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TMFPostOfTheDay (< 20)

ATP's Gomez Disaster



June 17, 2013 – Comments (1) | RELATED TICKERS: ATPAQ.DL

Board: ATP Oil & Gas Community

Author: TMFDoodleBugger

ATP is going to walk away from the Gomez field (MC711) leaving a major deepwater floating production facility unmanned right before hurricane season. Everyone who works offshore is outraged by this action! ATP claims it will take $153M to decommission the field and they don't even have the money to make payroll. The government ordered a directed suspension of operations and production back in April so there is no cashflow from this asset. If you will recall, I previously posted a story about how they have been disposing of oily water illegally out there for years and they got caught. That shut them down until they address the issue to the satisfaction of the BOEM. I have no idea what that will require since there could be criminal charges filed in that case.

Credit Suisse is taking all the assets with positive value (mainly Telemark and Clipper) for $691M but the only way they can pay that much is by excluding the assets with major liabilities and dwindling cash flow like Gomez. They are owed about that much from the DIP financing for the bankruptcy so that leaves the bondholders and everyone else with nothing but a company that can't make payroll and has a couple hundred million in abandonment liability. The judge apparently is going to let ATP leave Gomez unattended and just walk away from their obligations. This is very unsafe and could lead to another oil spill in the Gulf. If the structure becomes un-moored it could cause severe damage to other facilities in vicinity. The only good news is that the company that ATP bought Gomez from is now owned by Anadarko (ticker APC) so there is someone with deep pockets that will be on the hook for this asset. It is a little murky because APC only sold them one well and ATP did all the development afterward. Also, I think GE bought a 49% stake in the Innovator which is the the semi-submersible production facility. This is a big blow to APC unless they can get the facility back online. This is also a black-eye for all the small operators out there. It is unbelievable that a company with producing oil and gas assets that could borrow over $2B against their proven reserves could end up with nothing but liabilities.

As another anecdotal proof of their complete demise, we received an AFE to assume ATP's 30% share of the plugging liability for one of their Shelf assets. We (Arena Energy) owned a small interest in the field and I think we farmed it out to ATP years ago. After producing the reserves, they have walked away and we're stuck with the abandonment bill. This one should only be a few million which pales in comparison to Gomez. This is bad business all around. There needs to be a criminal investigation into the management of this company. The lack of any bonding for the abandonment is terrible and it appears the proven reserves were highly inflated.


1 Comments – Post Your Own

#1) On June 17, 2013 at 10:51 AM, OnceDaisy (< 20) wrote:

Thank you for another in a long series of excellent posts. 

You have identified a large problem; do you have any suggested solutions, or approaches?  For example, if a huge spill is likely, with concomitant massive liabilities and damages, shouldn't the people who will most likely incur such liabilities and/or damages step up now and pay to shut the facility down?  I suspect those "people" are most likely the taxpayer!

 Or should the government step in and shut it down and then sort out who, if anyone, is liable?

One does not want to over-react to any single incident, but this makes me less inclined to view anti-regulation arguments favorably. I fear that we have seen enough failures in industry self-regulation (e.g., banks) over recent years to reduce my faith in my fellow man.  I am moving toward the position of wanting people in a position to do great harm to be subject to close inspection and constant review.  This is not at all my long-held historical view.


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