Atlas Energy Resources, LLC Reports Record Financial Results for the Second Quarter 2008
PITTSBURGH, Pa.--(Business Wire)--
Atlas Energy Resources, LLC (NYSE:ATN) ("Atlas Energy" or "the
Company") today reported financial results for the second quarter
2008.
The highlights of the results for the second quarter 2008 include:
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-- Record adjusted earnings before interest, income taxes,
depreciation and amortization ("Adjusted EBITDA"), a non-GAAP
measure, of $80.1 million, as compared with $28.7 million for the
second quarter 2007, an increase of $51.4 million, or
approximately 179%. The increase over the prior year was primarily
related to 23% growth in Appalachian production, a 67% increase in
gross margin generated from partnership management fee sources and
the addition of the Company's Michigan segment operations. A
reconciliation from net income to Adjusted EBITDA is provided in
the financial tables of this release;
-- Distributable cash flow of $53.3 million, an increase of $34.5
million, or 183%, compared to the prior year comparable quarter. A
reconciliation from net income to distributable cash flow is
provided in the financial tables of this release;
-- Net income of $38.4 million. Adjusted net income was $41.3 million
for the second quarter 2008, an increase of $22.0 million from the
prior year comparable quarter. A reconciliation from net income to
adjusted net income is provided in the financial tables of this
release; and
-- Revenues of $217.6 million, an increase of $89.5 million, or
approximately 70%, compared to the prior year comparable period.
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Based on the financial results for the second quarter 2008, the
Company declared a record quarterly cash distribution of $0.61 per
unit for the period at a distribution coverage ratio of 1.3x. This
distribution reflects an approximate 42% increase compared to the
second quarter 2007 distribution of $0.43 per unit at 1.2x
distribution coverage. This quarter's distribution will be paid on
August 14, 2008 to unitholders of record as of August 6, 2008.
Recent Events
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-- During the second quarter 2008, Atlas Energy drilled or
participated in four successful horizontal wells in the
Chattanooga Shale of Eastern Tennessee. Initial results indicate
that horizontal Chattanooga Shale wells, with a 3,000 foot
lateral, can be drilled and completed for approximately $1.1
million, and are capable of stabilized production into a pipeline
of between 300 and 500 Mcfe per day. To date, Atlas Energy has
accumulated 117,000 net acres located in Eastern Tennessee. The
Company believes that its acreage contains more than 500 potential
horizontal drilling locations in the Chattanooga Shale.
Furthermore, most of this acreage is prospective from conventional
reservoirs, such as the Monteagle (Big Lime), the Fort Payne
Limestone, the Stones River and the Knox Group, for which the
Company believes it has up to 750 locations.
-- In May 2008, Atlas Energy completed a public offering of 2,070,000
of its Class B common units and sold 600,000 of its Class B common
units in a private placement to Atlas America, Inc. (NASDAQ: ATLS)
for combined net proceeds of approximately $108 million. The net
proceeds were used to repay a portion of Atlas Energy's
outstanding balance under its revolving credit facility. The
increased borrowing capacity will be used by the Company to fund
additional acreage acquisitions, accelerated development of the
Marcellus Shale and further development the Chattanooga and Antrim
Shale regions.
-- In addition to the equity offerings in May 2008, the Company issued
an additional $150.0 million of 10.75% senior unsecured notes due
in 2018 as an add-on offering to its $250 million senior note
offering in January 2008. The Company used the net proceeds from
the note offering to reduce the balance outstanding on its
revolving credit facility.
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Operating Highlights
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-- Atlas Energy continued to expand its acreage position and
development activities in the Marcellus Shale:
-- To date, the Company has drilled 78 vertical wells and one
horizontal Marcellus Shale well and is currently producing 69
Marcellus wells into a pipeline (nine wells are waiting on
completion);
-- As of June 30, 2008, Atlas Energy controlled approximately
552,000 Marcellus acres in Pennsylvania, New York and West
Virginia, of which approximately 269,000 of these acres are
located in the Company's current focus area of southwestern
Pennsylvania;
-- The Company continues to realize average peak production rates
(24 hours into a pipeline) of approximately one million cubic feet
("Mmcf") per day, with its best wells having initial peak rates of
approximately 3 Mmcf per day. At the end of the quarter, Atlas
Energy's gross operated Marcellus production was near 20 Mmcf per
day.
-- Net natural gas and oil production in Appalachia increased to
approximately 35 million cubic feet equivalents ("Mmcfe") per day
in the second quarter 2008, which was a 23% increase compared to
the second quarter of 2007 and 6.5% higher than the first quarter
of 2008;
-- The Company recently completed fundraising for the Public #17-2007
(B) drilling program, which raised approximately $236.0 million in
investor funds, representing the Company's largest individual
fundraising to date. Atlas Energy also filed Amendment No. 1 for
the Atlas Resources Public #18-2008 Drilling Program Registration
Statement with the Securities and Exchange Commission to offer and
sell up to $600 million in investor funds(1). The Company plans to
raise at least $500.0 million in total investor funds for the
fiscal year 2008;
-- As of June 30, 2008, the Company held a total acreage position of
approximately 1,115,000 net acres, of which 618,000 are
undeveloped, an increase of 17% from the net acreage position at
June 30, 2007.
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(1) Atlas Energy's subsidiary serves as managing general partner
of the partnership. A registration statement related to these
securities has been filed with the Securities and Exchange Commission
but has not yet become effective. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration
statement becomes effective. A written prospectus meeting the
requirements of Section 10 of the Securities Act may be obtained when
available from Anthem Securities, Inc. (a subsidiary of Atlas Energy),
1550 Coraopolis Heights Rd. - 2nd Floor, Moon Township, PA 15108
Appalachia Segment Results
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-- The Company drilled 241 gross wells in Appalachia during the second
quarter 2008, including 23 wells drilled into the Marcellus Shale.
The Company connected 238 wells to its gathering systems during
the second quarter 2008, compared to 237 wells in the second
quarter 2007.
-- Gross margin from partnership management fee sources increased by
67% to $23.2 million in the second quarter 2008 compared to $13.9
million in the prior year second quarter, resulting from increases
in per well construction revenues, per well servicing revenues and
administrative and oversight fees.
-- As of June 30, 2008, the Company held approximately 840,700 net
acres in the Appalachian Basin, of which approximately 578,700
acres were undeveloped, an increase of 28% from the net acreage
position at June 30, 2007.
-- As of June 30, 2008, the Company had identified 3,914 geologically
favorable shallow drilling locations on its acreage in the
Appalachian Basin, which does not include any locations
prospective for the Marcellus Shale, and had an interest in
approximately 8,800 gross producing wells in Appalachia, of which
it operated approximately 85%.
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Michigan Segment Results
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-- The Company drilled 40 gross wells and connected 15 wells in
Michigan during the second quarter 2008.
-- Natural gas and oil production in the Michigan averaged
approximately 60 Mmcfe per day for the second quarter 2008.
-- At June 30, 2008, the Company had approximately 273,900 net acres
in the Antrim Shale in Michigan, of which approximately 39,300
acres were undeveloped. On this acreage, the Company had
approximately 749 drilling locations in the Antrim Shale, almost
all of which were proved infill locations.
-- As of June 30, 2008, the Company had an interest in approximately
2,440 gross wells in Michigan, of which it operated approximately
74%.
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Hedging Summary
The Company entered into additional hedging contracts in the
current period for its natural gas and oil production. A summary of
the Company's aggregate hedge positions as of August 5, 2008 are as
follows:
Natural Gas
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Fixed Price Swaps
------------------
Average
Production Period Hedge Price (1)(3) Percentage
Ended December 31, (per mcf) Hedged (2)
------------------ ------------------- --------------------
2008 $ 9.08 77%
2009 $ 8.89 79%
2010 $ 8.39 56%
2011 $ 8.02 44%
2012 $ 8.06 33%
2013 $ 9.06 3%
Costless Collars
------------------
Average Average
Production Period Hedge Floor (1)(3) Hedge Ceiling (1)(3) Percentage
Ended December 31, (per mcf) (per mcf) Hedged (2)
------------------ ------------------- -------------------- ----------
2008 $ 8.28 $ 10.29 5%
2009 $ 12.02 $ 16.63 1%
2010 $ 8.76 $ 10.01 11%
2011 $ 8.30 $ 9.31 24%
2012 $ 7.78 $ 9.24 1%
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Crude Oil
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Fixed Price Swaps
------------------
Average
Production Period Hedge Price (1) Percentage
Ended December 31, (per bbl) Hedged (2)
------------------ ----------------- -----------------
2008 $ 104.12 33%
2009 $ 99.91 28%
2010 $ 97.31 24%
2011 $ 96.39 21%
2012 $ 96.00 17%
2013 $ 96.06 4%
Costless Collars
------------------
Average Average
Production Period Hedge Floor (1) Hedge Ceiling (1) Percentage
Ended December 31, (per bbl) (per bbl) Hedged (2)
------------------ ----------------- ----------------- --------------
2008 $ 85.00 $ 126.42 19%
2009 $ 85.00 $ 118.07 17%
2010 $ 85.00 $ 112.72 15%
2011 $ 85.00 $ 110.72 13%
2012 $ 85.00 $ 110.05 11%
2013 $ 85.00 $ 110.09 2%
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(1) "Mcf" represents thousand cubic feet; "Bbl" represents barrel.
(2) Percentages hedged are based on:
Natural Gas: a) for Appalachia, actual second quarter 2008
natural gas production, and b) for Michigan, previously
provided natural gas production guidance for full year 2008.
Crude Oil: actual second quarter 2008 crude oil production.
(3) Includes an estimated positive basis differential and Btu
adjustment.
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Interested parties are invited to access the live webcast of the
Company's second quarter 2008 results on Wednesday, August 6, 2008 at
9:00 am ET by going to the Investor Relations section of the Company's
website at www.atlasenergyresources.com. An audio replay of the
conference call will also be available beginning at 11:00 am EST on
Wednesday, August 6, 2008. To access the replay, dial 1-888-286-8010
and enter conference code 85022693.
Atlas Energy Resources, LLC develops and produces domestic natural
gas and to a lesser extent, oil. The Company is one of the largest
independent energy producers in the Appalachian Basin and northern
Michigan. The Company sponsors and manages tax-advantaged investment
partnerships, in which it co-invests, to finance the exploration and
development of its acreage in the Appalachian Basin. The Company is
active principally in Pennsylvania, Michigan and Tennessee. For more
information, visit the Company's website at
www.atlasenergyresources.com or contact investor relations at
bbegley@atlasamerica.com.
Atlas America, Inc. owns an approximate 64% limited partner
interest in Atlas Pipeline Holdings, L.P. (NYSE: AHD) and an
approximate 48% common unit interest and all of the Class A and
management incentive interests in Atlas Energy Resources, LLC. For
more information, please visit Atlas America's website at
www.atlasamerica.com, or contact Investor Relations at
bbegley@atlasamerica.com.
Atlas Pipeline Partners, L.P. is active in the transmission,
gathering and processing segments of the midstream natural gas
industry. In the Mid-Continent region of Oklahoma, Arkansas, southern
Kansas, northern and western Texas and the Texas panhandle, the
Partnership owns and operates eight active gas processing plants and a
treating facility, as well as approximately 7,900 miles of active
intrastate gas gathering pipeline and a 565-mile interstate natural
gas pipeline. In Appalachia, it owns and operates approximately 1,600
miles of natural gas gathering pipelines in western Pennsylvania,
western New York, eastern Ohio and northeastern Tennessee. For more
information, visit our website at www.atlaspipelinepartners.com or
contact bbegley@atlaspipelinepartners.com.
Atlas Pipeline Holdings, L.P. is a limited partnership which owns
and operates the general partner of Atlas Pipeline Partners, L.P.,
through which it owns a 2% general partner interest, all the incentive
distribution rights and approximately 5.8 million common units of
Atlas Pipeline Partners, L.P.
Certain matters discussed within this press release are
forward-looking statements. Although Atlas Energy Resources, LLC
believes the expectations reflected in such forward-looking statements
are based on reasonable assumptions, it can give no assurance that its
expectations will be attained. Factors that could cause actual results
to differ materially from expectations include financial performance,
regulatory changes, changes in local or national economic conditions
and other risks detailed from time to time in Atlas Energy's reports
filed with the SEC, including quarterly reports on Form 10-Q, reports
on Form 8-K and annual reports on Form 10-K.
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ATLAS ENERGY RESOURCES, LLC
Unaudited
Financial Summary
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
REVENUES
Well construction and
completion $122,341 $ 65,139 $226,479 $137,517
Gas and oil production 78,957 25,315 155,183 46,575
Administration and oversight 5,137 3,439 10,154 7,983
Well services 5,266 4,155 10,064 7,876
Gathering 5,855 3,750 10,265 7,038
Gain on mark-to-market
derivatives -- 26,257 -- 26,257
--------- --------- --------- ---------
Total revenues 217,556 128,055 412,145 233,246
COSTS AND EXPENSES
Well construction and
completion 106,384 56,648 196,939 119,580
Gas and oil production 15,205 4,445 28,286 8,347
Well services 2,650 2,147 5,062 4,190
Gathering fees 5,610 3,750 9,733 7,038
General and administrative 12,286 11,358 24,078 18,257
Depreciation, depletion and
amortization 22,948 6,807 44,758 12,675
--------- --------- --------- ---------
Total operating expenses 165,083 85,155 308,856 170,087
--------- --------- --------- ---------
OPERATING INCOME 52,473 42,900 103,289 63,159
OTHER INCOME (EXPENSE)
Interest expense (14,563) (1,530) (27,868) (1,940)
Other-net 449 295 481 387
--------- --------- --------- ---------
Total other expense (14,114) (1,235) (27,387) (1,553)
--------- --------- --------- ---------
Net income $ 38,359 $ 41,665 $ 75,902 $ 61,606
========= ========= ========= =========
Allocation of net income
attributable to members'
interests:
Class A units $ 2,465 $ 833 $ 4,419 $ 1,232
Class B common units 35,894 40,832 71,483 60,374
--------- --------- --------- ---------
Net income attributable to
members' interests $ 38,359 $ 41,665 $ 75,902 $ 61,606
========= ========= ========= =========
Net income per Class B common
unit:
Basic $ 0.58 $ 1.10 $ 1.16 $ 1.64
========= ========= ========= =========
Diluted $ 0.57 $ 1.08 $ 1.15 $ 1.62
========= ========= ========= =========
Weighted average Class B common
units outstanding:
Basic 62,144 37,196 61,427 36,913
========= ========= ========= =========
Diluted 63,163 37,705 62,199 37,338
========= ========= ========= =========
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June 30, December 31,
2008 2007
---------- ------------
Balance Sheet Data (at period end):
----------------------------------------------
Cash and cash equivalents $ 4,372 $ 25,258
Property and equipment, net 1,795,016 1,693,467
Total assets 2,064,137 1,891,234
Total debt 767,035 740,030
Total members' equity 637,005 836,115
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ATLAS ENERGY RESOURCES, LLC
Unaudited
Financial Information
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2008 2007 2008 2007
--------- ----------- --------- -----------
Capital Expenditure data:
--------------------------
Maintenance capital
expenditures $ 12,975 $ 8,750 $ 25,950 $ 17,500
Expansion capital
expenditures 63,783 1,291,911 106,425 1,305,238
--------- ----------- --------- -----------
Total $ 76,758 $1,300,661 $132,375 $1,322,738
========= =========== ========= ===========
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2008 2007 2008 2007
--------- ----------- --------- -----------
Reconciliation of net
income to adjusted net
income: (1)
Net income $ 38,359 $ 41,665 $ 75,902 $ 61,606
Adjustment to reflect
cash impact of
derivatives (2) 2,920 -- 7,948 --
Gain on mark-to-market
derivatives (3) -- (26,257) -- (26,257)
Non-recurring derivative
fees -- 3,873 -- 3,873
--------- ----------- --------- -----------
Adjusted Net income $ 41,279 $ 19,281 $ 83,850 $ 39,222
========= =========== ========= ===========
Reconciliation of net
income to non-GAAP
measures: (1)
Net income $ 38,359 $ 41,665 $ 75,902 $ 61,606
Depreciation and
amortization 22,948 6,807 44,758 12,675
Interest expense 14,563 1,530 27,868 1,940
--------- ----------- --------- -----------
EBITDA 75,870 50,002 148,528 76,221
Adjustment to reflect
cash impact of
derivatives (2) 2,920 -- 7,948 --
Gain on mark-to-market
derivatives (3) -- (26,257) -- (26,257)
Non-recurring derivative
fees -- 3,873 -- 3,873
Non-cash compensation
expense 1,339 1,044 2,659 2,089
--------- ----------- --------- -----------
Adjusted EBITDA 80,129 28,662 159,135 55,926
Interest expense (14,563) (1,530) (27,868) (1,940)
Amortization of deferred
financing costs
(included within
interest expense)
742 485 1,512 498
Maintenance capital
expenditures (12,975) (8,750) (25,950) (17,500)
--------- ----------- --------- -----------
Distributable cash
flow $ 53,333 $ 18,867 $106,829 $ 36,984
========= =========== ========= ===========
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(1) EBITDA, Adjusted EBITDA, Adjusted net income and distributable
cash flow are non-GAAP (generally accepted accounting principles)
financial measures under the rules of the Securities and Exchange
Commission. Management of Atlas Energy believes that EBITDA,
Adjusted EBITDA, Adjusted net income and distributable cash flow
provide additional information for evaluating the Company's
ability to make distributions to its unitholders, 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.
EBITDA is also a financial measurement that, with certain
negotiated adjustments, is utilized within Atlas Energy financial
covenants under its credit facility. EBITDA, Adjusted EBITDA,
Adjusted net income 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.
(2) Represents cash proceeds received from the settlement of
ineffective derivative gains recognized in fiscal 2007 associated
with the acquisition of AGO from natural gas produced during the
quarter and year-to-date but not reflected in the three months
and six months ended June 30, 2008 consolidated Statements of
Income.
(3) Represents ineffective non-cash gains related to the change in
value of derivative contracts associated with the acquisition of
AGO on June 29, 2007.
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ATLAS ENERGY RESOURCES, LLC
Operating Highlights
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
--------- -------- --------- --------
Production revenues (in
thousands):
Gas (1) $ 74,217 $22,709 $147,091 $42,137
Oil $ 4,706 $ 2,592 $ 8,058 $ 4,419
Production volume:(1) (2) (3)
Appalachia:
--------------------------------
Gas (Mcf/day) 32,259 25,593 31,272 24,643
Oil (Bbls/day) 419 462 409 411
--------- -------- --------- --------
Total (Mcfed) 34,773 28,365 33,726 27,109
--------- -------- --------- --------
Michigan: (4)
--------------------------------
Gas (Mcf/day) 59,767 60,308 59,411 60,308
Oil (Bbls/day) 15 -- 11 --
--------- -------- --------- --------
Total (Mcfed) 59,857 60,308 59,477 60,308
--------- -------- --------- --------
Total (Mcfe/day) 94,630 88,673 93,203 87,417
Average sales prices: (3) (5)
Gas (per Mcf) (6) $ 9.21 $ 9.27 $ 9.39 $ 9.20
Oil (per Bbl) $ 119.16 $ 61.62 $ 105.58 $ 59.40
Production costs:(7)
Lease operating expenses
as a percent of
production revenues 9% 9% 9% 9%
Lease operating expenses
per Mcfe $ 0.83 $ 0.88 $ 0.81 $ 0.85
Production taxes per Mcfe $ 0.43 $ 0.03 $ 0.38 $ 0.04
--------- -------- --------- --------
Total production costs per
Mcfe $ 1.26 $ 0.91 $ 1.19 $ 0.89
Depletion per Mcfe $ 2.56 $ 2.32 $ 2.54 $ 2.31
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(1) Excludes sales of residual gas and sales to landowners.
(2) Production quantities consist of the sum of (i) our proportionate
share of production from wells in which we have a direct
interest, based on our proportionate net revenue interest in such
wells, and (ii) our proportionate share of production from wells
owned by the investment partnerships in which we have an
interest, based on our equity interest in each such partnership
and based on each partnership's proportionate net revenue
interest in these wells.
(3) "Mcf" and "mcfd" represent thousand cubic feet and thousand cubic
feet per day; "mcfe" and "mcfed" represent thousand cubic feet
equivalent and thousand cubic feet equivalent 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.
(4) We acquired AGO on June 29, 2007, and production volume from these
assets have only been included from that date.
(5) Atlas Energy's average sales price for gas before the effects of
financial hedging were $11.21 and $8.36 per Mcf for the three
months ended June 30, 2008 and 2007 and $9.79 and $8.12 per Mcf
for the six months ended June 30, 2008 and 2007, respectively.
(6) Includes $2.9 million and $7.9 million in derivative proceeds,
which were not included as gas revenue in the three months and
six months ended June 30, 2008, respectively.
(7) 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.
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Atlas Energy Resources, LLC
Brian J. Begley
Investor Relations
215-546-5005
215-553-8455 (fax)
Copyright Business Wire 2008
