ATP Announces 2011 Financial Results And Operations Update

ATP Oil & Gas Corporation (NASDAQ:ATPG) today released 2011 financial results and an operations update.

Results of Operations

Revenues from oil and gas production were $687.2 million in 2011 compared to $438.0 million in 2010, an increase of 57%. Increased revenues were attributable to increased production volumes and higher oil prices. Production in 2011 was 9.0 million barrels (Bbls) of oil equivalent (MMBoe), 68% oil and condensate compared to 7.7 MMBoe, 58% oil and condensate in 2010, an increase of 17%.

Revenues were $177.7 million in fourth quarter 2011 compared to $141.7 million in fourth quarter 2010. Increased revenues were attributable to higher oil prices and a $3.1 million benefit for royalty relief related to 2010 production.

Production in fourth quarter 2011 was 2.3 MMBoe. Excluding 0.1 MMBoe related to royalty relief, fourth quarter 2011 production was 2.2 MMBoe, 70% oil and condensate compared to 2.3 MMBoe, 67% oil and condensate, in fourth quarter 2010. The decrease was primarily attributable to a natural decline in ATP’s producing wells over the preceding 12 months.

Lease operating expense for fourth quarter 2011 was $20.4 million compared to $43.1 million in fourth quarter 2010. The decrease was primarily related to nonrecurring workover expenses, which were $0.3 million in fourth quarter 2011 compared to $20.1 million in fourth quarter 2010. General and administrative expense was $9.8 million in fourth quarter 2011 compared to $15.7 million in fourth quarter 2010. The decrease was primarily a result of decreased compensation-related expense. Interest expense in fourth quarter 2011 was $76.5 million compared to $76.0 million in fourth quarter 2010.

For fourth quarter 2011, ATP recorded a net loss attributable to common shareholders of $28.5 million or $(0.56) per basic and diluted share compared to a net loss of $206.6 million or $(4.06) per basic and diluted share in fourth quarter 2010. The net loss attributable to common shareholders for fourth quarter 2011 and 2010 was impacted by items analysts sometimes exclude from published estimates. For fourth quarter 2011, those items included an impairment expense of $11.9 million, a gain on exchange/disposal of properties of $26.0 million and unrealized losses of $41.6 million on derivatives contracts. For fourth quarter 2010, the items included an impairment of $48.2 million, an expense of $14.9 million related to direct costs associated with the moratorium on deepwater drilling in the Gulf of Mexico, an unrealized loss on derivatives contracts of $34.1 million and the establishment of a valuation reserve for ATP’s deferred tax assets of $94.8 million.

Cash provided from operating activities in fourth quarter 2011 was $68.5 million compared to a use of cash of $40.0 million in fourth quarter 2010, a positive swing of $108.5 million.

At year-end 2011, ATP’s dollar-denominated limited-term net profits interests (NPI’s) and dollar-denominated overriding royalty interests (ORRI’s) amounted to $379.0 million, a decrease from $388.0 million in third quarter 2011. ATP made payments to NPI and ORRI holders of $52.4 million during the quarter. The decrease was partly offset by the sale of a new $15 million ORRI with an existing investor and by additions to the balance of certain ATP suppliers for work on the Clipper wells (Green Canyon 300 #2 and #4). The suppliers for these wells carried a significant portion of drilling costs with the intent to recoup them through NPI’s in the future. With the completion of the Clipper wells, ATP does not have any future agreements to enter into NPI’s or ORRI’s with its vendors. In the first quarter 2012, ATP expects NPI and ORRI payments to increase from fourth quarter 2011 due to increased production revenue and the effect of new NPI and ORRI transactions with investors.

The following schedule summarizes ATP’s NPI and ORRI activity during fourth quarter 2011.
   
Summary of Fourth Quarter 2011 NPI and ORRI Activity
(In Thousands)
(Unaudited)
 
NPI and ORRI balance as of September 30, 2011 $ 388,017
Additions related primarily to Clipper development 14,939
Addition for incremental override 14,995
Interest accretion 13,395
Payments to NPI and ORRI holders   (52,353 )
NPI and ORRI balance as of December 31, 2011 $ 378,993  
 

Since year-end 2011, ATP has closed $85 million in NPI and ORRI sales, including a $20 million sale that closed today. ATP expects to raise an additional $100 million from an asset sale transaction that is expected to close by the end of March 2012. In addition, ATP has executed and allocated a $155 million expansion of its first lien credit facility and anticipates drawing the funds after the filing of ATP’s 2011 annual report on Form 10-K. Combined with net cash advances from commodity hedging contracts, ATP expects to have raised over $350 million in additional liquidity during first quarter 2012 by quarter end.

Reserves

ATP reported year-end 2011 proved reserves of 118.9 MMBoe compared to 126.4 MMBoe at year-end 2010. ATP reported proved and probable reserves of 194.4 MMBoe at year-end 2011 compared to 211.3 MMBoe at year-end 2010. The changes were primarily a result of production of 9.0 MMBoe in 2011 and revisions to oil and gas reserves. On a Boe basis, ATP reported that oil and natural gas liquids (NGLs) represent 66% of year-end 2011 proved reserves and 65% of proved and probable reserves compared to 59% and 58%, respectively, at year-end 2010.

ATP reported a year-end 2011 SEC pre-tax PV-10 value of $4.2 billion for proved reserves and $7.3 billion for proved and probable reserves compared to $2.6 billion and $4.8 billion, respectively, at year-end 2010. This increase is primarily a result of pricing, but other factors include timing and an increase in oil and NGL reserves.

ATP will post to its web site the independent engineers’ letters that accompany the reserve reports by March 16, 2012.

Production and Operations Update

Production for first quarter 2012 is expected to fall within the range of 1.8 – 2.1 MMBoe. The Mississippi Canyon (“MC”) 942 A-3 (#2) well, the fourth well at ATP’s Telemark Hub, began production in late February 2012. ATP continues to see positive results from this well. For part of the first quarter, ATP has been required to temporarily shut in production at the Telemark Hub’s MC 941 A-1 and A-2 wells due to rig moves, workovers and required safety precautions. ATP is recompleting the MC 941 A-2 well, which requires ATP to shut in the well while an additional oil sand, the B sand, is completed. The completion operation is expected to lead to a substantial increase in the well’s productivity beginning in second quarter 2012. Upon completion of this operation, ATP also intends to complete a sleeve shift operation at the MC 941 A-1 well, which is expected to add approximately 1.5 MBoe per day to production beginning in second quarter 2012.

Capital spending for 2012 includes ongoing expenditures related to ATP’s Telemark Hub described above and the completion of the Clipper pipeline targeted for completion in late third quarter or early fourth quarter 2012. Once installed, this pipeline will connect the two Clipper wells to a host platform. The wells were completed and tested at a combined rate of 16 MBoe per day, net to ATP, in 2011. Other 2012 capital spending projects include continued construction of the Octabuoy floating production platform which will serve the Cheviot project, additional wells late in 2012 at the Gomez field and ATP’s first well in the deepwater offshore Israel area.

ATP expects to fund these projects through cash flow and additional sources of liquidity already announced or planned, such as the expansion of its first lien and selection of partners to join in property developments.

Hedging Update

A detailed hedging contracts schedule is provided near the end of this press release. During fourth quarter 2011 and first quarter 2012, ATP continued to add crude oil swaps for 2012 and 2013 volumes. In addition to standard swaps, ATP entered into a crude oil prepaid swap transaction during fourth quarter 2011 for 146,400 barrels at a price of $100.41. Subsequent to fourth quarter 2011, ATP has added a net 306,000 Bbls of crude oil prepaid swaps at an average price of $98.36. During future settlement months, ATP will deliver cash to the counterparty based on prevailing market prices, which may be higher or lower than those paid to ATP.

During first quarter 2012, ATP entered into basis swaps for 825,000 Bbls in 2012 at an average price spread of $12.34 and 820,000 Bbls in 2013 at an average price spread of $4.60. The basis swaps pay out based on the price spread between LLS (Louisiana Light Sweet), which is an approximate basis for most of ATP’s production, and WTI (West Texas Intermediate), which is the basis for certain ATP hedges.

ATP received $14.7 million in net cash advances from commodity price derivative contracts in fourth quarter 2011 and has received $19.4 million net so far in first quarter 2012.

During first quarter 2012, ATP entered into swaption agreements amounting to a net 365,000 Bbls in 2013 at an average strike price of $96.50 in January 2012. ATP receives cash up front and in exchange the counterparty receives the option to enter into a swap at a later date.

ATP's selected financial data schedule below contains additional information on the company's activities for fourth quarter 2011 and comparable 2010 period.
     
Selected Financial Data Three Months Ended Year Ended
(Unaudited) December 31, December 31,
2011   2010 2011   2010
 
Production
Natural gas (MMcf) 4,613 4,486 17,264 19,151
Gulf of Mexico 4,107 3,676 15,095 15,899
North Sea 506 810 2,169 3,252
Oil and condensate (MBbls) 1,510 1,538 6,111 4,471
Gulf of Mexico 1,509 1,537 6,107 4,464
North Sea 1 1 4 7
Natural gas, oil and condensate
MMcfe 13,675 13,716 53,930 45,978
MBoe 2,279 2,286 8,988 7,663
 
Average Prices
Natural gas (per Mcf) $ 4.12 $ 4.84 4.77 $ 4.83
Gulf of Mexico 3.58 4.11 4.23 4.53
North Sea 8.47 8.13 8.55 6.32
Oil and condensate (per Bbl) 105.07 78.04 98.98 72.94
Natural gas, oil and condensate
Per Mcfe $ 12.99 $ 10.33 $ 12.74 $ 9.11
Per Boe 77.96 61.98 76.45 54.66
 
Gain (Loss) on Oil and Gas Derivatives ($000's)
Natural gas contracts
Realized or settled during the period $ 1,876 $ 2,807 $ 2,996 $ 9,238
Unrealized 3,668 (7,037 ) 6,495 (3,288 )
Oil and condensate contracts
Realized or settled during the period (7,433 ) (5,931 ) (15,613 ) (11,923 )
Unrealized (45,270 ) (27,056 ) 31,313 (16,446 )
Total (47,159 ) (37,217 ) 25,191 (22,419 )
 

Year-End 2011 Conference Call

ATP Oil & Gas Corporation (NASDAQ: ATPG) will host a conference call on Friday, March 16 th at 12:30 pm CDT to discuss the company’s fourth quarter results followed by a Q&A session.

Year-End Results Conference Call

Date: Friday, March 16, 2012

Time: 1:30 pm EDT; 12:30 pm CDT; 11:30 pm MDT and 10:30 pm PDT

ATP invites interested persons to listen to the live webcast on the company’s website at www.atpog.com. Phone participants should dial 888-554-1422. A digital replay of the conference call will be available at 888-203-1112, ID# 4364330, for a period of 24 hours beginning at 5:00 pm CDT.

About ATP Oil & Gas Corporation

ATP Oil & Gas is an international offshore oil and gas development and production company with operations in the Gulf of Mexico, Mediterranean Sea and the North Sea. The company trades publicly as ATPG on the NASDAQ Global Select Market. For more information about ATP Oil & Gas Corporation, visit www.atpog.com.

Forward-looking Statements

Certain statements included in this news release contain "forward-looking statements" within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. ATP cautions that assumptions, expectations, projections, intentions, plans, beliefs or similar expressions used to identify forward-looking statements about future events may, and often do, vary from actual results and the differences can be material from those expressed or implied in such forward looking statements. Some of the key factors which could cause actual results to vary from those ATP expects include, without limitation, volatility in commodity prices for crude oil and natural gas, the condition of the capital markets generally, as well as ability to access them, the timing of planned capital expenditures, uncertainties in estimating reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting its business. ATP assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law. While ATP does not file reports with the SEC containing probable and possible reserve quantities, ATP occasionally will include them in news releases, presentations and discuss such reserves publicly. ATP and its independent third party reservoir engineers use the term “probable” to describe volumes of reserves potentially recoverable through additional drilling or recovery techniques that, by their nature, are more speculative than estimates of proved reserves. Any estimates of reserves in this news release have been prepared by our independent third party engineers. More information about the risks and uncertainties relating to ATP's forward-looking statements is found in the company's SEC filings or website, www.atpog.com.
   
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
    December 31,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 65,678 $ 154,695
Restricted cash 20,113 30,270
Accounts receivable (net of allowance of $225 and $225, respectively) 70,628 92,737
Deferred tax asset 480 8,191
Derivative assets 2,194 1,688
Other current assets   28,050     26,408  
Total current assets 187,143 313,989
 
Oil and gas properties (using the successful efforts method of accounting):
Proved properties 4,875,232 4,291,440
Unproved properties   22,945     20,402  
4,898,177 4,311,842
Less accumulated depletion, depreciation, impairment and amortization   (1,760,756 )   (1,407,206 )
Oil and gas properties, net 3,137,421 2,904,636
 
Restricted cash 10,000 10,000
Deferred financing costs, net 40,873 48,353
Other assets, net   13,337     13,124  
Total assets $ 3,388,774   $ 3,290,102  
 
Liabilities and Equity
Current liabilities:
Accounts payable and accruals $ 265,620 $ 230,703
Current maturities of long-term debt 33,848 21,625
Asset retirement obligation 52,536 43,386
Deferred tax liability 138 -
Derivative liability 68,816 37,893
Current maturities of other long-term obligations   113,657     86,521  
Total current liabilities 534,615 420,128
 
Long-term debt 1,976,157 1,857,784
Other long-term obligations 451,797 472,500
Asset retirement obligation 115,981 123,472
Deferred tax liability 27,493 16,956
Derivative liability   522     6,425  
Total liabilities 3,106,565 2,897,265
 
Temporary equity-redeemable noncontrolling interest 115,820 140,851
Temporary equity-convertible preferred stock, $0.001 par value 70,055 -
 
Shareholders' equity:
Convertible preferred stock, $0.001 par value 222,681 140,000
Common stock, $0.001 par value 52 51
Additional paid-in capital 529,669 570,739
Accumulated deficit (548,765 ) (356,866 )
Accumulated other comprehensive loss (106,392 ) (101,027 )
Treasury stock, at cost   (911 )   (911 )
Total shareholders' equity   96,334     251,986  
Total liabilities and equity $ 3,388,774   $ 3,290,102  

   
CONSOLIDATED INCOME STATEMENTS
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
Three Months Ended Year Ended
December 31, December 31,
2011 2010 2011 2010
Revenues:
Oil and gas production $ 177,690 $ 141,748 $ 687,208 $ 437,997
 
Costs, operating expenses and other:
Lease operating 20,448 43,121 122,202 132,544
Exploration 185 (90 ) 1,251 1,174
General and administrative 9,800 15,679 43,242 43,948
Depreciation, depletion and amortization 67,221 62,036 298,574 220,657
Impairment of oil and gas properties 11,935 48,189 57,639 63,267
Accretion of asset retirement obligation 3,843 3,408 15,000 13,827
Drilling interruption costs - 14,933 19,691 23,647
Loss on abandonment (158 ) 4,596 3,916 4,829
Gain on exchange/disposal of properties   (26,000 )   300     (27,000 )   (26,720 )
  87,274     192,172     534,515     477,173  
Income (loss) from operations   90,416     (50,424 )   152,693     (39,176 )
 
Other income (expense):
Interest income 39 105 223 696
Interest expense, net (76,528 ) (75,991 ) (326,411 ) (222,104 )
Derivative income (expense) (47,158 ) (37,218 ) 25,191 (22,419 )
Gain (loss) on debt extinguishment   4     2,855     1,095     (75,316 )
  (123,643 )   (110,249 )   (299,902 )   (319,143 )
 
Loss before income taxes   (33,227 )   (160,673 )   (147,209 )   (358,319 )
 
Income tax (expense) benefit:
Current 1,327 789 1,327 859
Deferred   19,389     (40,782 )   (19,395 )   35,414  
  20,716     (39,993 )   (18,068 )   36,273  
 
Net loss (12,511 ) (200,666 ) (165,277 ) (322,046 )
Less income attributable to the redeemable noncontrolling interest (9,668 ) (3,148 ) (26,622 ) (15,503 )
Less convertible preferred stock dividends   (6,312 )   (2,828 )   (18,583 )   (11,248 )
Net loss attributable to common shareholders $ (28,491 ) $ (206,642 ) $ (210,482 ) $ (348,797 )
 
Net loss per share attributable to common shareholders:
Basic $ (0.56 ) $ (4.06 ) $ (4.12 ) $ (6.88 )
Diluted $ (0.56 ) $ (4.06 ) $ (4.12 ) $ (6.88 )
 
Weighted average number of common shares:
Basic 51,127 50,838 51,077 50,715
Diluted 51,127 50,838 51,077 50,715

   
CONSOLIDATED CASH FLOW DATA
(In Thousands)
 
Twelve Months Ended
December 31,
2011 2010
Cash flows from operating activities:
Net loss $ (165,277 ) $ (322,046 )
Adjustments to operating activities 365,634 293,492
Changes in assets and liabilities   (3,266 )   (8,726 )
Net cash provided by (used in) operating activities   197,091     (37,280 )
 
Cash flows from investing activities:
Additions to oil and gas properties (436,910 ) (598,108 )
Proceeds from disposition of properties 27,000 17,053
Decrease (increase) in restricted cash   10,157     (29,766 )
Net cash used in investing activities   (399,753 )   (610,821 )
 
Cash flows from financing activities:
Proceeds from senior second lien notes - 1,492,965
Proceeds from first lien term loans 59,400 147,000
Proceeds from term loan facility - ATP Titan assets 91,000 238,750
Proceeds from term loans - 46,000
Payments of term loans (25,375 ) (1,263,727 )
Deferred financing costs (4,561 ) (62,937 )
Proceeds from preferred stock issuances, net of costs 149,866 -
Purchase of capped-call options on ATP common stock (26,500 ) -
Proceeds from other long-term obligations 85,326 231,888
Payments of other long-term obligations (180,848 ) (102,818 )
Distributions to noncontrolling interest (45,961 ) (14,250 )
Preferred stock dividends (15,098 ) (11,276 )
Derivative contracts, net 67,129 -
Other financings, net (42,534 ) (11,180 )
Exercise of stock options/warrants   205     3,609  
Net cash provided by financing activities   112,049     694,024  
 
Effect of exchange rate changes on cash and cash equivalents   1,596     (189 )
 
Increase (decrease) in cash and cash equivalents (89,017 ) 45,734
Cash and cash equivalents, beginning of year   154,695     108,961  
Cash and cash equivalents, end of year $ 65,678   $ 154,695  

                       
Derivatives Schedule
(Unaudited)
2012 2013
1Q   2Q   3Q   4Q   FY 1Q   2Q   3Q   4Q   FY
Gulf of Mexico
 
Natural Gas Swaps
Volumes (MMMBtu)

 
1,365 - - - 1,365 - - - - -
Price ($/MMBtu)

 
$ 4.64 - - - $ 4.64 - - - - -
 
Natural Gas Calls
Volumes (MMMBtu) 910 910 920 920 3,660 - - - - -
Price ($/MMBtu) $ 5.30 $ 5.30 $ 5.30 $ 5.50 $ 5.35 - - - - -
 
Crude Oil Swaps
Volumes (MBbls) 834 751 759 759 3,102 315 228 230 230 1,003
Price ($/Bbl) $ 109.16 $ 97.36 $ 97.36 $ 97.36 $ 100.53 $ 103.60 $ 108.88 $ 108.88 $ 108.88 $ 107.22
 
Prepaid Crude Oil Swaps (1)
Volumes (MBbls) 208 268 202 104 783 - - - - -
Price ($/Bbl) $ - $ - $ - $ - $ - - - - - -
 
Crude Oil Basis Swaps
Volumes (MBbls) - 273 276 276 825 270 182 184 184 820
Basis Price ($/Bbl, LLS - WTI) $ - $ 15.25 $ 10.90 $ 10.90 $ 12.34 $ 5.47 $ 4.18 $ 4.18 $ 4.18 $ 4.60
 
Crude Oil Swaptions (Calls Sold)(2)
Volumes (MBbls) - - - - - 90 91 92 92 365
Strike Price ($/Bbl) - - - - - $ 96.50 $ 96.50 $ 96.50 $ 96.50 $ 96.50
 
North Sea
Natural Gas Swaps
Volumes (MMMBtu) 455 455 460 460 1,830 180 - - - 180
Price ($/MMBtu)(3) $ 9.49 $ 8.26 $ 8.26 $ 10.13 $ 9.03 $ 11.28 - - - $ 11.28
- - -
                                             
The above are ATP's financial and physical commodity contracts outstanding as of March 14, 2012
Additional hedges, derivatives and fixed price contracts, if any, will be announced during the year.

(1)
 

ATP received cash proceeds at closing averaging approximately $105.03 per barrel. During the future contract settlement months, ATP will pay cash based on the prevailing market prices in effect at that time, which may be more or less than ATP is paid.

(2)

Call swaptions sold to a third party that allows the third party to exercise and enter into a swap with ATP at the strike price.

(3)

Assumes currency translation rate of 1.60 USD per GBP which approximates the rate as of March 14, 2012

 
Cash Payments Related to Other Long-term Obligations
(In Thousands)
(Unaudited)
 
Three Months Twelve Months
Ended Ended
December 31, December 31,
2011 2011
Net profits interests $ 38,669 $ 149,240
Dollar-denominated overriding royalty interests   13,684   108,332
NPI and ORRI payments 52,353 257,572
Gomez pipeline financing 5,428 21,847
Vendor deferrals   1,390   35,848
Total payments $ 59,171 $ 315,267

(1)
 

(1) Includes principal of $180,848 and interest of $134,419. The weighted average effective interest rate on our other long-term obligations was 18.9% as of December 31, 2011.
     
Other Long-term Obligations
(In Thousands)
(Unaudited)
 
December 31, December 31,
2011 2010
Net profits interests $ 336,669 $ 331,776
Dollar-denominated overriding royalty interests   42,324     52,825  
Total NPI and ORRI obligations 378,993 384,601
Gomez pipeline obligation 71,676 73,868
Vendor deferrals – Gulf of Mexico 17,493 7,096
Vendor deferrals – North Sea 94,710 90,874
Other   2,582     2,582  
Total 565,454 559,021
Less current maturities   (113,657 )   (86,521 )
Other long-term obligations $ 451,797   $ 472,500  

Copyright Business Wire 2010

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