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Author: ValuePEG One star, 50 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5166  
Subject: Enercom 1-on1 Q&A Recap & Analysis Date: 2/20/2010 6:40 AM
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First sorry it took so long to get this out to everyone, but I tried to feed the most important pieces out earlier.

Ok I promised a summary of all the questions asked, so here we go from the top, I tried to organize these by subject and I believe I’ve listed all questions & answers we had time to discuss. (Included my observations, analysis, or additional information in parenthesis where necessary)

Disclaimer: This Q&A was not a recorded interview, this is not to represent exact wording or chronology, the answers are from the best of my memory & notes, exact wording is used where possible to the best of my ability, but paraphrasing is likely to have also occurred.

Q: Flow-Test AT63#4?
A: The 10.7mboe/d at 87% oil flow rate is from the cleanup of E3 (24.5' net oil) & E4 (39.6' net oil), no choke sizes and flow pressures indicated (didn’t ask). E6 (50.3' net oil) has not been flow tested as E6 will not be produced at this time so more production can come from Mirage & Morgus. It makes no sense to open E6 to do a flow test now and then close it (if possible - Morris had doubts) when we want to concentrate production from Morgus/Mirage. (Speaking to someone else from another company they said to re-close it would mean pushing a plug down the well to just above E6 and pouring 10-20' of concrete on top of it - which would later have to be drilled through).

Q: Will this provide a reserve update or when might they have an idea?
A: The flow was right within their targeted range so no reserve updates at this time, LT 6+ month production rates can indicate differences in reserve.

Q: Monetization progress?
A: Titan will be done upon 1st production, as this is also when the drilling unit will be installed. It will be a different type structure than Innovator, interested parties (undisclosed) differ on whether or not they want the pipelines included in the deal. Cheviot will be done before construction is complete, structure is currently being formed, parties are Chinese Government and/or COSCO. (Look for minimum 60-75% monetizations)

Q: What is the time table for NPI repayment, and how is the rate determined?
A: NPI's will be paid back as a percentage of net proceeds from production, we did a bell curve of production rates vs oil price, and the sweet spot came in at 18-20 months. (this is good I thought it was a more rapid 12-14 month payback)
We are still working on the exact % of production but said it should be released soon. (I would expect after the work is Mirage #3 is finished - all work/all costs are in)

Q: Where are we in the ramp from ~18kboe/d to ~25kboe/d by the beginning of March?
A: Clipper will be added shortly, and there are a couple of small things we can do / we need to do (can’t remember which was said) to get there. (I think I caught Morris a little on this)

Q: AT63#4 March Production - Early/Mid/Late?
A: Target is 2nd half of March, initial production will come from E3 & E4 they have what is termed a "Smart Completion" - Individual hydraulically operated openings w/ full data feedback, pressure monitoring etc. so each can be controlled separately, 1 open 1 closed, both open, 1 partially open etc, to manage the individual pays for best performance. (No idea if this is the brand or model but interesting) - http://www.offshore-mag.com/index/article-display/1046315276...

E6 has a mechanical completion, so it isn’t planned to be opened until E3&E4 start to diminish.

Q: Drilling Unit installed on Titan?
A: This is to be done concurrently with AT63#4 production coming online so same target date.

Q: Mirage#3 production date?
A: 4-6 weeks later = beginning of May (previously stated)

Q: If Titan's at full production limits will Morgus#2 be completed at this time, if so why?
A: All 4 wells will be completed as planned, contracts preclude postponing Morgus#2. Once Titan hits max production, more production will be shut-in @ AT63#4 to maximize production from Mirage & Morgus. The primary goal in Phase-I is to drain MC941/942/943 not to drain AT63, the sooner that goal can be completed the sooner we can move to Phase-II. (You have to drain sands individually or 2 at a time if they can be commingled, that seems to be why you need to have more wells with more draw capacity because they are changing constantly as you switch sands etc. At least this is the way I currently understand it.)

Q: Is MinDOC-II being reconsidered due to the upgrade on reserves @ Mirage or AT63??
A: For the moment MinDOC-II is off the table, as the balance sheet looks more favorable, oil prices stabilize or rise, reserves are expanded or Shell wishes to use Titan, etc…, this will change. Possibilities range from upgrading Titan to current downstream of 35kbbl/d & 75-100mmcf/d to building MinDOC-II and a 2nd 16mile tieback to the Mars pipeline, all possibilities must be economic, i.e. benefits of accelerated production must outweigh costs. Upgrading Titan to the downstream max of 35Mboe/d & 75MMcf/day is possible - actually it is designed for 100MMcf/day - just needs a 2nd set of compressors. (I read this as check back in 6 months)

Q: How long will Titan have to stay at Mirage/Morgus?
A: Phase-I is currently estimated to be 8-10 years. (This would give us a plateau of 6-7 years instead of 2-2.5 via the previous production profile) The emphasis will be to drain MC941/942/943 as quickly as possible to move on to Phase-II. Now this could change if Shell decided to produce Vito (MC984/985) through Titan that could push it out to 10-12 years or longer.

Q: You stated MC943 that is Oasis, are there any targets or reserves booked there?
A: Actually there is a very nice looking target, at this time there are no reserves booked.

Q: Any clarifications on undisclosed amount or from who (Vito-Shell/Statoil/Anadarko my assumption), regarding deeper (Sub-salt) sale of rights at Mirage?
A: Only that Al Reese was quite pleased with the amount, no specifics can be given out.

Q: Future tieback opportunities, would these be targeted from a sidetrack from MC984/985-Vito?
A: The sale of the possible deeper reserves did not grant access to them from MC941-Mirage, they should be able to be flowed back to MC984/MC985. As far as tieback from Vito that is up to Shell if the reserves are large enough they will put their own platform there and tie it back downstream, if not they may wish to partner to use Titan or even sell them to us it is too early to tell.

Q: Regarding Gomez, what were the reasons behind the swap between 50% of Anduin West (MC754) and 10% Gladden (MC800)?
A: It has always been ATP’s goal to operate everything we touch, at MC800 we only had 10%, the operator decided they no longer wished to tie it back to Innovator so we decided we no longer wished to participate. The swap made perfect sense for us as now we have 75% of MC754 and now are operator, additional benefits are consolidation of properties, lower expense (no multi-mile tieback), and we expect to more than replace the reserves in the deal.

Q: Is there upside at the Cheviot property for reserve increases?
A: Definitely, the previous operator only produced 8% of the original in-place reserve estimate, now remember this was in the day of 2D mapping, and when production was shut-in by they were still producing 6.6kboe/d problem was they had punched through and were also producing 25kb of water per day, which they were unable to handle. Beyond this there are still possibilities of acquiring nearby properties as we have done with Gomez & Telemark. (Original in-place reserves were estimated 200Mboe w/ 16Mboe produced so far)

Q: What about other projects in the works/future?
A: 10 projects to keep us busy for years – of course Cheviot, but then there’s an new addition in UK called Skipper, Green Canyon (Clipper), Gomez 710/754, Tors expansion, etc. (Combination of my notes and Fox Business interview of Al Reese) –

http://video.foxbusiness.com/v/4025167/deep-water-find-to-do...

Q: What are they going to do going forward on future projects with respect to financing, for example if ATP was to start another hub in the GOM would they try and finance the next production unit out of cash flow as they did with the Titan?
A: What we have learned since Innovator with the building of Titan and bringing Telemark online, is that we don’t have to wait for production to start, we are accelerating this procedure and the monetization of Octabuoy will occur prior to completion of construction, that being said it will still depend on scope of project.

Q: Any chance of proceeding w/ previously approved share Buy-Back in next 1-2 years?
A: Yes this will continue to be considered, once we put our house back in order if we feel that the market is not properly valuing us we will strongly look at this as a possibility with our cash-flow.

Q: Future hedging plans LT against NG / overall?
A: We will be increasing our hedges in the near future, and we will be particularly looking to protect ourselves against a downturn in NG, luckily we are becoming more oily.

Q: Do they have any prospective Telemark / Gomez type acreage acquisitions in their current sights -- At what stage are such potential acquisitions -- Days, Weeks, Months??
A: We are always looking for acquisitions typically what we find or is brought to us are single or small groups, which we have to evaluate and possibly combine with others or our own to make them feasible, remember we are not like the majors we don’t go around writing 9 figure checks acquiring properties, these costs are usually minute in the scheme of things.


Additional insights obtained from attending both Pritchard Capital & Enercom conferences:

Overall mood & interest level toward ATP has been much improved by people running small investment groups / hedge funds / analysts / even small competitors. There was a generally positive buzz going on between people discussing ATP at Enercom, that of intrigue and even a little excitement. While at Pritchard Capital there a slight disgust that they couldn’t find anyone to fill in for Al Reese (cancelled due to back surgery), and those who I could pry an opinion out of took a “Show me the Money” stance and seemed disinterested until ATP performed.

I believe ATP now has the crowd’s attention and we have taken a huge step forward. When Titan begins production I believe as Tom Holisman stated “The audience is listening” (THX).
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