Atlas Energy, L.P. Reports Operating And Financial Results For The Second Quarter 2013

Atlas Energy, L.P. (NYSE: ATLS) (“Atlas Energy” or “ATLS”) today reported operating and financial results for the second quarter 2013.

Edward E. Cohen, Chief Executive Officer of Atlas Energy, stated, “Our results and substantial distribution increase this quarter reflect the strong performance of both our subsidiaries, ARP and APL. Happily, both businesses are fully integrating their recent accretive acquisitions, positioning them well for significant future returns to their stakeholders, as well as for ATLS.”
  • ATLS declared a cash distribution of $0.44 per limited partner unit for the second quarter 2013, which represents a $0.13 per unit, or 42%, increase over the first quarter 2013, and a 76% increase over the prior year second quarter. The second quarter 2013 ATLS distribution will be paid on August 19, 2013 to holders of record as of August 6, 2013. ATLS confirms its distribution guidance of $1.70 to $2.00 per unit for full year 2013, as well as distribution guidance of $2.50 to $2.80 per unit for full year 2014.
  • Atlas Energy completed its previously announced acquisition of approximately 45 billion cubic feet (“Bcf”) of natural gas proved reserves in the Arkoma Basin in southeastern Oklahoma from EP Energy E&P Company, L.P. (“EP Energy”) for $64.5 million net of purchase price adjustments. In addition, ATLS’ E&P subsidiary, Atlas Resource Partners, L.P. (NYSE: ARP), completed its acquisition of natural gas assets from EP Energy for $706 million net of purchase price adjustments. In conjunction with the closing ARP’s transaction with EP Energy, ATLS purchased approximately 3.75 million Class C convertible preferred units from ARP for approximately $87 million.
  • Atlas Pipeline Partners, L.P. (NYSE: APL), Atlas Energy’s midstream subsidiary, reported record processing volumes of over 1.25 Bcf per day and NGL production of over 118,000 barrels per day (“bpd”) for the second quarter 2013. The increase in processed volumes was primarily due to the addition of gathering and processing assets in the Eagle Ford Shale in south Texas through APL’s acquisition of TEAK Midstream in April 2013 for $1 billion, subject to customary purchase price adjustments.

Financial Results
  • On July 25, 2013, ARP increased its quarterly cash distribution to $0.54 per unit for the second quarter 2013, a 6% increase from ARP’s first quarter 2013 distribution. ATLS will receive approximately $13.2 million of cash distributions based upon ARP’s second quarter 2013 distribution.
  • On July 24, 2013, APL declared an increased distribution for the second quarter 2013 of $0.62 per unit, a 5% increase from APL’s first quarter 2013 distribution. ATLS will receive approximately $9.4 million of cash distributions based upon APL’s second quarter 2013 distribution.
  • On a GAAP basis, net loss attributable to limited partners was $5.2 million for the second quarter 2013 compared with net income of $51.6 million for the prior year comparable period. The difference in net income between current and prior year periods was due primarily to higher mark-to-market derivative gains recognized in the prior year quarter by Atlas Pipeline.

Recent Events

Atlas Energy’s and Atlas Resource’s Acquisition of EP Energy Assets

On July 31, 2013, ATLS acquired approximately 45 Bcf of natural gas proved reserves in the Arkoma Basin (southeastern Oklahoma; “Arkoma Assets”) from EP Energy for approximately $64.5 million in cash net of purchase price adjustments. In addition, on the same date, ARP acquired approximately 466 Bcf of natural gas proved reserves in the Raton (New Mexico) and Black Warrior (Alabama) Basins from EP Energy for $706 million in cash net of purchase price adjustments. Both transactions have an effective date of May 1, 2013 pursuant to the terms of the acquisition agreements, through which ATLS and ARP received cash flows from EP Energy for the respective assets acquired for the period after the acquisition effective date through the closing date.

In conjunction with the closing of ARP’s transaction with EP Energy, ATLS purchased approximately 3.75 million Class C convertible preferred units from ARP for approximately $87 million.

Atlas Energy’s Syndicated $240 Million Term Loan

On July 31, 2013, ATLS issued a six year $240 million senior secured term loan credit facility. The term loan was priced at LIBOR + 550 basis points with a 1% LIBOR floor. The proceeds from the term loan were used to fund the acquisition of the Arkoma assets from EP Energy and the purchase of the Class C convertible preferred units from ARP. As a result of the issuance of the term loan, Atlas Energy’s borrowing base on its credit facility was revised to $50 million.

Atlas Resource Issuance of $250 million 9.25% 2021 Senior Notes

On July 30, 2013, ARP issued $250 million of 9.25% Senior Notes due 2021 issued at 99.297%. The Partnership received net proceeds of $242.8 million after underwriting commissions and other transaction costs, and utilized the proceeds from the offering to fund a portion of the purchase price for its acquisition of the EP Energy Assets. The Senior Notes are subject to a registration rights agreement entered in connection with the transaction, which requires ARP, among other things, to file a registration statement with the SEC and exchange the privately placed notes for registered notes by certain dates.

Atlas Resource Second Quarter 2013 Highlights
  • ARP’s average net daily production for the second quarter 2013 was 133.6 million cubic feet of natural gas equivalents per day (“Mmcfed”). ARP continued its development activities during the quarter in the Mississippi Lime (OK) and Marble Falls (TX) regions, which have increased ARP’s net oil and liquids production. Additionally, ARP is currently in the process of connecting eight newly completed Marcellus Shale wells in Lycoming County, PA. ARP had substantial indications from these wells, which had average peak test rates of approximately 20 million cubic feet per day (“mmcfd”) per well, with one well having a peak rate as high as 32 MMcfd. ARP also continued to increase the liquid component of its production, which accounted for 21% of total volume for the second quarter 2013 compared with 7% for the prior year comparable period and 19% for the first quarter 2013.
  • ARP’s investment partnership margin(1) contributed $9.2 million to Adjusted EBITDA for the second quarter 2013.

(1) Investment partnership margin is comprised of Well Construction and Completion margin, Well Services margin and Administration and Oversight Fee revenues.

ATLS owns 100% of the general partner Class A units and the incentive distribution rights, and a 37% 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 statements of operations and as a component of partners’ capital on its consolidated balance sheets. A consolidating 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 second quarter 2013 earnings release for additional details on its financial results.

Atlas Pipeline Second Quarter 2013 Highlights
  • During the second quarter 2013, APL increased inlet volumes on its gathering and processing systems in the Mid Continent, and continued the integration of its newly acquired systems in the Arkoma (OK) and Eagle Ford Shale (TX) regions. APL processed an average of over 1.25 billion cubic feet per day (“Bcfd”) of natural gas in the second quarter 2013 amongst its WestOK, WestTX, Velma and the newly-acquired Arkoma and SouthTX systems, 84% higher than the prior year comparable quarter’s volumes. APL attained record high volumes with over 118,000 barrels per day “bpd”) of natural gas liquids generated from its five processing systems in highly prolific oil & gas basins, which primarily reside in Oklahoma and Texas.

ATLS owns a 2.0% general partner interest, all of the incentive distribution rights, and a 7.5% 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 statements of operations and as a component of partners’ capital on its consolidated balance sheets. A consolidating 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 second quarter 2013 earnings release for additional details on its financial results.

Hedge Positions
  • In connection with its acquisition of the Arkoma Assets, ATLS entered into direct natural gas hedge positions during the second quarter 2013 and currently has approximately 9.1 Bcf of its future production hedged through 2018, including an average floor price of over $4.39 per thousand cubic feet (“mcf”) through 2018. A summary of ATLS’s derivative positions as of August 8, 2013 is provided in the financial tables of this release.

Corporate Expenses
  • Cash general and administrative expense, excluding amounts attributable to APL and ARP, was $2.0 million for the second quarter 2013, $1.0 million lower than the first quarter 2013 and consistent with the prior year second quarter. The decrease from first quarter 2013 was due primarily to a decrease in seasonal corporate expenses incurred during the first quarter, including yearend compliance costs. Please refer to the consolidating statements of operations provided in the financial tables of this release.
  • Cash interest expense was $0.4 million for the second quarter 2013, an increase of $0.2 million compared to the first quarter 2013. As of June 30, 2013, pro forma for the issuance of the term loan, ATLS had $240 million of total debt, with no borrowings outstanding under its revolving credit facility, and a cash position of approximately $54 million.

Interested parties are invited to access the live webcast of an investor call with management regarding Atlas Energy, L.P.’s second quarter 2013 results on Friday, August 9, 2013 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 9, 2013 by dialing 888-286-8010, passcode: 51594938.

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 37% 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 6% 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 12,000 producing natural gas and oil wells, located primarily in Appalachia, the Barnett Shale (TX), the Raton Basin (NM) and Black Warrior Basin (AL). 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 Oklahoma, southern Kansas, northern and western Texas, and Tennessee, APL owns and operates 12 active gas processing plants, 18 gas treating facilities, as well as approximately 10,100 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, distribution amounts, 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’, ARP’s and APL’s reports filed with the U.S. Securities and Exchange Commission, including quarterly reports on Form 10-Q, current 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 STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per unit data)
 
Three Months Ended Six Months Ended
June 30, June 30,
Revenues:   2013       2012     2013       2012  
Gas and oil production $ 47,094 $ 19,460 $ 93,158 $ 36,624
Well construction and completion 24,851 12,241 81,329 55,960
Gathering and processing 535,922 256,420 956,009 561,561
Administration and oversight 3,391 1,315 4,476 4,146
Well services 4,864 5,252 9,680 10,258
Gain (loss) on mark-to-market derivatives(1) 27,107 67,847 15,024 55,812
Other, net   566     504     6,221     3,305  
Total revenues   643,795     363,039     1,165,897     727,666  
 
Costs and expenses:
Gas and oil production 19,035 4,447 34,251 8,952
Well construction and completion 21,609 10,606 70,721 48,301
Gathering and processing 453,868 213,551 805,609 465,396
Well services 2,305 2,414 4,623 4,844
General and administrative 53,874 37,607 94,532 74,855
Depreciation, depletion and amortization   68,580     32,534     120,246     62,484  
Total costs and expenses   619,271     301,159     1,129,982     664,832  
 
Operating income 24,524 61,880 35,915 62,834
 
Loss on asset sales and disposal (2,191 ) (16 ) (2,893 ) (7,021 )
Interest expense (27,531 ) (10,294 ) (53,341 ) (19,385 )
Loss on early extinguishment of debt   (19 )       (26,601 )    
 
Net income (loss) before tax (5,217 ) 51,570 (46,920 ) 36,428
Income tax benefit   28         37      
Net income (loss) (5,189 ) 51,570 (46,883 ) 36,428
Loss (income) attributable to non-controlling interests   (3,058 )   (59,191 )   26,040     (62,556 )
Net loss attributable to common limited partners $ (8,247 ) $ (7,621 ) $ (20,843 ) $ (26,128 )
 
Net loss attributable to common limited partners per unit:
Basic and Diluted $ (0.16 ) $ (0.15 ) $ (0.41 ) $ (0.51 )
 
Weighted average common limited partner units outstanding:
Basic and Diluted 51,380 51,318 51,375 51,306
 

(1)
  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

2013

2012

Current assets:
Cash and cash equivalents $ 70,430 $ 36,780
Accounts receivable 250,755 196,249
Current portion of derivative asset 64,402 35,351
Subscriptions receivable 11,036 55,357
Prepaid expenses and other   72,595   45,255
Total current assets 469,218 368,992
 

Property, plant and equipment, net
4,036,187 3,502,609

Intangible assets, net
570,999 200,680

Investment in joint venture
232,090 86,002

Goodwill, net
534,105 351,069

Long-term derivative asset
26,759 16,840

Other assets, net
  92,721   71,002
$ 5,962,079 $ 4,597,194
 

LIABILITIES AND PARTNERS’ CAPITAL
 

Current liabilities:
Current portion of long-term debt $ 522 $ 10,835
Accounts payable 94,270 119,028
Liabilities associated with drilling contracts 67,293
Accrued producer liabilities 140,505 109,725
Current portion of derivative liability 167
Current portion of derivative payable to Drilling Partnerships 5,969 11,293
Accrued interest 35,281 11,556
Accrued well drilling and completion costs 52,425 47,637
Accrued liabilities   118,006   103,291
Total current liabilities 447,145 480,658
 

Long-term debt, less current portion
1,944,297 1,529,508

Long-term derivative liability
130 888

Long-term derivative payable to Drilling Partnerships
38 2,429

Deferred income taxes, net
35,513 30,258

Asset retirement obligations and other
77,890 73,605
 

Commitments and contingencies
 

Partners’ Capital:
Common limited partners’ interests 448,808 456,171
Accumulated other comprehensive income   13,927   9,699
462,735 465,870
Non-controlling interests   2,994,331   2,013,978
Total partners’ capital   3,457,066   2,479,848
$ 5,962,079 $ 4,597,194
   
ATLAS ENERGY, L.P.
Financial and Operating Highlights

(unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
  2013       2012     2013       2012  
 
Net loss attributable to common limited partners per unit - basic $ (0.16 ) $ (0.15 ) $ (0.41 ) $ (0.51 )
 
Distributable cash flow per unit(1)(2) $ 0.44 $ 0.24 $ 0.75 $ 0.50
 
Cash distributions paid per unit(3) $ 0.44 $ 0.25 $ 0.75 $ 0.50
 
ATLAS RESOURCE:
Production volume:(4)(5)
Natural gas (Mcfd) 105,638 58,022 106,442 46,541
Oil (Bpd) 1,281 290 1,191 297
Natural gas liquids (Bpd)   3,386     463     3,292     443  
Total (Mcfed)   133,641     62,541     133,341     50,981  
 
Average sales prices:(5)
Natural gas (per Mcf) (6) $ 3.31 $ 3.49 $ 3.32 $ 3.81
Oil (per Bbl)(7) $ 90.90 $ 98.31 $ 89.97 $ 99.89
Natural gas liquids (per gallon) $ 0.63 $ 0.97 $ 0.65 $ 1.01
 
Production costs:(5)(8)
Lease operating expenses per Mcfe $ 1.21 $ 0.71 $ 1.09 $ 0.84
Production taxes per Mcfe 0.23 0.11 0.23 0.11
Transportation and compression expenses per Mcfe   0.24     0.29     0.20     0.29  
Total production costs per Mcfe $ 1.68 $ 1.11 $ 1.51 $ 1.24
 
ATLAS PIPELINE:
Production volume:(5)
Gathered gas volume(Mcfd) 1,432,818 772,661 1,371,537 737,816
Processed gas volume (Mcfd) 1,253,158 681,036 1,203,953 656,875
Residue gas volume (Mcfd) 1,090,703 562,242 1,052,202 537,270
Processed NGL volume (Bpd) 118,966 61,354 108,731 61,079
Condensate volume (Bpd) 4,543 3,584 4,090 3,246
 
Average sales prices:(5)
Natural gas (per Mcf) $ 3.82 $ 2.01 $ 3.59 $ 2.26
Condensate (per Bbl) $ 89.15 $ 87.00 $ 88.09 $ 91.95
Natural gas liquids (per gallon) $ 0.84 $ 0.80 $ 0.84 $ 0.92
 

(1)
  A reconciliation from net income to distributable cash flow is provided in the financial tables of this release.
 

(2)
Calculation consists of distributable cash flow divided by the weighted average common limited partner units outstanding of 51,380,000 and 51,318,000 for the three months ended June 30, 2013 and 2012, respectively, and 51,375,000 and 51,306,000 for the six months ended June 30, 2013 and 2012, respectively.
 
(3) 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.
 
(4) 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.
 
(5) “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.
 
(6) ARP’s average sales price for natural gas before the effects of financial hedging was $3.47 per Mcf and $2.03 per Mcf for the three months ended June 30, 2013 and 2012, respectively, and $3.18 per Mcf and $2.76 per Mcf for the six months ended June 30, 2013 and 2012, 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 $2.95 per Mcf ($3.10 per Mcf before the effects of financial hedging) and $2.87 per Mcf ($1.40 per Mcf before the effects of financial hedging) for the three months ended June 30, 2013 and 2012, respectively, and $2.98 per Mcf ($2.85 per Mcf before the effects of financial hedging) and $3.29 per Mcf ($2.24 per Mcf before the effects of financial hedging) for the six months ended June 30, 2013 and 2012, respectively.
 
(7) ARP’s average sales price for oil before the effects of financial hedging was $92.33 per barrel and $94.39 per barrel for the three months ended June 30, 2013 and 2012, respectively, and $91.63 per barrel and $97.60 per barrel for the six months ended June 30, 2013 and 2012, respectively.
 
(8) Production costs include labor to operate the wells and related equipment, repairs and maintenance, materials and supplies, property taxes, severance taxes, insurance, production overhead and transportation and compression expenses. 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 $1.10 per Mcfe ($1.57 per Mcfe for total production costs) and $0.38 per Mcfe ($0.78 per Mcfe for total production costs) for the three months ended June 30, 2013 and 2012, respectively, and $1.00 per Mcfe ($1.42 per Mcfe for total production costs) and $0.56 per Mcfe ($0.96 per Mcfe for total production costs) for the six months ended June 30, 2013 and 2012, respectively.
   
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:   2013       2012     2013       2012  
 
Atlas Resource Cash Distributions Earned(1):
Limited Partner Units $ 11,320 $ 8,385 $ 22,011 $ 10,900
Class A Units (2%) 697 263 1,195 327
Incentive Distribution Rights   1,187         1,635      
Total Atlas Resource Cash Distributions Earned(1)   13,204     8,648     24,841     11,227  
per limited partner unit $ 0.54 $ 0.40 $ 1.05 $ 0.52
 
Atlas Pipeline Cash Distributions Earned(1):
Limited Partner Units 3,568 3,222 6,963 6,444
General Partner 2% Interest 1,074 649 2,055 1,297
Incentive Distribution Rights   4,801     1,571     7,797     3,140  
Total Atlas Pipeline Cash Distributions Earned(1)   9,443     5,442     16,815     10,881  
per limited partner unit $ 0.62 $ 0.56 $ 1.21 $ 1.12
 
Total Cash Distributions Earned 22,647 14,090 41,656 22,108
 
Gross Margin for Acquisitions(2)

2,959

2,959

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

9,111
Cash general and administrative expenses(4) (2,006 ) (2,056 ) (4,993 ) (4,516 )
Other, net   723     197     728     446  
Adjusted EBITDA(5) 24,323 12,231 40,350 27,149
Cash interest expense(6) (355 ) (40 ) (531 ) (173 )
Cash interest expense on acquisition financing(2) (1,089 ) (1,089 )
Maintenance capital expenditures(2)(3)   (400 )       (400 )   (1,231 )
Distributable Cash Flow(5) $ 22,479   $ 12,191   $ 38,330   $ 25,745  
 
Distributions Paid(7) $ 22,609 $ 12,831 $ 38,535 $ 25,660
per limited partner unit $ 0.44 $ 0.25 $ 0.75 $ 0.50
Distribution coverage ratio 1.0x 1.0x 1.0x 1.0x
 
Reconciliation of non-GAAP measures to net loss (5):
Distributable cash flow $ 22,479 $ 12,191 $ 38,330 $ 25,745
Gross Margin for Acquisitions(2) (2,959 ) (2,959 )
Cash interest expense on acquisition financing(2) 1,089 1,089
E&P Operations EBITDA prior to spinoff on March 5, 2012(3) (9,111 )
Atlas Resource net loss attributable to ATLS common limited partners

(3,111

)

(11,657

)

(6,449

)

(16,599

)
Atlas Resource cash distributions earned by ATLS(1) (13,204 ) (8,648 ) (24,841 ) (11,227 )
Atlas Pipeline net income attributable to ATLS common limited partners

3,968

10,611

3,535

12,450
Atlas Pipeline cash distributions earned by ATLS(1) (9,443 ) (5,442 ) (16,815 ) (10,881 )
Non-recurring spinoff and acquisition costs (1,157 ) (1,157 ) (8,370 )
Amortization of deferred finance costs (87 ) (29 ) (146 ) (129 )
Non-cash stock compensation expense (5,578 ) (4,568 ) (11,354 ) (9,299 )
Maintenance capital expenditures(2)(3) 400 400 1,231
Other non-cash adjustments (417 ) (79 ) (249 ) 62
Premiums paid on swaption derivative contracts associated with asset acquisition

(227

)

(227

)

Income attributable to non-controlling interests   3,058     59,191     (26,040 )   62,556  
Net income (loss) $ (5,189 ) $ 51,570   $ (46,883 ) $ 36,428  
 
(1)   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.
 
(2) Includes gross margin generated and maintenance capital expenditures for the three months ended June 30, 2013 for the Arkoma assets, which were acquired by ATLS on July 31, 2013. Pursuant to the terms of the acquisition agreements, ATLS received cash flows from EP Energy for the period after the acquisition effective date of May 1, 2013 through the closing date of July 31, 2013 as an acquisition adjustment, which is not recognized within ATLS’ earnings under generally accepted accounting principles (GAAP). For purposes of declaring ATLS’ quarterly distribution for the second quarter 2013, the Partnership evaluated its distributable cash flow for full quarterly period including the gross margin for the Arkoma assets acquired, pro forma cash interest expense on the borrowings to fund the acquisition purchase price, and estimated maintenance capital expenditures associated with the Arkoma assets’ gross margin.
 
(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 for the six months ended June 30, 2012.
 
(4) Excludes non-cash stock-compensation expense, non-recurring spinoff costs and non-recurring acquisition costs incurred.
 
(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)
 
June 30, 2013
Atlas   Atlas   Atlas  
Energy Resource Pipeline Consolidated
Total debt $ 34,000 $ 275,000 $ 1,635,297 $ 1,944,297
Less: Cash   (6,396 )   (42,953 )   (21,081 )   (70,430 )
Total net debt 27,604 232,047 1,614,216 1,873,867
 
Partners’ capital   462,735     1,142,765     2,322,161    

3,457,066

(1)
 
Total capitalization $ 490,339   $ 1,374,812   $ 3,936,377   $ 5,330,933  
 
Ratio of net debt to capitalization 0.06x
     

(1) Net of eliminated amounts.
 
December 31, 2012
Atlas   Atlas   Atlas  
Energy Resource Pipeline Consolidated
Total debt $ 9,000 $ 351,425 $ 1,179,918 $ 1,540,343
Less: Cash   (10,194 )   (23,188 )   (3,398 )   (36,780 )
Total net debt /(cash) (1,194 ) 328,237 1,176,520 1,503,563
 
Partners’ capital   465,870     862,006     1,606,408    

2,479,848

(2)
 
Total capitalization $ 464,676   $ 1,190,243   $ 2,782,928   $ 3,983,411  
 
Ratio of net debt to capitalization 0.00x
     

(2) Net of eliminated amounts.
   
ATLAS ENERGY, L.P.
Hedge Position Summary – Directly-Held E&P Assets
(as of August 8, 2013)
 

Natural Gas
 

Swaptions
Average
Production Period Fixed Price Volumes
Ended December 31, (per mmbtu)(a) (mmbtus)(a)
2013(b) $ 4.06 1,000,000
2014 $ 4.16 2,760,000
2015 $ 4.29 2,280,000
2016 $ 4.42 1,440,000
2017 $ 4.59 1,200,000
2018 $ 4.80 420,000

____________________________

(a)
 

“mmbtu” represents million metric British thermal units.; “bbl” represents barrel.

(b)

Reflects hedges covering the last six months of 2013.
         
ATLAS ENERGY, L.P.
CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited; in thousands)
 

Three Months Ended June 30, 2013
 
Atlas Atlas Atlas
Energy Resource Pipeline Eliminations Consolidated
Revenues:
Gas and oil production $ $ 47,094 $ $ $ 47,094
Well construction and completion 24,851 24,851
Gathering and processing 4,463 531,536 (77 ) 535,922
Administration and oversight 3,391 3,391
Well services 4,864 4,864
Gain on mark-to-market derivatives 27,107 27,107
Other, net   79     (1,337 )   1,824         566  
Total revenues   79     83,326     560,467     (77 )   643,795  
 
Costs and expenses:
Gas and oil production 19,035 19,035
Well construction and completion 21,609 21,609
Gathering and processing 4,959 448,986 (77 ) 453,868
Well services 2,305 2,305
General and administrative 8,741 14,217 30,916 53,874
Depreciation, depletion and amortization  

   

22,197
   

46,383
   

   

68,580
 
Total costs and expenses   8,741     84,322     526,285     (77 )   619,271  
 
Operating income (loss) (8,662 ) (996 ) 34,182 24,524
 
Loss on asset sales and disposal (672 ) (1,519 ) (2,191 )
Interest expense (442 ) (4,508 ) (22,581 ) (27,531 )
Loss on early extinguishment of debt           (19 )       (19 )
 
Net income (loss) before tax (9,104 ) (6,176 ) 10,063 (5,217 )
Income tax benefit           28         28  
Net income (loss) (9,104 ) (6,176 ) 10,091 (5,189 )
Income attributable to non-controlling interests  

   

   

(1,810

)
 

(1,248

)
 

(3,058

)
Net income (loss) attributable to common limited partners

$

(9,104

)

$

(6,176

)

$

8,281
 

$

(1,248

)

$

(8,247

)
 

ATLAS ENERGY, L.P.
CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited; in thousands)
 

Three Months Ended June 30, 2012
           
Atlas Atlas Atlas
Energy Resource Pipeline Eliminations Consolidated
Revenues:
Gas and oil production $ $ 19,460 $ $ $ 19,460
Well construction and completion 12,241 12,241
Gathering and processing 2,863 253,679 (122 ) 256,420
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     (122 )   363,039  
 
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 (122 ) 213,551
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     (122 )   301,159  
 
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 )
Loss on early extinguishment of debt                    
 
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 STATEMENTS OF OPERATIONS

(unaudited; in thousands)
 

Six Months Ended June 30, 2013

 
    Atlas   Atlas   Atlas    
Energy Resource Pipeline Eliminations Consolidated
Revenues:
Gas and oil production $ $ 93,158 $ $ $ 93,158
Well construction and completion 81,329 81,329
Gathering and processing 8,048 948,109 (148 ) 956,009
Administration and oversight 4,476 4,476
Well services 9,680 9,680
Gain on mark-to-market derivatives 15,024 15,024
Other, net   252     (1,317 )   7,286         6,221  
Total revenues   252     195,374     970,419     (148 )   1,165,897  
 
Costs and expenses:
Gas and oil production 34,251 34,251
Well construction and completion 70,721 70,721
Gathering and processing 9,372 796,385 (148 ) 805,609
Well services 4,623 4,623
General and administrative 17,504 31,784 45,244 94,532
Depreciation, depletion and amortization  

   

43,405
   

76,841
   

   

120,246
 
Total costs and expenses   17,504     194,156     918,470     (148 )   1,129,982  
 
Operating income (loss) (17,252 ) 1,218 51,949 35,915
 
Loss on asset sales and disposal (1,374 ) (1,519 ) (2,893 )
Interest expense (677 ) (11,397 ) (41,267 ) (53,341 )

Loss on early extinguishment of debt
         

(26,601
)      

(26,601
)
 
Net loss before tax (17,929 ) (11,553 ) (17,438 ) (46,920 )
Income tax benefit           37         37  
Net loss (17,929 ) (11,553 ) (17,401 ) (46,883 )
(Income) loss attributable to non-controlling interests  

   

   

(3,179

)
 

29,219
   

26,040
 
Net loss attributable to common limited partners

$

(17,929

)

$

(11,553

)

$

(20,580

)

$

29,219
 

$

(20,843

)
 
 

ATLAS ENERGY, L.P.

CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited; in thousands)
 

Six Months Ended June 30, 2012
           
Atlas Atlas Atlas
Energy Resource Pipeline Eliminations Consolidated
Revenues:
Gas and oil production $ $ 36,624 $ $ $ 36,624
Well construction and completion 55,960 55,960
Gathering and processing 6,177 555,585 (201 ) 561,561
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     (201 )   727,666  
 
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 (201 ) 465,396
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     (201 )   664,832  
 
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 )
Loss on early extinguishment of debt                    
 
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.

CONDENSED CONSOLIDATING BALANCE SHEETS

(unaudited; in thousands)
 

June 30, 2013
 
  Atlas   Atlas   Atlas    
ASSETS Energy Resource Pipeline Eliminations Consolidated
Current assets:
Cash and cash equivalents $ 6,396 $ 42,953 $ 21,081 $ $ 70,430
Accounts receivable 2 43,809 206,944 250,755

Receivable from (advances from) affiliates

2,995

572

(3,567

)

Current portion of derivative asset

3,592
35,575 25,235 64,402
Subscriptions receivable 11,036 11,036
Prepaid expenses and other   69   9,765   62,761         72,595
Total current assets 13,054 143,710 312,454 469,218
 
Property, plant and equipment, net 1,413,109 2,623,078 4,036,187
Intangible assets, net 1,156 569,843 570,999
Investment in joint venture 232,090 232,090
Goodwill, net 31,784 502,321 534,105
Long-term derivative asset 12,168 14,591 26,759
Investment in subsidiaries 470,595 (470,595 )
Other assets, net   23,523   22,968   46,230         92,721
$ 507,172 $ 1,624,895 $ 4,300,607   $ (470,595 ) $ 5,962,079
 
LIABILITIES AND PARTNERS’ CAPITAL
 
Current liabilities:
Current portion of long-term debt $ $ $ 522 $ $ 522
Accounts payable 145 57,708 36,417 94,270
Accrued producer liabilities 140,505 140,505
Current portion of derivative liability 72 95 167

Current portion of derivative payable to Drilling Partnerships

5,969

5,969
Accrued interest 34 9,354 25,893 35,281

Accrued well drilling and completion costs

52,425

52,425
Accrued liabilities   6,928   13,261   97,817         118,006
Total current liabilities 7,107 138,789 301,249 447,145
 
Long-term debt, less current portion 34,000 275,000 1,635,297 1,944,297
Long-term derivative liability 130 130
Long-term derivative payable to Drilling Partnerships

38

38
Deferred income taxes, net 35,513 35,513
Asset retirement obligations and other 3,330 68,173 6,387 77,890
 
Partners’ Capital:
Common limited partners’ interests 448,808 1,106,447 2,277,682 (3,384,129 ) 448,808
Accumulated other comprehensive income  

13,927
 

36,318
 

   

(36,318

)
 

13,927
462,735 1,142,765 2,277,682 (3,420,447 ) 462,735
Non-controlling interests       44,479     2,949,852     2,994,331
Total partners’ capital   462,735   1,142,765   2,322,161     (470,595 )   3,457,066
$ 507,172 $ 1,624,895 $ 4,300,607   $ (470,595 ) $ 5,962,079
 
 

ATLAS ENERGY, L.P.

CONDENSED CONSOLIDATING BALANCE SHEETS

(unaudited; in thousands)
 

December 31, 2012
 
  Atlas   Atlas   Atlas    
ASSETS Energy Resource Pipeline Eliminations Consolidated
Current assets:
Cash and cash equivalents $ 10,194 $ 23,188 $ 3,398 $ $ 36,780
Accounts receivable 5 38,718 157,526 196,249

Receivable from (advances from) affiliates

11,353

(5,853

)

(5,500

)

Current portion of derivative asset 12,274 23,077 35,351
Subscriptions receivable 55,357 55,357
Prepaid expenses and other   118   9,063     36,074         45,255
Total current assets 21,670 132,747 214,575 368,992
 
Property, plant and equipment, net 1,302,228 2,200,381 3,502,609
Goodwill and intangible assets, net 33,104 518,645 551,749
Long-term derivative asset 8,898 7,942 16,840
Investment in joint venture 86,002 86,002
Investment in subsidiaries 454,436 (454,436 )
Other assets, net   22,287   16,122     32,593         71,002
$ 498,393 $ 1,493,099   $ 3,060,138   $ (454,436 ) $ 4,597,194
 
LIABILITIES AND PARTNERS’ CAPITAL
 
Current liabilities:
Current portion of long-term debt $ $ $ 10,835 $ $ 10,835
Accounts payable 171 59,549 59,308 119,028

Liabilities associated with drilling contracts

67,293

67,293
Accrued producer liabilities 109,725 109,725

Current portion of derivative payable to Drilling Partnerships

11,293

11,293
Accrued interest 4 1,153 10,399 11,556

Accrued well drilling and completion costs

47,637

47,637
Accrued liabilities   21,304   24,235     57,752         103,291
Total current liabilities 21,479 211,160 248,019 480,658
 
Long-term debt, less current portion 9,000 351,425 1,169,083 1,529,508
Long-term derivative liability 888 888
Long-term derivative payable to Drilling Partnerships

2,429

2,429
Deferred income taxes, net 30,258 30,258
Asset retirement obligations and other 2,044 65,191 6,370 73,605
 
Partners’ Capital:
Common limited partners’ interests 456,171 840,437 1,539,177 (2,379,614 ) 456,171
Accumulated other comprehensive income  

9,699
 

21,569
   

   

(21,569

)
 

9,699
465,870 862,006 1,539,177 (2,401,183 ) 465,870
Non-controlling interests         67,231     1,946,747     2,013,978
Total partners’ capital   465,870   862,006     1,606,408     (454,436 )   2,479,848
$ 498,393 $ 1,493,099   $ 3,060,138   $ (454,436 ) $ 4,597,194
 
 

ATLAS ENERGY, L.P.

Ownership Interests Summary
 
    Overall
Ownership
Interest

Atlas Energy Ownership Interests as of June 30, 2013:
Amount Percentage
 
ATLAS RESOURCE:
General partner interest 100 % 2.0 %
Common units 20,962,485 33.1 %
Incentive distribution rights 100 % N/A  
Total Atlas Energy ownership interests in Atlas Resource(1) 35.1 %
 
ATLAS PIPELINE:
General partner interest 100 % 2.0 %
Common units 5,754,253 6.3 %
Incentive distribution rights 100 % N/A  
Total Atlas Energy ownership interests in Atlas Pipeline 8.3 %
 
LIGHTFOOT CAPITAL PARTNERS, GP LLC:
Approximate general partner ownership interest 15.9 %
Approximate limited partner ownership interest 12.1 %
 

(1)
  As of August 9, 2013, subsequent to its purchase of Atlas Resource’s preferred limited partner units issued in connection with the EP Energy Acquisition, Atlas Energy had a 36.9% total ownership interest in Atlas Resource.
 

Copyright Business Wire 2010

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