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30 years in Finance/CFO. Individual investor focused on energy names
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  • ATP Oil & Gas: Dramatic Share Price Decrease Seems Likely.
    Atpg stunned the world when they released their quarterly earnings and admitted things are going very poorly.

    Quoting from the release:
    “The second quarter of 2010 and the early part of the third quarter has been one of the more challenging periods in the company’s history”

    First the good news ……………….Revenue was    101 m

    Expenses totaled    ………….                                  235 m

    Resulting in a pre tax loss of 134!!

    It could have been worse as they had 24 in gains from hedges.

    So 260 m in expenses vs. 101 m in revenue means they are spending 2.6 dollars for every dollar of revenue

    A company can not exist for very long out spending revenue.

    As bad as the PL is, the balance sheet is worse. They have completely tapped all their credit lines and have 206 m in cash. They owe 263M in Accounts Payable and have 84 m in other current liabilities. An analyst on todays called picked up on that and asked you only have 200 m in cash and your ap is 263!!

    They have long term obligations of 516 m and also 1,650 in debt.

    All in all, the liabilities total 2.6 b.

    Given that they only have 200 m in cash, and assuming a 50 m a month burn rate, they will be completely out of cash in 4 months. So, Atpg needs to raise more money perhaps equity. perhaps assets sales. The only hope is they sell a piece of the Titan as Al Reese said today , its 2 weeks away, but he acknowledged he been saying that for 4 months

    There is no way the operations support at 14 dollar price.
    It’s highly probable that dramatic Share Price Decrease Seems Likely.

    Well its fell from 14 to 11. I still say sell as single digits are coming imho

    Disclosure: no position in atpg, i try to invest in money making companies

    Disclosure: no positions

    Disclosure: no positions
    Tags: BP, atpg
    Aug 06 8:18 AM | Link | 10 Comments
  • Sandridge Energy (SD), morphing into an oil company.

    Sandridge Energy (NYSE:SD) is a land based E & P company that’s previous focus had been NG production. NG has been in a 2 year slide. SD has a leveraged Balance Sheet and has an excess of 2 b in debt. Sd has very nice NG hedges thru 2010, but is unhedged after 2010 for NG

    Many do not believe SD can manage its way thru this environment and it is one of the heaviest shorted energy names in the sector, more than CHK & HK or SWN combined

    Are the shorts right?? I think not.

    Sandridge is executing a strategy to increase oil production and will be reducing gas-drilling-related CapEx and shifting more capital to the Permian Basin and accelerating the development of their oil plays.

    SD had five oil rigs in January, to 13 today, drilling for oil. SD plans to be at 18 oil rigs by the fourth quarter without the impact of the new Arena acquisition. Therefore, oil production will be increasing rapidly. The majority of the wells take less than one week to drill, and the entire Permian Basin inventory has a rate of return of more than 80% based on today's oil strip.

    In addition, SD has made strategic investments by acquiring oil assets from Forest Energy and its recent Arena Acquisition.

    In Feb oil production for 2010 was forecasted to be 5.2 Mmbls rose to 5.8 Mmbls in May and should be raised again for 2010 to account for the Arena Acquisition to 7.3 Mmbls.  The company CEO is on record saying production will be 22,000 per day or over 8.0 Mmbls per year. At $80 per BBL , oil is 640 m in revenue just for the oil component.

    SD is well hedged for 2010 and is enjoying $9.15 per Mcfe prices on nearly 90% of its production this year. Earlier this year they added about 3.4 million barrels of oil hedged to $84.40 per barrel.

    SD will continue to develop the high CO2 Warwick Thrust reservoir in the Piñon Field with a 10-rig program. Finding cost is 1.00 per mcf and and the output will be processed by its new OXY Century Plant coming online later this summer.

    Sooner or later, the supply demand picture will get better on the NG side. Until then Sandridge will continue to focus on higher margin oil.

    SD stock has fallen more than 50 % YTD. Recent pressure in the price was due to selling by Arena holders who prefer to move on. This, coupled with the new focus on higher margin oil, has created a unique buying opportunity in my opinion. Most analyst’s have a $10 target which might be proven as too conservative.



    Disclosure: Long SD, other energy names
    Tags: CHK, SD, HK, FST, SWN
    Jul 26 10:17 AM | Link | 18 Comments
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