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2014 Annual Report
LETTER TO
SHAREHOLDERS
2014 will be remembered as a year of great operational success for Cobalt,
but due to the precipitous decline in oil prices, you, our shareholders were
unable to realize a commensurate financial reward through growth in our
share price that you would have rightfully anticipated. Our industry has
faced, and continues to face, extraordinary headwinds due to the significant
reduction in oil prices driven by a basic oversupply of crude. For Cobalt, we
have always believed that it is sound essential business practice to grow the
company based on long term fundamentals while always protecting the
business from near term threats caused by any external factor, whether it is
commodity price decline, regulatory change, or any other circumstance
outside of our control.
That has always been our model, and remains so today.
On behalf of Cobalt’s Board of Directors, I want to assure
you that our first priority is, and has always been, to fiercely
protect our balance sheet while also protecting the
significant intrinsic value of our assets.
Ten years ago, we started this company believing that we
could generate superior returns for our investors in a price
environment that was quite similar to the price environment
we are seeing today. We believed then, and we believe now,
that deepwater barrels, if found in large scale volumes can
generate high returns that are the most attractive in the
industry in any price environment. We fundamentally
believe that over time market forces will bring the costs of
goods and services in alignment with the long term view
of commodity price. However, there will be discontinuities
like we witnessed at the end of 2014 and are still seeing in
some sectors today, where the commodity price has
dropped, but the costs of goods and services have lagged
in their decline. We have already seen a near collapse in
the oshore drilling rig market which will eventually translate
into benefits for Cobalt, and we expect that with continued
lower oil prices we will witness deflationary cost pressure
on all sectors of the service industry.
As a wrap up of our 2014 performance, it is important to
recognize that we delivered our 2014 operational successes
with continued focus on the health, safety and security of
our team members, both employees and contractors, as well
as protection of the environment. In support of this important
focus, Cobalt’s Board initiated an annual Ray Britt Safety
Award to be given to an individual or team that exemplifies
extraordinary Health, Safety, Security and Environment (HSSE)
leadership above and beyond that required of the recipient.
This award is in memory of one of Cobalt’s extraordinary
leaders in HSSE stewardship, who lost his battle with illness
in 2014, but whose impact is still felt every day among the
Cobalt team.
During 2014, we remained focused on delivering long term
value for our shareholders, despite the commodity price
decline. We did this by continuing our unprecedented
track record of exploration success by drilling two significant
discoveries in Angola at Orca and Bicuar, and one significant
discovery in the Gulf of Mexico at Anchor. In addition, we
successfully executed a $1.3 billion convertible financing,
which will provide the liquidity we require to pivot our
exploration success into production and cash flow.
Joseph H. Bryant
Chairman and Chief Executive Ocer
