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Atlas Energy, L.P. Reports Operating And Financial Results For The Third Quarter 2012

Stocks in this article: APL ARP ATLS

Atlas Pipeline’s Mid-Continent Expansion Projects

In September 2012, APL brought online its new cryogenic, 200 MMcfd expansion of their WestOK processing facility (“Waynoka II”). The new Waynoka II facility is currently operating at over 60% capacity, and this expansion brings total processing capacity at WestOK to 458 Mmcfd. Also, APL continues construction on the WestTX Driver Plant expansion, which is comprised of an additional 200 Mmcfd of processing capacity at the system. The first phase which comprises 100 Mmcf/d in capacity is scheduled to be in service in the first quarter 2013.

Atlas Pipeline Bond Offering

On September 28, 2012, APL completed a private offering of $325 million 6.625% senior notes due in 2020. APL used the net proceeds of approximately $320 million from the offering to repay a portion of outstanding borrowings under its revolving credit facility. As of September 30, 2012, APL had cash and available borrowing capacity on its revolving credit facility of approximately $520.1 million.

Atlas Resource Third Quarter 2012 Highlights

  • ARP’s average net daily production for the third quarter 2012 was 96.3 Mmcfed, an increase of approximately 33.7 Mmcfed, or 54%, compared with the second quarter 2012. The increase was primarily due to the acquisition of Titan Operating, LLC (“Titan”) in the Barnett Shale in July 2012, a full quarter’s volume from ARP’s initial acquisition in the Barnett Shale in April 2012, and additional legacy Marcellus Shale wells connected in southwestern Pennsylvania during the quarter.
  • During the third quarter 2012, ARP continued drilling on initial locations in the oil & natural gas liquids (NGL) rich Mississippi Lime basin in northwestern Oklahoma. Two wells in ARP’s recently expanded Mississippi Lime position have been completed and are currently producing into a sales line, and one well is awaiting completion. ARP also drilled six wells this quarter in Hood County, Texas in the wet gas window of its Barnett Shale position. An additional two wells in the wet gas region of Tarrant County, Texas were also turned into line.

ATLS owns 100% of the general partner Class A units and the incentive distribution rights, and a 52% common limited partner interest in ARP. ATLS’ financial results are presented on a consolidated basis with those of ARP. Non-controlling interests in ARP are reflected as income (expense) in ATLS’ consolidated combined statements of operations and as a component of partners’ capital on its consolidated combined balance sheets. A consolidating combined statement of operations and balance sheet have also been provided in the financial tables to this release for the comparable periods presented. Please refer to the ARP third quarter 2012 earnings release for additional details on its financial results.

Atlas Pipeline Third Quarter 2012 Highlights

  • During the third quarter 2012, APL operated near or at nameplate capacity on all of its gathering and processing systems in the Mid Continent. APL processed an average of approximately 769 Mmcfd of natural gas in the third quarter 2012 amongst its WestOK, WestTX and Velma systems, 36% higher than the prior year comparable quarter’s volumes. APL again attained record high volumes over 56,300 bbl per day of natural gas liquids generated from APL’s three processing systems in Oklahoma and Texas.

ATLS owns a 2.0% general partner interest, all of the incentive distribution rights, and a 10.5% common limited partner interest in APL. ATLS’ financial results are presented on a consolidated basis with those of APL. Non-controlling interests in APL are reflected as income (expense) in ATLS’ consolidated combined statements of operations and as a component of partners’ capital on its consolidated combined balance sheets. A consolidating combined statement of operations and balance sheet have also been provided in the financial tables to this release for the comparable periods presented. Please refer to the APL third quarter 2012 earnings release for additional details on its financial results.

Corporate Expenses

  • Cash general and administrative expense, excluding amounts attributable to APL and ARP, was $1.4 million for the third quarter 2012, a $0.7 million decrease from the second quarter 2012 due to the timing of third party costs. Please refer to the consolidating combined statements of operations provided in the financial tables of this release.

Interested parties are invited to access the live webcast of an investor call with management regarding Atlas Energy, L.P.’s third quarter 2012 results on Thursday, November 1, 2012 at 9:00 am ET by going to the Investor Relations section of Atlas Energy’s website at www.atlasenergy.com. For those unavailable to listen to the live broadcast, the replay of the webcast will be available following the live call on the Atlas Energy website and telephonically beginning at 11:00 a.m. ET on November 1, 2012 by dialing 888-286-8010, passcode: 31065841.

Atlas Energy, L.P. (NYSE: ATLS) is a master limited partnership which owns all of the general partner Class A units and incentive distribution rights and an approximate 52% limited partner interest in its upstream oil & gas subsidiary, Atlas Resource Partners, L.P. Additionally, Atlas Energy owns and operates the general partner of its midstream oil & gas subsidiary, Atlas Pipeline Partners, L.P., through all of the general partner interest, all the incentive distribution rights and an approximate 11% limited partner interest. For more information, please visit our website at www.atlasenergy.com, or contact Investor Relations at InvestorRelations@atlasenergy.com.

Atlas Resource Partners, L.P. (NYSE: ARP) is an exploration & production master limited partnership which owns an interest in over 9,900 producing natural gas and oil wells, primarily in Appalachia and the Barnett Shale in Texas. ARP is also the largest sponsor of natural gas and oil investment partnerships in the U.S. For more information, please visit our website at www.atlasresourcepartners.com, or contact Investor Relations at InvestorRelations@atlasenergy.com.

Atlas Pipeline Partners, L.P. (NYSE: APL) is active in the gathering and processing segments of the midstream natural gas industry. In the midcontinent region of Oklahoma, southern Kansas, and northern and western Texas, APL owns and operates nine active gas processing plants as well as approximately 9,700 miles of active intrastate gas gathering pipeline. APL also has a 20% interest in West Texas LPG Pipeline Limited Partnership, which is operated by Chevron Corporation. For more information, visit the Partnership's website at www.atlaspipeline.com or contact IR@atlaspipeline.com.

Cautionary Note Regarding Forward-Looking Statements

This document contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. ATLS cautions readers that any forward-looking information is not a guarantee of future performance. Such forward-looking statements include, but are not limited to, statements about future financial and operating results, resource potential, ATLS’ plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties that could cause actual results to materially differ from the forward-looking statements include, but are not limited to, those associated with general economic and business conditions; changes in commodity prices; changes in the costs and results of drilling operations; uncertainties about estimates of reserves and resource potential; inability to obtain capital needed for operations; ATLS’ level of indebtedness; changes in government environmental policies and other environmental risks; the availability of drilling equipment and the timing of production; tax consequences of business transactions; and other risks, assumptions and uncertainties detailed from time to time in ATLS’ reports filed with the U.S. Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Forward-looking statements speak only as of the date hereof, and ATLS assumes no obligation to update such statements, except as may be required by applicable law.

ATLAS ENERGY, L.P.
CONSOLIDATED COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per unit data)

   
Three Months Ended Nine Months Ended
September 30, September 30,
Revenues:   2012       2011     2012       2011  
Gas and oil production $ 24,699 $ 16,305 $ 61,323 $ 51,654
Well construction and completion 36,317 35,657 92,277 64,336
Gathering and processing 298,024 357,620 859,786 983,572
Administration and oversight 4,440 2,337 8,586 5,073
Well services 5,086 4,910 15,344 15,051
Gain (loss) on mark-to-market derivatives (2) (18,907 ) 23,760 36,905 8,952
Other, net   5,270     890     8,575     26,657  
Total revenues   354,929     441,479     1,082,796     1,155,295  
 
Costs and expenses:
Gas and oil production 7,295 3,990 16,247 11,953
Well construction and completion 31,581 30,449 79,882 54,754
Gathering and processing 245,230 301,625 710,827 832,080
Well services 2,232 2,043 7,076 6,077
General and administrative (1) 33,991 18,617 108,846 57,046

Estimated expense on Chevron transaction

7,670 7,670
Depreciation, depletion and amortization   37,079     27,541     99,563     81,518  
Total costs and expenses   365,078     384,265     1,030,111     1,043,428  
 
Operating income (loss) (10,149 ) 57,214 52,685 111,867
 
Gain (loss) on asset sales and disposal 2 8 (7,019 ) 255,722
Interest expense (1) (11,245 ) (6,315 ) (30,630 ) (30,960 )
Loss on early extinguishment of debt               (19,574 )
 

Income (loss) from continuing operations

(21,392 ) 50,907 15,036 317,055
 
Loss from discontinued operations               (81 )

Net income (loss)

(21,392 ) 50,907 15,036 316,974
 
(Income) loss attributable to non-controlling interests  

9,982

   

(43,794

)

 

(52,574

)

 

(263,097

)

Net income (loss) after non-controlling interests (11,410 ) 7,113 (37,538 ) 53,877

Income not attributable to common limited partners (results of operations of the Transferred Business as of and prior to February 17, 2011, the date of acquisition) (1)

 

 

 

       

 

 

    (4,711 )
Net income (loss) attributable to common limited partners $ (11,410 )

$

7,113

  $ (37,538 )

$

49,166

 
 
Net income (loss) attributable to common limited partners per unit – basic:
Income (loss) from continuing operations attributable to common limited partners $ (0.22 ) $ 0.13 $ (0.73 ) $ 1.02
Loss from discontinued operations attributable to common limited partners                
Net income (loss) attributable to common limited partners $ (0.22 ) $ 0.13   $ (0.73 ) $ 1.02  
 
Net income (loss) attributable to common limited partners per unit – diluted:
Income (loss) from continuing operations attributable to common limited partners $ (0.22 ) $ 0.13 $ (0.73 ) $ 0.99
Loss from discontinued operations attributable to common limited partners                
Net income (loss) attributable to common limited partners

$

(0.22

)

$

0.13

 

$

(0.73

)

$

0.99

 
 
Weighted average common limited partner units outstanding:
Basic   51,335     51,257     51,316     47,212  
Diluted   51,335     53,100     51,316     48,488  
 
Net income (loss) attributable to common limited partners:
Income (loss) from continuing operations $ (11,410 ) $ 7,113 $

(37,538

) $ 49,176
Loss from discontinued operations               (10 )
Net income (loss) attributable to common limited partners $ (11,410 )

$

7,113

  $

(37,538

)

$

49,166

 
 

(1)

  In accordance with prevailing accounting literature, ATLS has adjusted its historical financial statements to present them combined with the historical financial results of the exploration and production business acquired from Chevron (the “Transferred Business”) for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of ATLS, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as ATLS was unable to identify and allocate such amounts to the Transferred Business for the respective periods.
 

(2)

Consists principally of hydrocarbon derivative gains / (losses) that relate to the operating activities of ATLS’s consolidated subsidiary, APL. The underlying hydrocarbon derivatives do not represent present or potential future obligations of ATLS.
 
ATLAS ENERGY, L.P.
CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands)

   

September 30,

December 31,

ASSETS

2012

2011

Current assets:

Cash and cash equivalents $ 33,255 $ 77,376
Accounts receivable 139,279 136,853
Current portion of derivative asset 32,738 15,447

Subscriptions receivable

8,495

34,455

Prepaid expenses and other  

17,956

 

24,779

Total current assets 231,723 288,910
 

Property, plant and equipment, net

2,825,201 2,093,283

Intangible assets, net

106,861 104,777

Investment in joint venture

85,714 86,879

Goodwill, net

31,784 31,784

Long-term derivative asset

22,339 30,941

Other assets, net

  59,744   48,197
$ 3,363,366 $ 2,684,771
 

LIABILITIES AND PARTNERS’ CAPITAL

 

Current liabilities:

Current portion of long-term debt $ 11,103 $ 2,085
Accounts payable 102,176 93,554
Liabilities associated with drilling contracts 5,550 71,719
Accrued producer liabilities 71,884 88,096
Current portion of derivative liability 280
Current portion of derivative payable to Drilling Partnerships 13,363 20,900
Accrued interest 9,834 1,629
Accrued well drilling and completion costs 50,169 17,585
Accrued liabilities   78,757   61,653
Total current liabilities 343,116 357,221
 

Long-term debt, less current portion

997,510 522,055

Long-term derivative liability

4,051

Long-term derivative payable to Drilling Partnerships

4,483 15,272

Asset retirement obligation and other

62,300 46,142
 

Commitments and contingencies

 

Partners’ Capital:

Common limited partners’ interests 454,725 554,999
Accumulated other comprehensive income   4,490   29,376
459,215 584,375
Non-controlling interests   1,492,691   1,159,706
Total partners’ capital   1,951,906   1,744,081
$ 3,363,366 $ 2,684,771
 
ATLAS ENERGY, L.P.
Financial and Operating Highlights
   
Three Months Ended Nine Months Ended
September 30, September 30,
  2012    

2011 (1)

  2012    

2011 (1)

 
Net income (loss) attributable to common limited partners per unit - basic $ (0.22 ) $ 0.13 $ (0.73 ) $ 1.02
 
Distributable cash flow per unit (2)(3) $ 0.27 $ 0.39 $ 0.78 $ 0.99
 
Cash distributions paid per unit (4) $ 0.27 $ 0.24 $ 0.77 $ 0.57
 
ATLAS RESOURCE:
Production volume: (5)(6)
Natural gas (Mcfd) 88,208 30,629 60,531 31,687
Oil (Bpd) 277 294 291 297
Natural gas liquids (Bpd)   1,067     408     652     448  
Total (Mcfed)   96,275     34,845     66,189    

36,158

 
 
Average sales prices: (6)
Natural gas (per Mcf) (7) $ 3.01 $ 5.10 $ 3.42 $ 5.24
Oil (per Bbl) (8) $ 87.86 $ 83.34 $ 95.70 $ 90.65
Natural gas liquids (per gallon) $ 0.61 $ 1.18 $ 0.79 $ 1.15
 
Production costs: (6)(9)
Lease operating expenses per Mcfe (10) $ 0.75 $ 1.12 $ 0.80 $ 1.05
Production taxes per Mcfe   0.13     0.11     0.12     0.10  
Total production costs per Mcfe (10) $ 0.88 $ 1.23 $ 0.92 $ 1.15
 
ATLAS PIPELINE:
Production volume: (6)
Gathered gas volume(Mcfd) 860,026 621,476 780,426 575,292
Processed gas volume (Mcfd) 768,988 566,652 696,445

529,750

Residue gas volume (Mcfd) 658,846 466,437 579,771 431,204
Processed NGL volume (Bpd) 56,363 52,977 59,557 52,617
Condensate volume (Bpd) 3,756 3,389 3,417 2,988
 
Average sales prices: (6)
Natural gas (per Mcf) $ 2.60 $ 4.04 $ 2.39 $ 4.04
Condensate (per Bbl) $ 86.65 $ 85.77 $ 90.07 $ 90.91
Natural gas liquids (per gallon) $ 0.87 $ 1.27 $ 0.90 $ 1.21
 

(1)

  In accordance with prevailing accounting literature, ATLS has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of ATLS, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as ATLS was unable to identify and allocate such amounts to the Transferred Business for the respective periods.
 

(2)

A reconciliation from net income to distributable cash flow is provided in the financial tables of this release.
 
(3) Calculation consists of distributable cash flow divided by the weighted average common limited partner units outstanding of 51,335,000 and 51,257,000 for the three months ended September 30, 2012 and 2011, respectively, and 51,316,000 for the nine months ended September 30, 2012. For the nine months ended September 30, 2011, the weighted average common limited partner units outstanding of 51,242,000 utilized for the calculation is the weighted average common limited partner units outstanding for the period subsequent to February 17, 2011, the date of acquisition for the Transferred Business, which includes the 23.4 million common limited partner units issued as partial consideration for the acquisition.
 
(4) Represents the cash distributions declared per limited partner unit for the respective period and paid by ATLS within 50 days after the end of each quarter, based upon the distributable cash flow generated during the respective quarter. The nine months ended September 30, 2011 includes a cash distribution payment of $0.11 per limited partner unit for the 1 st quarter 2011, which reflected a prorated cash distribution for the period from February 17, 2011, the date of acquisition for the Transferred Business, to March 31, 2011.
 
(5) Production quantities consist of the sum of (i) ARP’s proportionate share of production from wells in which it has a direct interest, based on ARP’s proportionate net revenue interest in such wells, and (ii) ARP’s proportionate share of production from wells owned by the investment partnerships in which ARP has an interest, based on its equity interest in each such partnership and based on each partnership’s proportionate net revenue interest in these wells.
 
(6) “Mcf” and “Mcfd” represent thousand cubic feet and thousand cubic feet per day; “Mcfe” and “Mcfed” represent thousand cubic feet equivalents and thousand cubic feet equivalents per day, and “Bbl” and “Bpd” represent barrels and barrels per day. Barrels are converted to Mcfe using the ratio of six Mcf’s to one barrel.
 
(7) ARP’s average sales price for natural gas before the effects of financial hedging was $2.46 per Mcf and $4.90 per Mcf for the three months ended September 30, 2012 and 2011, respectively, and $2.60 per Mcf and $4.69 per Mcf for the nine months ended September 30, 2012 and 2011, respectively. These amounts exclude the impact of subordination of production revenues to investor partners within the investor partnerships. Including the effects of subordination, average natural gas sales prices were $2.46 per Mcf ($1.91 per Mcf before the effects of financial hedging) and $4.33 per Mcf ($4.13 per Mcf before the effects of financial hedging) for the three months ended September 30, 2012 and 2011, respectively, and $2.88 per Mcf ($2.07 per Mcf before the effects of financial hedging) and $4.44 per Mcf ($3.89 per Mcf before the effects of financial hedging) for the nine months ended September 30, 2012 and 2011, respectively.
 
(8) ARP’s average sales price for oil before the effects of financial hedging was $84.30 per barrel and $81.85 per barrel for the three months ended September 30, 2012 and 2011, respectively, and $93.38 per barrel and $89.79 per barrel for the nine months ended September 30, 2012 and 2011, respectively.
 
(9) Production costs include labor to operate the wells and related equipment, repairs and maintenance, materials and supplies, property taxes, severance taxes, insurance and production overhead. These amounts exclude the effects of ARP’s proportionate share of lease operating expenses associated with subordination of production revenue to investor partners within ARP’s investor partnerships. Including the effects of these costs, lease operating expenses per Mcfe were $0.45 per Mcfe ($0.58 per Mcfe for total production costs) and $0.73 per Mcfe ($0.84 per Mcfe for total production costs) for the three months ended September 30, 2012 and 2011, respectively, and $0.51 per Mcfe ($0.63 per Mcfe for total production costs) and $0.71 per Mcfe ($0.82 per Mcfe for total production costs) for the nine months ended September 30, 2012 and 2011, respectively.
 
(10) The amount for the nine months ended September 30, 2011 was adjusted to reflect current period classification resulting from the misclassification of lease operating production expenses and transportation production expenses.
 
ATLAS ENERGY, L.P.
Financial Information

(unaudited; in thousands except per unit amounts)

   
Three Months Ended Nine Months Ended
September 30, September 30,
Adjusted EBITDA and Distributable Cash Flow Summary:   2012    

2011 (1)

  2012    

2011 (1)

 
Atlas Resource Cash Distributions Earned (2) :
Limited Partner Units $ 9,013 $ $ 19,913 $
Class A Units (2%) 350 677
Incentive Distribution Rights                

Total Atlas Resource Cash Distributions Earned (2)

  9,363         20,590      
per limited partner unit $ 0.43 $ $ 0.95 $
 
Atlas Pipeline Cash Distributions Earned (2) :
Limited Partner Units 3,280 3,107 9,724 8,121
General Partner 2% Interest 664 535 1,961 1,466
Incentive Distribution Rights   1,745     1,304     4,885     1,776  
Total Atlas Pipeline Cash Distributions Earned (2)   5,689     4,946     16,570     11,363  
per limited partner unit $ 0.57 $ 0.54 $ 1.69 $ 1.41
 
Total Cash Distributions Earned 15,052 4,946 37,160 11,363
 
E&P Operations Adjusted EBITDA prior to spinoff on

March 5, 2012 (3)

17,304

9,111

39,617

Cash general and administrative expenses (4) (1,394 ) (311 ) (5,910 ) (7,076 )
Other, net   537     677     983     14,987  
Adjusted EBITDA (5) 14,195 22,616 41,344 58,891
Cash interest expense (6) (80 ) (208 ) (253 ) (524 )
Maintenance capital expenditures (3)       (2,300 )   (1,231 )   (7,533 )
Distributable Cash Flow (5) $ 14,115   $ 20,108   $ 39,860   $ 50,834  
 
Distributions Paid (7) $ 13,866 $ 12,305 $ 39,527 $ 29,216
per limited partner unit $ 0.27 $ 0.24 $ 0.77 $ 0.57
Distribution coverage ratio 1.0x 1.6x 1.0x 1.7x
 
Reconciliation of non-GAAP measures to net income (loss) (5) :
Distributable cash flow $ 14,115 $ 20,108 $ 39,860 $ 50,834
Distributable cash flow of Transferred Business as of and prior to February 17, 2011 (the date of acquisition) (1)

8,261

E&P Operations EBITDA prior to spinoff on March 5, 2012 (3) (17,304 ) (9,111 ) (39,617 )
E&P Operations EBITDA of Transferred Business as of and prior to February 17, 2011 (1)

(8,510 )
Atlas Resource net loss attributable to ATLS common limited partners

(6,845

)

9,400

(23,444

)

24,640

Atlas Resource cash distributions earned by ATLS (2) (9,363 ) (20,590 )
Atlas Pipeline net income attributable to ATLS common limited partners

392

6,465

12,842

37,555

Atlas Pipeline cash distributions earned by ATLS (2) (5,689 ) (4,946 ) (16,570 ) (11,363 )
Non-recurring spinoff and acquisition costs (8,370 ) (2,087 )
Amortization of deferred finance costs (50 ) (171 ) (179 ) (5,356 )
Non-cash stock compensation expense (4,327 ) (4,319 ) (13,626 ) (8,931 )
Maintenance capital expenditures (3) 2,300 1,231 7,533
Other non-cash adjustments 357 (4,420 ) 419 918
Income attributable to non-controlling interests   (9,982 )   43,794     52,574     263,097  
Net income (loss) $ (21,392 ) $ 50,907   $ 15,036   $ 316,974  
 

(1)

  In accordance with prevailing accounting literature, ATLS has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of ATLS, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as ATLS was unable to identify and allocate such amounts to the Transferred Business for the respective periods.
 

(2)

Represents the cash distribution paid by ARP and APL within 45 days after the end of each quarter, based upon the distributable cash flow generated during the respective quarter.
 

(3)

Represents the E&P Operations Adjusted EBITDA generated and maintenance capital expenditures incurred by ATLS on a stand-alone basis prior to the transfer of its E&P assets to ARP on March 5, 2012.
 

(4)

Excludes non-cash stock-compensation expense, non-recurring spinoff costs and non-recurring acquisition costs incurred, including amounts in connection with the acquisition of the Transferred Business.
 

(5)

Adjusted EBITDA and distributable cash flow are non-GAAP (generally accepted accounting principles) financial measures under the rules of the Securities and Exchange Commission. Management of ATLS believes that adjusted EBITDA and distributable cash flow provide additional information for evaluating ATLS’s performance, among other things. These measures are widely used by commercial banks, investment bankers, rating agencies and investors in evaluating performance relative to peers and pre-set performance standards. Adjusted EBITDA is also a financial measurement that, with certain negotiated adjustments, is utilized within ATLS’s financial covenants under its credit facility. Adjusted EBITDA and distributable cash flow are not measures of financial performance under GAAP and, accordingly, should not be considered as a substitute for net income, operating income, or cash flows from operating activities in accordance with GAAP.
 

(6)

Excludes non-cash amortization of deferred financing costs.
 

(7)

Represents the cash distribution paid within 50 days after the end of each quarter, based upon the distributable cash flow generated during the respective quarter.
 
ATLAS ENERGY, L.P.
CAPITALIZATION INFORMATION

(unaudited; in thousands)

 
September 30, 2012
Atlas   Atlas   Atlas  
Energy Resource Pipeline Consolidated
Total debt $ $ 222,000 $ 786,613 $ 1,008,613
Less: Cash   (8,824 )   (24,266 )   (165 )   (33,255 )
Total net debt /(cash) (8,824 ) 197,734 786,448 975,358
 
Partners’ capital   459,215     708,748     1,224,060    

1,951,906 (1)

 

 
Total capitalization $ 450,391   $ 906,482   $ 2,010,508   $ 2,927,264  
 
Ratio of net debt to capitalization 0.00x
     

(1) Net of eliminated amounts.

 
  December 31, 2011
Atlas   Atlas   Atlas  
Energy Resource Pipeline Consolidated
Total debt $ $ $ 524,140 $ 524,140
Less: Cash   (22,500 )   (54,708 )   (168 )   (77,376 )
Total net debt /(cash) (22,500 ) (54,708 ) 523,972 446,764
 
Partners’ capital   584,375     457,175     1,236,228    

1,744,081 (2)

 

 
Total capitalization $ 561,875   $ 402,467   $ 1,760,200   $ 2,190,845  
 
Ratio of net debt to capitalization 0.00x
     

(2) Net of eliminated amounts.

 
ATLAS ENERGY, L.P.
CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)

 

Three Months Ended September 30, 2012

         
Atlas Atlas Atlas Consolidated
Energy Resource Pipeline Eliminations Combined
Revenues:
Gas and oil production $ $ 24,699 $ $ $ 24,699
Well construction and completion 36,317 36,317
Gathering and processing 4,134 293,890 298,024
Administration and oversight 4,440 4,440
Well services 5,086 5,086
Loss on mark-to-market derivatives (18,907 ) (18,907 )
Other, net   894     67     4,309       5,270  
Total revenues   894     74,743     279,292       354,929  
 
Costs and expenses:
Gas and oil production 7,295 7,295
Well construction and completion 31,581 31,581
Gathering and processing 4,558 240,672 245,230
Well services 2,232 2,232
General and administrative 5,721 16,147 12,123 33,991

Estimated expense on Chevron transaction

7,670 7,670
Depreciation, depletion and amortization  

   

13,918

   

23,161

   

 

 

37,079

 
Total costs and expenses   5,721     83,401     275,956      

365,078

 
 
Operating income (loss) (4,827 ) (8,658 ) 3,336 (10,149 )
 

Gain on asset sales and disposal

2 2
Interest expense   (130 )   (1,423 )   (9,692 )     (11,245 )
 
Loss from continuing operations (4,957 ) (10,079 ) (6,356 ) (21,392 )
Discontinued operations                  
Net loss (4,957 ) (10,079 ) (6,356 ) (21,392 )
Income attributable to non-controlling interests  

   

   

(1,511

)

 

11,493

 

9,982

 
Net loss attributable to common limited partners

$

(4,957

)

$

(10,079

)

$

(7,867

)

$

11,493

$

(11,410

)

 
ATLAS ENERGY, L.P.
CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)

 

Three Months Ended September 30, 2011

         
Atlas Atlas Atlas Consolidated
Energy Resource (1) Pipeline Eliminations Combined (1)
Revenues:
Gas and oil production $ $ 16,305 $ $ $ 16,305
Well construction and completion 35,657 35,657
Gathering and processing 4,431 353,189 357,620
Administration and oversight 2,337 2,337
Well services 4,910 4,910
Gain on mark-to-market derivatives 23,760 23,760
Other, net   (3,743 )   (50 )   4,683         890  
Total revenues   (3,743 )   63,590     381,632         441,479  
 
Costs and expenses:
Gas and oil production 3,990 3,990
Well construction and completion 30,449 30,449
Gathering and processing 4,880 296,745 301,625
Well services 2,043 2,043
General and administrative 4,630 4,757 9,230 18,617

Depreciation, depletion and amortization

 

   

8,071

   

19,470

   

   

27,541

 
Total costs and expenses   4,630     54,190     325,445         384,265  
 
Operating income (loss) (8,373 ) 9,400 56,187 57,214
 
Gain on asset sales and disposal 8 8
Interest expense (379 ) (5,936 ) (6,315 )
Loss on early extinguishment of debt                    
 
Income (loss) from continuing operations (8,752 ) 9,400 50,259 50,907
Discontinued operations                    
Net income (loss) (8,752 ) 9,400 50,259 50,907

Income attributable to non-controlling interests

 

   

   

(1,760

)

 

(42,034

)

 

(43,794

)

Net income (loss) after non-controlling interests

(8,752

)

9,400

48,499

(42,034

)

7,113

Income not attributable to common limited partners (results of operations of the Transferred Business as of and prior to February 17, 2011, the date of acquisition (1))

 

   

   

   

   

 
Net income (loss) attributable to common limited partners

$

(8,752

)

$

9,400

 

$

48,499

 

$

(42,034

)

$

7,113

 
 
(1)   In accordance with prevailing accounting literature, ATLS has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of ATLS, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as ATLS was unable to identify and allocate such amounts to the Transferred Business for the respective periods.
 
ATLAS ENERGY, L.P.
CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)

 

Nine Months Ended September 30, 2012

         
Atlas Atlas Atlas Consolidated
Energy Resource Pipeline Eliminations Combined
Revenues:
Gas and oil production $ $ 61,323 $ $ $ 61,323
Well construction and completion 92,277 92,277
Gathering and processing 10,311 849,475 859,786
Administration and oversight 8,586 8,586
Well services 15,344 15,344
Gain on mark-to-market derivatives 36,905 36,905
Other, net   1,402     (4,952 )   12,125         8,575  
Total revenues   1,402     182,889     898,505         1,082,796  
 
Costs and expenses:
Gas and oil production 16,247 16,247
Well construction and completion 79,882 79,882
Gathering and processing 13,185 697,642 710,827
Well services 7,076 7,076
General and administrative 27,906 48,427 32,513 108,846

Estimated expense on Chevron transaction

7,670 7,670
Depreciation, depletion and amortization  

   

33,848

   

65,715

   

   

99,563

 
Total costs and expenses   27,906     206,335     795,870         1,030,111  
 
Operating income (loss) (26,504 )

(23,446

) 102,635 52,685
 
Loss on asset sales and disposal (7,019 ) (7,019 )
Interest expense   (432 )   (2,529 )   (27,669 )       (30,630 )
 
Income (loss) from continuing operations (26,936 ) (32,994 ) 74,966 15,036
Discontinued operations                    
Net income (loss) (26,936 ) (32,994 ) 74,966 15,036

Income attributable to non-controlling interests

 

   

   

(4,108

)

 

(48,466

)

 

(52,574

)

Net income (loss) attributable to common limited partners

$

(26,936

)

$

(32,994

)

$

70,858

 

$

(48,466

)

$

(37,538

)

 
 
ATLAS ENERGY, L.P.
CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)

 

Nine Months Ended September 30, 2011

         
Atlas Atlas Atlas Consolidated
Energy Resource (1) Pipeline Eliminations Combined (1)
Revenues:
Gas and oil production $ $ 51,654 $ $ $ 51,654
Well construction and completion 64,336 64,336
Gathering and processing 14,048 969,524 983,572
Administration and oversight 5,073 5,073
Well services 15,051 15,051
Gain on mark-to-market derivatives 8,952 8,952
Other, net   16,071     (115 )   10,701         26,657  
Total revenues   16,071     150,047     989,177         1,155,295  
 
Costs and expenses:
Gas and oil production 11,953 11,953
Well construction and completion 54,754 54,754
Gathering and processing 16,377 815,703 832,080
Well services 6,077 6,077
General and administrative 17,954 12,275 26,817 57,046
Depreciation, depletion and amortization  

   

24,019

   

57,499

   

   

81,518

 
Total costs and expenses   17,954     125,455     900,019         1,043,428  
 
Operating income (loss) (1,883 ) 24,592 89,158 111,867
 
Gain on asset sales and disposal 48 255,674 255,722
Interest expense (6,435 ) (24,525 ) (30,960 )
Loss on early extinguishment of debt           (19,574 )       (19,574 )
 
Income (loss) from continuing operations (8,318 ) 24,640 300,733 317,055
Discontinued operations           (81 )       (81 )
Net income (loss) (8,318 ) 24,640 300,652 316,974

Income attributable to non-controlling interests

 

   

   

(4,492

)

 

(258,605

)

 

(263,097

)

Net income (loss) after non-controlling interests (8,318 ) 24,640 296,160 (258,605 ) 53,877

Income not attributable to common limited partners (results of operations of the Transferred Business as of and prior to February 17, 2011, the date of acquisition (1))

 

   

(4,711

)

 

   

   

(4,711

)

Net income (loss) attributable to common limited partners

$

(8,318

)

$

19,929

 

$

296,160

 

$

(258,605

)

$

49,166

 
 
(1)   In accordance with prevailing accounting literature, ATLS has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of ATLS, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as ATLS was unable to identify and allocate such amounts to the Transferred Business for the respective periods.
 
ATLAS ENERGY, L.P.
CONDENSED CONSOLIDATING BALANCE SHEETS
(unaudited; in thousands)
 

September 30, 2012

         
Atlas Atlas Atlas
ASSETS Energy Resource Pipeline Eliminations Consolidated
Current assets:
Cash and cash equivalents $ 8,824 $ 24,266 $ 165 $ $ 33,255
Accounts receivable 15 30,994 108,270 139,279

Receivable from (advances from) affiliates

3,790

(1,251

)

(2,539

)

Current portion of derivative asset 6,518 26,220 32,738
Subscriptions receivable 8,495 8,495
Prepaid expenses   166   7,107     10,683         17,956
Total current assets 12,795 76,129 142,799 231,723
Property, plant and equipment, net 1,016,110 1,809,091 2,825,201
Goodwill and intangible assets, net 33,149 105,496 138,645
Long-term derivative asset 5,144 17,195 22,339
Investment in joint venture 85,714 85,714
Investment in subsidiaries 440,117 (440,117 )
Other assets, net   22,327   8,410     29,007         59,744
$ 475,239 $ 1,138,942   $ 2,189,302   $ (440,117 ) $ 3,363,366
 
LIABILITIES AND PARTNERS’ CAPITAL
 
Current liabilities:
Current portion of long-term debt $ $ $ 11,103 $ $ 11,103
Accounts payable 29 42,831 59,316 102,176

Liabilities associated with drilling contracts

5,550

5,550

Accrued producer liabilities 71,884 71,884
Current portion of derivative liability 280 280

Current portion of derivative payable to Partnerships

13,363

13,363

Accrued interest 111 9,723 9,834

Accrued well drilling and completion costs

50,169

50,169

Accrued liabilities   14,581   32,928     31,248         78,757
Total current liabilities 14,610 145,232 183,274 343,116
 
Long-term debt, less current portion 222,000 775,510 997,510
Long-term derivative liability 4,051 4,051
Long-term derivative payable to Partnerships

4,483

4,483

Asset retirement obligation and other 1,414 54,428 6,458 62,300
 
Partners’ Capital:
Common limited partners’ interests 454,725 700,104 1,249,231 (1,949,335 ) 454,725
Accumulated other comprehensive income (loss)  

4,490

 

8,644

   

(1,057

)

 

(7,587

)

 

4,490

459,215 708,748 1,248,174 (1,956,922 ) 459,215
Non-controlling interests         (24,114 )   1,516,805     1,492,691
Total partners’ capital   459,215   708,748     1,224,060     (440,117 )   1,951,906
$ 475,239 $ 1,138,942   $ 2,189,302   $ (440,117 ) $ 3,363,366
 
ATLAS ENERGY, L.P.
CONDENSED CONSOLIDATING BALANCE SHEETS
(unaudited; in thousands)
 

December 31, 2011

         
Atlas Atlas Atlas
ASSETS Energy Resource Pipeline Eliminations Consolidated
Current assets:
Cash and cash equivalents $ 22,500 $ 54,708 $ 168 $ $ 77,376
Accounts receivable 869 20,572 115,412 136,853

Receivable from (advances from) affiliates

3,928

(1,253

)

(2,675

)

Current portion of derivative asset 13,802 1,645 15,447
Subscriptions receivable 34,455 34,455
Prepaid expenses   1,462   7,676     15,641         24,779
Total current assets 28,759 129,960 130,191 288,910
Property, plant and equipment, net 4,571 520,883 1,567,829 2,093,283
Goodwill and intangible assets, net 33,285 103,276 136,561
Long-term derivative asset 16,127 14,814 30,941
Investment in joint venture 86,879 86,879
Investment in subsidiaries 533,697 (533,697 )
Other assets, net   22,190   858     25,149         48,197
$ 589,217 $ 701,113   $ 1,928,138   $ (533,697 ) $ 2,684,771
 
LIABILITIES AND PARTNERS’ CAPITAL
 
Current liabilities:
Current portion of long-term debt $ $ $ 2,085 $ $ 2,085
Accounts payable 2,179 36,731 54,644 93,554

Liabilities associated with drilling contracts

71,719

71,719

Accrued producer liabilities 88,096 88,096

Current portion of derivative payable to Partnerships

20,900

20,900

Accrued interest 5 1,624 1,629

Accrued well drilling and completion costs

17,585

17,585

Accrued liabilities   2,418   35,952     23,283         61,653
Total current liabilities 4,602 182,887 169,732 357,221
Long-term debt, less current portion 522,055 522,055
Long-term derivative payable to Partnerships

15,272

15,272

Asset retirement obligation and other 240 45,779 123 46,142
 
Partners’ Capital:
Common limited partners’ interests 554,999 427,246 1,269,019 (1,696,265 ) 554,999
Accumulated other comprehensive income (loss)  

29,376

 

29,929

   

(4,390

)

 

(25,539

)

 

29,376

584,375 457,175 1,264,629 (1,721,804 ) 584,375
Non-controlling interests         (28,401 )   1,188,107     1,159,706
Total partners’ capital   584,375   457,175     1,236,228     (533,697 )   1,744,081
$ 589,217 $ 701,113   $ 1,928,138   $ (533,697 ) $ 2,684,771
 
ATLAS ENERGY, L.P.
Ownership Interests Summary
   
Overall
Ownership
Interest
Atlas Energy Ownership Interests as of September 30, 2012: Amount Percentage
 
ATLAS RESOURCE:
General partner interest 100 % 2.0 %
Common units 20,962,485 51.5 %
Incentive distribution rights 100 % N/A  
Total Atlas Energy ownership interests in Atlas Resource 53.5 %
 
ATLAS PIPELINE:
General partner interest 100 % 2.0 %
Common units 5,754,253 10.5 %
Incentive distribution rights 100 % N/A  
Total Atlas Energy ownership interests in Atlas Pipeline 12.5 %
 
LIGHTFOOT CAPITAL PARTNERS, GP LLC:
Approximate general partner ownership interest 15.9 %
Approximate limited partner ownership interest 12.1 %




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