ATP Corporation: A Fraction Worth More Than the Whole?

West Coast Asset Management posed the following idea at the Value Investing Congress in October:

What is ATP Natural Gas (ATPG):
ATP Oil & Gas Corporation is engaged in the acquisition, development and production of oil and natural gas properties in the Gulf of Mexico and the United Kingdom and Dutch Sectors of the North Sea. On December 31, 2007, the Company owned leasehold and other interests in 76 offshore blocks, 40 platforms and 127 wells, including 19 subsea wells, in the Gulf of Mexico. It operates 109 (86%) of these wells, including all of the subsea wells, and 78% of offshore platforms.

It also had interests in 10 blocks and two Company-operated subsea wells in the North Sea. The Company’s average working interest in these properties was approximately 82%. ATP had leasehold interests located in the Gulf of Mexico and North Sea covering approximately 447,910 gross and 372,386 net acres, of which 276,374 gross acres were developed and 206,322 net acres were developed.

Here is the guts of their presentation from the congress.




The stock also has >20% insider ownership.

Why bring it up now? I ran across this little tidbit the other day:
ATP Oil & Gas Corporation (ATPG) announced last week that its Board of Directors has approved a share repurchase program of up to 3,500,000 shares or roughly 10% of the currently outstanding shares. The program, authorized through the end of 2011, will be funded by free cash flow and the proceeds of asset sales and monetizations.

T. Paul Bulmahn, Chairman and CEO of ATP, stated that:

In August 2008, ATP estimated its recoverable oil and gas to be approximately 252 million BOE. With approximately 35 million outstanding shares, each share accounts for roughly seven BOE. This represents a large disconnect between our asset value per share and our trading value per share. With funds generated from our ongoing monetization program and with our internally generated cash flow, we intend to reduce debt, continue our 2008 and 2009 capital development program at levels we deem prudent and actively pursue a share repurchase program. The divestiture of a portion of two selected North Sea properties announced earlier today launches our repurchase of ATP shares. At these prices investing in our own shares is accretive to our equity owners.

ATP announced it will sell its U.K. assets in the North Sea to a subsidiary of EDF for about $430 million. The agreement transfers 80% of ATP's U.K. interest in its Tors (a 68% working interest) and Wenlock (an 80% working interest) properties to EDF. EDF has a later option to acquire the remaining ATP interests. 

The sale is expected before the end of 2008. ATP's U.K. subsidiary will remain as operator of both Tors and Wenlock. ATP said Monday it will use proceeds from the sale to reduce its debt, and further its development programs.

Essentially both of these transactions were talked about as value enhancers at the conference. The good news? In the current market sell-off, no one cares. The stock is stuck essentially where it was in the beginning of October.

One other huge point concerns the sale of the N. Sea assets, for $430 million? That sale is in excess of the company's current $398 million market cap.

For those looking for a buy in the gas sector, this just may be a huge winner...

Disclosure: None

Comments

[Steven Ward:]

ATP is like alot of other companies listed on the NYSE or Amex that have a large amount of assets in the
North Sea. They get no respect from investors.
Hopefully this turns around someday.

2008 Oct 31 09:16 AM

[Jimbo:]

I owned it when it was in the 40s. Got badly burned and sold at a loss.

2008 Oct 31 10:50 AM