ATP Update
Several of you have asked me for updates on ATP. Rather than blather on, I’m mostly just going to link to an excellent write up on an analysts breakfast held by ATP this Thursday, where the bull case is laid out far better than I can make it.
However, let’s look at developments since the last time I wrote. ATP is pressing full steam ahead in developing Telemark, their company changing lease in the GOM. When it comes on line it will more than double ATP’s production. They got the developers to agree to foot the bill for the development, about $200MM, in return for getting paid with future profits. They have several asset monetizations in the works - selling the Gomez pipeline, selling Titan, et al. Al Reese said this is as “close to 100%” sure as anything could be, as you will see in the link. GE and other companies are interested.
As is typical with these fields, the reserve volumes used to calculate PV-10 is very conservative. If you look back at ATP’s history, they’ve beat these estimates by huge margins. Don’t get tooooo excited about that, as that extra production comes in on the back end, and the present value of money means you have to discount those cashflows over several years. But still, take the > $5B in reserves as a low ball estimate.
They have other irons in the fire. North sea, for example. They are currently bidding on and winning new leases in the GOM near their current hubs.
Their bankers are working very closely with them over Telemark. They recognize the great value in that field, and it’s pretty hard to believe they’d shut down the company to get their money a few weeks earlier. The risk right now is that ATP is not going to do their monetization for the debt until Titan is in place and ready to go, so if there were significant delays they could actually blow a few covenants.
I said Telemark is company changing. Let’s put that in perspective. At todays strip prices, ATP’s cash flows next year will equal the current market cap. Yes, ATP is trading at 1x 2010 cash flows. A typical number is more like 10x. ATP plans to have *all* of the debt paid off by then.
Okay, so I did blather on. Anyway, here is the link backing up those points.
http://boards.fool.com/Message.asp?mid=27920815&sort=postdate
Tags: ATPG