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By Swizzled
March 2, 2009

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I've been sweating the debt covenants for months due to the energy price collapse over this time period. Now I'm feeling much better because of two things:

1) Al Reese CFO explicitly stated that they were onside all covenants as of Dec 31 at the recent Enercom conference
2) The ATP Innovator Partnership which raised an additional $150mil brings net debt to under $1bil, and puts them well clear of the covenants

They had $214mil of cash on the balance sheet at Dec 31, 2008 (per recent ATP presentations) and have $300mil of revenue hedged in 2009 so there are no issues regarding covering interest payments.

With the $150mil of cash from the Innovator 3/4 will go to debt retirement which will bring the debt maturing in 2011 down to about $200mil, and the rest of the debt doesn't mature until 2014.

Now that any going concern issues have been laid to rest, we can focus on what the assets less debt of the company might be worth.

A couple of ways to determine what the assets might be worth.

1) Past transactions. I'm going to ignore the June override sale which raised $86mil from selling one half of one percent of the company's proven reserves as it was done when commodity prices were at their peak. However, I think the sale of 10% of their proven reserves in October for $400mil is relevant despite higher commodity prices at the time. The reason I believe this is because these assets were entirely natural gas, and half of ATP's assets are oil which is worth considerably more on an energy equivalent basis. So if 10% of proven reserves are worth $400mil, then 100% should be worth close to $4bil.

2) Use a simple rule of thumb on value per barrel of oil. ATP has roughly 250mil barrels of oil of reserves. The usual rule of thumb is $20 per barrel, but to be conservative I'll use $15 per barrel. This would suggest a value of oil and gas reserves of about $3.7bil. Pretty close to what I reached in the first part.

Now the one part which was never really clear was the value of the infrastructure that ATP holds. I wasn't sure that they would be able to monetize any of that value. With the recent transaction involving the ATP Innovator in the most difficult of markets, it is evident that there is value in these assets to be realized. Here is what they are most likely worth:

ATP Innovator $150mil for the half that they still own (not disputable given a current transaction)
ATP Titan $500mil brand new floating production unit with 50 year life
Canyon Express Pipeline $300mil (based on cost, may be worth considerably more given new leases being sold in the proximity as it is the only existing delivery system).

Plus of course, add in the $214mil of cash on hand and subtract the debt.

And the total is:

$4,000,000,000 value of Oil and Gas reserves
$150,000,000 value of ATP Innovator MLP owned by ATP
$500,000,000 value of ATP Titan
$300,000,000 value of Canyon Express Pipeline
$214,000,000 value of Cash on Hand
($1,325,000,000) debt existing at year end
$150,000,000 proceeds from sale of ATP Innovator

$3,989,000,000 Total Value of assets less debt

35,897,000 shares outstanding

$111.12 value per share

Now, I will admit that if oil stays at $40 and gas at $4 this will be overstated somewhat. I personally believe that this energy prices are unsustainably low over anything but a very short term.

ATP has the staying power to wait until commodity prices increase, and the value of shares in a $7 gas and $70 oil world is certainly $70 plus.

Swizzled