Will ATP Oil & Gas Sink or Swim in the Second Half?

With half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at ATP Oil & Gas (Nasdaq: ATPG  ) . As we saw in our look at ATP earlier this month, the deep-sea exploration and production company has found some promising properties both in the Gulf of Mexico and off the coast of Israel. But will the company be able to cash in on those prospects in time to satisfy impatient bond investors? Let's take a quick look at ATP's prospects for the rest of the year and beyond.

Stats on ATP Oil & Gas

Average Stock Price Target $16.17
2012 EPS Estimate ($4.16)
2013 EPS Estimate ($2.46)
2012 Sales Growth Estimate 10.2%
2013 Sales Growth Estimate 30%
CAPS Rating (out of 5) ***

Source: Yahoo! Finance.

Will ATP Oil & Gas stay afloat for the rest of the year?
Few people have much doubt that ATP has potentially lucrative properties in its portfolio. With an estimated 1.5 trillion-3.4 trillion cubic feet of natural gas in the Levant Basin off Israel's coast, the company has definitely diversified beyond its early focus on the Gulf of Mexico. Noble Energy (NYSE: NBL  ) has had great success off the coast of Israel, with the company being part of a consortium that has finalized a 15-year deal to sell gas worth $16 billion-$23 billion to utility Israel Electric. Given the slow pace at which ATP has produced in the Gulf, the company really needs success elsewhere in order to start moving forward more rapidly.

But the biggest threat to ATP's share price is its huge overhang of debt. As Fool contributor Sean Williams noted in his recent article on ATP, the company has most of its debt maturing in mid-2015. That gives the company three years to develop enough resources to convince bond investors to refinance maturing debt; for shareholders to emerge unscathed, the refinancing has to involve a minimum of dilutive equity offerings. That's a tough proposition, especially as oil prices have started to moderate. If ATP either issues new shares or has to sell a lucrative property before it reaches its production potential, then investors will miss out on a big portion of their returns.

Perhaps the worst thing for ATP is the pace at which energy development is happening beyond the company. On land, Kodiak Oil & Gas (NYSE: KOG  ) has managed to boost both production and developed reserves. Meanwhile, Cheniere Energy (NYSE: LNG  ) expects to start exporting liquefied natural gas within the next few years, which could start an energy renaissance around the world, given the arbitrage opportunities that natural-gas transport affords right now.

ATP has plenty of good prospects. The problem, though, is that shareholders aren't likely to be the ones to benefit. Bad luck and poor capital planning make bondholders the more likely winners going forward.

If you like prospects for energy, let us show you another stock you should look at more closely. Read about it right here in the Motley Fool's special free report on the energy industry and its best prospects.

Click here to add ATP Oil & Gas to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter @DanCaplinger. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1954996, ~/Articles/ArticleHandler.aspx, 10/24/2016 11:30:10 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
ATPAQ.DL $0.00 Down +0.00 +0.00%
ATP Oil & Gas Corp CAPS Rating: ***
KOG.DL $0.00 Down +0.00 +0.00%
Kodiak Oil and Gas CAPS Rating: *****
NBL $35.38 Down -0.36 -1.01%
Noble Energy CAPS Rating: ***