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Americas: US cobalt negotiates standby rate for new gulf of mexico rig, seeks sublease

    While waiting for regulatory uncertainty to clear, US independent Cobalt International Energy has negotiated a $200,000/day standby rate for a new deepwater drilling rig scheduled for delivery soon to the Gulf of Mexico, Cobalt CEO Joseph Bryant said Friday.

    Meeting with analysts following release of Cobalt's third-quarter financial results, he said that standby rate for the Ensco 8503 compares with a two-year contract at $500,000/day, now scheduled to begin whenever Houston-based Cobalt is able to put the rig to work on its next deepwater Gulf project called North Platte Number One.

    At the same time, however, Bryant said Cobalt is seeking to sublease the 8503 until later in 2011 once confusion about a new Gulf of Mexico regulatory regime is clarified.

    "We are actively pursuing opportunities to move the rig out of the Gulf early in 2011 and are optimistic that will happen," said Bryant, noting that he would expect it to return in the second or third quarter to begin the North Platte project.

     But, he said the standby rate with Ensco will be in effect for 12 months on the rig, which is en route to the Gulf following construction in Singapore with delivery expected in January.

     Bryant said Cobalt has submitted applications for North Platte and another drilling prospect to the US Bureau of Ocean Energy Management.

    "I don't think that I see much of a leap in the near term, sometime in 2011 it's going to be OK," said Bryant, when asked about his expectation for processing of permits for a resumption of drilling after the end of a government moratorium following this year's Macondo oil-spill crisis.

    "There is just an avalanche of new regulations they are sorting through," Bryant said.

    "The process is a little fuzzy right now," he said. "But we are in the game in terms of providing all the information for both of those wells."

    Besides providing an update on the Gulf, Cobalt also coupled its third-quarter results with announcement of a contract with Diamond Offshore for use of Diamond's Ocean Confidence drilling rig on the first of two wells planned for the company's other deepwater exploration arena, in the pre-salt province offshore Angola.

     Calling the contract a "milestone" for Cobalt and a significant event for Angola, Bryant said the rig should be mobilized by the first quarter at a dayrate of $360,000.
    He said Cobalt worked closely with Angola's national oil company Sonangol to "design a drilling program according to acceptable safety standards."

     "We have focused all our efforts on the pre-salt deepwater of Africa and the subsalt deepwater in the Gulf of Mexico," Bryant said. "We are confident these basins over time will yield attractive returns."

     Founded five years ago as an exploration company, Cobalt does not yet have any production or revenues, and analysts have been watching its business model closely as a wildcatting enterprise focused only on high-risk deepwater activities.

    The company reported a $35 million loss for the quarter ended September 30 on costs of developing its ambitious exploration program.

    Cobalt also has reported $13 million worth of costs from force majeure declarations this year on suspensions stemming from the Macondo-related moratorium on deepwater drilling.

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