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Image courtesy of Cobalt International Energy.

Cobalt International Energy said Tuesday that a proposed billion dollar sale of stakes in two Angola blocks to Sonangol has fallen through.

Cobalt said it now plans to market its 40 percent working interest in Blocks 20 and 21 to a third party after state-owned Sonangol backed away from the deal.

Cobalt had agreed to sell the stakes to Sonangol last August for $1.75 billion.

Cobalt said that during a July meeting with Sonangol chairwoman Isabel dos Santos and members of her executive team the companies agreed that Cobalt would market the stakes to a third party.

Cobalt said that it received a letter on Monday from dos Santos confirming Sonangol’s support of marketing and selling the stakes to a third party.

Cobalt said that, given its agreement to market the interests, it is “unlikely that the sale transaction between Cobalt and Sonangol will close pursuant to the terms of the August 2015 Purchase and Sale Agreement.”

The agreement will automatically terminate on August 22, 2016.

Cobalt said it is currently preparing a data room for its Angola assets and “will immediately commence the marketing and sale process.”

“Although we would prefer the transaction with Sonangol to close, I am pleased that we can remarket these attractive liquid rich assets to third parties. The development cost environment has improved substantially, the fundamentals for medium to long term liquids pricing remains strong and we have delivered two new discoveries on Block 20,” Cobalt Energy CEO Tim Cutt said.

Last January, the U.S. Securities and Exchange Committee dropped a corruption probe into alleged bribes paid by Cobalt in Angola.

The SEC did not recommend any action against Cobalt.

Cobalt is still cooperating with a parallel investigation being conducted by the U.S. Department of Justice into the matter.

Cobalt Energy reported a net loss from continuing operations of $200.4 million, or $0.49 per basic and diluted share for the second quarter of 2016, compared to a net loss from continuing operations of $53.4 million a year ago.

The company said the wider loss is mainly attributable to a write off associated with the Goodfellow exploration well that totaled about $149.9 million.

The Goodfellow #1 exploration well was completed in March and failed to encounter hydrocarbons.

A subsequent sidetrack operation was also unsuccessful in finding hydrocarbons.

Cobalt said it expensed an aggregate of $149.9 million in the second quarter for Goodfellow, consisting of $107.5 million of costs through the second quarter associated with the Goodfellow #1 exploration well and sidetrack and $42.4 million for the impairment of the underlying leases.

The company said additional charges tied to the sidetrack operations will be recognized in the third quarter.

Cobalt operates Goodfellow with a 72.5 percent working interest.

Total E&P USA owns the remaining 27.5 percent working interest.