The Rodney Dangerfield of the Deepwater

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During the August earnings call of one of my favorite E&P companies, one analyst compared the firm to the late Rodney Dangerfield. It's an apt analogy. ATP Oil & Gas (Nasdaq: ATPG) gets no respect.

Perhaps most glaring is the miniscule multiple that Mr. Market is assigning to ATP's cash flows. Management has confirmed that the company is being valued at around one times expected 2008 cash flow. Meanwhile, a recent BMO report estimates a median multiple of 4.5 times cash flow for intermediates like Goodrich Petroleum (NYSE: GDP) and 3.3 times for smaller guys like Brigham Exploration (Nasdaq: BEXP).

One explanation for this depressed valuation might be that ATP is growing at a glacial pace. But that doesn't fly, because the company just reported 31% year-over-year production growth for the six months through June.

OK, maybe the company operates in Venezuela like Harvest Natural Resources (NYSE: HNR), and investors are discounting some expropriation risk. No, that's not right either -- ATP operates solely in the Gulf of Mexico and the North Sea.

There have been some operational hiccups, but ATP continues to execute on a unique path to upstream profits that I highlighted nearly a year ago. The only significant misstep since that time was a below-market equity offering that I believe left some shareholders feeling burned. But the company's chairman/founder/CEO stands closest to the flame as the single largest shareholder.

Like Ultra Petroleum (NYSE: UPL), ATP has a history of incentivizing its small staff to achieve great feats. Now that management's turned their focus to returning value to shareholders -- in a manner not unlike Chesapeake Energy's (NYSE: CHK) recent monetizations -- I think we're going to see some fireworks.

Just like Acergy SA (Nasdaq: ACGY), ATP appears to be a cheap date in the deepwater. The short interest on this stock is sky-high, so there must be a bear case somewhere out there. I'd love to hear it.