Flipper, welcome aboard. First, as you know, I am biased as I own equity. Second, ATPG is a weird company. We all know now that it was not the interest payment that took the company into BK. They pretty much did the digging for their own grave. So, anything can happen.
>> 1) Getting Clipper on line is most important to the over-rides and NPI's as according to the management 8-K nearly 1/2 of the cash flow goes to those. The depletion afterward looks steep. Since our concern is POST filing Clipper just reduces debt....of course not a bad thing.
My understanding is deep water wells need certain cap ex to maintain flow rate. If no fund is allocated for those, it will deplete. So the drop is probably come from both Clipper and Telemark.
>>2) Trying to use an EBITDA multiple to value worth appears very spotty at best, again looking at the steep drop in production from the 8-K from 8-13 on to 2-14. 2013 numbers come in reasonably heathly but extrapolating 2/14 numbers assuming a slight drop from there ($48.9m/m to $35m/m for remainder of 2014)....subtracting normal expenses, continuation of ORRI/NPI's payments...etc etc...comes in UNDER $200m in EBTDA for 2014. A REAL concern. So trying to take 2013 $600m in EBITDA and apply a multiple to compute an EV seems worthless. Using a forward 4 multiple on 2014 at $200m is $800 EV...$400m below first lien debt.
The 18 month projection is puzzling. It's assuming this will be 18 months BK process (see bankruptcy fee) but only allow 5 months of cap ex work. Why would ATPG stays in BK for 13 extra months and do nothing while paying the lawyers. So IMO, this can be a quick exit and/or ATPG and the creditors are working on a long term GOM plan.
>>4) The firm has been seacrhing for a minimum for 6 months I can see for partners (based off their April presentation) Their write down of UK assets shows they might be holding little prospects for UK assets. $492m has been spent realted to it.
My guess is they write it down because the "plan" does not allow money on it. If they give up hope on UK, why would they issue a PR to say that "The UK Company will continue to operate and manage its UK operations."
Israel is a long shot, it really depends on whether their partner need them to be the operator or not.
>>6) Cap Ex per the management 8-K drops to nearly $0 by next summer. Given ATP's history of double the depletion rates on their wells versus industry norms makes me wonder if they might be too optimistic even on production by 2/14 exit.
Next summer? It's like 5 months later. Jan 13. If they stop doing anything Jan 13 and see in BK for 18 months, u can kiss the 2nd lien bye bye. |
