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Cobalt (CIE) Reduces Debt Burden by $339.2M in 6 Months

Zacks Equity Research

Houston-based Cobalt International Energy, Inc. CIE has lowered its debt burden over the past six months by about $339.2 million through a series of debt exchanges.


Per a filing with the Securities and Exchange Commission, Cobalt issued $32.142 million in 7.750% second lien senior secured notes, due 2023, to some of its debt holders. The notes were issued in exchange for $60.932 million in convertible senior notes, due 2024, at 3.125% annual interest,earlier this month as part of the most recent of these financial exercises.


Per the filing, Cobalt has reached the limits of its ability to issue second lien secured notes under its senior secured indenturesin this final exchange. However, Cobalt declined to disclose further details.


Cobalt’s debt load has been eased by the exchange. We believe that the timing is extremely favorable for the company as it is already burdened with many other major problems.


James Painter, the president of exploration and appraisal, resigned in April just after four months of being in the job. Cobalt also faces a riskof being delistedfrom the New York Stock Exchange (NYSE) because its share price has fallen below the level allowed by the exchange. The 30-day average of the stock dipped below $1 per share on Feb 22, which means that the companyhad six months to return its share price to above $1 and keep it there long enough to get its 30-day average above that level, per the NYSE rules.


Cobalt is working on a strategy of a reverse stock split. In a recent vote, the company's shareholders approvedthe board to take that action, should the directors deem it necessary.


Recently, the U.S. Department of Justice closed a Foreign Corrupt Practices Act investigation into Cobalt’s operations in Angola. Notably, the company was sparedfrom regulatory actions.


Tim Cutt, the CEO of Cobalt, took control of the company in Jul 2016. Earlier,Cutt had served as the president of petroleum for BHP Billiton.


Cobalt’s price chart, however, is unimpressive. Shares of the company have lost 62.5% in the last three months, while the Zacks Oil& Gas – Exploration & Production – U.S. industry registered a decrease of 10.7%.

Cobalt currently has a Zacks Rank #4 (Sell). Some better-ranked stocks from the same space include SunCoke Energy, Inc. SXC, Enbridge Energy, L.P. EEP and Canadian Natural Resources Limited Ltd. CNQ. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see  the complete list of today’s Zacks #1 Rank stocks here.


SunCoke Energy posted a positive earnings surprise of 120.0% in the preceding quarter. The company beat estimates in two of the four trailing quarters with average negative earnings surprise of 35.78%.


Enbridge Energyposted a positive earnings surprise of 128.57% in the preceding quarter.The company beat estimates in three of the four trailing quarters with average positive earnings surprise of 38.22%.


Canadian Natural Resources posted a positive earnings surprise of 30.77% in the preceding quarter. It surpassed estimates in two of the four trailing quarters with average negative earnings surprise of 275.46%.


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