Jefferies Cuts Price Target on ATP Oil & Gas (ATPG), Growth is Good, But at What Expense

Jefferies is maintaining its Hold rating on shares of ATP Oil & Gas (NASDAQ: ATPG) while lowering its price target from $17 to $12.

Bull case: The firm believes that its current rate of ~24 mboe/d will nearly double to 42 mboe/d by Q4 of 2012 with five new tie-ins during that time.

Bear case: The company is expected to increase production by 33 percent over the next year, but the firm forecasts at a price of $320 million over cash flows through Q3 2011.

An analyst at the firm comments, "Cash flows will benefit from production from Telemark. However, required payments on alternative financing schemes mean the company will require additional funding by the third quarter of next year. ATPG has been creative in finding new sources of funding, but it is not cheap."

Jefferies is cutting its FY11 EPS estimate from ($2.10) to ($2.57), while raising its FY12 from $0.55 to $0.77.

For more ratings news on ATP Oil & Gas click here and for the rating history of ATP Oil & Gas click here.

Shares of ATP Oil & Gas closed at $10.33 yesterday.

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