ATP Oil & Gas Corporation announced second quarter 2008 results and hedging update.
Oil and gas production increased 26% to 3.1 MMBoe (18.5 Bcfe) for the second quarter of 2008, compared to 2.4 MMBoe (14.6 Bcfe) for the second quarter of 2007. Oil production was 1.4 MMBbls and natural gas production was 10.0 Bcf for the second quarter of 2008, compared to 1.0 MMBbls and 8.4 Bcfe for the second quarter of 2007. Oil and gas production increased 31% to 6.7 MMBoe (40.0 Bcfe) for the six months ended June 30, 2008, compared to 5.1 MMBoe (30.5 Bcfe) for the six months ended June 30, 2007.
Revenues from oil and gas production increased 45% to $191.8 million for the second quarter of 2008, compared to $132.2 million for the second quarter of 2007. Revenues from oil and gas production increased 51% to $417.8 million for the six months ended June 30, 2008, compared to $276.9 million for the six months ended June 30, 2007.
ATP recorded a net loss of $11.8 million or $0.33 per basic and diluted share for the second quarter of 2008, compared to net income of $6.1 million or $0.20 per basic and diluted share for the second quarter of 2007. ATP recorded net income of $35.1 million or $0.98 per basic share and $0.97 per diluted share for the six months ended June 30, 2008, compared to $33.6 million or $1.12 per basic share and $1.10 per diluted share for the six months ended June 30, 2007.
Results for the second quarter of 2008 were impacted by two items that research analysts typically exclude from their published estimates, a charge related to the extinguishment of our prior debt of $24.2 million ($15.7 million after tax) and a net unrealized loss on derivatives no longer accounted for as hedges of $49.2 million ($26.8 million after tax). The $24.2 million charge related to the costs of our previous debt which was required to be written off as a result of the closing of a new senior secured term loan facility which extended the maturity of ATP’s long-term debt and will provide flexibility with regard to the announced asset monetization program. Net income before these items, a non-GAAP measure, in the second quarter of 2008 was $30.8 million or $0.87 per basic share and $0.86 per diluted share. The same metric in the second quarter of 2007 is $11.9 million or $0.40 per basic and $0.39 per diluted share.
In the second quarter of 2008, ATP sold a limited term overriding royalty interest at its Gomez Hub in the Gulf of Mexico for $82.0 million representing 5.8 Bcfe of proved reserves from this property. While this transaction is considered a sale for accounting purposes, the relevant guidance prevents ATP from recognizing a gain on this transaction. As such, the sale proceeds are recorded as deferred revenue on the balance sheet and will be recognized as oil and gas revenues as the reserves attributable to the sold interest are produced. During the second quarter of 2008 the production attributable to the sold interest was 0.5 Bcfe. The related reserves attributable to the sold interest have been removed from ATP’s proved reserves and the production will be excluded from ATP’s reported production.
Due to the sale, ATP’s forecasted production from the Gomez Hub has been reduced accordingly. In addition, as a result of changes in timing of forecasted production related to the U.K. derivatives, certain contracts were restructured. In each case the derivative contracts related to the previously forecasted production no longer qualify for hedge accounting treatment and, as a result, unrealized losses previously deferred were charged to earnings in the current period. Accordingly, during the second quarter of 2008, ATP recorded derivatives expense of $50.2 million, which consists of the previously noted $49.2 million noncash unrealized loss and a $1.0 million realized loss. Subsequent changes in the fair value of these derivatives will be recorded on a mark-to-market basis in the income statement. In conjunction with changes in the timing of forecasted production in the UK, ATP unwound 2.2 Bcfe of natural gas swaps with an average price of $7.35 scheduled from October 2008 through March 2009, and replaced them with 3.1 Bcfe of natural gas swaps with an average price of $9.28 from April 2009 through March 2010.
During the second quarter of 2008, ATP acquired a 55% working interest in Clipper (Green Canyon Blocks 299 and 300), which includes proved reserves. ATP acquired a 100% working interest in Mississippi Canyon Block 304, expanding the Canyon Express Hub.
ATP has expanded its oil hedging program to include costless collars. These are listed below.
Gulf of Mexico Oil Collars
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