When I write about how a small oil company like Linc Energy, HRT Participacoes, Serica Energy, or Corridor Resources has the potential to make crazy multiples on your money, people are skeptical and have asked me for a precedent of a small public traded oil company having an enormous discovery. Below I provide the example of CIE.
Cobalt International Energy (CIE)
14-Dec-2011
closing price = $9.01
market cap = $3.533 billion
total enterprise value = $1.918 billion
hope/rumors of a huge find caused the stock to creep up
Friday, 10-Feb-2012
closing price = $23.98
After the close Cobalt announced that the Cameia-1 well had found a 1,180 foot "gross continuous oil column." that greatly exceeded expectations. Expectations were ~1 billion barrels.
Monday, 13-Feb-2012
CIE promptly opened at $33.98
Almost 10 billion dollars of wealth was generated for shareholders in a couple of months by one discovery.
Takeaway - If a company makes an oil discovery believed to be worth billions of dollars, then the share price will rapidly increase to reflect the newly found value.
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