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ATP Oil And Gas Files For Bankruptcy, CEO Blames Obama
Now that the "alternative energy" industry is in shambles following one after another solar company bankruptcy, as the realization that at current prices, alternative energy business models are still just too unsustainable, no matter how much public equity is pumped into them, more "traditional" companies have resumed circling the drain. First, it was Patriot Coal, which finally succumbed to reality a month ago. Now it is the turn of ATP Oil and Gas, which filed Chapter 11 in Texas last night. And sure enough, in a world in which nobody is to blame, and everything is someone else's fault, the CEO promptly made a case that he is blameless and it is all Obama's fault. According to Forbes: "The founder and chairman of [ATP Paul Bulmahn] wants the world to know that the Obama Administration—and its illegal ban on deepwater drilling in the wake of the BP disaster—is to blame for the implosion of his company. Not him. “It is all directly attributable to what the government did to us,” he rails. “This Administration has gone out of its way to create problems for my company, the company that I formed from scratch.”
Forbes continues:
He’s more than angry. Bulmahn, 68, has already brought suit against the U.S. government seeking damages ($68 million to start with) for the 2010 moratorium that shut down deepwater operations in the Gulf of Mexico for the better part of a year. In an earlier case brought by ATP and rig company Ensco, Federal District Judge Martin Feldman ruled in May 2011 that the feds “acted unlawfully by unreasonably delaying action” on drilling permit applications. Still, ATP has a long, winding road to any hope of recovering damages from the government (which says it’s protected from claims by sovereign immunity).
There is truth to Bahlman's allegations, although a lot of it may be attributable to sheer bad luck. After all it was just as the company had rolled out its massive expansion project: the $800 million Titan deepwater production platform, that disaster struck with the Deepwater Horizon leading to a drilling moratorium.
While hundreds of companies with operations in the gulf were affected by the government’s decision, perhaps no other was as hard hit as ATP—or as vulnerable. In 2010 the company had completed work on its $800 million deepwater production platform Titan and floated it out to the deepwater Telemark field 160 miles south of New Orleans. Bulmahn planned for Titan to complete drilling the final feet of four wells, hook them up, and let the oil—and the cash—start rolling in.
On April 19, 2010 ATP refinanced and rolled up $1.5 billion in debt into a new bond issue “and celebrated with champagne.” He says that at the time ATP stood a good chance of doubling its oil and gas volumes to 50,000 barrels per day within a year.
But the Deepwater Horizon exploded April 20. “We didn’t foresee an impact. The Titan is 80 miles farther south, and the spill is going to drift to the north,” says Bulmahn. Underwriter JPMorgan agreed, and it closed on the bond offering.
Soon ATP was informed by regulators that it would not be allowed to complete those Telemark wells, even though Titan was already outfitted with all the safety redun- dancies subsequently required for deepwater work. “They closed our spigot on revenues, but didn’t stop our expenses” for interest payments, rig contracts and the like. Bulmahn scrambled to spin off Titan as a subsidiary and borrowed $350 million more against it. ATP posted a net loss of $349 million in 2010.
And while the company's demise was surely not ameliorated by this administration's energy policies, there is a far more pragmatic reason why it had to file for bankruptcy: debt. $3.5 billion in debt to be precise, as that is how much it filed on its bankruptcy petition. Because had the company carried a clean balance sheet, it would have been able to mothball any temporarily non-viable project, cut costs to a minimum, and wait until the skies overhead shift. Instead, it was locked into a refinancing game to the bottom, with leverage into the stratosphere, that merely lay in wait for the spark to arrive, and set all that insurmountable debt on fire. And come it did.
Not only that, but despite the GOM setback, the company set off on an even more aggressive, and even more leveraged expansion scheme:
Instead of slashing costs and circling wagons, Bulmahn in late 2010 chose to take ATP on an international adventure. “I felt the need to find a way to keep our technically expert people occupied,” he says. That meant forging a deal with Isramco to drill an exploratory well offshore of Israel, near an area that has seen some massive natural gas discoveries. One well was finished in June; drilled to a depth of 14,000 feet it tapped as much as 800 billion cubic feet of gas. Sounds good, but it will be years before the infrastructure can be put in place to harvest it. Meanwhile ATP has $40 million in costs sunk off the coast of Israel.
Finally, the fact that ATP was just very badly run was hardly among the pressing issues the CEO felt like blaming his bankruptcy on:
Ravi Kamath, high-yield analyst with Global Hunter Securities, has been bearish on ATP for years and had a sell rating on ATP debt since early 2011, when it was trading at 104 cents on the dollar. It’s fallen to 29 cents now. Kamath says ATP’s problems reach far beyond the moratorium. He keeps a spreadsheet with 105 instances from the past decade where he says ATP has overpromised and then underdelivered. “Bulmahn has said lots of stuff that never happened,” says Kamath. “They have 11 years of bad forecasts.”
The irony is that in the end, it is the administration's fault, but not for the reason noted.
What Obama, in conjunction with Wall Street, and the Fed are guilty of, is encouraging people like Bulmahn, and everyone else, to lever up to the hilt on cheap, cheap debt. The more debt the better: just ask America's student and the record $1 trillion in debt they currently hold, more than all credit card debt combined, and the next credit bubble to pop. Just ask the second coming of the housing bubble as Wall Street investors, eager to build out rental empires are engaging in a wild borrowing spree to be among those participating in the REO-to-rental program, which too will soon implode. Also, blame the administration for allowing companies with atrocious balance sheets (if quality assets) such as Chesapeake to remain in existence, as despite an untenable leverage profile, ZIRP forces investors to plough ever more money into unsustainable businesses such as CHK. Why? It provides just a few more bps of yield, which in the past three years has become the mantra among the fixed income community.
ATP is just the first: massively levered company, with a balance sheet priced to perfection, ignorant of the risk borne by a massive debt load. Yes: interest rates may be at record lows, but soaring debt still has to be serviced. When the money inflows end, for one reason or another, and the debt interest can no longer be paid, it is game over.
This is what Obama is guilty of: forcing everyone in America to increasingly rely on debt as the only source of capital, leading to a world where even the tiniest gust of wind in an unexpected direction, or any other unpredictable development, can lead to immediate insolvency. Unless one is Too Big To Fail of course, and can afford to hold the world, and the US economy hostage.
And finally, since there is no such thing as a free lunch, as that the current administration is doing in allowing record low interest rates, is onboard the balance sheet risk to the tune of $1+ trillion in sovereign US debt added to the tally of current and future generations of Americans. Why not: after all rates are low, and the USD is the reserve currency. What can possibly go wrong.
In a word everything: as the last 3 weeks showed, a year's worth of gains in the bond market can go poof in the span of days, if not hours.
As for the reserve currency argument, well, there is always our favorite graphic.
Finally, as to what lies in store for ATP next, simple: the carcass will be picked clean as more debt is added, however this time to a fresh start company. In the process all the existing debt and quity will be wiped out. Just like what should have happened with America's just as insolvent financial system in the fall of 2008.
So what happens to ATP from here? They have already secured $600 million in debtor-in-possession financing, but after first-lien holders like Michael Dell’s MSD Capital are paid off, that won’t get it very far. Analysts say investors holding common shares, preferreds, convertible bonds and unsecured debt will get wiped out. Buyout bids are welcome.
In a few years time, the US itself, leveraged far, far more than ATP ever possibly could, may be seeking buyout bids for itself. And China will be delighted to oblige. At pennies on the then devalued dollar of course.
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Thank jebus BP had that blowout and not this putz.
Louisana Sink Hole Explained:
http://www.youtube.com/watch?v=wcbLvO0-huQ&list=UUHE92x768p8h-fMrqhsnE1Q...
"Assumption Parish Sheriff Mike Waguespack said Thursday he is now concerned the sinkhole is close to a well containing 1.5 million barrels of liquid butane, a highly volatile liquid that turns into a highly flammable vapor upon release. A breach of that well, he said, could be catastrophic."
The ATP CEO can blow it out his arse and take his complaints to the dry drunk former president who hasn't come out of his hole in Crawford, Texas and isn't speaking at the RNC in Tampa. For all the bullcrap about Solyndra, the subsidies to Big Oil are much larger. How many US jobs has Big Oil created in the US. Far fewer than 600K is what I've read. Karl Rove and GPS Crossroads can p(iss up a oil rig.
Consumers are perfectly capable of deciding for themselves what energy sources make sense to them, and funding alternatives when they are economically feasible and meke sense. Why are so many people so obsessed with taking away other peoples choices and making decicions for them. I dont want government funding oil or alternative energy. Thats my job as a consumer and my choice to make.
That's true, but others can limit your options, either by withholding supply or manipulation of pricing. So your "choice" is the one Hobson had to make.
Union pensions will be 100% first in line and debt/creditors will be screwed. Just look at Ca. local bankruptcies where cities were not allowed to touch the union contracts. Then cities must cut all services to citizens and the downward cycle of decay accelerates. Union pensions first, screw the citizens. Bankruptcy doesn't solve the municipal debt insolvency problems.
ATPG was a dumb business venture from day one. Any lender involved took a dumb swing for the fences. The CEO should apologize.
Call Corzine, no bux no regulations
Call Corzine, no bux no regulations 1800- call corzine, vaporized seg funds....
We dont need the federal government decifing what corporations can borrow. Thats why we have this crazy thing called investors.
We do need the federal government to be aware when its actions are harming US corporations and work to develop a relationship of respect and cooperation so tht they do not unnevissarily become a roadbadblock to what would otherwise be successful companies, thier employees and customers.
anybody hiring roughnecks ?
Chalie serious?
If so follow where the oil platforms went.
They are working.
As I recall some went to the North Sea.
Other countries pumping are Brazil?
Look Due East from Gulf of Mexico.
Chalie serious?
If so follow where the oil platforms went.
They are working.
As I recall some went to the North Sea.
Other countries pumping are Brazil?
Look Due East from Gulf of Mexico.
How's this for a possible bankruptcy: http://www.9wsyr.com/news/local/story/Expert-says-bankruptcy-for-Syracus... eh, "they're just city's, states and municipalities." clearly not nearly as important as an oil well or a steel mill. clearly. the oddity that we have bailed out Wall Street...so that Cities and States cannot pay their bills?...should be lost on no one. this is not a good way of figuring out how to actually start paying for the collapse of 2008. there is the potential for a sudden shift out of debt and into equities...and since equities go where the growth is whereas debt tends to just "go" such a shift could be dramatic indeed. Here's what to truly be afraid of in my view: http://en.wikipedia.org/wiki/Phillips_curve the interesting thing about the US economy over the last three decades is that wages have remained stagnant over that entire time. we got our price shock (oil at 140 bucks a barrel, gold soaring, the dollar tumbling) and in order to prevent growth from happening ever again "the Fed blew up the whole world." the irony of course is that while we have anemic growth in the economy at large commodities have spiked again...and since rates of return over the last decade courtesy of the Fed have been basically nil expected rates of return in the form of pensions, health care and tax receipts have completely collapsed at the State level. Basically a "government variant" of the Phillips curve with "Federal spending still soaring while every State in the Union is bankrupted." so while Wall Street is "living the life of Riley" with their Libor "at or near zero" and the Federal Government "driving prices of all goods higher to pay for their expanding wars" State and local governments have in effect been completely annihilated because their tax base has completely collapsed...pretty much forever it would seem. Talk about an impairment! Interestingly the data backs up my claim...showing that the US rate of growth would be far higher should State and local governments stop laying off everyone and actually be able to cut that benefit check...on the other hand what happens when a City the size of Syracuse...or say...Philadelphia "goes under" are calculations "not for the faint of heart." No worries tho! Wall Street will soon find the next Facebook i'm sure and all will be well http://www.youtube.com/watch?feature=player_detailpage&v=5nd-kqefLPg just another day "trading on the Street"...nothing go on there....
The quote? Priceless at any price.
- Ned
Somehow we pay $4 for a gallon of gas while the rest of the world is at $8. That is all I am saying about that.
Or maybe not, consider Saudi, Venezuela, etc.
But I have an answer to your point in three letters: "T A X E S."
don't cha' know.
- Ned
does'nt factor in the costs of military intervention, a key component.
Interventions in the oil market would have finished him off anyway. The only outcome of continued government interference in free markets is nationalization. If they want to set prices below proftability with interventions, they can do that with printed money and laws. But the companies will all go under. Then the government can swoop in and take over from those "dirty capitalist pigs" who proved free markets don't work. Just take a look at Argentina right now.
Is the rig for sale at 4 cents on the dollar?
Wake up people !! This is exactly what Rand predicted in her novel, it should be REQUIRED reading. The collectivists will drive out all the good men and true entrepreneurs to bankruptcy / out of the system. Will only remain all the crony capitalists sucking on the teat of government. Society WILL circle the drain and things will get WORSE and WORSE
The fact that there was a deepwater drilling moratorium just at the company put about 1 billion into a deepwater project AND continued bans on deepwater drilling from this administration, in my opinion, give the CEO a lot of credibility to blame this administration. Otherwise they would certainly not be filing for Chapter 11. Did I misread the article or does this quote
"Instead of slashing costs and circling wagons, Bulmahn in late 2010 chose to take ATP on an international adventure. “I felt the need to find a way to keep our technically expert people occupied,” he says."
Tell us that the CEO did everything in his power to keep his people employed, despite all the nasty stuff we hear about corporations, and oil corporations in particular? So the guy pushed every last button he had. And it didn't work. And thanks to this administration - which no one can argue wants to see this country and all it stands for fail utterly - we lose another company and many more people join the unemployment line. Could he have slashed costs and thrown people overboard? Sure he could have. Should he have had to do this? Not if we had a sane pro-America, pro-energy administration in power instead of this bullshit unicorn fairy dust and rainbows alternative energy nonsense we've lost billions of taxpayer dollars to.
You borrow money to make an initial investment, and then the government pulls the rug out from under you before you start seeing any returns on that investment.
Suppose I borrowed money to purchase land to build 200 houses on, and then the city decided to change the zoning regulations before I could start building.
Yeah, I'd say they have a lawsuit. Whether it will get anywhere or not is a different story.
I did some contract work for ATP. Incompetent is not nearly a strong enough word for the way they managed their company. Obanana helped bring ATP down, but they were at it for many years before that.
--------
As ATP Oil Files For Bankruptcy, CEO Blames Obama For Company’s Collapse By CHRISTOPHER HELMANPaul Buhlman swears the president’s ban on deepwater drilling killed his oil company. The whole story is a bit more complex.
http://blogs.forbes.com/christopherhelman/
...are guilty of, is encouraging people like Bulmahn, and everyone else, to lever up to the hilt on cheap, cheap debt.
Hmmm, what is it the Austrians say? Cheap, easy money will find its way into malinvestments?
True. When you gamble, often you lose. You gamble big, you lose big. It's called Capitalism. Many smaller business fail every day. They don't sue someone for their failure.
Blame seems to be the game in the US these days. No one wants to look in the mirror and see the real reason things happen. Lawyers get rich originating and defending lawsuits so they encourage them.
DEBT! If you borrow on a future unknown, then you are gambling. And, often, you lose.
Well, when the House changes the rules in the middle of the game, it's not really gambling, is it?
"You got 21. But now, I say 22 wins, and I have 22. You lose, sucker."
However, I suppose a case could be made that they "put all of their eggs in one basket", but I am not familiar enough with their overall operations.
"This is what Obama is guilty of: forcing everyone in America to increasingly rely on debt as the only source of capital, leading to a world where even the tiniest gust of wind in an unexpected direction, or any other unpredictable development, can lead to immediate insolvency. Unless one is Too Big To Fail of course, and can afford to hold the world, and the US economy hostage." Seriously?? Obama "forcing everyone in America to increasingly rely on debt". It's like pin the tail on the donkey, only with some folks here & on Wall Street it's pin the blame on Obama. Get real. I guess looking in the mirror really hurts huh? Fucking losers blame everyone but themselves all the time. Man up!!
You are right! All of these unemployed people and broke ass governments are victims of evil stupid business people who didn't even build them! Our fearless leaders are doing God's work, busily protecting us from them demons. We should never hold these saints accountable for anything as regardless of the results of their actions, their intentions come from nothing but goodness. And friend of mine just closed his business after forty years cause he was just to stupid and greedy to adapt to the "new way forward"
How many TV adds are we going to see about how Obama's actions killed someone's wife?
I think I'm going to start a new business ... Robo Signing Bk Paperwork
Halliburton caused the wells to burst. ATP was not at fault. That company was a victim of the engineered political enviornment after the disaster occured. Obama's fault...really.
It's O'Bama's Fault.
Karma is such a bitch.
This is just what bankruptcy laws are for. The assets will be put back to work or stay on the job and the equity holders will be wiped out. The taxpayers will not be on the hook as they are with GM. If the drilling moratorium was lifted, the workers would either keep working, or find a new job which is the normal way in the drilling industry even in good times. So he went bust, do you have any idea how many jobs he created in his long carreer, how much oil he produced? How much oil has the dept. of the interior ever produced. Would the world be a better place with twice as many bureaucrats or 1/2 as many?
So I guess now he's off to Galt's Gulch to watch it all fall apart, right?
LOL corporations. "It's the government's fault wah wah wahhhhhhhhhhhhhhhhh!!!!"
Grow a fucking sack. If you can't succeed in this fascist environment where you can buy legislation, while getting tax subs from the govt.....then you just fail at life.
Hey, a fascist government will pick a winner as well as a loser. Don't think for a minute that all corporations end up winners. That is the point of fascism.
If you can't succeed in this fascist environment where you can buy legislation, while getting tax subs from the govt.....then you just fail at life.
Sad but true. If you don't buy the politicians, you can bet your sweet bippy your competiton will.
Don't forget people, this world is morphing into the soceity that was taught to not keep score at games, everyone wins, everyone gets a trophy. About a decade ago the MSM was all about making the obese feel ok about themselves and it doesn't matter as long a your happy. Somewhere in the last 4 years ago or so it is now the govts busniess to make sure you are not fat and monitor your BMI at school starting with kindergarten. We are definitely at some turning point where guys my age just will never understatnd the "new rules" of society and at least my children are too young to know that the world they are growing up in is totally upside down.