Cash-strapped ATP Oil plans to sell hydrocarbon production payment

By Jim Witters

Wilmington, Del., July 5 - ATP Oil & Gas Corp. is seeking approval for the proposed $15 million sale of a hydrocarbon production payment that would provide cash essential for the continued operation of the company until the sale of substantially all of ATP's assets closes, according to a July 3 filing with the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, Credit Suisse agreed to pay $690.8 million for ATP's assets, including $45 million in cash to satisfy legitimate liens on assets that are ranked senior to the debtor-in-possession loan claims and the difference between the adjusted purchase price and the closing cash payment, if a positive number, by a credit bid of a portion of the value of the DIP loan claims.

The court conditionally approved the sale on June 21, and the companies expect the sale to close in late August.

"It has been no secret in this case that the debtor has been and is presently faced with significant liquidity challenges to overcome in the coming months in order to maintain the ongoing operations necessary to ultimately consummate the sale," the filing states.

"Put bluntly, absent an immediate infusion of funds sufficient to maintain a positive cash balance and continue its operation, the debtor will run out of cash before it is able to successfully close the sale. Specifically, the current cash collateral budget suggests that the debtor may reach a negative cash position within a number of days and, if allowed to continue, may ultimately experience a negative cash position of up to $11.3 million dollars in the week ending July 29," court documents state.

To help alleviate the cash problem, "certain of the DIP lenders offered to purchase a $15 million hydrocarbon production payment from the debtor related to the interests that are the subject of the credit bid," the filing states.

If the sale is approved, ATP will transfer rights to the $15 million hydrocarbon production payment to the lenders in exchange for an immediate $15 million cash infusion.

ATP agreed to use the funds for general corporate purposes in accordance with its budget through Aug. 30.

"Ultimately, the proposed purchase of this production payment was the only viable option that was made available to the debtor that it reasonably believed would provide it with sufficient funding and an operational cushion sufficient to reach the closing of the sale," the company's filing states.

A hearing on the proposed sale is scheduled for July 9.

ATP Oil & Gas is a Houston-based offshore oil and gas development and production company focused on the Gulf of Mexico, the Mediterranean Sea and the North Sea. The company filed for bankruptcy on Aug. 17, 2012 under Chapter 11 case number 12-36187.

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