As of our balance sheet statement at the end of 1Q 2011, we had roughly 1,950 in long-term debt, and an additional roughly 550 in "other liabilities." Can someone please explain what all categories of items factors into this "others" column? I'm still trying to figure out who we have gone from roughly a total of 1.3b in debt 1 year ago to 2.4b or so(estimate) today??
Now, to the hypothetical part......what do our regular longs(like myself) believe our retained infrastructure(i think this would mean everything but 1/2 of the Innovator) is worth, or what would it be worth in the form of a monetization or more likely several different monetizations? And do you guys/gals think the institutional investors, and retail investors alike would react positively to monetizing these assets to pay down this heavy debt?? I believe the premise behind owning/controlling/operating the infrastructure is to allow themselves to act in a timely, safe, and cost-efficient manner on the various projects(mainly Gomez, Telemark, and Cheviot).....but have those monies spent been a positive, or do they STILL serve as a positive to the company and its shareholders today? I would think realistically you could pay down 35-50% of that debt with just infrastructure sales........would that go further to unlock value and in time make the company more profitable?? Wouldn't then, if we do get these next 2 Telemark and Gomez wells online, wouldn't then the revenues from those alone make our situation go from a highly-leveraged company to a company that lives within its means and yet still retains that vast growth?? Just a little discussion opener on this Fri afternoon, after yet another terrible market day/week!!
This is where I would think selling Cheviot would make sense....if they strike it big in Israel
sell a small field of 50 million barrels to get the funds to develop a larger field of 200 million barrels and do it without diluting shareholders...
seriously, I don't want as a shareholder to get diluted 20-30% just to fund Israel....
4 good posts Prefer.....i'd be all for selling Cheviot, doubling stock i'm not sure, but it would certainly help unlock value i would think........the debt situation in my opinion is what people are seeing and fretting over........if we get the next 2 wells online and keep them online, that "situation" becomes less potentially problematic, but those as of now are still "ifs."
20 trading days or so away from next well coming on, jacking production 7,000 maybe more per day. That is about $300 mill a year in revs JUST FROM ONE WELL, and no additional infrastructure cost. Take $50 mill of that and pay for next well, and in 100 days revs are now up over $600 mill a year additional from just 2 wells. Total company revs last year were, what, less than $500 mill.
Management said on the last call what the total dry hole cost would be for the exploratory well in Israel, and it was either $40 mill total so about $20 mill for ATPG, or $80 mill total for about $40 mill for ATPG. Worst case, $40 mill cost, and cost won't be incurred until Titan is maxed out, and so, its about 10 20 days of Titan production, not much cost for a legitimate shot at doubling or tripling ( or more ) the size of the company.
Takeshi, With Titan maxxed at 25K bbls of oil, and this oil at $110, ATPG can generate $350 mill or so in FREE CASH FLOW (after interest expense and maintenance capex, but admittedly, before development capex) total company just from Titan. Of course, even without development capex, the rest of the company will generate additional cash. Capex can easily be held equal to or below this level if necessary, and spending $300 mill or so a year will grow cash flow tremendously. Now, of course with Titan maxed out, total company will be greater than 25,000 boepd, so, its not like I am disagreeing with your earlier statement.
$50 mill for this well at Telemark, and lets say $50 mill for the next. Paybacks on these wells at 7,000 a day and $110 oil are pretty short. Incredibly short at 9,000 or so a day. This will easily max out Titan, and within a couple months generate cash to pay for the next well at Gomez. Titan will likely be maxed out prior to year end. When next well at Gomez comes on, takes even less time to generate the cash for the next well at Gomez. Then, Titan is maxed out and Gomez has 2 additional wells. Cash flow is exploding. I just want to see ATPG set some significant $100 plus hedges.
I think whether equity dilution or more debt depends on the situation at that time. If the stock price is running high for various reasons (stock markets good.. etc), it makes sense to issue few shares and get a big round of equity funding. however equity markets are depressed and debt market looks more opportunistic. In 2012, if market recognizes and PPS is appropriately priced, I would vote for equity based finance rather than add more debt to the already high debt situation. High debt situations are no longer liked by Wall st/investment managers. That is the reason ATP current PPS is depressed as there are concerns that whether the company can service it or not. Had the debt been low or no debt and only equity, although there would be lot more shares but my thought is they would be appropriated priced. Comparing some oil producing companies with low debt and growth for Example KOG has debt of 40m but projected this year revenue of 160m and market cap of 1.0B. Based on those fundamentals and lot more sophistated infrastructure like Titan etc. what would be ATP's market cap is any body's guess.
I wanted to jump in on this conversation earlier but I had other obligations. I don't believe a secondary to fund an exploratory well(s) would be in the best interests of ATP at all. I actually believe that this would be the best way to sink the ship. I don't know if you recall, but at a previous cc the JP Morgan analyst...I think it was Alman or something or other...gave ATP management a big can of whoop a$$...it was quick but brutal...how do you manage risk? Response: We drill wells that have a 98% success rate and we could not foresee the Macondo disaster...Response: Isn't that why you put money away for a rainy day????? So back to the secondary issue: Are you suggesting that management will dilute ATP shareholder's holdings for the opportunity to spend hundreds of millions of dollars on an exploratory well that could very well come up empty? I believe they are building this company up for a sale or a merger...I don't think they can continue forever living life on the edge...they have to address the debt issues with what they have today or the stock price will continue to languish. I think of Israel like this... a 70" HD tv that's on sale for $300. I'm in debt $20K. Interest on $300 on a credit card is 21%. $300 not a good deal anymore. I'm not suggesting walking away from Israel...just need a lot of outside money where repayment is heavily based on a % of future production of the properties.