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Cobalt falls after SEC Angola corruption case moves forward

ZAIN SHAUK

HOUSTON (Bloomberg) -- Cobalt International Energy Inc. fell more than 10% after it reported a government corruption investigation into its Angola operations may lead to an enforcement action against the global oil producer.

Cobalt, based in Houston, received a Wells Notice from the U.S. Securities and Exchange Commission alleging violations of certain securities laws, the company said August 5 in a filing. The notice is part of an investigation dating back to 2011 examining whether Cobalt may have violated the Foreign Corrupt Practices Act in Angola, one of its biggest regions for investment and exploration.

The company said it’s cooperating with the SEC and believes its activities in Angola have complied with all laws.

The notice “is a reminder that, although this potential issue has been around for years, it isn’t going away anytime soon,” according to a Deutsche Bank AG note to investors.

Cobalt fell the most since Dec. 19, 2013, following the news and was down 11% to $14.27 at 12:47 p.m. in New York on August 5.

Cobalt Chairman and CEO Joseph Bryant declined to give specifics about the SEC’s allegations during a conference call with analysts, while saying they were directed at the company, not individuals.

“We understand due diligence,” Bryant said. “We have gone above and beyond in every case and we sit here today confident in our position.”

Angola Assets

Cobalt has operations in several offshore blocks in Angola, including in its Cameia prospect, where the company said it is finishing an appraisal well. In two of those blocks, the company was assigned to partner with Angolan contractor Nazaki Oil and Gaz SA.

Cobalt learned in 2010 of allegations that senior Angolan government officials were connected with Nazaki, the company said in prior SEC filings. In March 2011, the SEC began an investigation into the allegations, which led to the Wells Notice.

Separately, Global Witness, a non-governmental organization campaigning against corruption, said Angola’s use of payments by BP and its partners including Cobalt for a project in the country shows the need to improve transparency in resource industries.

BP and partners agreed to contribute $350 million, in installments, to be used for a research and technology center, Global Witness said in a statement, citing a Securities and Exchange Commission filing. The non-governmental organization said in a statement on its website that it was unable to gain information from BP, Cobalt or Angolan state oil company Sonangol EP confirming that the research center exists.

08/06/2014

 

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