ATP Oil & Gas Shares Plunged: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of ATP Oil & Gas (NAS: ATPG) tumbled again today falling 12% as the market began to panic about the company's oil production.
So what: In the third quarter, production averaged 24,000 barrels of crude, down from 31,000 in August, and a pair of the company's wells have slowed production. The lower production has sent ATP's bond yields skyrocketing, a major problem for a company that has $2 billion in long-term debt.
Now what: When you use as much leverage as ATP Oil & Gas, the risk is that your operations don't perform flawlessly and creditors lose faith in you. That's been happening slowly for ATP, and the stock now trades at about one-third of its 52-week high. I would stay away from this stock right now and wait for production to improve before jumping into shares and trying to catch a falling knife.
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At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.