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Anadarko, Cobalt shares rise on oil discovery

NEW YORK (AP) -- Shares of Anadarko jumped Wednesday, as did shares of Cobalt International Energy, after they announced a large oil discovery in the Gulf of Mexico.

THE SPARK: Anadarko and Cobalt said after the markets closed Tuesday that their Shenandoah-2 test well encountered more than 1,000 feet of oil pay, marking one of their largest discoveries ever in the Gulf of Mexico.

THE BIG PICTURE: Anadarko, based in The Woodlands, Texas, whose shares hit a 52-week high last week, is still a debt-heavy company. The company had about $13 billion in long-term debt at the end of last year. It sold a sizeable stake in an East African energy field recently, potentially providing funds to generate finds like the one announced Wednesday.

Anadarko has a 30 percent working interest in the well, while Houston's Cobalt has a 20 percent stake. The other owners include ConocoPhillips with a 30 percent stake, privately held Venari Resources LLC with a 10 percent stake and Marathon Oil Corp. with a 10 percent stake.

Anadarko said the well was drilled to a total depth of 31,405 feet in about 5,800 feet of water. It plans to do additional test drilling to help move the "potentially giant" project forward. Cobalt called the results so far "extraordinary."

THE ANALYSIS: Citi analyst Robert Morris backed his "Buy" ratings for Anadarko, Cobalt and Marathon, saying that the Shenandoah deposit could potentially contain between 500 million and 1 billion barrels of oil equivalent with the first oil expected in 2017.

Morris said the Shenandoah deposit could boost Anadarko's profits by between $3 and $6 per share, Cobalt's by $2.50 to $5 per share and Marathon's by 75 cents to $1.50 per share.

THE SHARES: Anadarko Petroleum Corp. rose $2.97, or 4 percent, to $83.28 after peaking at $87.48 earlier in the day and marking their highest price in more than a year.

Cobalt International Energy Inc. rose $2.21, or 9 percent, to $28, after reaching $28.56 earlier. Over the past 52 weeks, that company's shares have traded between $19.69 and $32.32.

Meanwhile, ConocoPhillips rose 69 cents to $60 and Marathon added 35 cents to $34.31.