ATP Oil and Gas Update (ATPG)
ATP and EDF just announced closing the £265MM agreement for the Tors and Wenlock transaction. That’s around $400MM vs a market cap of around $275MM. They are required to use 75% of this towards debt reduction, the rest can go towards share buybacks or such. With luck the stock prices will remain depressed while ATP implements their stock buyback.
Tags: ATPG
June 10th, 2009 at 2:28 pm
Whats your take on the stock issuance announced today? I don’t understand how Al can go on the record so many times saying the company is undervalued then issue stock at such a low share price. Thoughts?
June 10th, 2009 at 4:19 pm
I don’t know at the moment. I’d have to see their math. The tradeoff is: sell fields that will become more valuable in time (if oil continues to rise), sell infrastructure where the last deal was basically for development costs, or dilute the stock at low stock prices. And, of course, only they know what offers, if any, they are getting for infrastructure and/or leases.
However, it’s a 20% dilution to raise what, $60MM or so? I can’t say that is immediately thrilling to me.
The story of ATP is predicated on them realizing the value of what they have in the ground. When Telemark comes on line it will be bringing in well over $1MM a day - $1.6MM if they pump 365 days a year. If that $60MM gets Telemark operating sooner it adds a big cushion on debt covenants, and could allow them to repurchase shares, somewhat reversing the dilution. Of course, by then share prices should be higher, hence the “somewhat”.
June 11th, 2009 at 4:24 am
Yeah I wasn’t thrilled either as I was hoping to see them repurchase more shares as opposed to an additional offering. However, I think your right there only so many options to raising funds and selling off assests might not be that beneficial in the current market. I expect a negative reaction from the market on this but that could also provide a more attractive buying oppurtunity. Time will tell. Thanks for your input. By the way are there any other sites your active on or monitor. I have shied away from the rule1 blog for multiple reasons but would still like to find another site to bounce ideas off.
Regards,
Dan
June 11th, 2009 at 10:25 am
No, I don’t really read too much regarding individual investments - I find it’s too easy to be influenced by spurious concerns. I like the Value Investing Club, but you can only read that on a time delay. The Value Investing Congress Blog is also good. I read GuruFocus mainly to see what “gurus” (what a bad term) are buying.