I guess, it only gets people to [indiscernible].

Joseph H. Bryant

Yes, it totally depends on when the rig comes back. We're ready to go, the well's ready to go. We just got to get a reliable rig out there to test the well.

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

And then once you get the rig, how long does the actual flow testing operation take?

Joseph H. Bryant

It doesn't take that long. It takes probably about 10 days to get rigged up and ready to go. From -- the bookends on the test are probably 25 to 30 days, but that includes the abandonment of the well itself. So it takes a long time to actually run all the jewelry in the well, so I'm going to say 15 days or so once the rig shows up in the field before we would have test results.

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

Great. And then, Joe, when -- Joe, when you gave the list of wells, exploration wells for 2013, I counted 8 wells, including the one that's operated by someone else in the Gulf. Is 8 the right number?

Joseph H. Bryant

That's close enough. But for now, that's what our expectation is.

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

Okay. I'm just checking with you on this one. And with North Platte, so what -- just remind us what your pre-drill expectation is for reserves there? And are -- you feel pretty confident we'll get a result by year end?

Joseph H. Bryant

Yes, the D&M numbers on that were around 400 million to 800 million barrels.

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

Is that a P50 number or...

Joseph H. Bryant

It's kind of a range depending upon which D or P number you want to use, so that's kind of the range about times [ph] for it. I think, obviously, 800 million would be a lower probability and the 400 million would be more of the mean.

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

Okay, got you. And then your confidence in getting results by year end?

Joseph H. Bryant

No reason to believe we won't have results by year end.

Operator

[Operator Instructions] And our next question comes from Al Stanton with RBC.

Al Stanton - RBC Capital Markets, LLC, Research Division

I'm just trying to make an estimate for next year's spending and I was just looking at the wells and wondering whether this sort of a ballpark of $100 million to $150 million a well is still a reasonable number or whether you would pick out any wells as being particularly cheap or expensive. And then also in terms of -- do any benefit from carries and then I appreciate you spend more money than just on the drilling. Is -- how much seismic would we anticipate next year? Is it -- would that be a significant portion of next year's budget or would an estimate just north of the drilling costs be reasonable as a starting point for next year?

Joseph H. Bryant

Yes, as we said Al, we'll have a tentative guidance on spending for next right after the first of the year, which we're still pulling together. But I would say that the seismic spend in 2013 will be de minimis compared to the drilling spend next year. So as a general principle, I think you're right on that well costs will be what drives our spending in 2013.

Al Stanton - RBC Capital Markets, LLC, Research Division

All right. Okay. And then just finally going back to Capetz [ph]. When you're talking about -- you're hoping the well would flow well or flow rather than specifically the rate. How much of that is to do with the quality of the well and how much of that is to do with the reservoir?

Joseph H. Bryant

That's the question we're trying to answer, to be honest. Again, the word we use is regatzy [ph] the hole was much bigger because of the way it was drilled than the diameter of the drill bit and because of that, we're not -- we're not sure what we can believe in our log analysis, so we're trying to -- we're going to test the well to try to understand whether the well is -- we're seeing representative flow rates from the rock itself or there's a situation with the geometry as well where we do have -- I mean, we stimulate the well to make sure that we are connected to the reservoir, but this is a lot of speculation at this point. We'll just have to test the well and see what we end up with.

Operator

Our next question comes from Richard Tullis with Capital One South.

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

Joe, based on what you know thus far at Cameia, what do you estimate the reserves at right now?

Joseph H. Bryant

Well, we don't have reserves, strictly speaking, until we have an investment decision that confirms reserves. I just want to make that point clear. What I've always said in terms of resource is that we have, I think, unequivocally proven enough resource for a first development project and I've always quoted a minimum side of somewhere between 100 million and 150 million barrels to justify a first phase development. Obviously, I'm hopeful there's a quite a bit more than that there. We wouldn't be doing it if we didn't have the optimism there were more barrels there, but that's all we're quoting right now between Cameia 1 and Cameia 2.

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

Okay. And I know to get to the larger number put out there by D&M is a potential. You have the Cameia 2 flow test planned for late this year and then really not another well planned until you get closer to the development. And what do you have to see to move you toward the higher number? Is it something further out, a couple of years out before you get to that number?

Joseph H. Bryant

Keep in mind that's a 3-dimensional problem, one is -- one dimension is depth. We've got to see how much deeper these hydrocarbons go on the structure, both in the super pay zone, which we still haven't seen any water contact on that structure. And we'll find that out later on as we drill development wells. And secondly, how much oil is producible and can become reserves is in that middle zone and that lower zone and we'll answer some of those questions with this flow test coming up in the lower zone. And then that information will instruct us in terms of how much appraisal drilling we do on that deeper zone that's unrelated necessarily to the upper super pay.

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

Okay. That's helpful. And just finally...

Joseph H. Bryant

Keep in mind that D&M's number is related to all of those intervals not just at super pay, so all we're really talking about when I quoted those numbers were the super pay itself.

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

Okay. And then just finally, any idea yet on looking forward, expected development cost, net to Cobalt for Cameia? What could we look for, on a yearly basis, some sort of range?

Joseph H. Bryant

Yes, I don't want to get into those numbers now because the team is pulling all those together and I don't want to preempt any of the work they're doing. But when we have them and we're ready to sanction the project, I'll sure communicate those to you.

Operator

And a follow-up question comes from Joe Allman with JPMorgan.

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

Joe, just on Cameia, obviously, you're working on the flow test for Cameia 2, but can you just give us the sequence of events and the timetable that you see right now towards development to get us to first production?

Joseph H. Bryant

That's pretty simple, Joe. Again, this flow test, I want to make sure everybody understands, is almost completely unrelated to the phase development project that we have in mind for the super pay. So if you call upside, the deeper zone produces. As far as the super pay goes, there's several different streams of analysis that are going. One is the actual reservoir engineering, which takes into account the kinds of fluids that we have, pressure maintenance that obviously will be involved and then another stream of work is the engineering, around the subsea equipment itself that sits on the seafloor and feeds back to a floating FPSO, and we're doing both of those bits of engineering independently right now. So you got reservoir engineering, which will feed into the drilling engineering and then we've got subsea engineering and then we've got the floating engineering. So all of those things are underway and that leads us to believe that we can get the field online sometime, first quarter of 2016 based on all the data we have right now.

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

And then -- and how many wells would you expect you would need to get to first production?

Joseph H. Bryant

We'd probably have 5 wells in that development.

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

And I'm assuming that you would drill most of them or the rest of them in 2015, I guess.

Joseph H. Bryant

Yes, we would obviously make sure we had them all drilled in time to fill the facility. And then we just have to look at how long it's going to take to drill and then we back up from there and get the rig out there and drill them.

Operator

And our next question comes from the line of Matt Portillo with Tudor, Pickering, Holt.

Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Just a few quick questions for me. I just wanted to discuss the commercial threshold a little bit further. Are there any specific deals that you're looking at to run the analysis on 100 million to 150 million barrels for the commercial threshold? And the reason I ask is I think most of your Brazilian peers in the pre-salt tend to need something between 250 million and 300 million barrels of recoverable resource-plus to kind of reach a commercial threshold. So I'm just trying to distinguish kind of your views on that and maybe if this is just a conservative estimate at this point on your part.

Joseph H. Bryant

Well, I don't know whether it's conservative or not. I think it's -- the numbers are the numbers. When we run our analysis based on scoping estimates of cost, which have a very wide range, and our analysis suggest that these projects are economic in that range of resource. So obviously, with more resource, they get more economic. And I really can't comment on the South American economics. Of course, they're completely different fiscal term, so I can't make that direct comparison for you.

Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Okay. And then in terms of the FPSO, have you -- as you mentioned phase development, have you determined what sort of FPSO you'd be looking on a throughput perspective?

Joseph H. Bryant

There's a handful of FPSO that we're looking at right now. I would say, nominally, these FPSOs are used for this kind of servicer in the range of 100,000 barrels a day plus or minus a few tens of thousands, but that's the general range of the spec on these FPSOs.

Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Great. And then just a final question. You've reprocessed your regional seismic. Could you talk a little bit about your ability to image salt seal and kind of your confidence around that? And then potentially, just discuss a little bit I guess on Lontra, how you guys are thinking about geological risks and maybe what your biggest concerns are for the Lontra prospect.

Joseph H. Bryant

We don't have any real concerns at all about our ability to seismic image the salt interface -- was that your first question? I was having trouble understanding. I think that was what you're asking. So we don't have any real issues about our ability to see the salt. Now we obviously can't guarantee from seismic that it seals, but based on everything we have seen out there, we don't have that as a high risk at this point. In terms of Lontra, the biggest risk we see on Lontra is the field is so big that we want to make sure that our first wells on the structure are in the locations which have best reservoir rocks. So strictly speaking, we're not looking to drill -- we're not developing one location on Lontra. There's several locations on Lontra that look feasible for the first wells.

Operator

And our next question comes from Ed Westlake with Crédit Suisse.

Edward Westlake - Crédit Suisse AG, Research Division

But just following on from that salt seal question, there were some concerns expressed recently that the salt thickness in the basement highs may not be thick enough to provide a seal. From your statements on the previous question, I feel it's as if that's not something you're concerned about, but maybe talk about how the salt thickness varies as you go from the sort of the flanks up until the basement seals which is where some of the best rocks are?

Joseph H. Bryant

What we -- what I can say is that we've always -- before we drill wells out there, we have in the back of our minds how thick a salt section did we need to form the seal and what we can say is we had -- as you've heard me say several times, when you look at the dozen or so wells that have penetrated the pre-salt out there, we've -- these are historic wells, not recent wells. Virtually, every one of them has found hydrocarbon when they penetrated the salt. Some of the salt thicknesses have been remarkably thin. And so at this point, we just have not seen any seal failures due to base of salt. That doesn't mean that will always be the case. We do see salt thinning on the top of the structures, but at this point, we're pleasantly surprised that the salt and the shales that are right above the salt seem to be very, very effective in terms of sealing the hydrocarbons generated in the pre-salt.

Edward Westlake - Crédit Suisse AG, Research Division

Right. Do you think the shale is contributing as well to the sealing or...

Joseph H. Bryant

I'd say we hope so, but it doesn't make any difference to us whether it's the shale or the salt, but it seems like it's working.

Edward Westlake - Crédit Suisse AG, Research Division

Right. And then 2 very short questions which you may have covered, apologies for that. When are you going to spud or when is TOTAL going to spud Gabon, do you know? Any update on the timing?

Joseph H. Bryant

I don't have the updated timing. What they're telling us is sometime in first quarter. And I can't tell you if it's January 1 or March 15. So we'll keep you posted on that and I'm sure they will as well.

Edward Westlake - Crédit Suisse AG, Research Division

And in terms of the -- how long it will take to drill that well?

Joseph H. Bryant

I haven't seen that. I don't have it on the top of my head. We'll get back to you on that, okay?

Edward Westlake - Crédit Suisse AG, Research Division

Okay. Great. And then timing on reaching TD on North Platte?

Joseph H. Bryant

Between now and the end of the year, I hope to be talking to you about those results.

Operator

And Mr. Bryant, there are no further questions at the queue at this time. I'd like to hand it over now back to you.

Joseph H. Bryant

Okay. Well, listen. I certainly appreciate everybody's efforts to be on the call today. As I said earlier, our efforts this quarter have been to set the stage for a steady stream of catalyst over the coming year and as we all know, I think any one of these has the potential to deliver enormous value to our shareholders.

Finally, again, I want to express my concern for all of you on the East Coast, having lived through that unpleasant circumstance, we can relate and know how unpleasant it can be without creature comforts that we're all used to. So good luck to you all, and if you have any follow-up questions, please don't hesitate to get in touch with us here at Cobalt. Thanks, again.

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