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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (35580)	10/6/2009 10:21:55 AM
From: E_K_S	Read Replies (2) of 78763

RE:ATPG - The one thing that caught my eye in their presentation (page 4) was that they achieved a "...98% success rate converting non-producing properties to producing properties...". Can they continue to have this success rate? Do they need this type of continued success rate on future wells to make that $114.000/share price target? There is just a bit too much leverage and debt for me but I suppose as a small position in a large portfolio of assets could make sense especially w/ a three bagger potential. I do like their exposure to owning and operating off shore deep drilling rig platforms. However they pay no established pattern of dividends but rather keep and own a percentage of the on-going production stream. SFL owns a few of the deep water drilling rigs and builds in a profit sharing percentage that is added to their fixed return. The shareholder receives a steady dividend (now around 10%). Their quarterly profit sharing amounts can amount to as much as 25% of the annual dividend income paid. When I look at these different energy asset plays, I find that it's all about the proven reserves they have, how fast they can replace their reserves (based on the company's previous record of success) and the income stream generated from the active wells in operation. I was surprised to find that NG wells in general can produce for a long time (as along as 20-30 years!). I have bee researching Williams Companies, Inc. (WMB) and a sister company, Williams Pipeline Partners L.P. (WMZ) a MLP with interests in their pipeline operations. The MLP pays a 6% dividend, owns an interest in a very steady cash flow stream from the pipeline (transportation) operation but has limited up side from exploration or new NG well development. If you want just the income (from the pipeline operations), you buy the MLP and if you want exposure to the NG exploration, well development & production and also own an interest in their network of pipelines, you buy WMB. My preference is to own a huge diversified company like COP that owns a bit of everything and does not have so much debit spread across a few potential high production assets like ATPG. If ATPG hits their discovery wells, there is a huge potential return. EKS

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