Bonanza Creek, Cobalt International Tumble as Oil Woes Mount

  • Bonanza Creek: ’substantial doubt’ about ability to continue
  • Cobalt says Angola sale to state oil company now unlikely

Oil explorers Bonanza Creek Energy Inc. and Cobalt International Energy Inc. both tumbled in New York trading Tuesday after reporting second-quarter losses and mounting financial concerns amid the global slump in crude prices.

Bonanza Creek shares fell 3.85 percent to 77 cents at the close of trading, after earlier dropping as much as 25 percent to reach its lowest price since the stock began trading in 2011. The Denver-based driller said in a statement Monday that it would skip a payment due on $300 million in bonds and had “substantial doubt" about its ability to continue as a going concern.

The company also said its financial problems had forced it to scrap plans to sell drilling properties in Arkansas and Colorado, and that it was uncertain it could meet contracts to supply oil as soon as next month. Bonanza Creek said last month that it had hired Perella Weinberg Partners to help evaluate “financial and transactional alternatives" including a possible restructuring.

The earnings report, which included a $49.5 million quarterly loss, offered “bad news galore," wrote Phillips Johnston, a Capital One Securities analyst in New Orleans, in a note to clients Tuesday. Bonanza Creek is “running out of viable options to remain solvent, especially if it cannot sell assets because potential buyers are spooked."

Cobalt International, meanwhile, fell 28 percent to close at 98 cents after earlier declining as much as 44 percent. In a statement Tuesday, the Houston company said a planned sale of $1.75 billion of offshore assets in Angola was “unlikely" to go through after a meeting last week with the state-owned oil company, Sonangol.

The two sides decided Cobalt would be best to find other buyers at the meeting with Sonangol Chairwoman Isabel dos Santos, the billionaire daughter of Angolan President Jose Eduardo dos Santos. Cobalt will begin marketing the properties immediately and wants to close a deal this year, Chief Executive Officer Tim Cutt told analysts on a conference call Tuesday.

Cobalt last year said the U.S. Securities and Exchange Commission had ended a probe into allegations that senior Angolan government official had connections to a local company with a stake in the Cobalt operation. The SEC recommended no action against the explorer. In a regulatory filing, Cobalt said it was still cooperating with a parallel investigation by the U.S. Justice Department.

The driller also said it had to write off $150 million in expenses in the second quarter, after failing to strike oil in its Goodfellow well in the Gulf of Mexico. Cobalt reported a net loss of $200.4 million, or 49 cents a share, in the quarter.

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