ATP Posts Record Q1 Earnings
ATP Oil & Gas Corporation on Thursday announced first quarter 2007 results and provided an operations update.
-- Achieved quarterly record net income of $0.92 per basic share; -- Achieved quarterly record revenue of $146.3 million; -- Expanded the Canyon Express Hub; -- Expanded the Gomez Hub; -- Expanded the Tors Hub; -- Lowered cost of capital by refinancing Libor + 4.75% second lien debt with first lien debt at Libor + 3.5% and improved financial strength by adding $191.5 million in liquidity.
Results of Operations
Natural gas and oil production increased 168% from 5.9 Bcfe (66 MMcfe/d) for the first quarter 2006 to 15.9 Bcfe (177 MMcfe/d). Natural gas, oil and condensate price realizations per Mcfe increased 19% from $7.62 for the first quarter 2006 to $9.11. The increase in price realizations primarily reflects improved cash flow hedges. Revenues from production increased 220% from $45.2 million for the first quarter 2006 to $144.7 million. The increase in revenue was principally due to the aforementioned increases in production and price realizations.
Lease operating expenses (LOE) per Mcfe was $1.33, compared to $1.80 per Mcfe in the first quarter 2006. The decrease per Mcfe was primarily attributable to higher production levels during 2007 and the additional first quarter 2006 costs related to the 2005 hurricanes. General and administrative (G&A) expense increased $0.8 million to $8.8 million from the first quarter 2006. Included in G&A expense is $1.6 million in the first quarter 2007 and $2.2 million in the first quarter 2006 of non-cash stock based compensation. The G&A increase was primarily due to increased employee compensation and higher legal, professional and accounting fees. Depreciation, depletion, and amortization (DD&A) per Mcfe was $3.36 for the first quarter, compared to $2.91 for the first quarter 2006.
ATP recorded net income available to common shareholders in the first quarter of $27.4 million or $0.92 per basic share and $0.89 per diluted share, compared to a net loss available to common shareholders of $9.9 million or $0.34 per basic and diluted share in the first quarter 2006.
The company's selected operating statistics and financial information included within this press release contains additional information on activities for the first quarter and the comparable 2006 period.
Gomez Hub Expansion - On January 23, 2007, ATP acquired, primarily through the granting of a limited net profits interest, a 100% working interest in Mississippi Canyon ("MC") 755 ("Anduin"), a 50% working interest in a prospect at MC 754 ("Anduin West"), and a 25% working interest in a prospect at MC 800 ("Gladden").
Canyon Express Hub Expansion - On January 8, 2007, ATP completed the acquisition of a 50% working interest in MC Block 305 ("Aconcagua"), a 16.7% working interest in MC Block 348 ("Camden Hills"), and an additional 25.8% interest in Canyon Express Pipeline Common System ("Canyon Express"). Both Aconcagua (located in 6,820' of water) and Camden Hills (located in 7,112' of water), along with the company's King's Peak field, produce through the Canyon Express pipeline, in which ATP owns a 45.1% interest following this acquisition. In addition to the proved producing reserves, ATP completed this transaction primarily to acquire the undeveloped reservoirs of Aconcagua, for further study of Camden Hills, and to expand its interest in the Canyon Express Hub.
Operations and Development
Tors - Production commenced from the Garrow G1 well in February 2007. The G1 well, along with the Kilmar K1 and K2 wells, comprise the three producing wells at Tors. The Kilmar K3 well, which is scheduled to be drilled this summer, will be the fourth well at Tors and should increase field production capacity to approximately 80 MMcf/d net. At this time, ATP anticipates drilling additional wells, subject to reservoir performance.
Wenlock - ATP is currently drilling the horizontal leg of the Wenlock W1 well in the productive horizon. The W1 well is expected to be completed before the end of the second quarter with first production scheduled this summer.
Gulf of Mexico Deepwater
Gomez Hub - Immediately following the acquisition of Anduin, ATP moved a semi-submersible drilling rig on location to reenter, sidetrack and complete the MC 755 #2 ST1 well. The operation was successful and the well will be tied back to the ATP Innovator and placed on production this summer.
ATP is currently drilling the second stage of the MC 711 #8 well and is targeting proved, probable, and logged hydrocarbons in the northern portion of the MC 711 block. The first stage of the well targeted an extension opportunity in an adjacent fault block on MC 667. This zone contained an insufficient amount of pay and has been deemed non-commercial. As a result, ATP expects to record exploration expense of approximately $10 million in the second quarter for the portion of the well attributable to MC 667. The development well should be completed by the second quarter and placed on production this summer.
Production commenced from the MC 711 #5 well located in the northern portion of the block in March 2007. This well brought field production to approximately 115 MMcfe/d net, meeting the current processing capacity of the ATP Innovator. ATP intends to expand the capacity of the ATP Innovator to approximately 200 MMcfe/d this summer. The facility upgrade should take roughly 30 to 45 days and involves installing a second natural gas compression and processing module on the platform and redesigning the subsea architecture to accommodate additional wells, including the Anduin discovery (MC 755 #2 ST1) and the second northern well at MC 711 (MC 711 #8).
Telemark Hub (MC 941/942 and Atwater Valley 63) - The hull and topsides construction of the MinDOC are progressing. The well design and planning are also underway. The MinDOC sail-out is scheduled for summer 2008 with first production late in 2008.
Gulf of Mexico Shelf
Ship Shoal ("SS") 351 - Two successful wells were drilled during 2007. Based on these results, the company intends to drill up to three additional wells before beginning completion operations. SS 351 will be tied back to ATP's SS 358 platform and is scheduled to commence production late in the second quarter.
South Timbalier ("ST") 77 - ATP drilled the ST 77 #6 extension well. This well found proved reserves in the adjacent fault block from ATP's ST 77 #4 well and commenced production on March 15, 2007.
High Island ("HI") A-589 - The jacket and topsides construction are underway with installation of the platform scheduled for July 2007. The platform rig from SS 351 will move to HI A-589 once the drilling program at SS 351 is complete. There are up to two wells planned for HI A-589 with first production expected late 2007 or early 2008.
Capital Resources and Liquidity
During the first quarter, ATP expanded and improved the terms of its first lien term loans. The expansion resulted in $191.5 million of incremental proceeds. The company refinanced its $175.0 million second lien term loan with first lien term loan proceeds at an annual interest savings of 1.25% or $2.2 million. The interest rate of LIBOR + 3.5% and maturity of April 14, 2010 of the first lien term loan remains unchanged. The amendment also allows for a pre-agreement for an MLP structure of up to $500 million.
Cash flow from operating activities was $84.2 million during the first quarter, compared to $28.8 million in cash flow from operating activities for the same 2006 period. Cash flow from operating activities prior to changes in assets and liabilities, a non-GAAP measure frequently used by research analysts, was $96.2 million for the first quarter, compared to $19.5 million for the same 2006 period. A non-GAAP reconciliation of cash flow from operating activities prior to changes in assets and liabilities can be found near the end of this press release.
At March 31, 2007, ATP had working capital of $127.4 million, compared to $77.5 million at December 31, 2006. ATP had $261.7 million in cash and cash equivalents on hand at March 31, 2007, compared to $182.6 million in cash and cash equivalents at December 31, 2006. Cash paid for acquisition and development activities for the three months ended March 31, 2007 was $169.5 million, compared to $96.1 million in the same 2006 period.
ATP has been active in the derivatives market this year. Since the beginning of 2007, the company has purchased crude oil puts and entered into crude oil and natural gas fixed forward sales representing approximately 64 Bcfe of production at an average hedge price of $8.71/Mcfe. In total for 2007, 2008, and 2009, ATP has 112 Bcfe hedged at an average price of $9.22/Mcfe, representing potential future revenue of more than $1.0 billion. A complete listing of the company's hedge positions can be found near the end of this press release.
ATP Oil & Gas is an international offshore oil and gas development and production company with operations in the Gulf of Mexico and the North Sea.
- Lessons from ATP Bankruptcy There for Those Who Listen (Jun 30)
- Cosco Discontinues Octabuoy Hull and Topside Module Project (Jan 12)
- Cosco Reveals Buying Interest for Octabuoy Hull and Topside Module (Jul 23)