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

Atlas Energy, L.P. (NYSE: ATLS) (“Atlas Energy” or “ATLS”) today reported operating and financial results for the second quarter 2012.

Second Quarter 2012 Highlights
  • Atlas Energy’s E&P subsidiary, Atlas Resource Partners, L.P. (NYSE: ARP), recently closed two acquisitions in the Barnett Shale (TX), which added a total of approximately 527 Bcfe of net proved reserves, bringing ARP’s total pro forma net proved reserves to approximately 700 Bcfe, or an increase of almost four times the amount of ARP’s initial net proved reserves in March 2012. ARP reached record average net production of 62.5 Mmcfe/d for the second quarter 2012, a 57% increase from the sequential quarter and a 71% increase from the prior year quarter. Following the second quarter 2012, pro forma average net daily production reached a peak rate of approximately 102 Mmcfe/d, due to the closing of the Titan transaction in the Barnett Shale.
  • Atlas Pipeline Partners, L.P. (NYSE: APL), Atlas Energy’s midstream subsidiary, announced record processing volumes at each of its systems of 681 Mmcf/d and natural gas liquids (NGL) production of 61,350 bpd for the second quarter 2012.
  • ATLS declared a cash distribution of $0.25 per limited partner unit for the second quarter 2012. The second quarter 2012 distribution represents a $0.03 per unit increase, or 14%, over the prior year comparable quarter.

Edward E. Cohen, Chief Executive Officer of Atlas Energy, stated, “Both our operating subsidiaries, Atlas Resource and Atlas Pipeline, continue to execute on their substantial growth initiatives. Atlas Resource completed two accretive acquisitions to establish our new position in the Barnett Shale, and Atlas Pipeline has made significant progress on its organic growth projects to expand their systems in Oklahoma and Texas. We expect these and further positive announcements to enhance the cash flow to our subsidiaries and, ultimately, to Atlas Energy.”

Financial Results

  • On June 28, 2012, ARP declared a quarterly cash distribution for the second quarter 2012 of $0.40 per unit, which is payable August 14, 2012 to holders of record as of July 12, 2012. ATLS earned approximately $8.6 million of cash distributions based upon ARP’s recently announced second quarter 2012 distribution.
  • On July 17, 2012, APL declared a distribution for the second quarter of 2012 of $0.56 per common limited partner unit to holders of record on August 7, 2012, which will be paid on August 14, 2012. ATLS earned approximately $5.4 million of cash distributions based upon APL’s recently announced second quarter 2012 distribution.
  • On a GAAP basis, net loss attributable to limited partners was $7.6 million for the second quarter 2012 compared to income of $16.5 million for the prior year comparable period. The loss for the second quarter 2012 is due primarily to transaction costs related to ARP’s recent Barnett Shale acquisition. The net income in the prior year quarter was primarily attributable to ATLS’ share of Lightfoot Capital Partners, GP LLC’s recognized gain on its sale of International Resource Partners. Please see the reconciliation of GAAP net income (loss) to Adjusted EBITDA and distributable cash flow in the financial tables of this release for further information.

Recent Events

Atlas Resource’s Acquisition of Titan Operating, L.L.C.

On July 25, 2012, ARP acquired Titan Operating, L.L.C. (“Titan”), a privately held company based in Fort Worth, Texas. Through the Titan transaction, ARP acquired approximately 250 Bcfe of proved reserves and associated assets in the Barnett Shale in Texas. This transaction represents ARP’s second acquisition in the Barnett Shale in 2012, establishing a position of approximately 527 Bcfe of total net proved reserves in the region. ARP’s total net proved reserves pro forma for the acquisition are approximately 700 Bcfe, almost four times greater than its original net reserves upon first trading publicly in March 2012. The acquisition was funded through a private placement of approximately 3.8 million ARP common units and approximately 3.8 million newly-created Class B Convertible Preferred ARP units (or approximately $184 million in total equity consideration, based on the ARP closing price of $24.23 on the date of the transaction announcement on May 16, 2012), as well as approximately $15.4 million in cash for closing adjustments. Concurrent with the closing of the Titan transaction, ARP expanded the borrowing base on its revolving credit line from $250 million to $310 million.

Atlas Resource’s Acquisition of Barnett Shale Assets from Carrizo

On April 30, 2012, ARP closed its acquisition of approximately 277 Bcfe of proved reserves, including undeveloped drilling locations, in the Barnett Shale in Texas from Carrizo Oil & Gas (NASD: CRZO) for approximately $190 million, or $0.69 per mcfe. The transaction was funded by a private placement of equity of approximately $120 million and approximately $70 million borrowed against ARP’s revolving credit facility.

Atlas Pipeline’s Mid-Continent Expansion Projects

APL has completed the previously announced Velma (OK) expansion of an additional 60 Mmcf/d of processing capacity, which was placed in service in June 2012. The WestOK expansion of an additional 200 Mmcf/d of cryogenic processing capacity is nearing completion and is scheduled to be placed in service during the second half of 2012. APL’s WestTX Driver Plant construction is in process, which is comprised of an additional 200 Mmcf/d of processing capacity at the system. The first phase of 100 Mmcf/d in capacity is scheduled to be in service in the first half of 2013.

Atlas Resource Second Quarter 2012 Highlights
  • Average net daily production for the second quarter 2012 was 62.5 million cubic feet equivalents per day (“Mmcfed”), an increase of approximately 23.1 Mmcfed, or 59%, compared with the first quarter 2012. The increase was primarily due to the Barnett Shale assets acquired in April 2012, as well as additional legacy Marcellus Shale wells connected in southwestern Pennsylvania during the quarter.
  • During the second quarter 2012, ARP began initial drilling on locations in the oil & natural gas liquids (NGL) rich Mississippi Lime basin in northwestern Oklahoma. ARP is currently the operating partner in a 50/50 joint venture with Equal Energy, Ltd. (NYSE: EQU), in which the parties will develop locations in Alfalfa, Grant and Garfield Counties in Oklahoma.

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 Atlas Resource second quarter 2012 earnings release for additional details on its financial results.

Atlas Pipeline Second Quarter 2012 Highlights
  • During the second quarter 2012, APL operated near or at nameplate capacity on all of its gathering and processing systems in the Mid Continent. APL processed approximately 681 Mmcf/d of natural gas in the second quarter 2012 amongst its WestOK, WestTX and Velma systems, almost 8% higher than the first quarter 2012 and 27% higher than the prior year comparable quarter’s volumes. APL again attained record high volumes of approximately 61,350 bbl per day of gross 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 Atlas Pipeline second 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 $2.1 million for the second quarter 2012, a $4.1 million decrease from the prior year comparable quarter. In February 2011, ATLS completed its acquisition of the exploration and production operations from Chevron Corp, which assumed the majority of Atlas Energy’s expenses in the prior year second quarter. 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 second quarter 2012 results on Wednesday, August 8, 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 August 8, 2012 by dialing 888-286-8010, passcode: 74016861.

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 8,600 producing natural gas and oil wells, representing approximately 700 Bcfe of net proved reserves, 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 seven active gas processing plants as well as approximately 9,100 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     Six Months Ended
June 30, June 30,
Revenues: 2012     2011 2012     2011
Gas and oil production $ 19,460 $ 17,723 $ 36,624 $ 35,349
Well construction and completion 12,241 10,954 55,960 28,679
Gathering and processing 256,542 345,734 561,762 625,952
Administration and oversight 1,315 1,375 4,146 2,736
Well services 5,252 4,855 10,258 10,141
Gain (loss) on mark-to-market derivatives(2) 67,847 6,837 55,812 (14,808 )
Other, net   504     21,414     3,305     25,767  
Total revenues   363,161     408,892     727,867     713,816  
 
Costs and expenses:
Gas and oil production 4,447 4,042 8,952 7,963
Well construction and completion 10,606 9,284 48,301 24,305
Gathering and processing 213,673 293,471 465,597 530,455
Well services 2,414 1,674 4,844 4,034
General and administrative(1) 37,607 22,239 74,855 38,429
Depreciation, depletion and amortization   32,534     27,370     62,484     53,977  
Total costs and expenses   301,281     358,080     665,033     659,163  
 
Operating income 61,880 50,812 62,834 54,653
 
Gain (loss) on asset sales and disposal (16 ) (233 ) (7,021 ) 255,714
Interest expense(1) (10,294 ) (6,567 ) (19,385 ) (24,645 )
Loss on early extinguishment of debt       (19,574 )       (19,574 )
 
Income from continuing operations 51,570 24,438 36,428 266,148
 
Loss from discontinued operations               (81 )
Net income 51,570 24,438 36,428 266,067
 
Income attributable to non-controlling interests   (59,191 )   (7,925 )   (62,556 )   (219,303 )
Net income (loss) after non-controlling interests (7,621 ) 16,513 (26,128 ) 46,764
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 $ (7,621 )

$

16,513
  $ (26,128 )

$

42,053
 
 
Net income (loss) attributable to common limited partners per unit – basic:
Income (loss) from continuing operations attributable to common limited partners $ (0.15 ) $ 0.31 $ (0.51 ) $ 0.91
Loss from discontinued operations attributable to common limited partners                
Net income (loss) attributable to common limited partners $ (0.15 ) $ 0.31   $ (0.51 ) $ 0.91  
 
Net income (loss) attributable to common limited partners per unit – diluted:
Income (loss) from continuing operations attributable to common limited partners $ (0.15 ) $ 0.30 $ (0.51 ) $ 0.89
Loss from discontinued operations attributable to common limited partners                
Net income (loss) attributable to common limited partners $ (0.15 ) $ 0.30   $ (0.51 ) $ 0.89  
 
Weighted average common limited partner units outstanding:
Basic   51,318     51,235     51,306     45,156  
Diluted   51,318     52,965     51,306     46,143  
 
Net income (loss) attributable to common limited partners:
Income (loss) from continuing operations $ (7,621 ) $ 16,513 $ (26,128 ) $ 42,063
Loss from discontinued operations               (10 )
Net income (loss) attributable to common limited partners $ (7,621 )

$

16,513
  $ (26,128 )

$

42,053
 
 
 

(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 Corp (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)
 
 
   

June 30,
   

December 31,

ASSETS

2012

2011

Current assets:

Cash and cash equivalents

$

32,697

$

77,376

Accounts receivable

117,427

136,853

Current portion of derivative asset

53,470

15,447

Prepaid expenses and other
 

19,004
 

59,234

Total current assets

222,598

288,910
 

Property, plant and equipment, net

2,457,539

2,093,283

Intangible assets, net

113,111

104,777

Investment in joint venture

86,092

86,879

Goodwill, net

31,784

31,784

Long-term derivative asset

49,233

30,941

Other assets, net
 

53,638
 

48,197

$

3,013,995

$

2,684,771
 

LIABILITIES AND PARTNERS’ CAPITAL
 

Current liabilities:

Current portion of long-term debt

$

3,908

$

2,085

Accounts payable

64,437

93,554

Liabilities associated with drilling contracts

18,757

71,719

Accrued producer liabilities

56,494

88,096

Current portion of derivative payable to Drilling Partnerships

15,880

20,900

Accrued interest

2,186

1,629

Accrued well drilling and completion costs

34,936

17,585

Accrued liabilities
 

56,107
 

61,653

Total current liabilities

252,705

357,221
 

Long-term debt, less current portion

853,065

522,055

Long-term derivative payable to Drilling Partnerships

8,508

15,272

Asset retirement obligation and other

58,638

46,142
 

Commitments and contingencies
 

Partners’ Capital:

Common limited partners’ interests

438,011

554,999

Accumulated other comprehensive income
 

22,247
 

29,376

460,258

584,375

Non-controlling interests
 

1,380,821
 

1,159,706

Total partners’ capital
 

1,841,079
 

1,744,081

$

3,013,995

$

2,684,771
 
 
ATLAS ENERGY, L.P.
Financial and Operating Highlights
 
 
    Three Months Ended     Six Months Ended
June 30, June 30,
2012    

2011(1)
2012    

2011(1)
 
Net income (loss) attributable to common limited partners per unit - basic $ (0.15 ) $ 0.31 $ (0.51 ) $ 0.91
 
Distributable cash flow per unit(2)(3) $ 0.24 $ 0.46 $ 0.50 $ 0.60
 
Cash distributions paid per unit(4) $ 0.25 $ 0.22 $ 0.50 $ 0.33
 
ATLAS RESOURCE:
Production volume:(5)(6)
Natural gas (Mcfd) 58,022 31,799 46,541 32,225
Oil (Bpd) 290 334 297 298
Natural gas liquids (Bpd)   463     472     443     469  
Total (Mcfed)   62,541     36,633     50,981     36,825  
 
Average sales prices:(6)

Natural gas (per Mcf) (7)
$ 3.49 $ 5.15 $ 3.81 $ 5.31
Oil (per Bbl)(8) $ 98.31 $ 99.70 $ 99.89 $ 94.32
Natural gas liquids (per gallon) $ 0.97 $ 1.23 $ 1.01 $ 1.14
 
Production costs:(6)(9)
Lease operating expenses per Mcfe(10) $ 0.71 $ 1.05 $ 0.84 $ 1.01
Production taxes per Mcfe   0.11     0.09     0.11     0.10  
Total production costs per Mcfe(10) $ 0.82 $ 1.14 $ 0.95 $ 1.12
 
ATLAS PIPELINE:
Production volume:(6)
Gathered gas volume(Mcfd) 748,673 574,599 713,828 551,819
Processed gas volume (Mcfd) 681,036 538,207 656,875 513,171
Residue gas volume (Mcfd) 562,242 441,998 537,270 413,295
Processed NGL volume (Bpd) 61,354 53,718 61,079 52,435
Condensate volume (Bpd) 3,584 3,153 3,246 2,785
 
Average sales prices:(6)
Natural gas (per Mcf) $ 2.01 $ 4.13 $ 2.26 $ 4.05
Condensate (per Bbl) $ 87.00 $ 98.23 $ 91.95 $ 93.79
Natural gas liquids (per gallon) $ 0.80 $ 1.25 $ 0.92 $ 1.18
 
 

(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 51,318,000 and 51,235,000 for the three months ended June 30, 2012 and 2011, respectively, and 51,306,000 for the six months ended June 30, 2012. For the six months ended June 30, 2011, the weighted average common limited partner units outstanding 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 six months ended June 30, 2011 includes a cash distribution payment of $0.11 per limited partner unit for the 1st 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 $2.03 per Mcf and $5.05 per Mcf for the three months ended June 30, 2012 and 2011, respectively, and $2.76 per Mcf and $4.64 per Mcf for the six months ended June 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 $2.87 per Mcf ($1.40 per Mcf before the effects of financial hedging) and $4.31 per Mcf ($4.20 per Mcf before the effects of financial hedging) for the three months ended June 30, 2012 and 2011, respectively, and $3.29 per Mcf ($2.24 per Mcf before the effects of financial hedging) and $4.49 per Mcf ($3.82 per Mcf before the effects of financial hedging) for the six months ended June 30, 2012 and 2011, respectively.
 

(8)
ARP’s average sales price for oil before the effects of financial hedging was $94.39 per barrel and $99.70 per barrel for the three months ended June 30, 2012 and 2011, respectively, and $97.60 per barrel and $92.25 per barrel for the six months ended June 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 $0.38 per Mcfe ($0.49 per Mcfe for total production costs) and $0.71 per Mcfe ($0.80 per Mcfe for total production costs) for the three months ended June 30, 2012 and 2011, respectively, and $0.56 per Mcfe ($0.67 per Mcfe for total production costs) and $0.70 per Mcfe ($0.80 per Mcfe for total production costs) for the six months ended June 30, 2012 and 2011, respectively.
 

(10)
The amount for the six months ended June 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     Six Months Ended
June 30, June 30,
Adjusted EBITDA and Distributable Cash Flow Summary: 2012    

2011(1)
2012    

2011(1)
 
Atlas Resource Cash Distributions Earned(2):
Limited Partner Units $ 8,385 $ $ 10,900 $
Class A Units (2%) 263 327
Incentive Distribution Rights                
Total Atlas Resource Cash Distributions Earned(2)   8,648         11,227      
per limited partner unit $ 0.40 $ $ 0.52 $
 
Atlas Pipeline Cash Distributions Earned(2):
Limited Partner Units 3,222 2,712 6,444 5,014
General Partner 2% Interest 649 503 1,297 931
Incentive Distribution Rights   1,571     472     3,140     472  
Total Atlas Pipeline Cash Distributions Earned(2)   5,442     3,687     10,881     6,417  
per limited partner unit $ 0.56 $ 0.47 $ 1.12 $ 0.87
 
Total Cash Distributions Earned 14,090 3,687 22,108 6,417
 

E&P Operations Adjusted EBITDA prior to spinoff on March 5, 2012(3)

15,823

9,111

22,313
Cash general and administrative expenses(4) (2,056 ) (6,238 ) (4,516 ) (6,765 )
Other, net   197     13,916     446     14,310  
Adjusted EBITDA(5) 12,231 27,188 27,149 36,275
Cash interest expense(6) (40 ) (170 ) (173 ) (316 )
Maintenance capital expenditures(3)       (3,567 )   (1,231 )   (5,233 )
Distributable Cash Flow(5) $ 12,191   $ 23,451   $ 25,745   $ 30,726  
 
Distributions Paid(7) $ 12,831 $ 11,276 $ 25,660 $ 16,911
per limited partner unit $ 0.25 $ 0.22 $ 0.50 $ 0.33
Distribution coverage ratio

 

1.0

x

 

2.1

x

 

1.0

x

 

1.8

x
 

Reconciliation of non-GAAP measures to net income (loss)(5):
Distributable cash flow $ 12,191 $ 23,451 $ 25,745 $ 30,726
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) (15,823 ) (9,111 ) (22,313 )
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

(11,657

)

7,775

(16,599

)

15,240
Atlas Resource cash distributions earned by ATLS(2) (8,648 ) (11,227 )
Atlas Pipeline net income attributable to ATLS common limited partners

10,611

896

12,450

31,090
Atlas Pipeline cash distributions earned by ATLS(2) (5,442 ) (3,687 ) (10,881 ) (6,417 )
Non-recurring spinoff and acquisition costs (8,370 ) (2,087 )
Amortization of deferred finance costs (29 ) (253 ) (129 ) (5,185 )
Non-cash stock compensation expense (4,568 ) (4,111 ) (9,299 ) (4,612 )
Maintenance capital expenditures(3) 3,567 1,231 5,233
Other non-cash adjustments (79 ) 4,698 62 5,338
Income attributable to non-controlling interests   59,191     7,925     62,556     219,303  
Net income $ 51,570   $ 24,438   $ 36,428   $ 266,067  
 
 
(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, was utilized within ATLS’s financial covenants under its previously existing 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)
 
 
    June 30, 2012
Atlas     Atlas     Atlas    
Energy Resource Pipeline Consolidated
Total debt $ $ 144,000 $ 712,973 $ 856,973
Less: Cash   (7,297 )   (25,143 )   (257 )   (32,697 )
Total net debt /(cash) (7,297 ) 118,857 712,716 824,276
 
Partners’ capital   460,258     563,382     1,258,551    

1,841,079

(1)
 
Total capitalization $ 452,961   $ 682,239   $ 1,971,267   $ 2,665,355  
 
Ratio of net debt to capitalization

 

0.00

x
 

(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

 

0.00

x
 

(2) Net of eliminated amounts.
 
 
ATLAS ENERGY, L.P.
CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)
 

Three Months Ended June 30, 2012
 
 
    Atlas     Atlas     Atlas         Consolidated
Energy Resource Pipeline Eliminations Combined
Revenues:
Gas and oil production $ $ 19,460 $ $ $ 19,460
Well construction and completion 12,241 12,241
Gathering and processing 2,863 253,679 256,542
Administration and oversight 1,315 1,315
Well services 5,252 5,252
Gain on mark-to-market derivatives 67,847 67,847
Other, net   118     (4,086 )   4,472         504  
Total revenues   118     37,045     325,998         363,161  
 
Costs and expenses:
Gas and oil production 4,447 4,447
Well construction and completion 10,606 10,606
Gathering and processing 3,953 209,720 213,673
Well services 2,414 2,414
General and administrative 6,624 20,538 10,445 37,607
Depreciation, depletion and amortization  

   

10,822
   

21,712
   

   

32,534
 
Total costs and expenses   6,624     52,780     241,877         301,281  
 
Operating income (loss) (6,506 ) (15,735 ) 84,121 61,880
 
Loss on asset sales and disposal (16 ) (16 )
Interest expense   (69 )   (956 )   (9,269 )       (10,294 )
 
Income (loss) from continuing operations (6,575 ) (16,707 ) 74,852 51,570
Discontinued operations                    
Net income (loss) (6,575 ) (16,707 ) 74,852 51,570

Income attributable to non-controlling interests
 

   

   

(1,061

)
 

(58,130

)
 

(59,191

)
Net income (loss) attributable to common limited partners

$

(6,575

)

$

(16,707

)

$

73,791
 

$

(58,130

)

$

(7,621

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

(unaudited; in thousands)
 

Three Months Ended June 30, 2011
 
 
    Atlas     Atlas     Atlas         Consolidated
Energy Resource(1) Pipeline Eliminations Combined(1)
Revenues:
Gas and oil production $ $ 17,723 $ $ $ 17,723
Well construction and completion 10,954 10,954
Gathering and processing 5,118 340,616 345,734
Administration and oversight 1,375 1,375
Well services 4,855 4,855
Gain on mark-to-market derivatives 6,837 6,837
Other, net   18,658     (12 )   2,768         21,414  
Total revenues   18,658     40,013     350,221         408,892  
 
Costs and expenses:
Gas and oil production 4,042 4,042
Well construction and completion 9,284 9,284
Gathering and processing 5,763 287,708 293,471
Well services 1,674 1,674
General and administrative 10,393 3,276 8,570 22,239
Depreciation, depletion and amortization  

   

8,247
   

19,123
   

   

27,370
 
Total costs and expenses   10,393     32,286     315,401         358,080  
 
Operating income 8,265 7,727 34,820 50,812
 
Gain (loss) on asset sales and disposal 48 (281 ) (233 )
Interest expense (423 ) (6,144 ) (6,567 )
Loss on early extinguishment of debt           (19,574 )       (19,574 )
 
Income from continuing operations 7,842 7,775 8,821 24,438
Discontinued operations                    
Net income 7,842 7,775 8,821 24,438

Income attributable to non-controlling interests
 

   

   

(1,545

)
 

(6,380

)
 

(7,925

)
Net income (loss) after non-controlling interests

7,842

7,775

7,276

(6,380

)

16,513
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 attributable to common limited partners

$

7,842
 

$

7,775
 

$

7,276
 

$

(6,380

)

$

16,513
 
 
 

(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)
 

Six Months Ended June 30, 2012
 
 
    Atlas     Atlas     Atlas         Consolidated
Energy Resource Pipeline Eliminations Combined
Revenues:
Gas and oil production $ $ 36,624 $ $ $ 36,624
Well construction and completion 55,960 55,960
Gathering and processing 6,177 555,585 561,762
Administration and oversight 4,146 4,146
Well services 10,258 10,258
Gain on mark-to-market derivatives 55,812 55,812
Other, net   508     (5,019 )   7,816         3,305  
Total revenues   508     108,146     619,213         727,867  
 
Costs and expenses:
Gas and oil production 8,952 8,952
Well construction and completion 48,301 48,301
Gathering and processing 8,627 456,970 465,597
Well services 4,844 4,844
General and administrative 22,185 32,280 20,390 74,855
Depreciation, depletion and amortization  

   

19,930
   

42,554
   

   

62,484
 
Total costs and expenses   22,185     122,934     519,914         665,033  
 
Operating income (loss) (21,677 ) (14,788 ) 99,299 62,834
 
Loss on asset sales and disposal (7,021 ) (7,021 )
Interest expense   (302 )   (1,106 )   (17,977 )       (19,385 )
 
Income (loss) from continuing operations (21,979 ) (22,915 ) 81,322 36,428
Discontinued operations                    
Net income (loss) (21,979 ) (22,915 ) 81,322 36,428

Income attributable to non-controlling interests
 

   

   

(2,597

)
 

(59,959

)
 

(62,556

)
Net income (loss) attributable to common limited partners

$

(21,979

)

$

(22,915

)

$

78,725
 

$

(59,959

)

$

(26,128

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

(unaudited; in thousands)
 

Six Months Ended June 30, 2011
 
 
    Atlas     Atlas     Atlas         Consolidated
Energy Resource(1) Pipeline Eliminations Combined(1)
Revenues:
Gas and oil production $ $ 35,349 $ $ $ 35,349
Well construction and completion 28,679 28,679
Gathering and processing 9,617 616,335 625,952
Administration and oversight 2,736 2,736
Well services 10,141 10,141
Loss on mark-to-market derivatives (14,808 ) (14,808 )
Other, net   19,814     (65 )   6,018         25,767  
Total revenues   19,814     86,457     607,545         713,816  
 
Costs and expenses:
Gas and oil production 7,963 7,963
Well construction and completion 24,305 24,305
Gathering and processing 11,497 518,958 530,455
Well services 4,034 4,034
General and administrative 13,324 7,518 17,587 38,429
Depreciation, depletion and amortization  

   

15,948
   

38,029
   

   

53,977
 
Total costs and expenses   13,324     71,265     574,574         659,163  
 
Operating income 6,490 15,192 32,971 54,653
 
Gain on asset sales and disposal 48 255,666 255,714
Interest expense (6,056 ) (18,589 ) (24,645 )
Loss on early extinguishment of debt           (19,574 )       (19,574 )
 
Income from continuing operations 434 15,240 250,474 266,148
Discontinued operations           (81 )       (81 )
Net income 434 15,240 250,393 266,067

Income attributable to non-controlling interests
 

   

   

(2,732

)
 

(216,571

)
 

(219,303

)
Net income after non-controlling interests 434 15,240 247,661 (216,571 ) 46,764
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 attributable to common limited partners

$

434
 

$

10,529
 

$

247,661
 

$

(216,571

)

$

42,053
 
 
 

(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)
 

June 30, 2012
 
 
    Atlas     Atlas     Atlas        
ASSETS Energy Resource Pipeline Eliminations Consolidated
Current assets:
Cash and cash equivalents $ 7,297 $ 25,143 $ 257 $ $ 32,697
Accounts receivable 86 22,790 94,551 117,427

Receivable from (advances from) affiliates

2,870

(723

)

(2,147

)

Current portion of derivative asset 16,127 37,343 53,470
Prepaid expenses and other   249   7,173     11,582         19,004
Total current assets 10,502 70,510 141,586 222,598
Property, plant and equipment, net 752,505 1,705,034 2,457,539
Goodwill and intangible assets, net 33,193 111,702 144,895
Long-term derivative asset 19,554 29,679 49,233
Investment in joint venture 86,092 86,092
Investment in subsidiaries 441,112 (441,112 )
Other assets, net   21,386   8,090     24,162         53,638
$ 473,000 $ 883,852   $ 2,098,255   $ (441,112 ) $ 3,013,995
 
LIABILITIES AND PARTNERS’ CAPITAL
 
Current liabilities:
Current portion of long-term debt $ $ $ 3,908 $ $ 3,908
Accounts payable 364 26,006 38,067 64,437

Liabilities associated with drilling contracts

18,757

18,757
Accrued producer liabilities 56,494 56,494

Current portion of derivative payable to Partnerships

15,880

15,880
Accrued interest 187 1,999 2,186

Accrued well drilling and completion costs

34,936

34,936
Accrued liabilities   11,043   21,022     24,042         56,107
Total current liabilities 11,407 116,788 124,510 252,705
Long-term debt, less current portion 144,000 709,065 853,065
Long-term derivative payable to Partnerships

8,508

8,508
Asset retirement obligation and other 1,335 51,174 6,129 58,638
 
Partners’ Capital:
Common limited partners’ interests 438,011 529,137 1,286,372 (1,815,509 ) 438,011
Accumulated other comprehensive income (loss)  

22,247
 

34,245
   

(2,136

)
 

(32,109

)
 

22,247
460,258 563,382 1,284,236 (1,847,618 ) 460,258
Non-controlling interests         (25,685 )   1,406,506     1,380,821
Total partners’ capital   460,258   563,382     1,258,551     (441,112 )   1,841,079
$ 473,000 $ 883,852   $ 2,098,255   $ (441,112 ) $ 3,013,995
 
 
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
Prepaid expenses and other   1,462   42,131     15,641         59,234
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
 
 

 

 

Atlas Energy Ownership Interests as of June 30, 2012:
   

 

 

Amount
    Overall

Ownership

Interest

Percentage
 
ATLAS RESOURCE:
General partner interest 100% 2.0 %
Common units 20,962,485 63.7 %
Incentive distribution rights 100% N/A  
Total Atlas Energy ownership interests in Atlas Resource 65.7 %
 
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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