Faith is the bird that feels the light and sings when the dawn is still dark.
-- Rabindranath Tagore
The ATP Oil & Gas
First production from the firm's deepwater Telemark field, which promises to more than double 2009 production in 2010, is on schedule for later this quarter. Despite this critical fact, relayed in the middle of a decidedly confusing press release last week, skepticism swirls around the stock. Shares are beaten down, and short interest is running high. Even InterOil
If anyone doubts the commercial potential of ATP's Telemark field, which now sports 49.3 million barrels of proved reserves, I'm not aware of such an argument. I also can't believe that anyone short the stock is betting against the firm's technical capabilities, given the trail of world records and accolades ATP leaves in its wake. Ultimately, I believe it's more a matter of timing.
The timing of cash flows is critical here, because of ATP's very significant debt load. Along with outfits like SandRidge Energy
In this context, I think we can see why the reaction to last week's press release, which contained mostly good news, was so brutal. While Telemark is on schedule, there were delays at other projects that tanked fourth-quarter production volumes. The company didn't come out and say this in the release, so you had to read between the lines.
Elsewhere in its press release, ATP detailed additional steps taken to shore up the firm's liquidity position and ensure that the firm stays within its debt covenants throughout 2010. This could be interpreted as a positive, proactive development, but the moves were taken by others as a sign that the company is in trouble. In this way, the release was much like a Rorschach test.
Being that I sang about ATP in our best stock for 2010 series, I'm obviously inclined to see the light here. At the same time, I think that even those with the deepest faith in this firm should consider taking out some insurance in the form of a protective put. It's a small price to pay to avoid the dreaded P-LOC.