Cobalt International Energy "Going Concern" Warning

This was in their September 10-Q filing:

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

As of September 30, 2017, we had $547.3 million in cash and cash equivalents, restricted cash, short–term investments and long–term restricted cash and $2,840.8 million in aggregate principal amount of long–term debt outstanding. We have interest payments of $167.0 million due on our outstanding long–term debt in the next twelve months, including an interest payment of $12.3 million due on November 15, 2017 on our 2024 Notes (as described below). In addition, we continue to incur significant net losses, which has caused us to have a stockholders’ deficit of $1,470.4 million as of September 30, 2017.

Although we commenced initial production from our Heidelberg project in January 2016, our ongoing capital and operating expenditures will vastly exceed the revenue we expect to receive from our oil and natural gas operations for the foreseeable future. In order to grow production, we need to develop our discoveries into producing oil and natural gas properties, which will require that we raise substantial additional funding. If we are unable to raise substantial additional funding on a timely basis or on acceptable terms, we may be required to significantly curtail our exploration, appraisal and development activities or sell assets.

In assessing whether there is substantial doubt about our ability to continue as a going concern, we considered our projected cash inflows and outflows as well as any cash related covenants associated with our financing structure. The indentures governing our 10.75% first lien notes due 2021 (the “First Lien Notes”) and our 7.75% second lien notes due 2023 (the “Second Lien Notes” and together with the First Lien Notes, the “Secured Notes”) contain certain covenants including the maintenance of a minimum consolidated cash balance (as defined in such indenture) of at least $200.0 million. If we are unsuccessful in our current marketing efforts with respect to the sale of our Gulf of Mexico assets and do not make or receive any payments to or from Sonangol, we expect our projected cash balance would be out of compliance with the minimum consolidated cash balance covenant during the first quarter of 2018. If the holders of the Secured Notes were to accelerate the indebtedness under the Secured Notes as a result of such default, such acceleration would cause a cross–default or cross–acceleration of all of our other outstanding indebtedness. Such a cross–default or cross–acceleration could have a wider impact on our liquidity than might otherwise arise from a default or acceleration of a single debt instrument. If an event of default occurs, or if other debt agreements cross–default, and the lenders under the affected debt agreements accelerate the maturity of the debt outstanding, we will not have sufficient liquidity to repay all of our outstanding indebtedness. Thus, we have concluded that there is substantial doubt about our ability to continue as a going concern.

On October 10, 2017, we received a notification from the New York Stock Exchange (“NYSE”) that we are no longer in compliance with the continued listing standards because our average global market capitalization had fallen below $50.0 million for 30 consecutive trading days and our stockholders’ equity was less than $50.0 million. If we are unable to maintain compliance with the NYSE listing requirements, our common stock will be delisted from the NYSE, which would constitute a “fundamental change” under the terms of the indentures governing our 2.625% Convertible Senior Notes due 2019 (the “2019 Notes”) and our 3.125% Convertible Senior Notes due 2024 (the “2024 Notes” and together with our 2019 Notes, the “Convertible Notes”). In such case, we could be required to repurchase for cash any such Convertible Notes. A requirement by such holders for us to repurchase some or all of such notes for cash would cause a cross–default or cross–acceleration of all of our other outstanding indebtedness.

Our ability to continue as a going concern is subject to, among other factors, (i) our ability to monetize assets, obtain financing or refinance existing indebtedness and continue our cost cutting efforts; (ii) the production rates achieved from Heidelberg; (iii) oil and natural gas prices; (iv) the number of commercially viable hydrocarbon discoveries made and the quantities of hydrocarbons discovered; (v) the speed and cost with which we can bring such discoveries to production; (vi) whether and to what extent we invest in additional oil leases and concessional licenses; and (vii) the actual cost of exploration, appraisal and development of our prospects.

There can be no assurance that we will be able to obtain additional funding on satisfactory terms or at all. In addition, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs and support our growth. If additional funding cannot be obtained on a timely basis and on satisfactory terms, then our operations would be materially negatively impacted. We have engaged Houlihan Lokey, Inc. as financial advisor and Kirkland & Ellis LLP as special legal advisor to advise management and our board of directors regarding potential strategic alternatives to enhance liquidity and address our current capital structure. Such strategic alternatives may include asset sales or liquidity–enhancing transactions that we have commenced previously, as well as restructuring some or all of our debt to preserve cash flow which may include seeking private restructuring or reorganization under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Code").

The marketing efforts with respect to our Gulf of Mexico assets continue, but have taken longer than anticipated. If we are unable to sell our Gulf of Mexico assets or the entire company on favorable terms or at all, or enter into an alternative strategic transaction, we may seek bankruptcy protection to continue our efforts to restructure our business and capital structure and may have to liquidate our assets and may receive less than the value at which those assets are carried on our unaudited condensed consolidated financial statements.

Their bond due December 2019 last traded at 10 cents, for a yield to maturity of 162%.