April 29, 2010

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

April 29, 2010

Post by dan_s »

The gang we now have in Washington will have a field day with the GOM oil spill.

Make no mistake about it, this is a major problem for BP and there is the potential for it to become a significant environmental problem. The company has estimated it is now costing them $6 Million per day for the efforts to contain the spill. That is a drop in the bucket compared to the lawsuits to follow.

BP said yesterday that they are making progress on the construction of a subsea oil collection device that could be installed in as little as two weeks. A drilling rig has moved into place that was set to begin drilling a relief well. It is likely to take several weeks to stop the leaking well that is now putting 1,000 to 5,000 bopd into the water. The oil sheen already covers a large area in the GOM and it will get worse. If it drifts into the coastal areas it will get nasty in the press.

This is the first major oil spill in the Gulf of Mexico since 1979. Despite an excellent safety record the industry will once again be labeled a "boggy man" by Washington. Politicians just can't stand to waste a good disaster if there is political gain to be had.

Senator Bill Nelson, D-Florida, a longtime drilling opponent said "all along the Gulf Coast business leaders are scared to death that the oil is moving toward them" and "If this thing keeps leaking thousands of barrels of oil a day for months it will drive a stake in the hearts of any drilling close to Florida shores." Senators negotiating a broad climate change and energy bill have included expanded offshore drilling in the plan in an effor to lure enough support from Republicans and oil-patch Democrats to pass the legislation. If even a few senators withdraw their support from the bill because of the drilling issue, the whole compromise could unravel. A month ago it appeared there was a very good chance the moratorium on offshore drilling would be lifted. Now that is in serious doubt.

Offshore drilling is risky business. Eleven men lost their lives in this accident. Our prayers go out to those families.

We need to develop our country's offshore oil & gas reserves. We need to do it safely. We need leaders that can avoid using each disaster for their own political gain.

Dan
Dan Steffens
Energy Prospectus Group
jeremur

Re: April 29, 2010

Post by jeremur »

Dan can you make an estimate as to whether this will impact atpg it is taking a beating for a second day and on big volumn today
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: April 29, 2010

Post by dan_s »

Jere;

The current oil spill should have very little effect on ATPG operations. In fact, all the wells they need to get their Telemark Hub up to capacity have already been drilled, they just need to be tied into the platform.

ATPG was downgraded this morning by Wunderlich this morning as part of the "Great Oil Spill Sell-off". See article below by Toby Shute.

As I have posted to the E-P Group several times, ATPG will not have an impressive Q1 report since Telemark did not come on-line until very late in the quarter. I recommended to those not owning it to buy on the dip following the Q1 report because ATPG's production and revenues will be "off to the races" for the rest of this year.

Also, most on Wall Street still think the majority of ATPG's revenues come from the sale of natural gas. That is far from the the truth. Per my forecast model (which can be found under the Sweet-16 tab), 70% of ATPG's revenues in 2010 will come from the sale of oil and that percentage will go up in 2010.

As soon as ATPG releases Q1 results I will update their forecast model and make it available to all of our members.

The Great Oil Spill Sell-Off
By Toby Shute (Motley Fool)
April 30, 2010

Rate ATPG CAPS Rating 5/5 Stars

As each day passes, the headlines surrounding BP's (NYSE: BP) oil spill in the Gulf of Mexico keep getting worse.

Yesterday, we learned that the leak from the bottom of the Macondo exploration well is five times more severe than initially thought. Louisiana declared a state of emergency, and the Air Force and the Navy are now helping the Coast Guard try to contain a spill that could surpass Exxon Valdez to become the worst in U.S. history.

BP, along with contractors Halliburton (NYSE: HAL) and equipment maker Cameron (NYSE: CAM), has been served with at least one lawsuit already. Transocean (NYSE: RIG), whose Deepwater Horizon rig caught fire and sank to the ocean floor, could bring its share of litigation risk as well. All of these stocks have been battered since the accident was first announced, with Transocean hit particularly hard.

Some analysts are arguing that the sell-off in BP shares is overdone. Because it's one of the biggest oil companies in the world, a double-digit percentage decline obviously translates to a gigantic loss of market value. Bernstein Research estimates that BP could be on the hook for up to $8 billion in costs, but the company's equity has lost roughly three times that amount in market value.

That BP is oversold is probably a good bet. An even better bet, I think, is that companies that had nothing to do with the spill are also selling at a senseless discount. Here are three ideas:

Dril-Quip (NYSE: DRQ) is a manufacturer of offshore drilling and production equipment like wellheads and riser systems. The stock was down 9% at one point today. You'd think it had provided the blowout preventer that failed to engage, not Cameron.

ATP Oil & Gas (Nasdaq: ATPG) is an offshore exploration and production company that recently began production from a new deepwater field in the Gulf of Mexico. Two weeks ago, I said the shares were no longer in best buy territory -- but they're headed in that direction.

Finally, Cobalt International Energy (NYSE: CIE) is an offshore explorer that I've had my eye on since its unheralded IPO last fall. I've given a ballpark figure of the shares' value in the $19 to $23 range, so today's price has me quite interested. I should note that partner Anadarko Petroleum has had mechanical difficulties drilling out the Heidelberg structure, and that could justifiably knock a little off the share price. This isn't commensurate with the beating the stock has taken, though.
Dan Steffens
Energy Prospectus Group
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