NEW YORK (AP) -- Shares of Cobalt International Energy Inc. soared Wednesday, after the company struck oil at one of its deep water drilling sites in the Gulf of Mexico.
THE SPARK: Houston-based Cobalt said that more tests need to be done, but it made a "significant" oil discovery at its North Platte prospect in the Gulf.
THE BIG PICTURE: The prospect is located in about 4,400 feet of water and was drilled to a total depth of about 34,500 feet. Cobalt first attempted to drill the prospect in May 2010, and had a rig on the well location when federal officials put a drilling moratorium in place after the 2010 Gulf Coast oil spill, requiring Cobalt to move the rig off the well location.
Cobalt is North Platte's operator and has a 60 percent working interest in the prospect. Total E&P USA Inc. holds the other 40 percent working interest.
THE ANALYSIS: Citi analyst Joseph Stewart said the discovery confirms the company's geologic model for the area and removes a significant amount of the risk surrounding the quality of the site.
Stewart backed his "Buy" rating boosted his price target for the company's stock by $3 to $40.
THE SHARES: Up $3.93, or 16.5 percent, to $27.71 in afternoon trading, after peaking at $27.96 earlier in the day. Over the past 52 weeks, the company's shares have traded between $8.77 and $36.51.