I’ve been a shareholder of ATP Oil and Gas for a pretty long time. I started buying shares in September 2008 at $16 as they were plummeting during the market/credit/oil collapse and averaged down aggressively at various stages as the shares touched a low under $3 in March 2009.
As ATP managed their way painfully through the credit crisis eventually completing construction of the infrastructure at their Telemark Deepwater hub the share price rebounded up to a high of $23 in April 2010. I was feeling pretty good with nothing seemingly standing between a rapid increase in production and likely a continued rise in the share price.
You know the rest, BP, oil spill, ATP share price collapse.
I wrote the following with ATP shares at $11 in August as I felt like a significant rise was again inevitable:
http://www.gurufocus.com/news.php?id=105495
So far so good with the share price back up to $18 and production increased. But still one very significant problem for ATP and ATP shareholders. Still no Deepwater drilling permits are being approved !
Current ATP production is at something like 28,000 barrels a day having increased fairly dramatically from under 14,000 barrels a day a little over a year ago. There is plenty more to come should the company finally be allowed to drill again.
ATP has 4 large development wells to drill that already have all the plumbing already in place. These wells are expected to add between 20,000 and 25,000 barrels a day of production. Another big step change for ATP and all they need are pieces of paper approved by the government.
I’ve not really been too concerned as to when these permits are coming. I feel that it is a matter of when and not if and ATP has the liquidity to wait for them for quite a while. So I was actually a little surprised to see the head government official in charge of approving these permits suggest that it might only be a couple of weeks until the next permits:
http://fuelfix.com/blog/2011/02/11/bromwich-deepwater-permits-could-be-issued-in-next-several-weeks/
“Federal regulators could issue the first new deep-water drilling permits since last April’s Gulf oil spill “in the next several weeks,” the nation’s top offshore drilling regulator told Houston Chronicle editors and reporters today.
Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, previously had projected the first permits by the end of the second quarter.
The hold-up for the five deep-water permits that are pending is mainly related to industry finishing the construction of equipment for a spill containment system, Bromwich told the Chronicle editorial board.
An industry consortium formed by oil majors including Exxon Mobil, Shell and Chevron is expected to conduct testing later this month on a capping stack that could handle a Macondo-like blowout. A second well containment system being developed by Helix Corp. is expected to be ready by the end of March.
Bromwich is in town to speak at a symposium on offshore drilling at Rice University’s Baker Institute. Here’s a copy of his prepared remarks.
Thirty-one shallow water drilling permits have been approved since last June, while there are currently nine shallow- water permits pending, Bromwich said.That’s not the pace industry would like, but he said no more than 15 permits have been in line waiting for review since the Macondo blowout and oil spill. BOEMRE actually shifted staff to the permit review process last year to speed up the process, but industry hasn’t applied for shallow-water permits at a higher pace.
Bromwich denied suspicions by the oil industry and its supporters that the pace of permitting reflects a desire by the White House to stop all offshore drilling.
“I have very little contact with the White House,” Bromwich said. “They’re interested in what I do, but they can’t lean on me to do political things.”
If anything, he said, the pace of permitting may have been slowed by BOEMRE field personnel who are extra cautious about making decisions in the wake of the Deepwater Horizon accident, for fear of making a decision that could expose them to criminal liability.
Bromwich, a criminal lawyer, said he wants to reassure employees they need not fear prosecution if they perform their duties conscientiously.
“That’s something I’m going to stress to them in a meeting next week,” where he will speak to the approximately 500 BOEMRE workers along the Gulf Coast who take in the drilling applications.
The joint BOEMRE/U.S. Coast Guard investigation of the failed blowout preventer on the Deepwater Horizon is still ongoing and shoudl be done by the end of February, with a report on it to be issued toward the end of March. That will mean the next hearing of that investigatory panel will not happen until April at the earlier, Bromwich said.”
Next couple of weeks. End of June. Doesn’t really matter. When it happens the stock price of ATP could have a pretty sizable pop. At 40,000 barrels a day plus of oil weighted production ATP shares could well justify $30 or more in terms of valuation. You can check my prior articles for valuation specifics if interested. I’ll just keep my head down until that share price pop happens.
I’ve learned more from my experience with this company than I can remember at this point. I’ve done a pretty good job of analyzing the situation, but the BP mess really caught me off guard. It was a bit of a cruel joke for the spill to happen just as ATP had finished the infrastructure at Telemark, but for me it taught a valuable lesson. Don’t underestimate the likelihood of something completely impossible to predict happening.
40 years of drilling in the Gulf of Mexico in United States waters and nothing similar to this once. “Why me ? Why now ?” A common thought for me as I watched ATP’s share price collapse following the spill. My future investments are unlikely to include companies leveraged to the hilt like ATP again.
Lesson learned…I hope.
Now how about a drilling permit Bromwich ???
