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+--- Thread: ATPG (/showthread.php?tid=151)
- admin - 12-27-2011
I know there are quite a few of you out there who have positions in ATPG, and I wonder whether you can give us a few reasons to buy that one. I've always been a little reluctant because of the debt..
- sltibbs - 12-27-2011
Hi Friends,
Here is some I have written on ATPG in the past. It is on my rarely updated website, but the comments are still relevant.
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ATP Oil & Gas (ATPG) (Oct. 10 - 8.53/share) : This is a highly leveraged, deep value play with highly technically competent managment. Also, note that this firm is a developer of properties, not an exploration firm, something the market does not appreciate in my opinion. After being greatly harmed by the financial crisis and Macando well leak in the Gulf of Mexico ATPG is finally back up to full spead and with a PV 10 of $5.8 billion USD based on SEC Pricing (Market cap ~500 million USD), with $2.3 billion USD in net debt, $1 billion in infrastructure. Currently, drilling 4th well at Telemark after which the firm should be FCF even/ slightlypositive and after hooking up the pipeline for the Clipper find they will be securely ahead. The big came changer is their Cheviot asset in the North Sea. ATPG picked it up cheap, as they always do, after other producers were unable to handle the high water content. So they specifically designed and are building the Octabuoy to handle such. Cheviot has 39.0 mmboe proven and 17.0 mmboe probably (65% oil) and is expected to be online 2014. Due to convertible dilution above 27.5, which was raised by management's call option purchase, I say sell the Jan 2013 calls for around 0.90, nice yield for the current pricing. Also, insiders have been buying.
ATP Oil & Gas (Nov. 14 - 5.69) recently underperformed due to underperformance from one of their Telemark wells. Without too much detail, the well came in about half the rate initially anounced because the sand was much finer then what was expected requiring the well to be throttled to have the initial 7,000 boepd to avoid damaging the gravel pack. The reserves are expected to stay the same, but at a slower rate. They could drill a second well from Mods 202 rig on the Titan platform, which is much cheaper than a drilling ship, but still a negative due to time and costs. I expect they will get Titan maxed out (25k bopd) and if needed they could always sell/partner on Cheviot to cover costs. However, if oil prices drop dramatically and stay down then the firm would fold, but this is nothing new, this time the market was greatly disappointed. Based on the large recent decline, excellent assets and management, I believe it is a nice speculative play at the current price.
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Hope this helps.
Best,
Sam
- ValueSleuth - 12-27-2011
Thanks, Sam.
ATP is also branching out into exploration in the areas off-shore from Israel. Those interested can best view the latest presentation on ATP's website.
In addition, ATP has a 8% convertible perpetual preferred issue that presents a very compelling more conservative method of investing. The symbol is ATPGP and I've written on it on IV -- link to latest: http://www.investorvillage.com/smbd.asp?mb=2831&mn=3480&pt=msg&mid=11276028
Purchasing the preferred is tricky, so you have to "work" to keep from getting killed on the spread.
The current premium to conversion (ATP @ $7.26; ATPGP @ $34) is only 2.69%. If you can get the preferred at $34, you get paid a whopping 23.53%, and cover the premium in less than one quarterly dividend payment, while you wait for the company to become cash flow positive.
The key is to buy "right" and just hold. This issue is not a trading vehicle, as the liquidity is basically non-existent.
ValueSleuth
- admin - 12-27-2011
Ok, thanks for this. That $2B debt sort of sits there, intimidatingly, and by the looks of it, they keep borrowing
- Bincbanker - 12-28-2011
Sam the reason I got OUT of ATPG is because the US gov't can and has, controlled ATPG future with what I consider a "Banana Republic move" to close down the whole of the GOM operations on political pressure, they changed the rules half way the game and got away with it
Look at the amount of Drilling rigs and current political atmosfeer in The GOM and you realize that ;
The huge amount of rigs is asking for a next disater, enough has already escaped to unknown resting place
The politics have not changed
The BP Oil spill is not over yet, until then I will never invest in The O&G industry based in the US
Afteral you do not Ground every aircraft in The USA after a Boeing 737 crashed, this is what happened to the operations in the GOM
ATPG is a great Co , but the dept issue got worst because of lack of legistative trust. Image what will happen if say BHP has a leak
- sltibbs - 12-28-2011
Bincbanker,
I agree with your 737 analogy and previously got out of ATPG as well, but when it reach sub 7 I got back in. Yes, the risk and debt are huge, but the assets are solid and management are highly technically skilled. That along with the huge discount to PV-10 and my opinion of Oil pricing makes it a good holding, very risky, but good.
Best,
Sam
RE: ATPG - Parker45 - 04-15-2015
they always do, after other producers were unable to handle the high water content. So they specifically designed and are building the Octabuoy to handle such. Cheviot has 39.0 mmboe proven and 17.0 mmboe probably (65% oil) and is expected to be online 2014. Due to convertible dilution above 27.5, which was raised by management's call option purchase, I say sell the Jan 2013 calls for around 0.90, nice yield for the current pricing. Also, insiders have been buying.