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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (38105)	5/29/2010 5:34:48 PM
From: Spekulatius	1 Recommendation Read Replies (1) \| Respond to of 78714

more ATPG - the other problem that I see with the NPV calculation is the reserve valuation. They own about 212MBOE (proved and probable) so with an EV of 1.7B$ that is about 8$/BOE. This seems low but not much lower than some majors. My favorite TOT for example owns 10B BOE proved and about 20B BOE proved and probable and the total EV is 120B$. So per BOE I arrive at a # of 12$/BOE (proved) and 6$ BOE (proved and probable). Well that is cheap too. Now ATPG reserves could be worth more because they are located at the GOM and royalties are very low in the US compared to almost anywhere else in the world, but now we need to throw in a discount. Now is ATPG cheaper or more expensive than TOT you can guess this yourself. Still I am tempted to play ATPG - the price seems to swing so much and if fears are overblown, this will get back to 20$ fairly quick. Worst case we have a zero but I think that 20$ are much more likely than zero and there is potential for prices substantially >20$ too, so I think risk reward is favorable.

To: Spekulatius who wrote (38105)	5/31/2010 5:27:11 PM
From: Grantcw	Respond to of 78714

Hello Spekulatius, Yes, I believe that model was created before many of the current risks presented themselves. It's still very useful as a starting point... To me, there are a couple of potential outcomes here in the next year for ATPG: 1) Outcome 1 would be ATPG gets VERY lucky and is basically unaffected. It's new Canyon Express well progress may be stopped , but the important project is Telemark. If somehow Telemark wells can continue their progress because of: A) The Titan is given an exemption to the recent stop-drill pronouncements because it is technologically superior in safety to other rigs out there. Or B) Political pressure somehow ends the 6 month moratorium early (maybe due to jobs?) Or C) Drilling has gone enough on all the wells and maybe the pronouncement doesn't apply because only completion is necessary? 2) Outcome 2 would be that Telemark can't proceed for 6 months. ATPG would be at a higher run rate of production than 2009 and could try to keep moving on production of unaffected wells until the 6 month moratorium was over and serious production increases could proceed. Personally, I think without another major surprise, ATPG would be ok from a cash flow perspective here until the ramp-up in 2011. 3) Outcome 3 would basically be that something else horrible happens to ATPG. New insurance costs could turn out to be extremely high, or hurricane season could force ATPG shut-ins or something worse, or the moratorium could be pushed out beyond 6 months. So, I'm guessing we're going to end up with outcome #2, which to me implies a significant undervaluation of shares at current levels. An outcome of #1 or somewhere between #1 and #2 would imply a bigger undervaluation. And a #3 would be a big mess and ATPG would be to start back into creative financing mode, in my opinion. But, seemingly 1/2 of the companies I've invested in over the past 2 years have some level of serious risk. Pays to stay diversified. My question to others is are there oil companies out there that have been cut in 1/2 like ATPG over the last month? And do these companies have seemingly significant undervaluation in addition to less risk than ATPG? If so, I'd like to explore investment in them... Thanks, cwg