ATP Investor Says Royalty Payments Won’t Halt Under Bankruptcy
NGP Capital Resources Co. (NGPC), the Houston-based fund that invests in energy producers, said it expects its monthly royalty payments from ATP Oil & Gas Corp. (ATPG) won’t be interrupted if ATP files for bankruptcy protection.
The “overriding royalty interests” NGP owns are shares of proceeds from the sale of oil and natural gas in two of ATP’s Gulf of Mexico oilfields. The royalties would be treated as production payments in bankruptcy court, and as such wouldn’t be halted, Scott Biar, NGP’s chief financial officer, said today.
ATP is arranging $600 million in debtor-in-possession financing from Credit Suisse Group AG ahead of a possible bankruptcy filing, two people with knowledge of the matter said last week.
NGP paid $25 million to ATP last month in exchange for a 5 percent overriding royalty interest in the oil company’s Telemark field, adding to the 10.8 percent royalty interest NGP already owned in ATP’s Gomez field as a result of a previous cash infusion, Biar said during a meeting with investors on the sidelines of Enercom Consulting’s Oil and Gas Conference in Denver.
“There’s substantial production from both those fields,” Biar said. The royalty payments “should be recognized as production payments under the bankruptcy code, should that transpire. There are no sure things in life, particularly in bankruptcy court.”
Albert Reese, ATP’s CFO, didn’t immediately return a message left on his office phone.
ATP lost 94 percent of its market value this year as it missed production targets and delayed marquee projects. The company canceled a scheduled presentation today at the same Denver conference that Biar attended. The ATP royalty interests represent the third-largest investment in NGP’s portfolio.
Standard & Poor’s said on Aug. 1 that ATP won’t have enough cash to make an $89 million payment in November on its 11.875 percent notes due in May 2015 without outside financing.
ATP shares fell 16 percent today to 41 cents in New York.
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