Atlas Energy's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Atlas Energy (ATLS)

Q1 2012 Earnings Call

May 8, 2012 09:00 am ET


Edward Cohen – Chief Executive Officer and President

Matthew Jones – Senior Vice President, President and Chief Operating Officer – E&P

Sean McGrath – Chief Financial Officer

Brian Begley – Director, Investor Relations


Craig Shere – Tuohy Brothers

Wayne Cooperman – Cobalt Capital



Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Atlas Energy LP and Atlas Resource Partners LP Earnings Conference Call. My name is Larry and I will be your operator for today. (Operator instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today, Mr. Brian Begley, Head of Investor Relations. Please proceed.

Brian Begley

Good morning, everyone, and thank you for joining us for today’s call. As we get started, I’d like to remind everyone that during this call we’ll make certain forward-looking statements, and in this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contains words such as expects, anticipates, and similar words or phrases.

Forward-looking statements, by their nature, address matters that are uncertain and are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected in the forward-looking statements. We discuss these risks in our quarterly report on Form 10-Q and our annual report, also on Form 10-K, particularly in Item 1.

I’d also like to caution you not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as the date hereof. The Company undertakes no obligations to publicly update our forward-looking statements or to publicly release the results of any revisions to forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

In both our Atlas Energy and Atlas Resource earnings releases, we provide a reconciliation for net income to adjusted EBITDA and distributable cash flow as we believe that these non-GAAP measures offer the best means of evaluating the results of our business. Also, in our Atlas Energy release we continue to show consolidating balance sheets and income statements that present the rollup of the operations of both Atlas Energy and Atlas Pipeline.

Lastly, we’ll be participating in several upcoming investor conferences, including the NAPTP Conference in Greenwich, Connecticut on May 23 rd and the RBC Energy and Power Conference in New York on June 5 th.

With that, I’d like to turn the call over to our Chief Executive Officer, Ed Cohen, for his remarks.

Ed Cohen

Thanks, Brian, and hello, everyone. You know, today marks eight weeks since the birth of Atlas Resources Partners as a public company. What an eight weeks it has been. From launch through the end of last week, ARP stock has risen some 31% and our parent company, ATLS, has risen even more – over 40%.

In fact, since December 31, 2011, Atlas (ATLS) stock is up an astounding 57%. It has more than doubled since the new, initially small ATLS emerged after the February 2011 sale to Chevron of the overwhelming majority of our E&P assets.

Our shareholders and I really owe a great debt to our employees, who have executed almost flawlessly on our game plan, but the game plan itself and its increasing acceptance by the market is clearly a vitally important aspect of that achievement.

The immediate success of Atlas Resource Partners has confirmed our initial thesis that the heated cash-consuming competition to develop oil and gas plays in new basins would provide opportunities to purchase production and acreage in noncore plays, that is noncore to the sellers, on terms extremely attractive to buyers.

More recently, the anemic price of natural gas hauling earlier excess of expansion has produced a financial challenge for some companies and the further plethora of buying opportunities for ARP. Almost every day brings new opportunities. We are busily, and, I hope, judiciously at work and we expect in the near future to announce new developments no less positive than the first quarter’s Carrizo purchase and the recent Equal Energy joint venture involving liquids-rich acreage in the core of the Mississippi Lime play at Oklahoma.

Now, in the Carrizo transaction on April 30 th, ARP acquired about $277 billion cubic feet equivalent of proved reserves in the Barnett Shale in Texas for approximately $0.69 per Mcfe. You heard that correctly – $0.69 per a thousand cubic feet. This single acquisition was accordingly transformative, immediately increasing ARP’s net proved reserves by over 160% to approximately 440 billion cubic feet equivalent. This transaction will, of course, be immediately accretive to ARP’s adjusted EBITDA and immediately accretive to distributable cash flow.

ARP has conservatively hedged approximately 100% of its acquired production through June 2013, about 80% for the period thereafter through June 2015, and a substantial additional amount for the subsequent two years, bringing it well hedged into 2017 on this acquisition.

Compatible with our commitment to maintaining low leverage in our operating companies, the Carrizo transaction was funded by a private placement of equity of approximately $120 million. Only about $70 million was borrowed against ARP’s revolving credit facility.

Concurrent with the closing of this transaction, ARP expanded the capacity on its revolving credit line from $138 million to a borrowing base of approximately $250 million and we continue to play conservatively. Only $17 million had been drawn on this line as of the end of the first quarter.

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