ATP Replaces 214% of Production, Collects $472MM from Asset Sales
In 2008, ATP Oil & Gas Corporation achieved record net income and revenues, replaced 214% of its oil and gas production, and received $472 million in cash proceeds from asset sales.
Additionally, last Friday ATP and GE Energy Financial Services jointly announced a new infrastructure partnership. The partnership will include the ATP Innovator, the floating production platform servicing ATP's deepwater Gomez Hub. This transaction does not include any oil and gas reserves, and ATP continues to operate and hold a 100% working interest in the Gomez field.
- Record annual net income of $122 million or $3.43 per basic and $3.39 per diluted share with record annual revenues of $618 million.
- Total additions to reserves from all sources of 20 MMBoe (123 Bcfe), contributing to a production replacement ratio of 214%.
- Asset sales of $472 million, representing 11 MMBoe and resulting in a 2008 gain on sale of $119 million with an additional $59 million of deferred revenue to be recognized in the future.
Results of Operations
ATP recorded net income of $122 million or $3.43 per basic and $3.39 per diluted share for 2008, compared to net income of $49 million or $1.58 per basic and $1.55 per diluted share for 2007. ATP recorded net income of $50 million or $1.41 per basic and diluted share for the fourth quarter of 2008, compared to net income of $13 million or $0.39 per basic and $0.38 per diluted share for the fourth quarter of 2007.
Total revenues were $618 million for 2008 and $81 million for the fourth quarter of 2008, compared to $608 million for 2007 and $213 million for the fourth quarter of 2007. Production and realized prices, which account for the oil and gas revenues portion of total revenues for 2008 and 2007, are included in the Selected Operating Statistics table within this release.
Oil and gas production totaled 10 MMBoe (57 Bcfe) for 2008 and 1 MMBoe (5 Bcfe) for the fourth quarter of 2008, compared to 11 MMBoe (64 Bcfe) for 2007 and 3 MMBoe (20 Bcfe) for the fourth quarter of 2007. Production in 2008 from August through December was impacted by 2 MMBoe (10 Bcfe) due to hurricane related damage to third-party downstream pipelines, which caused reserves from the third and fourth quarters to be deferred to future periods. Lease operating expenses were impacted on a per unit basis in the fourth quarter of 2008 due to decreased production volumes and additional hurricane related costs in the Gulf of Mexico. As of March 2, 2009, one Gulf of Mexico shelf property remains shut-in since the hurricane, but is expected to return to production once third-party infrastructure repairs are completed.
ATP's selected operating statistics and financial information below contain additional information on the company's activities for the year and fourth quarter of 2008 and the comparable periods in 2007.
ATP reported independent third-party proved reserves at year end 2008 of 119 MMBoe (55% oil). ATP's proved reserves are located 63% in the Gulf of Mexico and 37% in the North Sea. The pre-tax PV-10 was determined using SEC pricing as of December 31, 2008.
ATP achieved a 214% production replacement ratio from all sources in 2008, based on production of 10 MMBoe and net additions of 20 MMBoe.
Capital Resources and Liquidity
ATP had working capital of approximately $36 million as of December 31, 2008, a decrease of approximately $60 million from December 31, 2007. Working capital, as defined in our Senior Secured Credit Facility, excludes certain noncash items and was $73 million as of December 31, 2008, compared to $197 million as of December 31, 2007. ATP had unrestricted cash of $215 million at December 31, 2008, compared to $199 million at December 31, 2007. For the year ended December 31, 2008, ATP was in compliance with all the terms of its credit agreement. The pre-tax PV-10 of our oil and gas reserves for purposes of our credit agreement was $3.7 billion. Moreover, based on the Company’s projections, ATP believes that it will remain in compliance with all of its financial covenants throughout 2009.
Cash provided by operating activities during 2008 and 2007 was $547 million and $329 million, respectively. Cash flow from operating activities increased primarily due to higher derivatives income, business interruption insurance proceeds, and from changes in working capital during 2008 compared to 2007. Cash flow from operating activities prior to changes in assets and liabilities (a non-GAAP measure frequently used by research analysts) was $467 million for 2008, compared to $384 million for 2007. A non-GAAP reconciliation is provided near the end of this press release.
During 2008, ATP closed two transactions for the sale of reserves for $472 million, representing 11 MMBoe of proved reserves. The first sale, which closed during June 2008, was for 1.0 MMBoe of proved reserves in the form of a 15% limited-term overriding royalty interest for $82 million. The second sale was for 80% of our net interests in the Tors and Wenlock fields located in the U.K. sector of the North Sea for GBP 265 million, or approximately $390 million ($399 million before transaction costs). The transaction closed during December 2008. The two transactions reflect an average in-place sales price of $42.03 per Boe.
Cash paid for acquisition and development of oil and gas properties for 2008 was $918 million, including $43 million of capitalized interest, compared to $849 million for 2007. Offsetting this amount in 2008 was the $472 million of asset sales proceeds previously discussed. Capital expenditures for 2009 are currently estimated to be between $300 million and $500 million. Since ATP operates essentially all of its properties under development, ATP has the flexibility to adjust capital spending plans and development activities. ATP anticipates funding its capital program in 2009 from cash on hand and cash generated from operations. ATP is actively pursuing the sale of partial interests in selected assets and, if successful, will further reduce its debt and potentially revise its development plans and budgets during the year.
During the fourth quarter of 2008, ATP recognized a $98 million gain on derivatives, largely from restructuring a portion of its commodity price hedges. An updated schedule of our current commodity price hedges as of March 2, 2009 is provided near the end of this press release.
On Friday February 27, 2009, ATP and GE Energy Financial Services (GE) jointly announced an infrastructure partnership. GE will invest $150 million for a 49% stake in the limited partnership, which will own the ATP Innovator. ATP will hold the remaining 51% stake and act as managing partner. The transaction will be effective June 1, 2008 and will allow ATP exclusive use of the ATP Innovator. ATP remains operator and continues to hold a 100% working interest in the Gomez field and its oil and gas reserves.
During the second quarter of 2008, ATP amended the terms of its Senior Secured Credit Facility. The primary facility, $1,050 million, matures in July 2014. In addition, an asset sale facility of $600 million with a maturity of January 2011 was added to accommodate ATP's announced asset monetization program. In December 2008, ATP retired $273 million of the asset sale facility in conjunction with the partial sale of the two North Sea properties noted above.
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