EX-99.1 2 dex991.htm PRESS RELEASE DATED MAY 6, 2010 Press Release dated May 6, 2010

Exhibit 99.1

NEWS RELEASE

 

CONTACT:    Brian J. Begley
   Vice President - Investor Relations
   Atlas Energy, Inc.
   (877) 280-2857
   (215) 553-8455 (fax)

ATLAS ENERGY, INC. REPORTS OPERATING AND FINANCIAL RESULTS

FOR THE FIRST QUARTER 2010

Pittsburgh, PA – May 6, 2010, Atlas Energy, Inc. (NASDAQ: ATLS) (“Atlas” or “the Company”) today reported operating and financial results for the first quarter 2010.

First Quarter 2010 Results

 

  •  

Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP measure, for the Company’s exploration and production operations (“E&P Operations”) was $69.1 million for the first quarter 2010, as compared with $65.2 million for the prior year comparable quarter. Adjusted net income, a non-GAAP measure, was $14.7 million for the first quarter 2010 compared with $8.3 million for the prior year first quarter. Adjusted diluted net income per share was $0.18 for the first quarter 2010 compared with $0.21 per share for the first quarter 2009. On a GAAP basis, the Company recognized a net loss of $2.1 million for the first quarter 2010 compared with net income of $4.6 million for the prior year first quarter. A reconciliation of net income (loss) to adjusted EBITDA and adjusted net income is provided in the financial tables of this release.

 

  •  

During the first quarter 2010, Atlas negotiated a joint venture with Reliance Industries Limited (“Reliance”), the largest private sector company in India and a global energy leader, in which Atlas transferred an interest in approximately 300,000 of its Marcellus Shale position in a transaction valued at $1.7 billion. Reliance paid approximately $340 million in cash at closing and an additional $1.36 billion will be paid in the form of a drilling carry. Atlas will serve as the development operator for the joint venture. Atlas and Reliance have agreed upon a five-year development plan that calls for the drilling of 45 horizontal Marcellus Shale wells for the joint venture during the remainder of 2010, increasing to 108 wells in 2011, 178 wells in 2012, and 300 wells in 2013 and 2014. During the carry period, Reliance will pay 85% of the drilling costs for a 40% interest in the joint venture and Atlas will fund 15% of the drilling costs for a 60% interest.

 

  •  

Subsequent to the closing of the Reliance joint venture, Atlas and Reliance agreed to acquire 42,344 acres within its core areas of southwestern Pennsylvania. Substantially all of this acreage is held by production.

 

  •  

Since initiating its horizontal Marcellus Shale drilling program in the first quarter of 2009, Atlas has spud 42 wells in its core area of southwestern Pennsylvania; 29 of these wells have been successfully drilled to total depth and cased. The remaining 13 wells are in the process of being drilled. Atlas has turned 17 of these horizontal wells into line; 6 wells in the wet gas area and 11 wells in the dry gas area.

 

  •  

Of the 11 dry gas horizontal Marcellus Shale well completions, 7 wells were landed low in the Marcellus Shale section. These wells are all strong producers and have averaged approximately 5 million cubic feet (“Mmcf”) per day of initial production into a pipeline and are exhibiting a shallower decline than the Company’s original 4 billion cubic feet (“Bcf”) EUR type curve. Actual results suggest a 6 Bcf EUR type curve with average first year production greater than 2 Mmcf per day.

 

  •  

Laurel Mountain Midstream, LLC, (“LLM”) a joint venture between Atlas Pipeline Partners, L.P. and The Williams Companies (“Williams”), gathers and processes the Company’s Marcellus Shale gas. Williams has been LMM’s operator since May 2009. All of the Company’s natural gas production from the Marcellus Shale is currently delivered into a legacy gathering system that was originally designed to transport low

 

pressure gas from vertical upper Devonian wells. While this system has meter and compression capacity of over 200 Mmcf per day, the Company’s gross deliveries of approximately 115 Mmcf per day are hydraulically constrained due primarily to the system’s relatively small diameter pipe. Horizontal Marcellus Shale wells with initial flowing pressures of 1,500 pounds per square inch or more are pressuring up the system and inhibiting older, lower pressure wells from producing into the system. As a result, the Company believes that approximately 30 Mmcf per day of its gross production (approximately 10 Mmcf per day of net production to Atlas) is currently curtailed due either to high system pressures or the unavailability of system capacity.

 

  •  

LMM is currently building a new gathering system (the “Header System”), with larger diameter pipelines and larger compressor stations, throughout the Company’s core Marcellus Shale acreage in southwestern Pennsylvania. The Header System is scheduled to be completed by the end of the second quarter of 2011. Once completed, this new system will provide to Atlas an incremental 300 Mmcf per day of new capacity with the ability to scale up to over 1 Bcf per day as the Company’s production grows. By the end of the second quarter of 2011, the Company expects its gross production in the Appalachian Basin to grow to over 200 Mmcf per day, with net production to Atlas’s account of between 85 and 95 Mmcf per day. In the meantime, LMM is attempting to loop existing legacy lines and add compression in order to provide incremental capacity while the new Header System is developed. In addition, LMM intends to make parts of the new Header System available to Atlas prior to the completion of the entire system next year. Several of these looping projects and truncations of the Header System are experiencing permitting delays and the timing of incremental capacity during 2010 is uncertain. Atlas is working closely with Williams to adjust its well turn-in schedule so as to turn wells into line in areas where capacity exists or is expected to become available soon.

 

  •  

The Company benefitted from its strong hedge positions during the first quarter 2010, realizing an average natural gas price of $7.61 per thousand cubic feet (“mcf”) for its production volumes, compared to an average market price of $5.68 per mcf. Currently, the Company has an unrealized mark-to-market hedge gain of approximately $90 million for its remaining future hedges positions.

 

  •  

Atlas has significantly increased its liquidity position as a result of the Marcellus Shale joint venture transaction with Reliance in April 2010. Upon the close of the transaction, Atlas had approximately $56 million drawn against its revolving credit facility, which currently has a borrowing base capacity of $550 million. The Company had outstanding debt of approximately $656 million immediately following close of the transaction, compared to debt of approximately $945 million as of March 31, 2009.

Appalachia Operations

 

  •  

Atlas had average net daily natural gas production in its Appalachia segment of 45.2 million cubic feet equivalents (“Mmcfe”) per day during the first quarter 2010.

 

  •  

Currently, Atlas and Reliance jointly control over 345,000 net Marcellus Shale acres in the area of mutual interest (“AMI”). Atlas also controls an additional 280,000 acres prospective for the Marcellus Shale outside of the AMI.

Michigan/Indiana Operations

 

  •  

Natural gas production from the Michigan/Indiana segment averaged 54.7 Mmcfe per day during the first quarter 2010.

 

  •  

At March 31, 2010, the Company had approximately 270,000 net acres in the Antrim Shale of Michigan, of which approximately 22,800 were undeveloped. Atlas maintains over 500 proved infill drilling locations in the Antrim Shale.

 

  •  

Atlas announced today that it has amassed 115,000 gross acres (70,000 net acres) in the emerging Utica/Collingwood Shale play which underlies several counties of northwestern Michigan at depths between 6,000 and 9,000 feet. During the first quarter of this year, a competitor successfully drilled a horizontal well that was landed in the Collingwood Limestone/Shale which lies directly below the Utica Shale. Atlas plans to drill several wells over the next year and expects to recover significant natural gas liquids from the rich gas stream. Atlas acquired approximately 15,000 net acres in the first quarter of 2010 at an average price per acre of approximately $321 per acre. Atlas’s remaining acreage is generally held by its own Antrim Shale production. At a State of Michigan lease sale that took place on March 4, 2010, acreage that is prospective for the Collingwood/Utica Shale went for prices up to $5,500 per acre.

  •  

The Company had access to approximately 123,000 net acres in the biogenic New Albany Shale as of March 31, 2010, with over 450 potential locations. Atlas plans to drill approximately 100 wells in the New Albany Shale through its investment partnership programs.

Corporate and Other

 

  •  

General and administrative expense, excluding amounts attributable to Atlas Pipeline Partners, L.P. (“APL”) and Atlas Pipeline Holdings, L.P. (“AHD”), was $20.2 million for the first quarter 2010 compared with $17.8 million for the prior year comparable quarter. The increase in the first quarter 2010 compared to the prior year was principally related to $1.8 million increase in wages and other corporate activities due to the growth of its business and a $0.6 million increase in non-cash stock compensation expense. See the consolidating statements of operations provided in the financial tables of this release.

 

  •  

Depreciation, depletion and amortization expense, excluding amounts attributable to APL and AHD, was $26.5 million for the first quarter 2010 compared with $28.0 million for the prior year comparable quarter. The decrease was due primarily to a decrease in the Company’s depletable basis, principally due to the $156.4 million write-down of its Upper Devonian field during the three months ended December 31, 2009, and decreases in production volumes in certain regions. See the consolidating statements of operations provided in the financial tables of this release.

 

  •  

Interest expense, excluding amounts attributable to APL and AHD, was $18.0 million for the first quarter 2010 compared with $13.0 million for the prior year first quarter. The increase in interest expense was primarily due to Atlas Energy Resources, LLC’s (“ATN”), the Company’s wholly-owned subsidiary, $200 million 12.125% senior note offering in July 2009, partially offset by lower average borrowings under its credit facility. See the consolidating statements of operations provided in the financial tables of this release.

Hedging Summary

 

  •  

In January 2010, the Company received approximately $20.1 million in proceeds from the early settlement of natural gas hedge positions related to periods from 2011 through 2013. Simultaneously, these hedge positions were effectively replaced with similar hedge contracts at current prevailing prices. The net proceeds from the hedge monetization were used to reduce indebtedness.

 

  •  

The Company entered into additional derivative contracts during the first quarter 2010 for its natural gas production. A summary of the Company’s current equity derivative positions as of May 6, 2010 is as follows:

Natural Gas

Fixed Price Swaps

 

Production Period Ended December 31,

    Average
Fixed  Price
(per mcf)(a)(b)		    Volumes
(per mcf)(a)

2010(c)

   $ 7.64    20,866,482

2011

    $ 6.56    17,993,502

2012

    $ 6.67    14,563,158

2013

    $ 6.90    9,834,099

Costless Collars

 

Production Period Ended December 31,

    Average
Floor Price
(per  mcf)(a)(b)		    Average
Ceiling Price
(per  mcf)(a)(b)		    Volumes
(per  mcf)(a)

2010(c)

   $ 8.03    $ 9.22    1,824,688

2011

    $ 6.07    $ 7.15    8,677,367

2012

    $ 6.23    $ 7.31    8,287,466

2013

    $ 6.30    $ 7.46    9,643,515

2014

    $ 6.82    $ 8.01    1,684,887

Crude Oil

Fixed Price Swaps

 

Production Period Ended December 31,

    Average
Fixed  Price
(per bbl)(a)		    Volumes
(bbls)(a)

2010(c)

   $ 97.10    29,776

2011

    $ 69.77    32,194

2012

    $ 71.55    26,139

2013

    $ 72.26    5,900

Costless Collars

 

Production Period Ended December 31,

    Average
Floor Price
(per  bbl)(a)		    Average
Ceiling Price
(per  bbl)(a)		    Volumes
(bbls)(a)

2010(c)

   $ 85.00    $ 112.30    18,941

2011

    $ 60.00    $ 80.92    20,361

2012

    $ 60.00    $ 86.50    16,777

2013

    $ 60.00    $ 88.90    3,540

 

(a)

“Mcf” represents thousand cubic feet; “bbl” represents barrel.

( b )

Includes an estimated positive basis differential and Btu (British thermal units) adjustment.

(c)

Reflects hedges covering the last nine months of 2010.

Interest in Atlas Pipeline and Atlas Pipeline Holdings

Through the Company’s controlling interest in AHD, which owns and operates the general partner of APL and owns 5.8 million limited partner units in APL, the Company recognizes approximately 10% of APL’s net income (loss) after eliminating non-controlling interests. A consolidating statement of operations and balance sheet has been provided in the financial tables of the release, which segregates the Company’s E&P Operations financial results from the APL midstream financial results.

* * *

Interested parties are invited to access the live webcast of an investor call with management regarding Atlas Energy, Inc.’s first quarter 2010 results on Friday, May 7, 2010 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 12:00 p.m. ET on May 7, 2010 by dialing 888-286-8010, passcode: 82970260.

At March 31, 2010, the Company had a 100.0% ownership interest in ATN, an approximate 2.1% direct ownership interest in APL, a publicly-traded limited partnership, and an approximate 64.3% limited partner interest and 100% of the general partner interest in AHD. The Company’s financial results are presented on a consolidated basis with those of ATN, AHD, and APL. Non-controlling interests in ATN, AHD, and APL are reflected as income (expense) in the Company’s consolidated statements of operations and as a component of shareholders’ equity on its consolidated balance sheets. A consolidating statement of operations and balance sheet has also been provided in the financial tables to the release for the comparable periods presented.

Please see the respective AHD and APL earnings releases for more information with regard to their first quarter 2010 financial results.

Atlas Energy, Inc. is one of the largest independent natural gas producers in the Appalachian and Michigan Basins and a leading producer in the Marcellus Shale in Pennsylvania. Atlas is also the country’s largest sponsor and manager of tax-advantaged energy investment partnerships. Atlas currently operates in the Marcellus Shale in a joint venture with Reliance Industries, Ltd. of India, through which it has a 60% undivided interest. Atlas also owns 1.1 million common units in APL and a 64% interest in AHD. For more information, please visit Atlas’ website at www.atlasenergy.com, or contact Investor Relations at InvestorRelations@atlasenergy.com.

Atlas Pipeline Partners, L.P. is active in the gathering and processing segments of the midstream natural gas industry. In the Mid-Continent region of Oklahoma, southern Kansas, northern and western Texas and the Texas panhandle, APL owns and operates eight active gas processing plants and a treating facility, as well as approximately 10,300 miles of active intrastate gas gathering pipeline. In Appalachia, APL is a 49% joint venture partner with Williams in Laurel Mountain Midstream, LLC, which manages the natural gas gathering system in that region, namely from the Marcellus Shale in southwestern Pennsylvania. For more information, visit APL’s website at www.atlaspipelinepartners.com or contact investorrelations@atlaspipelinepartners.com.

Atlas Pipeline Holdings, L.P. is a limited partnership which owns and operates the general partner of APL, through which it owns a 1.9% general partner interest, all the incentive distribution rights and approximately 5.8 million common units of APL.

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. Atlas Energy, Inc. 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, the Company’s 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 price; changes in the costs and results of drilling operations; uncertainties about estimates of reserves and resource potential; inability to obtain capital needed for operations; the Company’s 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 the Company’s reports filed with the U.S. Securities and Exchange Commission (the “SEC”). Forward-looking statements speak only as of the date hereof, and the Company assumes no obligation to update such statements, except as may be required by applicable law.

ATLAS ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share data)

 

     Three Months Ended
March 31,		  
     2010     2009  

Revenues:

     

Gas and oil production

    $ 63,909      $ 71,943   

Well construction and completion

      72,642        112,368   

Transmission, gathering and processing

      279,666        163,667   

Administration and oversight

      2,047        3,853   

Well services

      5,312        5,093   

Loss on asset sales

      (3,009 )      —     

Gain on mark-to-market derivatives(1)

      4,133        316   

Other, net

      4,257        4,881   
                

Total revenues

      428,957        362,121   
                

Costs and expenses:

     

Gas and oil production

      12,284        11,286   

Well construction and completion

      61,561        95,397   

Transmission, gathering and processing

      230,057        152,527   

Well services

      2,578        2,424   

General and administrative

      30,811        27,896   

Depreciation, depletion and amortization

      49,254        50,695   
                

Total costs and expenses

      386,545        340,225   
                

Operating income

      42,412        21,896   

Interest expense

      (44,599 )      (34,620 ) 
                

Loss from continuing operations before income tax provision (benefit)

      (2,187 )      (12,724 ) 

Income tax provision (benefit)

      (1,408 )      2,594   
                

Net loss from continuing operations

      (779 )      (15,318 ) 

Discontinued operations:

     

Income from discontinued operations (net of income tax provision of $399 for the three months ended March 31, 2009)

      —          8,477   
                

Net loss

      (779 )      (6,841 ) 

(Income) loss attributable to non-controlling interests

      (1,322 )      11,484   
                

Net income (loss) attributable to common shareholders

    $ (2,101 )    $ 4,643   
                

Net income (loss) attributable to common shareholders per share – basic:

     

Income (loss) from continuing operations attributable to common shareholders

    $ (0.03 )    $ 0.10   

Income from discontinued operations attributable to common shareholders

      —          0.02   
                

Net income (loss) attributable to common shareholders

    $ (0.03 )    $ 0.12   
                

Net income (loss) attributable to common shareholders per share – diluted:

     

Income (loss) from continuing operations attributable to common shareholders

    $ (0.03 )    $ 0.10   

Income from discontinued operations attributable to common shareholders

      —          0.02   
                

Net income (loss) attributable to common shareholders

    $ (0.03 )    $ 0.12   
                

Weighted average common shares outstanding:

     

Basic

      78,200        39,281   
                

Diluted

      78,200        39,751   
                

Income (loss) attributable to common shareholders:

     

Income (loss) from continuing operations (net of income tax provision (benefit) of $(1,408) and $2,594 for the three months ended March 31, 2010 and 2009, respectively)

    $ (2,101 )    $ 4,020   

Income from discontinued operations (net of income tax provision of $399 for the three months ended March 31, 2009)

      —          623   
                

Net income (loss) attributable to common shareholders

    $ (2,101 )    $ 4,643   
                

 

(1)

Consists principally of hydrocarbon derivative gains / (losses) that relate to the operating activities of the Company’s consolidated subsidiary, APL. The underlying hydrocarbon derivatives do not represent present or potential future obligations of the Company.

ATLAS ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands)

 

     March 31,
2010		    December 31,
2009
ASSETS      

Current assets:

      

Cash and cash equivalents

    $ 13,548    $ 20,627

Accounts receivable

      137,335      172,848

Current portion of derivative asset

      118,433      74,064

Subscription receivable from Partnerships

      —        47,275

Prepaid expenses and other

      31,046      31,010

Prepaid and deferred taxes

      1,128      1,559
             

Total current assets

      301,490      347,383

Property, plant and equipment, net

      3,586,735      3,555,802

Goodwill and intangible assets, net

      199,564      206,130

Long-term derivative asset

      106,383      59,291

Investment in joint venture

      130,461      132,990

Deferred tax asset

      11,445      29,734

Other assets, net

      82,684      74,833
             
   $ 4,418,762    $ 4,406,163
             
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities:

      

Current portion of long-term debt

    $ 4,590    $ 8,000

Accounts payable

      82,451      99,748

Liabilities associated with drilling contracts

      49,508      122,532

Accrued producer liabilities

      65,621      66,211

Current portion of derivative liability

      17,732      38,485

Current portion of derivative payable to Partnerships

      37,605      22,382

Accrued interest

      28,309      38,898

Accrued well drilling and completion costs

      84,715      89,261

Current portion of deferred tax liability

      33,052      26,415

Accrued and other current liabilities

      36,459      46,142
             

Total current liabilities

      440,042      558,074

Long-term debt, less current portion

      2,070,133      2,040,572

Long-term derivative liability

      38,629      25,441

Long-term derivative payable to Partnerships

      39,187      22,380

Other long-term liabilities

      58,988      56,180

Shareholders’ equity:

      

Shareholders’ equity

      1,066,997      1,065,290

Accumulated other comprehensive income

      99,740      58,022
             
     1,166,737      1,123,312

Non-controlling interests

      605,046      580,204
             

Total shareholders’ equity

      1,771,783      1,703,516
             
   $ 4,418,762    $ 4,406,163
             

ATLAS ENERGY, INC.

Financial and Operating Highlights

 

     Three Months Ended
March 31,
     2010     2009

Net income (loss) attributable to common shareholders per share – basic

    $ (0.03 )    $ 0.12

Adjusted net income attributable to common shareholders per share – basic(1)

    $ 0.19      $ 0.21

Pro forma adjusted net income attributable to common shareholders per share – basic(1)

    $ 0.19      $ 0.19

E&P Operations Discretionary Cash Flow per share(2)

    $ 0.67      $ 0.68

Production revenues (in thousands):

     

Natural gas

   $ 59,542      $ 69,874

Oil

      4,367 (3)      2,069

Production volume:(4) (5)

     

Appalachia:

     

Natural gas (Mcfd)

      40,029        39,908

Oil (Bpd)

      868 (6)      393
              

Total (Mcfed)

      45,239        42,267
              

Michigan/Indiana:

     

Natural gas (Mcfd)

      54,516        58,250

Oil (Bpd)

      34 (6)      6
              

Total (Mcfed)

      54,719        58,289
              

Total:

     

Natural gas (Mcfd)

      94,545        98,158

Oil (Bpd)

      902 (6)      400
              

Total (Mcfed)

      99,958        100,556
              

Average sales prices:(5)

    

Natural gas (per Mcf) (7)(8)

    $ 7.61      $ 8.09

Oil (per Bbl)(9)

      71.99        57.56

Production costs:(5)(10)

    

Lease operating expenses per Mcfe

    $ 0.87      $ 0.91

Production taxes per Mcfe

      0.20        0.19
              

Total production costs per Mcfe

    $ 1.07      $ 1.10
              

Depletion per Mcfe(5)

   $ 2.81      $ 2.98

 

(1)

A reconciliation from net loss to adjusted net income attributable to common shareholders per share and pro forma adjusted net income attributable to common shareholders per share is provided in the financial tables of this release.

(2)

Calculation consists of discretionary cash flow divided by pro forma weighted average common shares outstanding for the respective period. A reconciliation from net loss to discretionary cash flow is provided in the financial tables of this release. Pro forma weighted average common shares outstanding for the respective period consists of the historical basic weighted average shares of the Company for the respective period, adjusted for the 38.8 million shares of the Company’s common stock issued in connection with the Merger.

(3)

Includes NGL production revenue for the three months ended March 31, 2010.

(4)

Production quantities consist of the sum of (i) the Company’s proportionate share of production from wells in which it has a direct interest, based on the Company’s proportionate net revenue interest in such wells, and (ii) the Company’s proportionate share of production from wells owned by the investment partnerships in which the Company 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)

Includes NGL production volume for the first quarter 2010.

(7)

The Company’s average sales price for gas before the effects of financial hedging was $5.68 and $5.21 per Mcf for the three months ended March 31, 2010 and 2009, respectively. These amounts exclude the impact of certain allocations of production revenues to investor partners within the investor partnerships for the three months ended March 31, 2010. Including the effects of these allocations, average gas sales prices for the three months ended March 31, 2010 was $7.03 per Mcf ($5.10 per Mcf before the effects of financial hedging). There were no such allocations of production revenue for the three months ended March 31, 2009.

(8)

Includes cash proceeds of $0.3 million and $1.6 million for the three months ended March 31, 2010 and 2009, respectively, received from the settlement of ineffective derivative gains associated with the acquisition of the Company’s Michigan operations but not reflected in the consolidated statements of operations.

(9)

The Company’s average sales price for oil before the effects of financial hedging was $67.58 and $30.01 per barrel for the three months ended March 31, 2010 and 2009, respectively.

(10)

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 our proportionate share of lease operating expenses associated with certain allocations of production revenue to investor partners within our investor partnerships for the three months ended March 31, 2010. Including the effects of these costs, lease operating expenses per Mcfe for the three months ended March 31, 2010 were $0.69 per Mcfe (total production costs per Mcfe were $0.89). There were no such allocations of production revenue and therefore no effect on lease operating expenses for the three months ended March 31, 2009.

ATLAS ENERGY, INC.

CAPITALIZATION INFORMATION

(unaudited; in thousands)

 

     March 31, 2010     December 31, 2009  
     Atlas
Energy		     Atlas
Pipeline
and  Atlas
Pipeline
Holdings		     Consolidated     Atlas
Energy		     Atlas
Pipeline
and Atlas
Pipeline
Holdings		     Consolidated  

Total debt

    $ 867,324      $ 1,207,399      $ 2,074,723      $ 786,390      $ 1,262,182      $ 2,048,572   

Less: Cash

      (13,370 )      (178 )      (13,548 )      (19,525 )      (1,102 )      (20,627 ) 
                                                

Total net debt

      853,954        1,207,221        2,061,175        766,865        1,261,080        2,027,945   

Shareholders’ equity

      1,166,896        716,073        1,771,783 (1)      1,123,481        690,726        1,703,516 (1) 
                                                

Total capitalization

    $ 2,020,850      $ 1,923,294      $ 3,832,958      $ 1,890,346      $ 1,951,806      $ 3,731,461   
                                                

Ratio of net debt to capitalization

      0.42x            0.41x       

 

(1)

Net of eliminated amounts.

ATLAS ENERGY, INC.

CAPITAL EXPENDITURE DATA

(unaudited; in thousands)

 

     Three Months Ended
March 31,
     2010    2009(1)

Atlas Energy

    $ 69,999    $ 57,207

Atlas Pipeline Partners

      10,914      72,196
             

Consolidated capital expenditures

    $ 80,913    $ 129,403
             

 

(1)

Restated to reflect amounts reclassified to discontinued operations due to APL’s sale of its NOARK gas gathering and interstate pipeline system.

ATLAS ENERGY, INC.

Financial Information

(unaudited; in thousands)

 

     Three Months Ended
March 31, 		 
     2010     2009  

E&P Operations:

     

Gas and oil production margin(1)

    $ 72,035      $ 58,965   

Well construction and completion margin

      11,081        16,971   

Administration and oversight margin

      2,047        3,853   

Well services margin

      2,734        2,669   

Gathering

      (3,210 )      (2,757 ) 
                

E&P Operations Gross Margin

      84,687        79,701   

Cash general and administrative expenses(2)

      (16,364 )      (14,511 ) 

Other, net

      799        47   
                

E&P Operations Adjusted EBITDA(3)

     69,122        65,237   

Cash interest expense(4)

      (16,966 )      (12,290 ) 
                

E&P Operations Discretionary Cash Flow(3)

     52,156        52,947   

Capital expenditures

      (69,999 )      (57,207 ) 
                

E&P Operations Free Cash Flow(3)(5)

   $ (17,843 )    $ (4,260 ) 
                
     Three Months Ended
March 31,		  
     2010     2009  

Reconciliation of non-GAAP measures to net loss attributable to common shareholders(3):

     

E&P Operations Discretionary Cash Flow

    $ 52,156      $ 52,947   

Atlas Pipeline and Atlas Pipeline Holdings net loss attributable to common

shareholders

      (861 )      (2,793 ) 

Income tax benefit (provision)

      1,408        (2,594 ) 

Depreciation, depletion and amortization

      (26,508 )      (28,027 ) 

Amortization of deferred finance costs

      (1,066 )      (665 ) 

Non-cash stock compensation expense

      (3,863 )      (3,243 ) 

Non-cash net loss on sales of assets

      (2,942 )      —     

Income attributable to ATN non-controlling interests(6)

      (15 )      (9,378 ) 

Adjustments to reflect the cash impact of derivatives(1)

      (20,410 )      (1,604 ) 
                

Net income (loss) attributable to common shareholders

    $ (2,101 )    $ 4,643   
                

 

(1)

Includes adjustments to reflect the cash impact of derivatives, including (i) $20.1 million of cash proceeds received in January 2010 from the early settlement of natural gas and oil derivative positions and (ii) cash proceeds received from the settlement of ineffective derivative gains not reflected in its consolidated statements of operations for the three months ended March 31, 2010 and 2009.

(2)

Excludes non-cash stock-compensation expense.

(3)

Adjusted EBITDA, discretionary cash flow and free cash flow are non-GAAP (generally accepted accounting principles) financial measures under the rules of the Securities and Exchange Commission. Management of the Company believes that adjusted EBITDA, discretionary cash flow and free cash flow provide additional information for evaluating the Company’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 Atlas Energy Resources’ financial covenants under its credit facility. Adjusted EBITDA, discretionary cash flow and free 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.

(4)

Excludes non-cash amortization of deferred financing costs.

(5)

Excludes the impact of cash distributions paid by Atlas Energy Resources, LLC to its non-controlling interests for periods prior to the Merger on September 29, 2009.

(6)

Represents the non-controlling interests in the net income (loss) of Atlas Energy Resources, LLC prior to the Merger on September 29, 2009.

ATLAS ENERGY, INC.

Financial Information

(unaudited; in thousands, except per share data)

 

     Three Months Ended
March 31, 		 
     2010     2009  

Reconciliation of net income (loss) attributable to common shareholders to non-GAAP measure(1):

  

Net income (loss) attributable to common shareholders

    $ (2,101 )    $ 4,643   

Atlas Pipeline and Atlas Pipeline Holdings loss attributable to common

shareholders

      861        2,793   

Adjustments to reflect the cash impact of derivatives

      20,410        1,604   

Non-cash net loss on sales of assets

      2,942        —     

Non-cash stock compensation expense

      3,863        3,243   

Adjustment to non-controlling interests for the above items

      —          (1,618 ) 

Tax effect of the above items

      (11,264 )      (2,360 ) 
                

Adjusted net income attributable to common shareholders

    $ 14,711      $ 8,305   
                

Basic

    $ 0.19      $ 0.21   

Diluted

    $ 0.18      $ 0.21   

Weighted average common shares outstanding:

     

Basic

      78,200        39,281   

Diluted

      81,059        39,751   

Adjusted net income attributable to common shareholders

    $ 14,711      $ 8,305   

Adjustment to remove non-controlling interests for Atlas Energy Resources, LLC

      —          10,996   

Tax effect of the above item

      —          (4,310 ) 
                

Pro forma adjusted net income attributable to common shareholders

    $ 14,711      $ 14,991   
                

Pro forma adjusted net income attributable to common shareholders per share:

     

Basic

    $ 0.19      $ 0.19   

Diluted

    $ 0.18      $ 0.19   

Pro forma weighted average common shares outstanding(3):

    

Basic

      78,200        78,057   

Diluted

      81,059        78,527   

 

(1)

Adjusted net income attributable to common shareholders is a non-GAAP financial measure under the rules of the Securities and Exchange Commission. Management of the Company believes that the above financial measure provides additional information with respect to the Company’s ability to meet its capital expense and working capital requirements. Adjusted net income is not a measure of financial performance under GAAP and, accordingly, should not be considered as a substitute for revenues, net income or cash flows from operating activities prepared in accordance with GAAP.

(2)

Adjusted to reflect the Merger on September 29, 2009, through which the Company issued 38.8 million shares of its common stock in exchange for the 33.4 million Class B common units of ATN not previously held by the Company. The Merger effectively removes the non-controlling interests in the net income of ATN upon the completion of the transaction.

(3)

Consists of the historical basic and diluted weighted average shares of the Company for the respective period, adjusted for the 38.8 million shares of the Company’s common stock issued in connection with the Merger.

ATLAS ENERGY, INC.

CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited; in thousands)

Three Months Ended March 31, 2010

 

     Atlas
Energy		     Atlas
Pipeline
and Atlas
Pipeline
Holdings		     Eliminations     Consolidated  

Revenues:

         

Gas and oil production

    $ 63,909      $ —        $ —        $ 63,909   

Well construction and completion

      72,642        —          —          72,642   

Transmission, gathering and processing

      4,461        275,205        —          279,666   

Administration and oversight

      2,047        —          —          2,047   

Well services

      5,312        —          —          5,312   

Loss on asset sales

      (2,942 )      (67 )      —          (3,009 ) 

Gain on mark-to-market derivatives

      —          4,133        —          4,133   

Other, net

      799        3,940        (482 )      4,257   
                                

Total revenues

      146,228        283,211        (482 )      428,957   
                                

Costs and expenses:

         

Gas and oil production

      12,284        —          —          12,284   

Well construction and completion

      61,561        —          —          61,561   

Transmission, gathering and processing

      7,671        222,386        —          230,057   

Well services

      2,578        —          —          2,578   

General and administrative

      20,227        10,584        —          30,811   

Depreciation, depletion and amortization

      26,508        22,746        —          49,254   
                                

Total costs and expenses

      130,829        255,716        —          386,545   
                                

Operating income

      15,399        27,495        (482 )      42,412   

Interest expense

      (18,032 )      (27,049 )      482        (44,599 ) 
                                

Income (loss) before income tax benefit

      (2,633 )      446        —          (2,187 ) 

Income tax benefit

      (1,408 )      —          —          (1,408 ) 
                                

Net income (loss)

      (1,225 )      446        —          (779 ) 

Income attributable to non-controlling interests – E&P Operations

      (15 )      —          —          (15 ) 

Loss (income) attributable to non-controlling interests – Atlas Pipeline and Atlas Pipeline Holdings

      —          (1,317 )      10        (1,307 ) 
                                

Net loss attributable to common shareholders ommon shareholds

    $ (1,240 )    $ (871 )    $ 10      $ (2,101 ) 
                                

ATLAS ENERGY, INC.

CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited; in thousands)

Three Months Ended March 31, 2009

 

     Atlas
Energy		     Atlas
Pipeline
and Atlas
Pipeline
Holdings		     Eliminations     Consolidated  

Revenues:

         

Gas and oil production

    $ 71,943      $ —        $ —        $ 71,943   

Well construction and completion

      112,368        —          —          112,368   

Transmission, gathering and processing

      4,723        169,093        (10,149 )      163,667   

Administration and oversight

      3,853        —          —          3,853   

Well services

      5,093        —          —          5,093   

Gain on mark-to-market derivatives

      —          316        —          316   

Other, net

      76        4,834        (29 )      4,881   
                                

Total revenues

      198,056        174,243        (10,178 )      362,121   
                                

Costs and expenses:

         

Gas and oil production

      14,582        —          (3,296 )      11,286   

Well construction and completion

      95,397        —          —          95,397   

Transmission, gathering and processing

      7,480        151,900        (6,853 )      152,527   

Well services

      2,424        —          —          2,424   

General and administrative

      17,754        10,142        —          27,896   

Depreciation, depletion and amortization

      28,027        22,668        —          50,695   
                                

Total costs and expenses

      165,664        184,710        (10,149 )      340,225   
                                

Operating income (loss)

      32,392        (10,467 )      (29 )      21,896   

Interest expense

      (12,984 )      (21,665 )      29        (34,620 ) 
                                

Income (loss) from continuing operations before income

tax expense

      19,408        (32,132 )      —          (12,724 ) 

Income tax expense

      2,594        —          —          2,594   
                                

Net income (loss) from continuing operations

      16,814        (32,132 )      —          (15,318 ) 

Discontinued operations

      —          8,477        —          8,477   
                                

Net income (loss)

      16,814        (23,655 )      —          (6,841 ) 

Income attributable to non-controlling interests – E&P Operations

      (9,378 )      —          —          (9,378 ) 

Loss (income) attributable to non-controlling interests – Atlas Pipeline and Atlas Pipeline Holdings

      —          (469 )      21,331        20,862   
                                

Net income (loss) attributable to common shareholders

    $ 7,436      $ (24,124 )    $ 21,331      $ 4,643   
                                

ATLAS ENERGY, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

(unaudited; in thousands)

March 31, 2010

 

     Atlas
Energy		    Atlas
Pipeline
and Atlas
Pipeline
Holdings		     Eliminations     Consolidated
ASSETS          

Current assets:

          

Cash and cash equivalents

    $ 13,370    $ 178      $ —        $ 13,548

Accounts receivable

      102,005      64,207        (28,877 )      137,335

Current portion of derivative asset

      117,798      635        —          118,433

Prepaid expenses and other

      15,355      15,691        —          31,046

Prepaid and deferred taxes

      1,128      —          —          1,128
                             

Total current assets

      249,656      80,711        (28,877 )      301,490

Property, plant and equipment, net

      1,907,263      1,679,472        —          3,586,735

Goodwill and intangible assets, net

      37,862      161,702        —          199,564

Long-term derivative asset

      106,383      —          —          106,383

Investment in joint venture

      —        130,461        —          130,461

Deferred tax asset

      11,445      —          —          11,445

Investment in subsidiaries

      111,186      —          (111,186 )      —  

Other assets, net

      49,937      32,747        —          82,684
                             
   $ 2,473,732    $ 2,085,093      $ (140,063 )    $ 4,418,762
                             
LIABILITIES AND SHAREHOLDERS’ EQUITY          

Current liabilities:

          

Current portion of long-term debt

    $ —      $ 33,467      $ (28,877 )    $ 4,590

Accounts payable

      70,371      12,080        —          82,451

Liabilities associated with drilling contracts

      49,508      —          —          49,508

Accrued producer liabilities

      —        65,621        —          65,621

Current portion of derivative liability

      4,306      13,426        —          17,732

Current portion of derivative payable to Partnerships

      37,605      —          —          37,605

Accrued interest

      11,753      16,556        —          28,309

Accrued well drilling and completion costs

      84,715      —          —          84,715

Current portion of deferred tax liability

      33,052      —          —          33,052

Accrued and other current liabilities

      19,646      16,813        —          36,459
                             

Total current liabilities

      310,956      157,963        (28,877 )      440,042

Long-term debt, less current portion

      867,324      1,202,809        —          2,070,133

Long-term derivative liability

      30,736      7,893        —          38,629

Long-term derivative payable to Partnerships

      39,187      —          —          39,187

Other long-term liabilities

      58,633      355        —          58,988

Shareholders’ equity:

          

Shareholders’ equity (deficit)

      1,066,997      (11,196 )      11,196        1,066,997

Accumulated other comprehensive income (loss)

      99,740      (4,891 )      4,891        99,740
                             
     1,166,737      (16,087 )      16,087        1,166,737

Non-controlling interests

      159      732,160        (127,273 )      605,046
                             

Total shareholders’ equity

      1,166,896      716,073        (111,186 )      1,771,783
                             
   $ 2,473,732    $ 2,085,093      $ (140,063 )    $ 4,418,762
                             

ATLAS ENERGY, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

(unaudited; in thousands)

December 31, 2009

 

     Atlas
Energy		    Atlas
Pipeline
and  Atlas
Pipeline
Holdings		     Eliminations     Consolidated
ASSETS          

Current assets:

          

Cash and cash equivalents

    $ 19,525    $ 1,102      $ —        $ 20,627

Accounts receivable

      98,687      98,416        (24,255 )      172,848

Current portion of derivative asset

      73,066      998        —          74,064

Subscriptions receivable from Partnerships

      47,275      —          —          47,275

Prepaid expenses and other

      15,606      15,404        —          31,010

Prepaid and deferred taxes

      1,559      —          —          1,559
                             

Total current assets

      255,718      115,920        (24,255 )      347,383

Property, plant and equipment, net

      1,871,418      1,684,384        —          3,555,802

Goodwill and intangible assets, net

      38,039      168,091        —          206,130

Long-term derivative asset

      58,930      361        —          59,291

Investment in joint venture

      —        132,990        —          132,990

Deferred tax asset

      29,734      —          —          29,734

Investment in subsidiaries

      110,691      —          (110,691 )      —  

Other assets, net

      40,719      34,114        —          74,833
                             
   $ 2,405,249    $ 2,135,860      $ (134,946 )    $ 4,406,163
                             
LIABILITIES AND SHAREHOLDERS’ EQUITY          

Current liabilities:

          

Current portion of long-term debt

    $ —      $ 32,255      $ (24,255 )    $ 8,000

Accounts payable

      76,820      22,928        —          99,748

Liabilities associated with drilling contracts

      122,532      —          —          122,532

Accrued producer liabilities

      —        66,211        —          66,211

Current portion of derivative liability

      4,652      33,833        —          38,485

Current portion of derivative payable to

Partnerships

      22,382      —          —          22,382

Accrued interest

      29,245      9,653        —          38,898

Accrued well drilling and completion costs

      89,261      —          —          89,261

Current portion of deferred tax liability

      26,415      —          —          26,415

Accrued and other current liabilities

      31,594      14,548        —          46,142
                             

Total current liabilities

      402,901      179,428        (24,255 )      558,074

Long-term debt, less current portion

      786,390      1,254,182        —          2,040,572

Long-term derivative liability

      14,315      11,126        —          25,441

Long-term derivative payable to Partnerships

      22,380      —          —          22,380

Other long-term liabilities

      55,782      398        —          56,180

Shareholders’ equity:

          

Shareholders’ equity (deficit)

      1,065,290      (7,755 )      7,755        1,065,290

Accumulated other comprehensive income (loss)

      58,022      (6,550 )      6,550        58,022
                             
     1,123,312      (14,305 )      14,305        1,123,312

Non-controlling interests

      169      705,031        (124,996 )      580,204
                             

Total shareholders’ equity

      1,123,481      690,726        (110,691 )      1,703,516
                             
   $ 2,405,249    $ 2,135,860      $ (134,946 )    $ 4,406,163
                             

ATLAS ENERGY RESOURCES, LLC

STAND-ALONE CONSOLIDATED STATEMENTS OF OPERATIONS DATA

(unaudited; in thousands, except per unit data)

 

     Three Months Ended
March 31,		  
     2010     2009  

Revenues:

     

Gas and oil production

    $ 63,909      $ 71,943   

Well construction and completion

      72,642        112,368   

Gathering

      4,461        4,723   

Administration and oversight

      2,047        3,853   

Well services

      5,312        5,093   

Loss on asset sales

      (2,942 )      —     

Other, net

      209        79   
                

Total revenues

      145,638        198,059   
                

Costs and expenses:

     

Gas and oil production

      12,284        14,581   

Well construction and completion

      61,561        95,397   

Gathering

      7,671        4,493   

Well services

      2,578        2,424   

General and administrative

      14,314        14,549   

Depreciation, depletion and amortization

      26,508        28,028   
                

Total costs and expenses

      124,916        159,472   
                

Operating income

      20,722        38,587   

Interest expense

      (18,032 )      (12,984 ) 
                

Net income

      2,690        25,603   

Income attributable to non-controlling interests

      (15 )      (15 ) 
                

Net income attributable to owner’s/members’ interests

    $ 2,675      $ 25,588   
                

Allocation of net income attributable to owner’s/members’ interests:

     

Portion allocable to members’ interests (period prior to Merger on September 29, 2009)

    $ —        $ 25,588   

Portion allocable to owner’s interest (period subsequent to Merger on September 29, 2009)

      2,675        —     
                

Net income attributable to owner’s/members’ interests

    $ 2,675      $ 25,588   
                

Allocation of net income attributable to members’ interests:

     

Class A member’s units

    $ —        $ (7,444 ) 

Class B members’ units

      —          33,032   
                

Net income attributable to members’ interests

    $ —        $ 25,588   
                

Net income attributable to Class B members per unit:

     

Basic

    $ —        $ 0.52   
                

Diluted

    $ —        $ 0.52   
                

Weighted average Class B members’ units outstanding:

     

Basic

      —          63,381   
                

Diluted

      —          63,381   
                

ATLAS ENERGY RESOURCES, LLC

STAND-ALONE CONDENSED CONSOLIDATED BALANCE SHEET DATA

(unaudited; in thousands)

 

     March 31,
2010		    December 31,
2009

ASSETS

      

Current assets:

      

Cash and cash equivalents

    $ 3,104    $ 3,640

Accounts receivable

      66,616      71,058

Current portion of derivative receivable from Partnerships

      181      270

Current portion of derivative asset

      117,798      73,066

Subscriptions receivable from Partnerships

      —        47,275

Prepaid expenses and other

      15,101      15,621
             

Total current assets

      202,800      210,930

Property, plant and equipment, net

      1,907,263      1,871,418

Other assets, net

      26,544      23,747

Advances to affiliates

      23,727      5,689

Long-term derivative asset

      106,383      58,930

Intangible assets, net

      2,696      2,873

Goodwill, net

      35,166      35,166
             
   $ 2,304,579    $ 2,208,753
             

LIABILITIES AND OWNER’S EQUITY

      

Current liabilities:

      

Accounts payable

    $ 70,514    $ 76,993

Accrued interest

      11,753      29,245

Accrued liabilities

      10,975      14,308

Liabilities associated with drilling contracts

      49,508      122,532

Accrued well drilling and completion costs

      84,715      89,261

Current portion of derivative payable to Partnerships

      37,605      22,382

Current portion of derivative liability

      4,306      4,652
             

Total current liabilities

      269,376      359,373

Long-term debt, less current portion

      867,324      786,390

Long-term derivative payable to Partnerships

      39,187      22,380

Long-term derivative liability

      30,736      14,315

Asset retirement obligations

      52,608      51,813

Commitments and contingencies

      

Owner’s equity:

      

Owner’s equity

      875,845      873,170

Accumulated other comprehensive income

      169,344      101,143
             
     1,045,189      974,313

Non-controlling interests

      159      169
             

Total owner’s equity

      1,045,348      974,482
             
   $ 2,304,579    $ 2,208,753
             

ATLAS ENERGY, INC.

Ownership Interests Summary

 

Atlas Energy Ownership Interests as of March 31, 2010:

    Amount     Overall
Ownership
Interest
Percentage		  

ATLAS PIPELINE HOLDINGS(1):

     

General partner interest

    100 %    N/A   

Common units

    17,808,109      64.3 % 
        

Total

      64.3 % 
        

ATLAS PIPELINE:

     

Atlas Energy directly-owned common units

    1,112,000      2.0 % 

LIGHTFOOT CAPITAL PARTNERS, GP LLC:

     

Approximate ownership interest

      18.0 % 

 

(1)       Atlas Pipeline Holdings directly owns the following ownership interests in Atlas Pipeline Partners:

         

General partner interest

    100 %    1.9 % 

Common units

    5,754,253      10.6 % 

Incentive distribution rights

    100 %    N/A   
        

Total Atlas Pipeline Holdings direct ownership interests in Atlas Pipeline

      12.5 %