As a longtime shareholder of ATP Oil and Gas I have for weeks been looking forward to the company presentation at the August 25 Enercom conference. I thought that finally the company had a chance to focus investor attention on the important catalysts that are coming in the next few weeks (first production from the MC941#3 well which is going to increase cash flow by 40% and the liquidity enhancing event which will be the ATP Titan monetization) as well as the fact that all of the Gulf of Mexico infrastructure spending is complete.
Instead the ATP CEO focused the first part of his presentation on explaining to listeners (all of whom are investors in or analysts of energy stocks) all of the things oil is used for and explaining the distinction between exploration and development drilling. I think individual shareholders who were not able to attend or have someone attend for them the breakout session after the presentation missed the important sharing of company specific information.
So as a service to fellow shareholders please enjoy a recap of the breakout session (as provided to me be several who were in attendance) as well as a very informative interview that Al Reese had with Pimm Fox of Bloomberg radio.
First Hand Accounts of the Breakout Session
- Management reiterated the MC941 #3 well will be on production before the end of September 2010
- The expected rate of production from this well is 7,000 to 10,000 BOE per day.
- With the MC941#3 well and the MC754 well which will come on production at Gomez in Q4 the company will end the year with production of 30,000 to 40,000 BOE per day
- The company entered the year at just under 14,000 BOE per day so they will have doubled production easily and could actually nearly double production from current levels of 22,000 BOE per day
- With the addition of only the 4 expected wells in 2011 (2 at Telemark and 2 at Gomez) the company 2011 exit rate will be in the 45,000 to 55,000 BOE per day range
- The company has several other GOM projects that could be added quickly in 2011 as well (Entrada, Clipper and Green Canyon 37)
- ATPG is having discussions about leveraging its Deepwater expertise in other parts of the world
- Management has complete confidence in a transaction involving the ATP Titan that will dramatically improve company liquidity just as cash flow also explodes upwards
http://media.bloomberg.com/bb/avfile/Markets/Analyst_Calls/v1kut6BZ35nc.mp3
Well worth listening to for shareholders or interested investors. Key observations:
- ATP and other independents have been in Washington all summer helping politicians understand what consequences would come from proposed actions
- The Certificate of Financial Responsibility limit is going to be manageable for ATP and other smaller companies as pooling by smaller companies will be allowed. This was always the key issue, not the economic liability cap.
- Existing leases can’t be arbitrarily amended as they are existing contracts. Any government legislation should only apply to future leases.
- Moratorium could well be gone in advance of November. It is very unpopular amongst the majority of the general public and is not something that the Democrats are going to want as an election issue.
- ATP Titan is the state of the art drilling and production unit in the GOM
- Capital expenditures are dropping dramatically from $500mil in H1 to $140mil in H2 because the installation of the Titan and the Telemark hub is complete (large infrastructure spending is over, drilling is only spending now)
Note From Pritchard Capital Regarding Enercom Conversations
Rather than take it from me the reports I have gotten back from Enercom here is what Pritchard Capital had to say about ATP following Enercom (note their expectation that ATP will be among the earliest to resume drilling):
“ATPG – Production Increasing – Management reiterated the MC 941#3 well at Telemark will be on production by the end of Q3 2010 at an expected rate of 7-10MBoe/d. With the MC 754#2 well being brought on in Q4 2010 along with the Garrow G-2 well in the UK North Sea, the company could exit 2010 at 30-40MBoe/d, with the high end almost double the Q2 2010 average of 21.3MBoe/d and exit rate of 23MBoe/d. Assuming only 4 deepwater wells are brought on in 2011 (2 at Telemark and 2 at Gomez), the 2011 exit rate could be 45-55 MBoe/d. Several other deepwater GOM projects (Entrada, Clipper and Green Canyon 37) could be developed in a relatively short time frame in a more robust deepwater GOM environment. ATPG is talking to other companies about leveraging its GOM deepwater development expertise in other parts of the world. Management remains very confident in a liquidity event happening for the Titan. With Macondo no longer on the front pages and an end to the GOM moratorium seemingly in sight, the company's development model, using the most modern, state-of-the-art equipment, better positions it in our view to get back to deepwater drilling faster than other more exploration-oriented companies. Patient investors could be handsomely rewarded.”
