Cobalt International Energy IPO prices below range

DENVER (AP) -- Cobalt International Energy Inc. hoped investors would contribute more than $1 billion to its search for oil miles beneath the ocean even though it has no proven reserves and it expects no revenue for at least another two years.

But the Houston-based company fell short of its goal Tuesday evening, raising $850.5 million in its initial public offering as it priced 63 million shares at $13.50 each -- below the $15 to $17 range it had expected. Proceeds could reach $978.1 million if the offering's underwriters exercise an option to buy 9.45 million more shares.

Cobalt is a risky bet, say analysts who research IPOs.

Founded in 2005 by a group of private equity investors and longtime oil industry executives, including Chairman and CEO Joseph H. Bryant, whose resume includes stints at Unocal Corp., BP and Amoco, Cobalt has posted losses throughout its history and no one really knows where volatile oil prices will be in three years.

When the company strikes oil, it will take Cobalt additional time to get a well in production, analysts said.

"IPO buyers are looking for financials that are tangible, a revenue stream that's visible and profits. They're not looking for concepts right now," said Scott Sweet, senior managing partner of IPOBoutique in Tampa, Fla., comparing Cobalt to an early-stage biotech firm that still needs to go through four phases of testing to get federal approval.

In 2008, the company had a loss of $71.6 million, compared with a loss of $108.9 million the previous year. The company has lost $322.1 million since its inception.

It is unusual for an oil and gas company to go to the public markets without reserves in place or production under way, said research analyst Nick Einhorn of Renaissance Capital based in Greenwich, Conn.

"There's a lot of risks but I think for an investor who kind of believes in this deepwater opportunity, it is a good way to get 100 percent exposure to that," he said.

Cobalt has developed a proprietary method for exploration that involves analyzing geophysical information, including seismic data. It has purchased leases in the Gulf of Mexico, and off the coast of Angola and Gabon, regions where many major oil companies operate.

It has invested about $1 billion and expects to spend $1.4 billion over the next two years on exploration, Einhorn said.

Cobalt is reaching out to the public markets as the oil industry is recovering from the recession. Oil prices have hovered in the $70 range since early October, up from a low of $32.70 per barrel in January. But supplies have remained high and demand has diminished.

The company aims to raise money to finance drilling and exploration through 2011, capital spending and for general corporate purposes.

Cobalt shares will begin trading under the symbol "CIE" on the New York Stock Exchange on Wednesday.

Gas prices keep climbing as average hits $3.39 a gallon

By James R. Healey, USA TODAY
Oil set a record on Monday — and gasoline tried to.
The nationwide average for a gallon of regular was $3.389, the federal Energy Information Administration reported. That's the highest actual price the EIA has recorded, but still short of the $3.413 that would match the record after adjusting for inflation. That is $1.417 in March 1981.


GOING PREMIUM: More cars are using pricier premium gas

Oil, already at all-time highs, closed Nymex trading Monday at a record $111.76 a barrel, up $1.62 from the Friday close.

"At this point, there's not much reason for prices to come back down," says Peter Beutel, president of energy consultant Cameron Hanover. "Everything's saying it's going to go higher."

Oil rose on a weak dollar and short-term supply worries caused by sabotage in Nigeria and problems on a Midwest pipeline. It ignored short-term forecasts of less U.S. demand and long-term news of what may be the world's third-biggest oil deposit, in deep water hundreds of miles off Brazil. That would take years to develop.

Diesel — the fuel of the semis, locomotives and local delivery trucks that tote goods to keep the U.S. economy going — averaged $4.059. That was up 10.4 cents in a week and $1.182 more than a year ago. It's the first EIA report showing diesel averaging $4 or more. The previous record was $3.989 March 24.

Diesel, like gasoline, skyrocketed in 1981, but even adjusted for inflation, today's price is at least $1 higher.

The EIA's Monday survey showed that the gasoline average jumped 5.7 cents in the past week. If that pace continues, the average would pierce the inflation-adjusted high by the weekend. Monday's price was up 51.7 cents from a year ago.

The government's most recent short-term energy forecast, published last week, foresees a monthly average as high as $3.60 this spring, and cautions: "It is possible that prices at some point will cross the $4-per-gallon threshold."

Some West Coast stations are above $4 for regular, but the only local U.S. average that high is Wailuku, Hawaii, at $4.072, according to a daily price report by the Oil Price Information Service and AAA.

Import prices rise 2.8% in March on a tide of oil

WASHINGTON (Reuters) — U.S. import prices rose a more-than-expected 2.8% in March as petroleum prices jumped 9.1%, a Labor Department report showed Friday.
U.S. export prices rose 1.5% during the month, also more than expected and the largest monthly gain on record, as prices for farm and food products continued to rise.

Analysts polled by Reuters had forecast a 2% rise in import prices in March and a 0.5% rise in export prices.

The larger-than-expected rise in import prices boosted the dollar in early trading after the report. Stronger inflation could limit the Federal Reserve's ability to cut interest rates during the current economic slowdown.

Import prices have risen 14.8% over the last 12 months, the largest year-to-year gain since the Labor Department began publishing the data.

FIND MORE STORIES IN: Federal Reserve | Labor Department | Reuters
A large factor was petroleum prices, which have risen 60% over the past year, although prices for food, feed and beverages have increased 14%.

Export prices have risen 7.9% over the last 12 months, also the largest increase on record.

Prices for agricultural exports and food, feed and beverage exports have both risen more than 33% over the past year.

Gasoline prices rise to a record $3.30 and head higher

By John Wilen, AP Business Writer
NEW YORK — Retail gasoline prices surged to a record above $3.30 a gallon Friday and appear poised to rise further in coming weeks as gasoline supplies tighten.
Oil prices, meanwhile, supported the gas price rally, jumping more than $2 a barrel after a dismal employment report sent the dollar lower.

At the pump, gas prices rose 1.4 cents overnight to a national average of $3.303 a gallon, according to AAA and the Oil Price Information Service. That's the latest in a series of records, and about 60 cents higher than a year ago.

While oil's surge above $100 a barrel the last month has boosted gasoline prices so far this year, analysts now expect gas prices to continue rising regardless of what direction crude takes. The Energy Department expects prices to peak near $3.50 a gallon later in the spring, but many analysts predict the spike could approach $4.

That's because gasoline supplies are falling, in part because producers are cutting back production due to the high cost of crude — the more expensive crude is, the more refiners have to pay and the lower their profit.

FIND MORE STORIES IN: Texas | Los Angeles | Labor Department | New York Mercantile Exchange | Energy Department | Oil Price Information Service | Corpus Christi | ConocoPhillips | ATA Airlines | Valero Energy | Mike Pina
They're also in the process of switching over from producing winter grades of gasoline to the less polluting but more expensive grade of fuel they're required to sell in the summer.

"That cuts back on some of the supply and helps to pump up the price," says Mike Pina, a spokesman for AAA.

The margin between the price refiners pay for crude and what they get for selling the products they make from it is around $11 to $12 a barrel right now, according to the Oil Price Information Service. However, that margin has slipped into negative territory some days and is well below margins of $37 a barrel refiners earned last spring.

On Thursday, ConocoPhillips said high crude prices were significantly hurting refining margins. Last week, Valero Energy cut output at its Corpus Christi, Texas, refinery due to high supplies and falling demand. Analysts believe many other refiners are adopting similar tactics.

Friday's price spike is a sign those cutbacks may be working, giving everyone in the supply chain, from refiners to retailers, the ability to raise prices to try to boost margins. Many gas retailers say they make more on the sale of coffee and sundries in their convenience stores than from selling gasoline.

Of course, that's not good news for consumers also paying higher food prices and watching their home values slide. Food prices are high due in part to diesel prices, which held steady overnight at a national average $4.023 a gallon, near recent records.

High oil prices are also hurting airlines. Aloha Airlines shut down and ATA Airlines filed for bankruptcy protection in recent weeks, citing high fuel prices as a cause of their failures.

In futures trading, meanwhile, oil futures rose Friday after the Labor Department said employers cut payrolls by 80,000 jobs last month, much more than analysts had expected. The unemployment rate rose to 5.1%. That news sent the dollar lower and pushed light, sweet crude for May delivery up $2.40 to settle at $106.23 a barrel on the New York Mercantile Exchange. Gasoline futures for May delivery rose 3.24 cents to settle at $2.7567 a gallon.

Gasoline futures were also boosted Friday by a fire that shut down part of a Los Angeles refinery.

Much of crude's price moves in recent months have been tied to the dollar. Many investors view crude, gold and other hard commodities as hedges against a falling dollar and rising prices. Also, crude becomes less expensive for overseas investors when the dollar is falling.