Results of Operations:
ATP Oil & Gas has recorded oil and gas production for the first quarter of 2009 was 1.7 MMBoe (10 Bcfe) compared to 3.6 MMBoe (21.6 Bcfe) for the year-ago quarter. Oil production was 0.9 MMBbls (55% of total production) and natural gas production was 4.5 Bcf for the first quarter of 2009, compared to 1.6 MMBbls (45% of total production) and 11.8 Bcfe in the year-ago quarter. In December of 2009, ATP Oil & Gas sold 80% of Wenlock and Tors in the UK North Sea, which impacted production for the first quarter of 2009. Production was further impacted by curtailment of production at Gomez because of third party pipeline repairs in the Gulf of Mexico.
Revenues from oil and gas production were $68.3 million for the first quarter of 2009, compared to $226 million for the year-ago quarter mainly because of the drop in oil and natural gas prices and the production. New wells at Gomez and Wenlock and properties placed back on production following hurricane related repairs in the Gulf of Mexico resulted in a 90% raise in production for the first quarter of 2009 compared to the fourth quarter of 2008.
Capital Resources and Liquidity
On March 6, 2009, ATP Oil & Gas and GE Energy Financial Services (GE) jointly announced the formation of ATP Infrastructure Partners, L.P. (ATP-IP). The company has contributed the ATP Innovator to ATP-IP for a 49% limited partner interest and a 2% general partner interest. GE contributed $150 million to ATP-IP for a 49% limited partner interest. The ATP Innovator is the floating production facility situated on Mississippi Canyon block 711, at present serving the Gomez Hub.
The transaction was effective June 1, 2008 and allows ATP Oil & Gas exclusive use of the ATP Innovator during the term of the platform use agreement. The company remains the operator and continues to hold a 100% working interest in the Gomez field and its oil and gas reserves. Under the partnership agreements, ATP Oil & Gas will pay to ATP-IP a minimum fee or a per unit charge for all hydrocarbons processed by the ATP Innovator, and all partners will be entitled to future quarterly cash distributions in accordance with the provisions of the agreement. As a result of this transaction, the company has decreased its long term debt by $31.2 million in March of 2009 and will reduce debt by another $5.2 million in May of 2009.
Working capital, as defined in ATP Oil & Gas’ senior secured credit facility was $43.4 million as of March 31, 2009. The company had unrestricted cash of $103.4 million and restricted cash of $13.5 million at March 31, 2009, as a result of the successful well at Gomez in the first quarter of 2009, the $13.5 million of restricted cash was released in April of 2009. During the first quarter of 2009, ATP Oil & Gas incurred $33.5 million of interest expense.
The company capitalized $20.9 million of this interest, which was directly related with the building of the ATP Titan and the Octabuoy. For the quarter ended March 31, 2009, ATP Oil & Gas was in compliance with all the terms of its credit agreement. Further, based on the company’s projections, ATP Oil & Gas believes that it will remain in compliance with all of its financial covenants throughout 2009.
During the first quarter 2009 ATP Oil & Gas incurred $167 million of capital expenditures on oil and gas properties. These expenditures were incurred predominately at the company’s three major 2009 developments, the Gomez Hub and the Telemark Hub in the Gulf of Mexico and Wenlock in the North Sea. In March 2009, ATP Oil & Gas placed on production the Gomez #8 well and the Wenlock #2 well. The company s at present drilling the #3 well at Wenlock and anticipates the well to be concluded and on production during the second quarter of 2009.
ATP Oil & Gas is tightening its estimated capital expenditure for 2009 to $300 million to $400 million from the earlier announced estimate of $300 million to $500 million. The focus of the company’s remaining program for 2009 will center on finalizing the drilling and completion of the Wenlock #3 well and achieving first production at ATP Oil & Gas’ Telemark Hub. The company expects funding its capital program in 2009 from cash on hand and cash generated from operations. Besides ATP Oil & Gas is actively pursuing the sale of certain infrastructure assets and selected oil and gas properties to further decrease debt and improve liquidity.
