When the general mood in a market is gloomy and the bears have the upper hand, even good news can get overlooked, or rather overpowered. For those with money to speculate with, and a great deal of patience, that situation can often lead to opportunities. That is the case this week with one E&P company.
Cobalt International energy (CIE) announced this week that they had made a “very large” oil discovery at the Anchor #2 well in the Gulf of Mexico. Management did not offer any details as to how large, presumably because CIE is only a 20 percent holder in the well, which is operated by Chevron who have a 55 percent interest. They did, however, describe it as one of their best wells in the Gulf.
The stock did react positively to the news, but as I write it is trading at only about $0.30, or 3.6 percent higher than the close on January 5th, before the announcement.
Pessimism is understandable; should oil continue to fall then it doesn’t matter how much oil you discover. This week, though, there have been signs that a bottom is forming somewhere below $50. There could still be a little further to drop before a turn around, but, as I said a few weeks ago, oil at the $40 level last seen in the depths of the depression makes little sense. Yes, supply has increased significantly since then, but consumption has also continued on an upward path. There may be fears that the rate of increase is slowing, but none of that justifies oil at recession…