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
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
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
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.