ATP Oil & Gas Corporation (NASDAQ: ATPG) is engaged in the acquisition, development and production of oil and natural gas in the Gulf of Mexico, North Sea and more recently the Mediterranean Sea. The primary near-term catalysts for the company are increasing oil production in the deepwater Gulf of Mexico, as well as its exploration projects in the Mediterranean Sea offshore Israel.
ATP recently announced the company’s fourth well at Telemark, utilizing the ATP Titan drilling and production platform, recorded IP rates in excess of 7,000 BOEPD (85% oil). The Mississippi Canyon Block 942 A-3 (#2) well encountered 239 feet of net pay. ATP operates the deepwater Telemark Hub in 4,000 feet of water with 100% working interest. The well’s IP rate met management’s expectations.
The company produced 9 million BOE in 2011, 68% crude oil. ATP disclosed in its most recent presentation a proved reserve SEC PV-10 value of $4.3 billion and a proved and probable reserve SEC PV-10 value of $7.3 billion.
Click here for the news release.
OAG360 Comments:
There is concern with investors and analysts over ATP’s production and debt levels. Recently however, the company made positive steps at Telemark and has near-term production growth opportunities on the horizon.
Source: ATP Corporate Presentation
The IP rates recorded from ATP’s fourth well at Telemark utilizing the ATP Titan is in line with the previous three wells by recording IP rates in excess of 7,000 BOEPD. Prior to this well announcement, ATP’s production during Q4’11 averaged 23,400 BOEPD. OAG360 notes that ATP has several near-term catalyst during 2012 for additional production volumes including: a sleeve shift at the Mississippi Canyon (MC) 941 A-1 well that is expected to add 1.5 MBOEPD in Q1’12, as well as the installation of the Clipper pipeline with production expected in late Q3’12 or early Q4’12. The two Clipper wells tested at a combined average of 16 MBOEPD net to ATP. OAG360 notes that ATP has a 98% success rate converting undeveloped properties to production so we expect to see additional projects during 2012 that will be successful, and provide the incremental production needed to increase production volumes.
Source: ATP Corporate Presentation
Israel Project Start-Up Scheduled for 2012:
During the wake of the Gulf of Mexico drilling moratorium, ATP diversified into Israel to target multi-Tcf potential. The company owns interests in three blocks: Daniel East, Daniel West and Shimshon. SHimson will be the first target area and ATP will operate the project with a 40% WI. The company has allocated between $24 to $29 million to the project which is schedule to start drilling in Q2’12. A third party reservoir engineering firm estimated gross potential natural gas reserves at Shimshon to be 2.5 – 3.4 TCF (net 0.9 – 1.2 TCF). OAG360 notes that just north of ATP’s three blocks are the Leviathan, Damar and Dalit blocks. Noble Energy (NYSE: NE) is the operator of the block and in approximately two and half years, they discovered collectively 25 TCF of reserves in those three blocks. We believe ATP has the operational know-how to successfully explore the blocks in Israel. The target areas are located offshore, in deepwater with depths up to 4,000 feet – the same as ATP’s Telemark Hub. If successful, ATP has a ready market in Israel willing, and needing LNG production from operators offshore.
Source: ATP Corporate Presentation
Valuation:
ATP’s estimated year-end 2011 proved and probable pre-tax PV-10 value increased to $7.3 billion based on SEC pricing, up 52% from $4.8 billion at year-end 2010, and a year-end 2011 SEC pre-tax PV-10 value of $4.2 billion for its proved reserves.
