Cobalt International Energy (CIE), an exploration and production company with its head office in West Houston was warned by the New York Stock Exchange (NYSE) that it could be delisted as the overall value of its shares has dropped below the exchange’s $50 million market capital threshold.
The company says it will submit a plan to the NYSE within 45 days detailing its plan to return to compliance within 6 months.
Back in March, it received a notice from the NYSE because its share price dropped below the requirement of a $1 minimum average closing share price. It resolved that by completing a 1-for-15 reverse stock split in June. After that split, the shares traded at $3.15 per share. They closed today at $1.17 per share.
Cobalt is heavily in debt and has been trying to sell assets in deepwater Gulf of Mexico and offshore Angola to avoid Chapter 11. At the end of June, the company had $600 million of cash and cash equivalents It has long-term debt with a face value of $2.5 billion, though bonds are trading at nearly a 50% discount to that. It has to maintain a cash balance of at least $200 million to comply with one of the debt covenants. If it doesn’t sell any assets, the company expects to breach that covenant in early 2018.
The financial prospects for the company suffered a big setback in August 2016 with the collapse of its deal to sell its 40% interest in fields in offshore Angola to Sonangol, the state oil company for $1.7 billion. The deal was terminated because the Angolan government didn’t approve the deal. The company is now suing Sonangol.
Don’t feel sorry for the CEO Tim Cutt and CFO David Powell though. In August 2017, the CEO received a $4 million lump sum cash payment and the CFO $1.5 million. These are retention payments designed to keep the executives at the company for the next year. Both executives joined the company in July 2016. Cutt has an annual salary of $1 million and received a bonus for 2016 (paid in March 2017) of $875,000 while Powell has an annual salary of $510,000 and received a cash bonus of $322,000.
When the CEO joined the company he was granted stock worth $4 million. With the drop in the share price, that stock is only worth around $250,000 now, so it appears the retention payment is, in effect, a make-whole payment.
Other key employees received retention payments of $10.6 million.