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Atlas Energy, L.P. (ATLS) Reports Operating and Financial Results for the Fourth Quarter and Full Year 2011
  • On March 13, 2012, Atlas Energy unitholders will receive approximately 19.6% of the common limited partner interest of Atlas Resource Partners, L.P., a newly-formed E&P MLP which will hold substantially all of ATLS’ oil & gas assets and investment partnership business
  • Atlas Energy reports $21.5 million in Adjusted EBITDA for the fourth quarter 2011
  • Distributable cash flow was $19.0 million for the current quarter, or $0.37 per common unit
  • ATLS declared a cash distribution of $0.24 per limited partner unit for the fourth quarter 2011, at a distribution coverage ratio of 1.5x

PHILADELPHIA--(BUSINESS WIRE)--Feb. 27, 2012-- Atlas Energy, L.P. (NYSE: ATLS) (“Atlas Energy” or “ATLS”) today reported operating and financial results for the fourth quarter 2011.

Fourth Quarter 2011 and Full Year 2011 Highlights & Results

  • Adjusted earnings before interest, income taxes, depreciation and amortization (“EBITDA”), a non-GAAP measure, of $21.5 million(1)(2) for the fourth quarter 2011 and $80.2 million for the full year 2011;
  • Distributable cash flow, a non-GAAP measure, of $19.0 million, or $0.37 per common unit(1)(2) for the fourth quarter 2011 and $69.9 million, or $1.44 per common unit, for the full year 2011;
  • ATLS declared a cash distribution of $0.24 per limited partner unit for the fourth quarter 2011, a $0.17 per unit increase, or over 200%, from the prior year comparable quarter. Coverage on the fourth quarter 2011 distribution was 1.5x; and,
  • On a GAAP basis, net loss was $9.6 million for the fourth quarter 2011 compared to $47.0 million for the prior year comparable period. The loss for each period was caused primarily by non-cash expenses, including asset impairment write downs on certain oil & gas properties and losses on mark-to-market derivatives. Please see the reconciliation of GAAP net loss to adjusted EBITDA in the financial tables of this release for further information.
 

(1)

  A reconciliation of GAAP net loss to adjusted EBITDA and distributable cash flow is provided in the financial tables of this release.

(2)

On February 17, 2011, ATLS acquired certain assets and assumed certain liabilities (the “Transferred Business”) from Atlas Energy, Inc., the former owner of ATLS’ general partner. ATLS’ gross margin, adjusted EBITDA and distributable cash flow include the results of operations of the Transferred Business from the date of acquisition. However, in accordance with prevailing accounting principles, all other ATLS financial information, including revenues and net income, are presented combined with those of the Transferred Business for historical periods prior to the date of acquisition, although ATLS did not own the Transferred Business for these periods.
 

Recent Events

Atlas Energy Formally Approves Distribution of Atlas Resource Partners’ Units to ATLS Unitholders

On February 16, 2012, ATLS and Atlas Resource Partners, L.P. (“ARP”), a newly formed exploration & production (“E&P”) master limited partnership (“MLP”) that will hold substantially all of ATLS’ current natural gas and oil development and production assets and its investment partnership business, announced that the board of directors of ATLS’ general partner approved the distribution of approximately 5.24 million ARP common units, representing an approximate 19.6% limited partner interest in ARP. The distribution of ARP units will be conducted on Tuesday, March 13, 2012 to all ATLS unitholders of record as of Tuesday, February 28, 2012. ATLS unitholders will receive 0.1021 of a common unit of ARP for each common unit of ATLS owned as of the close of business on the record date. ATLS unitholders will receive cash in lieu of fractional units of ARP, which will be aggregated and sold on their behalf by ATLS’ transfer agent.

Immediately after the distribution of the limited partner interests in ARP, ATLS will continue to hold common units representing an approximate 78.4% limited partner interest in ARP, as well as the general partner of ARP, which will hold a 2% general partner interest and all of the incentive distribution rights in ARP. ATLS will also continue to own its existing interest in the midstream operations of Atlas Pipeline Partners, L.P. (NYSE: APL), ATLS’ midstream subsidiary, a leading natural gas gathering and processing MLP based in the Mid Continent region in Oklahoma and Texas.

E&P Operations & Investment Partnership Business

  • Average net daily production for the fourth quarter 2011 was 35.2 million cubic feet equivalents per day (“mmcfed”), including net daily production of 31.5 mmcfed for the Appalachia segment.
  • As of December 31, 2011, ATLS had approximately 167.6 billion cubic feet equivalents in net proved natural gas & oil reserves, valued at a PV-10 amount of approximately $219.9 million, which does not include the value of ATLS’ commodity derivatives. The fair value of ATLS’ commodity derivatives at December 31, 2011 was approximately $29.9 million.
  • Investment partnership margin(3) contributed $14.8 million to distributable cash flow for the fourth quarter 2011 compared with $10.4 million for the third quarter 2011. This rise was primarily due to the increase in funds raised and capital deployed for the direct investment programs.
  • In December 2011, ATLS completed fundraising for Atlas Resources Series 31 - 2011, raising a total of approximately $42.1 million in investor capital for future drilling activity, bringing total funds raised in 2011 to $141.9 million. ATLS expects to raise approximately $250 million in investor funds in 2012.
  (3)   Investment partnership margin is comprised of Well Construction and Completion margin, Well Services margin and Administration and Oversight Fee revenues.
 

Interest in Atlas Pipeline Partners, L.P.

  • On January 26, 2012, APL declared a cash distribution of $0.55 per unit on its outstanding common limited partner units, representing the cash distribution for the quarter ended December 31, 2011, an $0.18 per unit increase, or 48.6%, from the prior year comparable quarter. ATLS received $5.2 million of cash distributions from APL on February 14, 2012, the payment date for the APL fourth quarter 2011 distribution, a $2.7 million, or over 100%, increase from the prior year comparable quarter.
  • During the fourth quarter 2011, APL operated at or above nameplate capacity on all of its gathering and processing systems in the Mid Continent. APL processed approximately 601 mmcfd of natural gas in the fourth quarter 2011 amongst its WestOK, WestTX and Velma systems, a 23% increase over the prior year comparable quarter’s volumes. Record high volumes of approximately 58,600 bbl per day of gross natural gas liquids were generated from APL’s three processing systems in Oklahoma and Texas.
  • APL recently provided updated adjusted EBITDA guidance for 2012 in a range of $200 million to $225 million, and also issued 2013 adjusted EBITDA guidance in a range of $250 million to $300 million. The growth in expected cash flow through 2013 is a result of organic expansion projects underway at APL, to increase throughput capacity and efficiency on all three of APL’s operating systems.
  • At December 31, 2011, ATLS owned a 2.0% general partner interest, all of the incentive distribution rights, and a 10.7% common limited partner interest in APL. ATLS’ financial results are presented on a consolidated basis with those of APL. Non-controlling interests in APL are reflected as income (expense) in ATLS’ consolidated combined statements of operations and as a component of partners’ capital on its consolidated combined balance sheets. A consolidating combined statement of operations and balance sheet have also been provided in the financial tables to this release for the comparable periods presented.

Please refer to the Atlas Pipeline fourth quarter 2011 earnings release for additional details on its financial results.

Corporate and Other

  • Cash general and administrative expense, excluding amounts attributable to APL, was $9.8 million for the fourth quarter 2011. The current period is presented net of $3.3 million fees received, net of $0.2 million associated costs, from ATLS’ Transition Service Agreement with Chevron Corp., through which ATLS has provided accounting and other services. Please refer to the consolidating combined statements of operations provided in the financial tables of this release.
  • Cash interest expense, excluding amounts attributable to APL, was $0.2 million for the fourth quarter 2011. As of December 31, 2011, ATLS had no amounts outstanding under its revolving credit facility, which has a current borrowing base of $160 million, and had a cash position of $77.2 million.

Hedging Summary

  • ATLS entered into additional derivative contracts during the fourth quarter 2011 and the early part of the first quarter of 2012 for its natural gas and oil production. ATLS currently has approximately 35.8 billion cubic feet equivalents of its future production hedged through 2016. A summary of the ATLS’ current derivative positions as of February 27, 2012 is as follows:
     

Natural Gas

 

Fixed Price Swaps

Average
Production Period Fixed Price Volumes
Ended December 31, (per mcf)(a)(b) (per mcf)(a) % Hedged(c)
2012 $ 5.05 6,285,714 56 %
2013 $ 5.70 2,971,429 27 %
2014 $ 5.52 3,771,429 34 %
2015 $ 5.80 3,771,429 34 %
2016 $ 4.75 1,028,571 9 %
         

Costless Collars

Average Average
Production Period Floor Price Ceiling Price Volumes
Ended December 31, (per mcf)(a)(b) (per mcf)(a)(b) (per mcf)(a) % Hedged(c)
2012 $ 4.43 $ 5.69 4,114,286 37 %
2013 $ 4.76 $ 5.86 5,257,143 47 %
2014 $ 4.58 $ 5.52 3,657,143 33 %
2015 $ 4.66 $ 5.64 3,657,143 33 %
       

Crude Oil

 

Fixed Price Swaps

Average
Production Period Fixed Price Volumes
Ended December 31, (per bbl)(a) (per bbl)(a) % Hedged(c)
2012 $ 99.30 8,250 7 %
2013 $ 97.45 9,000 7 %
2014 $ 93.80 12,000 10 %
2015 $ 90.90 12,000 10 %
2016 $ 89.10 9,000 7 %
         

Costless Collars

Average Average
Production Period Floor Price Ceiling Price Volumes
Ended December 31, (per bbl)(a) (per bbl)(a) (bbls)(a) % Hedged(c)
2012 $ 90.00 $ 117.91 60,000 49 %
2013 $ 90.00 $ 116.40 60,000 49 %
2014 $ 80.00 $ 121.25 24,000 19 %
2015 $ 80.00 $ 120.75 24,000 19 %
         
  (a)   “Mcf” represents thousand cubic feet; “bbl” represents barrel.
(b) Includes an estimated positive basis differential and Btu (British thermal units) adjustment.
(c) Hedge percentages based on Q4 2011 average production rates.
 

Interested parties are invited to access the live webcast of an investor call with management regarding Atlas Energy, L.P.’s fourth quarter 2011 results on Tuesday, February 28, 2012 at 9:00 am ET by going to the Investor Relations section of Atlas Energy’s website at www.atlasenergy.com. For those unavailable to listen to the live broadcast, the replay of the webcast will be available following the live call on the Atlas Energy website and telephonically beginning at 12:00 p.m. ET on February 28, 2012 by dialing 888-286-8010, passcode: 94367344.

Atlas Energy, L.P. is a master limited partnership which owns an interest in over 8,500 producing natural gas and oil wells, representing approximately 168 Bcfe of net proved reserves. Additionally, Atlas Energy owns and operates the general partner of Atlas Pipeline Partners, L.P. (NYSE: APL), through which it owns a 2% general partner interest, all of the incentive distribution rights and approximately 5.75 million common limited partner units of APL. For more information, please visit our website at www.atlasenergy.com, or contact Investor Relations at InvestorRelations@atlasenergy.com.

Atlas Resource Partners, L.P. is currently a wholly owned subsidiary of Atlas Energy, L.P. and will become a publicly traded master limited partnership through a distribution by Atlas Energy, L.P. to its unitholders of common units representing limited partnership interests in Atlas Resource Partners. Prior to the distribution, Atlas Energy will transfer substantially all of its current natural gas and oil development and production assets and investment partnership business to Atlas Resource Partners. Atlas Resource Partners has received authorization to have its common units listed on the New York Stock Exchange under the ticker symbol “ARP”.

Atlas Pipeline Partners, L.P. (NYSE: APL) is active in the gathering and processing segments of the midstream natural gas industry. In the Mid-Continent region of Oklahoma, southern Kansas, and northern and western Texas, APL owns and operates five active gas processing plants as well as approximately 8,600 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 APL’s website at www.atlaspipeline.com or contact IR@atlaspipeline.com.

Cautionary Note Regarding Forward-Looking Statements

This document contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. ATLS cautions readers that any forward-looking information is not a guarantee of future performance. Such forward-looking statements include, but are not limited to, statements about future financial and operating results, resource potential, ATLS’ plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties that could cause actual results to materially differ from the forward-looking statements include, but are not limited to, those associated with general economic and business conditions; changes in commodity prices; changes in the costs and results of drilling operations; uncertainties about estimates of reserves and resource potential; inability to obtain capital needed for operations; ATLS’ level of indebtedness; changes in government environmental policies and other environmental risks; the availability of drilling equipment and the timing of production; tax consequences of business transactions; and other risks, assumptions and uncertainties detailed from time to time in ATLS’ reports filed with the U.S. Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Forward-looking statements speak only as of the date hereof, and ATLS assumes no obligation to update such statements, except as may be required by applicable law.

   
ATLAS ENERGY, L.P.
CONSOLIDATED COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per unit data)

 
Three Months Ended Years Ended
December 31, December 31,
Revenues: 2011  

2010(1)

2011(1)

 

2010(1)

Gas and oil production $ 15,325 $ 22,234 $ 66,979 $ 93,050
Well construction and completion 70,947 30,117 135,283 206,802
Gathering and processing 346,181 261,892 1,329,753 945,228
Administration and oversight 2,668 2,243 7,741 9,716
Well services 4,752 5,405 19,803 20,994
Loss on mark-to-market derivatives(2) (29,405 ) (9,682 ) (20,453 ) (5,944 )
Other, net   5,146     6,806     31,803     17,437  
Total revenues   415,614     319,015     1,570,909     1,287,283  
 
Costs and expenses:
Gas and oil production 5,147 6,460 17,100 23,323
Well construction and completion 60,876 25,523 115,630 175,247
Gathering and processing 291,306 214,960 1,123,386 790,167
Well services 2,661 3,131 8,738 10,822
General and administrative(1) 23,538 12,211 80,584 37,561
Depreciation, depletion and amortization 27,855 28,079 109,373 115,655
Asset impairment   6,995     50,669     6,995     50,669  
Total costs and expenses   418,378     341,033     1,461,806     1,203,444  
 
Operating income (loss) (2,764 ) (22,018 ) 109,103 83,839
 
Gain (loss) on asset sales 570 (10,729 ) 256,292 (13,676 )
Interest expense(1) (7,434 ) (14,219 ) (38,394 ) (90,448 )
Loss on early extinguishment of debt           (19,574 )   (4,359 )
 
Income (loss) from continuing operations (9,628 ) (46,966 ) 307,427 (24,644 )
 
Income (loss) from discontinued operations       471     (81 )   321,155  
Net (loss) income (9,628 ) (46,495 ) 307,346 296,511
 
Loss (income) attributable to non-controlling interests   5,454     9,295     (257,643 )   (245,764 )
Net income (loss) after non-controlling interests (4,174 ) (37,200 ) 49,703 50,747
Loss (income) not attributable to common limited partners (results of operations of the Transferred Business as of and prior to February 17, 2011, the date of acquisition)(1)  

 

 

    33,192    

 

 

(4,711

 

 

)

  (22,813 )
Net income (loss) attributable to common limited partners $ (4,174 )

$

(4,008

)

$

44,992

 

$

27,934

 
 
Net income (loss) attributable to common limited partners per unit – basic:
Income (loss) from continuing operations attributable to common limited partners $ (0.08 ) $ (0.14 ) $ 0.91 $ (0.43 )
Income from discontinued operations attributable to common limited partners               1.44  
Net income (loss) attributable to common limited partners $ (0.08 ) $ (0.14 ) $ 0.91   $ 1.01  
 
 
Net income (loss) attributable to common limited partners per unit – diluted:
Income (loss) from continuing operations attributable to common limited partners $ (0.08 ) $ (0.14 ) $ 0.88 $ (0.43 )
Income from discontinued operations attributable to common limited partners               1.44  

Net income (loss) attributable to common limited partners

$

(0.08

)

$

(0.14

)

$

0.88

 

$

1.01

 
 
Weighted average common limited partner units outstanding:
Basic   51,271     27,762     48,235     27,718  
Diluted   51,271     27,762     49,694     27,718  
 
Net income (loss) attributable to common limited partners:
Income (loss) from continuing operations $ (4,174 ) $ (4,076 ) $ 45,002 $ (11,994 )
Income (loss) from discontinued operations       68     (10 )   39,928  
Net income (loss) attributable to common limited partners $ (4,174 ) $ (4,008 ) $ 44,992   $ 27,934  
 

(1)

  In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of the Partnership, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as the Partnership was unable to identify and allocate such amounts to the Transferred Business for the respective periods.

(2)

Consists principally of hydrocarbon derivative gains / (losses) that relate to the operating activities of the Partnership’s consolidated subsidiary, APL. The underlying hydrocarbon derivatives do not represent present or potential future obligations of the Partnership.
 
   
ATLAS ENERGY, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands)

 

December 31,

December 31,

ASSETS

2011

2010(1)

Current assets:

Cash and cash equivalents

$

77,376

$

247

Accounts receivable

136,853

120,697

Current portion of derivative asset

15,447

36,621

Prepaid expenses and other

 

59,234

 

23,652

 

Total current assets

288,910

181,217

 

Property, plant and equipment, net

2,093,283

1,849,486

Intangible assets, net

104,777

128,543

Investment in joint venture

86,879

153,358

Goodwill, net

31,784

31,784

Long-term derivative asset

30,941

36,125

Other assets, net

 

47,524

 

54,749

 

$

2,684,098

$

2,435,262

 
 

LIABILITIES AND PARTNERS’ CAPITAL

 

Current liabilities:

Current portion of long-term debt

$

2,085

$

35,625

Accounts payable

93,554

75,339

Liabilities associated with drilling contracts

71,719

65,072

Accrued producer liabilities

88,096

72,996

Current portion of derivative liability

4,917

Current portion of derivative payable to Drilling Partnerships

20,900

30,797

Accrued interest

1,629

1,921

Accrued well drilling and completion costs

17,585

30,126

Advances from affiliates

14,335

Accrued liabilities

 

61,653

 

42,654

 

Total current liabilities

357,221

373,782

 

Long-term debt, less current portion

522,055

565,764

Long-term derivative liability

11,901

Long-term derivative payable to Drilling Partnerships

15,272

34,796

Other long-term liabilities

45,469

42,896

 

Commitments and contingencies

 

Partners’ Capital:

Common limited partners’ interests

554,999

413,054

Accumulated other comprehensive income

 

29,376

 

3,882

 

584,375

416,936

Non-controlling interests

 

1,159,706

 

989,187

 

Total partners’ capital

 

1,744,081

 

1,406,123

 

$

2,684,098

$

2,435,262

 
 

(1)

  In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011.
 
   
ATLAS ENERGY, L.P.
Financial and Operating Highlights
 
Three Months Ended Years Ended
December 31, December 31,
2011  

2010(1)

2011(1)

 

2010(1)

 
Net income (loss) attributable to common limited partners per

unit - basic

$ (0.08 ) $ (0.14 ) $ 0.91 $ 1.01
 
Distributable cash flow per unit(2)(3) $ 0.37 $ $ 1.36 $
 
Cash distributions paid per unit(4) $ 0.24 $ 0.07 $ 0.81 $ 0.12
 
Production revenues (in thousands):
Natural gas $ 10,713 $ 17,829 $ 49,096 $ 75,630
Oil 2,716 2,461 10,057 10,541
Natural gas liquids   1,896     1,944     7,826     6,879  
Total production revenues $ 15,325   $ 22,234   $ 66,979   $ 93,050  
 
Production volume:(5)(6)

Appalachia(7):

Natural gas (Mcfd) 26,886 30,539 27,843 33,872
Oil (Bpd) 339 321 307 373
Natural gas liquids (Bpd)   432     517     444     499  
Total (Mcfed)   31,507     35,568     32,352     39,107  

New Albany/Antrim:

Natural gas (Mcfd) 3,062 3,076 3,144 1,983
Oil (Bpd)
Natural gas liquids (Bpd)                
Total (Mcfed)   3,062     3,076     3,144     1,983  

Niobrara:

Natural gas (Mcfd) 612 416
Oil (Bpd)
Natural gas liquids (Bpd)                
Total (Mcfed)   612         416      

Total:

Natural gas (Mcfd) 30,560 33,616 31,403 35,855
Oil (Bpd) 339 321 307 373
Natural gas liquids (Bpd)   432     517     444     499  
Total (Mcfed)   35,182     38,644     35,912     41,090  
 
Average sales prices:(6)
Natural gas (per Mcf) (8) $ 4.20 $ 6.86 $ 4.98 $ 7.08
Oil (per Bbl)(9) $ 87.19 $ 83.21 $ 89.70 $ 77.31
Natural gas liquids (per Bbl) total realized price $ 47.74 $ 40.90 $ 48.26 $ 37.78
 
Production costs:(6)(10)
Lease operating expenses per Mcfe $ 1.20 $ 1.27 $ 1.06 $ 1.27
Production taxes per Mcfe   0.08     0.05     0.10     0.04  
Total production costs per Mcfe $ 1.28 $ 1.32 $ 1.16 $ 1.31
 
Depletion per Mcfe(6) $ 2.10 $ 2.42 $ 2.09 $ 2.44

 

(1)

  In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011.

(2)

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

(3)

Calculation consists of distributable cash flow divided by the weighted average common limited partner units outstanding for the 4th quarter 2011 and the year ended December 31, 2011 of 51,271,000 and 51,253,000, respectively. For the year ended December 31, 2011, the weighted average common limited partner units outstanding utilized for the calculation is the weighted average common limited partner units outstanding for the period subsequent to February 17, 2011, the date of acquisition for the Transferred Business, which includes the 23.4 million common limited partner units issued as partial consideration for the acquisition.

(4)

Represents the cash distributions declared per limited partner unit for the respective period and paid by the Partnership within 50 days after the end of each quarter, based upon the distributable cash flow generated during the respective quarter.

(5)

Production quantities consist of the sum of (i) the Partnership’s proportionate share of production from wells in which it has a direct interest, based on the Partnership’s proportionate net revenue interest in such wells, and (ii) the Partnership’s proportionate share of production from wells owned by the investment partnerships in which the Partnership has an interest, based on its equity interest in each such partnership and based on each partnership’s proportionate net revenue interest in these wells.

(6)

“Mcf” and “Mcfd” represent thousand cubic feet and thousand cubic feet per day; “Mcfe” and “Mcfed” represent thousand cubic feet equivalents and thousand cubic feet equivalents per day, and “Bbl” and “Bpd” represent barrels and barrels per day. Barrels are converted to Mcfe using the ratio of six Mcf’s to one barrel.

(7)

Appalachia consists of the Partnership’s production located in Pennsylvania, Ohio, New York, West Virginia and Tennessee.

(8)

The Partnership’s average sales price for natural gas before the effects of financial hedging was $3.68 per Mcf and $3.85 per Mcf for the three months ended December 31, 2011 and 2010, respectively, and $4.53 per Mcf and $4.60 per Mcf for the years ended December 31, 2011 and 2010, 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 $3.81 per Mcf ($3.29 per Mcf before the effects of financial hedging) and $5.76 per Mcf ($2.76 per Mcf before the effects of financial hedging) for the three months ended December 31, 2011 and 2010, respectively, and $4.28 per Mcf ($3.83 per Mcf before the effects of financial hedging) and $5.78 per Mcf ($3.30 per Mcf before the effects of financial hedging) for the years ended December 31, 2011 and 2010, respectively.

(9)

The Partnership’s average sales price for oil before the effects of financial hedging was $86.76 per barrel and $79.51 per barrel for the three months ended December 31, 2011 and 2010, respectively, and $89.07 per barrel and $71.37 per barrel for the year ended December 31, 2011 and 2010, 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 the Partnership’s proportionate share of lease operating expenses associated with subordination of production revenue to investor partners within the Partnership’s investor partnerships. Including the effects of these costs, lease operating expenses per Mcfe were $0.98 per Mcfe ($1.06 per Mcfe for total production costs) and $0.89 per Mcfe ($0.94 per Mcfe for total production costs) for the three months ended December 31, 2011 and 2010, respectively, and $0.75 per Mcfe ($0.85 per Mcfe for total production costs) and $0.86 per Mcfe ($0.90 per Mcfe for total production costs) for the years ended December 31, 2011 and 2010, respectively.
 
 
ATLAS ENERGY, L.P.
CAPITALIZATION INFORMATION

(unaudited; in thousands)

   
December 31, 2011 December 31, 2010(1)
Atlas   Atlas   Atlas   Atlas   Consolidated
Energy Pipeline Consolidated Energy Pipeline Combined
Total debt $ $ 522,055 $ 522,055 $ 35,415 $ 565,974 $ 601,389
Less: Cash   (77,208 )   (168 )   (77,376 )   (83 )   (164 )   (247 )
Total net debt/(cash) (77,208 ) 521,887 444,679 35,332 565,810 601,142
 
Partners’ capital   584,928     1,236,228    

1,744,081(2)

  418,369     1,041,647    

1,406,123(2)

 
Total capitalization $ 507,720   $ 1,758,115   $ 2,188,760   $ 453,701   $ 1,607,457   $ 2,007,265  
 
Ratio of net debt to

capitalization

0.00x 

 

0.08x 

 

 

(1)

  In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011.

(2)

Net of eliminated amounts.
 
   
ATLAS ENERGY, L.P.
CAPITAL EXPENDITURE DATA

(unaudited; in thousands)

 
Three Months Ended Years Ended
December 31, December 31,
2011  

2010(1)

2011  

2010(1)

Atlas Energy

Maintenance capital expenditures(2) $ 2,300 $ $ 9,833 $
Expansion capital expenditures   8,754   22,892     37,491   93,608  
Total $ 11,054 $ 22,892   $ 47,324 $ 93,608  
 

Atlas Pipeline

Maintenance capital expenditures $ 4,796 $ 4,443 $ 18,247 $ 10,921
Expansion capital expenditures   92,486   10,999     227,179   34,831  
Total $ 97,282 $ 15,442   $ 245,426 $ 45,752  
 

Consolidated Combined

Maintenance capital expenditures $ 7,096 $ 4,443 $ 28,080 $ 10,921
Expansion capital expenditures   101,240   33,891     264,670   128,439  
Total $ 108,336 $ 38,334   $ 292,750 $ 139,360  
 

(1)

  In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011.

(2)

Prior to the Partnership’s acquisition of the Transferred Business on February 17, 2011, the Partnership had no maintenance capital requirements with regard to its oil and gas properties.
   
ATLAS ENERGY, L.P.
Financial Information

(unaudited; in thousands)

 
Three Months Ended Years Ended
December 31, December 31,
Atlas Energy Stand-Alone Adjusted EBITDA and   2011       2010     2011       2010  
Distributable Cash Flow Summary:
Gas and oil production margin $ 10,678 $ $ 41,306 $
Well construction and completion margin 10,071 17,145
Administration and oversight margin 2,668 6,729
Well services margin 2,091 9,528
Gathering   (767 )       (2,437 )    
Gross Margin 24,741 72,271
Cash general and administrative expenses(1) (9,800 ) (1,548 ) (24,953 ) (2,295 )
Atlas Pipeline cash distributions(2) 5,195 2,534 16,558 4,911
Other, net   1,322         16,307      
Adjusted EBITDA(3) 21,458 986 80,183 2,616
Cash interest expense(4) (202 ) (1,031 ) (726 ) (3,175 )
Maintenance capital expenditures(5)   (2,300 )       (9,833 )    
Distributable Cash Flow(3) $ 18,956   $ (45 ) $ 69,624   $ (559 )
 
Distributions Paid(6) $ 12,310 $ 1,948 $ 41,526 $ 3,334
per limited partner unit $ 0.24 $ 0.07 $ 0.81 $ 0.12
 
Reconciliation of non-GAAP measures to net income (loss) attributable to common limited partners(4):
Atlas Energy stand-alone distributable cash flow $ 18,956 $ (45 ) $ 69,624 $ (559 )
Distributable cash flow of Transferred Business as of and prior to February 17, 2011 (the date of acquisition)(7)

24,117

8,261

115,778

Atlas Pipeline net income attributable to common limited partners

198

(1,266

)

37,753

34,674

Atlas Pipeline cash distributions(2) (5,195 ) (2,534 ) (16,558 ) (4,911 )
Non-recurring acquisition costs (2,087 )
Depreciation, depletion and amortization (7,919 ) (8,829 ) (31,938 ) (40,758 )
Asset impairment (6,995 ) (50,669 ) (6,995 ) (50,669 )
Amortization of deferred finance costs (154 ) (5,510 )
Non-cash stock compensation expense (4,201 ) (163 ) (13,132 ) (1,245 )
Maintenance capital expenditures(5) 2,300 9,833
Non-cash net gain (loss) on asset sales 42 90 (2,947 )

Other non-cash adjustments(8)

(1,206

) 2,189 362 1,384

Income not attributable to common limited partners (results of operations of the Transferred Business as of and prior to February 17, 2011, the date of acquisition)(7)

 

 

 

   

 

 

33,192

   

 

 

(4,711

 

 

)

 

 

 

(22,813

 

 

)

Net (loss) income attributable to common limited partners

 

$

(4,174

)

$

(4,008

)

$

44,992

 

$

27,934

 
 

(1)

  Excludes non-cash stock-compensation expense and non-recurring costs incurred in connection with the acquisition of the Transferred Business.

(2)

Represents the cash distribution earned from Atlas Pipeline during the respective quarterly period (and paid from to the Partnership within 45 days after the completion of the respective quarterly period).

(3)

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 the Partnership believes that adjusted EBITDA and distributable cash flow provide additional information for evaluating the Partnership’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 the Partnership’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.

(4)

Excludes non-cash amortization of deferred financing costs.

(5)

Prior to the Partnership’s acquisition of the Transferred Business on February 17, 2011, the Partnership had no maintenance capital requirements with regard to its oil and gas properties.

(6)

Represents the cash distributions declared for the respective period and paid by the Partnership within 50 days after the end of each quarter, based upon the distributable cash flow generated during the respective quarter.

(7)

In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011.

(8)

For the three months ended December 31, 2011, includes $0.5 million of Pennsylvania impact fee related to periods prior to the 4th quarter 2011. The fee was instituted by the state of Pennsylvania subsequent to December 31, 2011, with the fee related to the full year 2011. The Partnership allocated the fee prorata to each of the quarterly periods during 2011.
 
       

ATLAS ENERGY, L.P.

CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)

 

Three Months Ended December 31, 2011

 
Atlas Atlas Consolidated
Energy Pipeline Eliminations Combined
Revenues:
Gas and oil production $ 15,325 $ $ $ 15,325
Well construction and completion 70,947 70,947
Gathering and processing 3,698 342,483 346,181
Administration and oversight 2,668 2,668
Well services 4,752 4,752
Loss on mark-to-market derivatives (29,405 ) (29,405 )
Other, net   616     4,530       5,146  
Total revenues   98,006     317,608       415,614  
 
Costs and expenses:
Gas and oil production 5,147 5,147
Well construction and completion 60,876 60,876
Gathering and processing 4,465 286,841 291,306
Well services 2,661 2,661
General and administrative 14,001 9,537 23,538
Depreciation, depletion and amortization 7,919 19,936 27,855
Asset impairment   6,995           6,995  
Total costs and expenses   102,064     316,314       418,378  
 
Operating (loss) income (4,058 ) 1,294 (2,764 )
 
Gain on asset sales 42 528 570
Interest expense (356 ) (7,078 ) (7,434 )
Loss on early extinguishment of debt              
 
Loss from continuing operations (4,372 ) (5,256 ) (9,628 )
Discontinued operations              
Net loss (4,372 ) (5,256 ) (9,628 )
Income attributable to non-controlling interests       (1,708 )   7,162   5,454  
Net loss attributable to common limited partners $ (4,372 ) $ (6,964 ) $ 7,162 $ (4,174 )
 
       

ATLAS ENERGY, L.P.

CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)
 

Three Months Ended December 31, 2010

 
Atlas Atlas Consolidated
Energy(1) Pipeline Eliminations Combined(1)
Revenues:
Gas and oil production $ 22,234 $ $ $ 22,234
Well construction and completion 30,117 30,117
Gathering and processing 2,673 259,219 261,892
Administration and oversight 2,243 2,243
Well services 5,405 5,405
Loss on mark-to-market derivatives (9,682 ) (9,682 )
Other, net   2,470     4,336       6,806  
Total revenues   65,142     253,873       319,015  
 
Costs and expenses:
Gas and oil production 6,460 6,460
Well construction and completion 25,523 25,523
Gathering and processing 3,722 211,238 214,960
Well services 3,131 3,131
General and administrative 1,711

(1)

10,500 12,211
Depreciation, depletion and amortization 8,829 19,250 28,079
Asset impairment   50,669           50,669  
Total costs and expenses   100,045     240,988       341,033  
 
Operating (loss) income (34,903 ) 12,885 (22,018 )
 
Loss on asset sales (10,729 ) (10,729 )
Interest expense (1,031 )

(1)

(13,188 ) (14,219 )
Loss on early extinguishment of debt              
 
Loss from continuing operations (35,934 ) (11,032 ) (46,966 )
Discontinued operations       471       471  
Net loss (35,934 ) (10,561 ) (46,495 )
Income attributable to non-controlling interests       (1,940 )   11,235   9,295  
Net income after non-controlling interests (35,934 ) (12,501 ) 11,235 (37,200 )

Loss not attributable to common limited partners (results of operations of the Transferred Business as of and prior to February 17, 2011, the date of acquisition(1))

 

33,192

   

   

 

33,192

 
Net loss attributable to common limited partners $ (2,742 ) $ (12,501 ) $ 11,235 $ (4,008 )
 

(1)

  In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of the Partnership, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as the Partnership was unable to identify and allocate such amounts to the Transferred Business for the respective periods.
 
     
ATLAS ENERGY, L.P.
CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)

 

Year Ended December 31, 2011

 

Atlas Atlas Consolidated
Energy(1) Pipeline Eliminations Combined(1)
Revenues:
Gas and oil production $ 66,979 $ $ $ 66,979
Well construction and completion 135,283 135,283
Gathering and processing 17,746 1,312,007 1,329,753
Administration and oversight 7,741 7,741
Well services 19,803 19,803
Loss on mark-to-market derivatives (20,453 ) (20,453 )
Other, net   16,572     15,231         31,803  
Total revenues   264,124     1,306,785         1,570,909  
 
Costs and expenses:
Gas and oil production 17,100 17,100
Well construction and completion 115,630 115,630
Gathering and processing 20,842 1,102,544 1,123,386
Well services 8,738 8,738
General and administrative 44,230

(1)

36,354 80,584
Depreciation, depletion and amortization 31,938 77,435 109,373
Asset impairment   6,995             6,995  
Total costs and expenses   245,473     1,216,333         1,461,806  
 
Operating income 18,651 90,452 109,103
 
Gain on asset sales 90 256,202 256,292
Interest expense (6,791 )

(1)

(31,603 ) (38,394 )
Loss on early extinguishment of debt       (19,574 )       (19,574 )
 
Income from continuing operations 11,950 295,477 307,427
Discontinued operations       (81 )       (81 )
Net income 11,950 295,396 307,346
Income attributable to non-controlling interests       (6,200 )   (251,443 )   (257,643 )
Net income after non-controlling interests 11,950 289,196 (251,443 ) 49,703

Income not attributable to common limited partners (results of operations of the Transferred Business as of and prior to February 17, 2011, the date of acquisition(1))

 

 

 

(4,711

 

 

)

 

 

 

   

 

 

   

 

 

(4,711

 

 

)

Net income attributable to common limited partners $ 7,239   $ 289,196   $ (251,443 ) $ 44,992  
 

(1)

  In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of the Partnership, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as the Partnership was unable to identify and allocate such amounts to the Transferred Business for the respective periods.
 
       
ATLAS ENERGY, L.P.
CONSOLIDATING COMBINED STATEMENTS OF OPERATIONS

(unaudited; in thousands)

 

Year Ended December 31, 2010

 
Atlas Atlas Consolidated
Energy(1) Pipeline Eliminations Combined(1)
Revenues:
Gas and oil production $ 93,050 $ $ $ 93,050
Well construction and completion 206,802 206,802
Gathering and processing 14,087 931,141 945,228
Administration and oversight 9,716 9,716
Well services 20,994 20,994
Loss on mark-to-market derivatives (5,944 ) (5,944 )
Other, net   2,126     15,311         17,437  
Total revenues   346,775     940,508         1,287,283  
 
Costs and expenses:
Gas and oil production 23,323 23,323
Well construction and completion 175,247 175,247
Gathering and processing 20,221 769,946 790,167
Well services 10,822 10,822
General and administrative 3,540

(1)

34,021 37,561
Depreciation, depletion and amortization 40,758 74,897 115,655
Asset impairment   50,669             50,669  
Total costs and expenses   324,580     878,864         1,203,444  
 
Operating income 22,195 61,644 83,839
 
Loss on asset sales (2,947 ) (10,729 ) (13,676 )
Interest expense (3,175 )

(1)

(87,273 ) (90,448 )
Loss on early extinguishment of debt       (4,359 )       (4,359 )
 
Income (loss) from continuing operations 16,073 (40,717 ) (24,644 )
Discontinued operations       321,155         321,155  
Net income 16,073 280,438 296,511
Income attributable to non-controlling interests       (5,518 )   (240,246 )   (245,764 )
Net income after non-controlling interests 16,073 274,920 (240,246 ) 50,747
Income not attributable to common limited partners

(results of operations of the Transferred Business as of and prior to February 17, 2011, the date of acquisition(1))

  (22,813 )             (22,813 )
Net (loss) income attributable to common limited partners

$

(6,740

)

$

274,920

 

$

(240,246

)

$

27,934

 
 

(1)

In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011. However, since the results of operations of the Transferred Business prior to its acquisition date are not attributable to the common limited partners of the Partnership, these amounts have been deducted to obtain net income (loss) attributable to common limited partners for the respective period. Also, the historical results of the Transferred Business prior to the acquisition date do not reflect general and administrative expenses and interest expense as the Partnership was unable to identify and allocate such amounts to the Transferred Business for the respective periods.
 
       

ATLAS ENERGY, L.P.

CONDENSED CONSOLIDATING BALANCE SHEETS

(unaudited; in thousands)
 

December 31, 2011

 
Atlas Atlas
ASSETS Energy Pipeline Eliminations Consolidated
Current assets:
Cash and cash equivalents $ 77,208 $ 168 $ $ 77,376
Accounts receivable 21,441 115,412 136,853
Current portion of derivative asset 13,802 1,645 15,447
Prepaid expenses and other   43,593     15,641         59,234
Total current assets 156,044 132,866 288,910
Property, plant and equipment, net 525,454 1,567,829 2,093,283
Goodwill and intangible assets, net 33,285 103,276 136,561
Long-term derivative asset 16,127 14,814 30,941
Investment in joint venture 86,879 86,879
Investment in subsidiaries 77,075 (77,075 )
Other assets, net   22,375     25,149         47,524
$ 830,360   $ 1,930,813   $ (77,075 ) $ 2,684,098
 
LIABILITIES AND PARTNERS’ CAPITAL
 
Current liabilities:
Current portion of long-term debt $ $ 2,085 $ $ 2,085
Accounts payable 38,910 54,644 93,554
Liabilities associated with drilling contracts 71,719 71,719
Accrued producer liabilities 88,096 88,096
Current portion of derivative liability

Current portion of derivative payable to Partnerships

20,900

20,900

Accrued interest 5 1,624 1,629
Accrued well drilling and completion costs 17,585 17,585
Advances from (receivable from) affiliates (2,675 ) 2,675
Accrued liabilities   38,370     23,283         61,653
Total current liabilities 184,814 172,407 357,221
Long-term debt, less current portion 522,055 522,055
Long-term derivative liability
Long-term derivative payable to Partnerships 15,272 15,272
Other long-term liabilities 45,346 123 45,469
 
Partners’ Capital:
Common limited partners’ interests 554,999 1,269,019 (1,269,019 ) 554,999
Accumulated other comprehensive income (loss)   29,929     (4,390 )   3,837     29,376
584,928 1,264,629 (1,265,182 ) 584,375
Non-controlling interests       (28,401 )   1,188,107     1,159,706
Total partners’ capital   584,928     1,236,228     (77,075 )   1,744,081
$ 830,360   $ 1,930,813   $ (77,075 ) $ 2,684,098
 
         

ATLAS ENERGY, L.P.

CONDENSED CONSOLIDATING COMBINED BALANCE SHEETS

(unaudited; in thousands)

 

December 31, 2010

 
Atlas Atlas Consolidated
ASSETS Energy(1) Pipeline Eliminations Combined(1)
Current assets:
Cash and cash equivalents $ 83 $ 164 $ $ 247
Accounts receivable 20,938 99,759 120,697
Current portion of derivative asset 36,621 36,621
Prepaid expenses and other   8,534   15,118         23,652
Total current assets 66,176 115,041 181,217
 
Property, plant and equipment, net 508,484 1,341,002 1,849,486
Goodwill and intangible assets, net 33,948 126,379 160,327
Long-term derivative asset 36,125 36,125
Investment in joint venture 153,358 153,358
Investment in subsidiaries 53,893 (53,893 )
Other assets, net   25,681   29,068         54,749
$ 724,307 $ 1,764,848   $ (53,893 ) $ 2,435,262
 
LIABILITIES AND PARTNERS’ CAPITAL
 
Current liabilities:
Current portion of long-term debt $ 35,415 $ 210 $ $ 35,625
Accounts payable 45,957 29,382 75,339
Liabilities associated with drilling contracts 65,072 65,072
Accrued producer liabilities 72,996 72,996
Current portion of derivative liability 353 4,564 4,917

Current portion of derivative payable to Partnerships

30,797

30,797

Accrued interest 1,921 1,921
Accrued well drilling and completion costs 30,126 30,126
Advances from affiliates 2,055 12,280 14,335
Accrued liabilities   12,401   30,253         42,654
Total current liabilities 222,176 151,606 373,782
 
Long-term debt, less current portion 565,764 565,764
Long-term derivative liability 6,293 5,608 11,901

Long-term derivative payable to Partnerships

34,796 34,796
Other long-term liabilities 42,673 223 42,896
 
Partners’ Capital:
Common limited partners’ interests 413,054 1,085,408 (1,085,408 ) 413,054

Accumulated other comprehensive income (loss)

  5,315   (11,224 )   9,791     3,882
418,369 1,074,184 (1,075,617 ) 416,936
Non-controlling interests     (32,537 )   1,021,724     989,187
Total partners’ capital   418,369   1,041,647     (53,893 )   1,406,123
$ 724,307 $ 1,764,848   $ (53,893 ) $ 2,435,262
 

(1)

  In accordance with prevailing accounting literature, the Partnership has adjusted its historical financial statements to present them combined with the historical financial results of the Transferred Business for all periods prior to its acquisition date of February 17, 2011.
 

 

ATLAS ENERGY, L.P.

Ownership Interests Summary

 

 

 

Atlas Energy Ownership Interests as of December 31, 2011:

   

 

 

Amount

 

Overall
Ownership
Interest
Percentage

 
ATLAS PIPELINE:
General partner interest 100% 2.0 %
Common units 5,754,253 10.7 %
Incentive distribution rights 100% N/A  

Total Atlas Energy ownership interests in Atlas Pipeline

12.7 %
 
LIGHTFOOT CAPITAL PARTNERS, GP LLC:
Approximate general partner ownership interest 15.9 %
Approximate limited partner ownership interest 12.1 %
 

Source: Atlas Energy, L.P.

Atlas Energy, L.P.
Brian J. Begley
Investor Relations
877-280-2857
fax: 215-405-2718