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Former BP, Unocal execs form new firm E&P independent Cobalt looking to enter deepwater Gulf with $500M in the bank, a seasoned ‘Dream Team’ Ray Tyson Petroleum News Contributing Writer
Cobalt International Energy and its high-powered team of former BP and Unocal executives have put together a nice bankroll to start accumulating oil and gas leases in the deepwater Gulf of Mexico, a particularly arduous task for an upstart E&P independent with no current acreage whatsoever.
Nevertheless, with $500 million from New York investment banks Goldman Sachs and Carlyle/Riverstone, Houston-based Cobalt is off and running with superior financial support and its dream team.
Moreover, Cobalt management anticipates two more rounds of financial bargaining that could raise an additional $125 million to $250 million from overseas investors.
Company says it expects to be competitive “We expect that from the outset we will be competitive explorers in deepwater Gulf of Mexico and select international basins,” Cobalt Chairman and chief executive Joseph Bryant, a former president of both Unocal and BP Angola, said Dec. 1. “We will immediately hire critical technical team members who are experts in the basins where we will focus.”
Cobalt’s other executives include Vice Chairman Samuel Gillespie, former general counsel of Unocal and Mobil; Vice President of Exploration James Painter, former vice president of exploration with Unocal and Ocean Energy; and President James Farnsworth, former vice president for worldwide exploration and technology at BP.
Last but certainly not least is Laura Munoz, Cobalt’s vice president and general counsel. Munoz is what every new independent requires, an acquisition and merger specialist, the job she holds with New York law firm Wachtell, Lipton, Rosen & Katz. Munoz also holds various degrees from Harvard, Yale and the University of Cambridge, and was once a college professor teaching international relations in Mexico. GOM, international deepwater targeted Led by executives with vast global experience, it’s only logical that Cobalt is targeting deepwater Gulf of Mexico and international hydrocarbon provinces, including West Africa.
“We believe they will create a ‘super-explorer’ enterprise that will deliver great results,” said David Leuschen, co-founder of Riverstone Holdings and managing director of Carlyle/Riverstone Global Energy and Power Funds.
Evidently Cobalt was quick to recognize what could be the last major opportunity for a well-financed independent to latch on to some of the thousands of oil and gas leases set to expire in deepwater Gulf of Mexico.
Bryant and most of his executive team came from companies that are highly active explorers with impressive deepwater records, most notably BP’s Thunder Horse discovery in Mississippi Canyon, the largest find ever in the Gulf with more than 1 billion barrels of oil equivalent. Unocal’s long list of discoveries in the Gulf includes St. Malo, a large ultra-deepwater prospect that helped open the prolific Lower Tertiary play in Walker Ridge.
Unocal and BP also are experienced bidders when it comes to Gulf of Mexico oil and gas lease sales — an important attribute these former executives would bring to Cobalt’s participation in future sales when thousands of previously unavailable deepwater leases start hitting the market next year. High number of GOM leases due to expire With the unusually high number of Gulf deepwater leases expiring over the next three to four years, it’s also no surprise that the stated mission of Bryant and company is to partake of this golden opportunity to acquire prime real estate in the region.
However, this strategy likely would be an expensive undertaking given the expected competition from much larger companies with deep pockets. More likely, Cobalt’s objective would be to partner on leases with the majors and other independents, a common practice in deeper waters of the Gulf where drilling costs are enormous.
The U.S. Minerals Management Service estimates more than 2,500 of these previously leased blocks are scheduled to expire in the 2006-2007 timeframe alone, compared to just 741 leases in the 2004-2005 timeframe, a nearly four-fold increase.
These so-called “newly available” blocks consist of expiring 10-year leases dating back to the Gulf’s boom years when the Deepwater Royalty Relief Act was introduced. MMS believes only about 10 percent of these leases will be explored before expiring, particularly in light of the current drilling rig shortage.
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