Atlas Pipeline Partners, L.P. : Atlas Resource Partners, L.P. Reports Operating and Financial Results for the First Quarter 2012
05/07/2012| 05:40pm US/Eastern
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Atlas Resource Partners (ARP) acquired the exploration and
production business from Atlas Energy in March, 2012
Acquired 277 Bcfe of proved reserves in the Barnett Shale for $190
million, expanding its net reserves over 160% to approximately 450 Bcfe
Announced a joint venture with Equal Energy to develop 14,500 acres
in the core of the Mississippi Lime play in Oklahoma, increasing ARP's
oil & liquids exposure
Average net daily production increased to 39.4 Mmcfe/d,
approximately 12% higher than the fourth quarter 2011
Borrowing base increased to $250 million in conjunction with the
Barnett Shale acquisition; $17 million drawn at period end
Atlas Resource Partners, L.P. (NYSE: ARP) ("Atlas Resource" or
"ARP") today reported operating and financial results for the
first quarter 2012.
First Quarter 2012 Highlights & Results
In March 2012, ARP acquired the exploration and production business
from Atlas Energy, L.P. (NYSE: ATLS), the owner of ARP's general
partner and an approximate 64% limited partner interest in ARP.
Adjusted earnings before interest, income taxes, depreciation and
amortization ("EBITDA"), a non-GAAP measure, of $13.5 million(1),
or $0.50 per common unit, for the full first quarter 2012;
Distributable cash flow, a non-GAAP measure, of $3.8 million, or $0.14
per common unit(1) for the period from March 5, 2012, the
effective date of the spinoff from ATLS, to March 31, 2012;
ARP declared a pro-rated cash distribution of $0.12 per limited
partner unit for the partial first quarter 2012. Coverage on the first
quarter 2012 distribution was 1.2x; and,
On a GAAP basis, net loss was $6.2 million for the first quarter 2012.
The loss for the first quarter 2012 included a non-cash asset
impairment of approximately $7 million related to a legacy contract
initiated prior to the acquisition from Chevron Corp. and subject to
immediate write-off. 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.
Recent Events
Barnett Shale Acquisition
On April 30, 2012, ARP acquired approximately 277 Bcfe of proved
reserves, including undeveloped drilling locations, in the Barnett Shale
in Texas from Carrizo Oil & Gas, Inc. (NASD: CRZO) for approximately
$190 million, or $0.69 per mcfe. The acquisition of the Barnett Shale
position increased ARP's net proved reserves by over 160% to
approximately 450 billion cubic feet equivalents ("Bcfe"). This
transaction is expected to be immediately accretive to ARP's adjusted
EBITDA and distributable cash flow. ARP hedged approximately 100% of its
acquired production through June 2013, using a combination of swap and
put option contracts. Additionally, ARP hedged approximately 80% of its
acquired production in the Barnett Shale for a substantial amount
thereafter. The transaction was funded by a private placement of equity
of approximately $120 million and approximately $70 million borrowed
against ARP's revolving credit facility. Concurrent with the closing of
the transaction, ARP expanded the capacity on its revolving credit line
to a borrowing base of approximately $250 million from $138 million.
Mississippi Lime Joint Venture
On April 17, 2012, ARP acquired a 50% interest in approximately 14,500
net undeveloped acres in the core of the oil & liquids rich Mississippi
Lime play in northwestern Oklahoma from subsidiaries of Equal Energy,
Ltd. ("Equal") (NYSE: EQU; TSX: EQU) for approximately $18 million,
which was funded through borrowings under ARP's revolving credit
facility. The acreage position is located in Alfalfa, Garfield and Grant
Counties, Oklahoma and is almost entirely held by Equal's existing
production from the Hunton formation. ARP and Equal also entered into a
participation and development agreement, whereby ARP and Equal will
drill continuously with one rig in the Mississippi Lime for the first 18
months following the transaction's closing. ARP will operate the
drilling and completion activities, and Equal will undertake production
operations, including water disposal. ARP also has the option to drill
an additional four net wells to its account in the 12 months following
closing. After the initial 18 months, additional rigs may be added. Each
party can contribute acreage to the venture through the establishment of
an area of mutual interest closely surrounding Equal's existing acreage
position.
E&P Operations & Investment Partnership Business
Average net daily production for the first quarter 2012 was 39.4
million cubic feet equivalents per day ("Mmcfed"), an increase of
approximately 4.2 Mmcfed, or 12%, compared with the fourth quarter
2011. The increase was primarily due to additional Marcellus Shale
wells connected in southwestern Pennsylvania during the quarter.
Drilled 60 net wells within ARP's investment partnerships during the
first quarter 2012 compared with 20 net wells for the prior year
comparable period, a 300% increase. At March 31, 2012, ARP had $28.0
million of funds raised from its investment partnerships that had not
been applied to the completion of wells at period end, and thus at
quarter end had not yet been recognized as well construction and
completion revenue on its consolidated combined statements of
operations. ARP expects to recognize this amount as revenue during the
remainder of 2012.
Corporate Expenses
Cash general and administrative expense was $9.3 million for the first
quarter 2012, a $5.1 million increase from $4.2 million for the prior
year first quarter and a decrease of $0.1 million from the fourth
quarter 2011. The increase from prior year first quarter was
principally due to $2.7 million of reimbursements received in the
prior year from a transition service agreement with Chevron Corp.
Additionally, Chevron assumed the majority of Atlas' expenses in the
prior year comparable quarter, as the transaction was completed midway
through that period.
Cash interest expense was $0.1 million for the first quarter 2012. As
of March 31, 2012, ARP had $17.0 million outstanding under its
revolving credit facility, which has a current borrowing base of $250
million, and had a cash position of $33.7 million.
ARP recognized a $7.0 million loss on asset disposal during the first
quarter 2012 pertaining to its decision to terminate a farm out
agreement with a third party for well drilling in the South Knox area
of the New Albany Shale that was originally entered into in 2010. The
farm out agreement, which was a legacy contract initiated prior to the
acquisition from Chevron Corp. in February 2011, contained certain
well drilling targets for ARP to maintain ownership of the South Knox
processing plant, which ARP's management decided in 2012 not to pursue
due to the current natural gas price environment. As a result, ARP
yielded ownership of the processing plant and recorded a loss related
to the net book values of those assets as of March 31, 2012.
Hedging Summary
ARP entered into additional derivative contracts during the first
quarter 2012 for its natural gas and oil production. ARP currently has
approximately 64.7 billion cubic feet equivalents of its future
production hedged through 2016. A summary of the ARP current
derivative positions as of May 7, 2012 is as follows:
Includes an estimated positive basis differential and Btu (British
thermal units) adjustment.
(c)
Reflects hedges covering the last nine months of 2012.
(d)
These derivative contracts reflect the additional hedge positions
which ARP entered related to its acquisition of Barnett Shale
assets. Swaptions are contracts which provide ARP the option to
enter into swap contracts up through May 31, 2012 for the reported
natural gas volumes and prices.
Interested parties are invited to access the live webcast of an investor
call with management regarding Atlas Resource Partners, L.P.'s firstquarter
2012 results on Tuesday, May 8, 2012 at 9:00 am ET by going to the Investor
Relations section of Atlas Resource's website at www.atlasresourcepartners.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 Resource
website and telephonically beginning at 11:00 a.m. ET on May 8, 2012 by
dialing 888-286-8010, passcode: 75755395.
Atlas Energy, L.P. (NYSE: ATLS) is a master limited partnership
which owns all of the general partner Class A units and incentive
distribution rights and an approximate 64% limited partner interest in
its upstream oil & gas subsidiary, Atlas Resource Partners, L.P.
Additionally, Atlas Energy owns and operates the general partner of its
midstream oil & gas subsidiary, Atlas Pipeline Partners, L.P., through
all of the general partner interest, all the incentive distribution
rights and an approximate 11% limited partner interest. For more
information, please visit our website at www.atlasenergy.com,
or contact Investor Relations at InvestorRelations@atlasenergy.com.
Atlas Resource Partners, L.P. (NYSE: ARP) is an exploration &
production master limited partnership which owns an interest in over
8,600 producing natural gas and oil wells, representing approximately
450 Bcfe of net proved reserves, primarily in Appalachia and the Barnett
Shale in Texas. ARP is also the largest sponsor of natural gas and oil
investment partnerships in the U.S. For more information, please visit
our website at www.atlasresourcepartners.com,
or contact Investor Relations at InvestorRelations@atlasenergy.com.
Atlas Pipeline Partners, L.P. (NYSE: APL) is active in the
gathering and processing segments of the midstream natural gas industry.
In the midcontinent region of Oklahoma, southern Kansas, and northern
and western Texas, APL owns and operates seven active gas processing
plants as well as approximately 9,000 miles of active intrastate gas
gathering pipeline. APL also has a 20% interest in West Texas LPG
Pipeline Limited Partnership, which is operated by Chevron Corporation.
For more information, visit the Partnership's website at www.atlaspipeline.com
or contact IR@atlaspipeline.com.
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.ARP 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, ARP'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 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; ARP'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 ARP's 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 ARP
assumes no obligation to update such statements, except as may be
required by applicable law.
ATLAS RESOURCE PARTNERS, L.P.
CONSOLIDATED COMBINED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per unit data)
Three Months Ended
March 31,
2012
2011
Revenues:
Gas and oil production
$
17,164
$
17,626
Well construction and completion
43,719
17,725
Gathering and processing
3,314
4,499
Administration and oversight
2,831
1,361
Well services
5,006
5,286
Other, net
(933
)
(53
)
Total revenues
71,101
46,444
Costs and expenses:
Gas and oil production
4,505
3,921
Well construction and completion
37,695
15,021
Gathering and processing
4,674
5,734
Well services
2,430
2,360
General and administrative
11,742
4,242
Depreciation, depletion and amortization
9,108
7,701
Total costs and expenses
70,154
38,979
Operating income
947
7,465
Loss on asset disposal
(7,005
)
--
Interest expense
(150
)
--
Net income (loss)
$
(6,208
)
$
7,465
Allocation of net income (loss):
Portion applicable to owner's interest (period prior to the transfer
of assets on March 5, 2012)
$
250
$
7,465
Portion applicable to common limited partners and general partner's
interests (period subsequent to the transfer of assets on March 5,
2012)
(6,458
)
--
Net income (loss)
$
(6,208
)
$
7,465
Allocation of net loss attributable to common limited partners
and the general partner:
General partner's interest
$
(129
)
$
--
Common limited partners' interest
(6,329
)
--
Net loss attributable to common limited partners and the general
partner
$
(6,458
)
$
--
Net loss attributable to common limited partners per unit:
Basic
$
(0.24
)
$
--
Diluted
$
(0.24
)
$
--
Weighted average common limited partner units outstanding:
Basic
26,200
--
Diluted
26,200
--
ATLAS RESOURCE PARTNERS, L.P.
CONSOLIDATED COMBINED BALANCE SHEETS
(unaudited; in thousands)
March 31,
December 31,
ASSETS
2012
2011
Current assets:
Cash and cash equivalents
$
33,681
$
54,708
Accounts receivable
21,556
53,774
Current portion of derivative asset
26,154
13,801
Prepaid expenses and other
6,614
7,677
Total current assets
88,005
129,960
Property, plant and equipment, net
521,671
520,883
Goodwill and intangible assets, net
33,238
33,285
Long-term derivative asset
20,311
16,128
Other assets, net
4,750
857
$
667,975
$
701,113
LIABILITIES AND PARTNERS' CAPITAL/EQUITY
Current liabilities:
Accounts payable
$
33,291
$
36,731
Liabilities associated with drilling contracts
27,998
71,719
Current portion of derivative payable to Drilling Partnerships
18,541
20,900
Accrued well drilling and completion costs
20,404
17,585
Accrued liabilities
24,312
35,952
Total current liabilities
124,546
182,887
Long-term debt
17,000
--
Long-term derivative payable to Drilling Partnerships
11,499
15,272
Asset retirement obligations and other
46,769
45,779
Commitments and contingencies
Partners' Capital/Equity:
General partner's interest
8,533
--
Common limited partners' interests
418,130
--
Equity
--
427,246
Accumulated other comprehensive income
41,498
29,929
Total partners' capital/equity
468,161
457,175
$
667,975
$
701,113
ATLAS RESOURCE PARTNERS, L.P.
Financial and Operating Highlights
Three Months Ended
March 31,
2012
2011
Net loss attributable to common limited partners per unit - basic
$
(0.24
)
$
?
Distributable cash flow per unit(1)(2)
$
0.14
$
?
Cash distributions paid per unit(3)
$
0.12
$
?
Production revenues (in thousands):
Natural gas
$
12,699
$
13,722
Oil
2,787
2,059
Natural gas liquids
1,678
1,845
Total production revenues
$
17,164
$
17,626
Production volume:(4)(5)
Appalachia(6):
Natural gas (Mcfd)
31,391
29,226
Oil (Bpd)
305
262
Natural gas liquids (Bpd)
422
465
Total (Mcfed)
35,751
33,589
New Albany/Antrim:
Natural gas (Mcfd)
3,026
3,244
Oil (Bpd)
--
--
Natural gas liquids (Bpd)
--
--
Total (Mcfed)
3,026
3,244
Niobrara:
Natural gas (Mcfd)
642
185
Oil (Bpd)
--
--
Natural gas liquids (Bpd)
--
--
Total (Mcfed)
642
185
Total:
Natural gas (Mcfd)
35,060
32,655
Oil (Bpd)
305
262
Natural gas liquids (Bpd)
422
465
Total (Mcfed)
39,420
37,019
Average sales prices:(5)
Natural gas (per Mcf) (7)
$
4.33
$
5.46
Oil (per Bbl)(8)
$
100.41
$
87.39
Natural gas liquids (per Bbl)
$
43.73
$
44.04
Production costs:(5)(9)
Lease operating expenses per Mcfe(10)
$
1.05
$
0.98
Production taxes per Mcfe
0.11
0.11
Total production costs per Mcfe(10)
$
1.16
$
1.09
Depletion per Mcfe(5)
$
2.11
$
1.97
(1)
A reconciliation from net income to distributable cash flow is
provided in the financial tables of this release.
(2)
For the three months ended March 31, 2012, 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 March 5, 2012, the date of
the transfer of assets, to March 31, 2012. Prior to March 5, 2012,
no common limited partner units were outstanding.
(3)
Represents the cash distributions declared per limited partner unit
for the respective period and paid by ARP within 45 days after the
end of each quarter, based upon the distributable cash flow
generated during the respective quarter. The cash distribution
declared of $0.12 per limited partner unit for the 1st
quarter 2012 reflects a prorated cash distribution for the 27-day
period from March 5, 2012, the date of transfer of the assets to
ARP, to March 31, 2012.
(4)
Production quantities consist of the sum of (i) ARP's proportionate
share of production from wells in which it has a direct interest,
based on ARP's proportionate net revenue interest in such wells, and
(ii) ARP's proportionate share of production from wells owned by the
investment partnerships in which ARP has an interest, based on its
equity interest in each such partnership and based on each
partnership's proportionate net revenue interest in these wells.
(5)
"Mcf" and "Mcfd" represent thousand cubic feet and thousand cubic
feet per day; "Mcfe" and "Mcfed" represent thousand cubic feet
equivalents and thousand cubic feet equivalents per day, and "Bbl"
and "Bpd" represent barrels and barrels per day. Barrels are
converted to Mcfe using the ratio of six Mcf's to one barrel.
(6)
Appalachia consists of ARP's production located in Pennsylvania,
Ohio, New York, West Virginia and Tennessee.
(7)
ARP's average sales prices for natural gas before the effects of
financial hedging were $2.88 per Mcf and $4.47 per Mcf for the three
months ended March 31, 2012 and 2011, respectively. These amounts
exclude the impact of subordination of production revenues to
investor partners within the investor partnerships. Including the
effects of subordination, average natural gas sales prices were
$3.98 per Mcf ($2.53 per Mcf before the effects of financial
hedging) and $4.67 per Mcf ($3.68 per Mcf before the effects of
financial hedging) for the three months ended March 31, 2012 and
2011, respectively.
(8)
ARP's average sales prices for oil before the effects of financial
hedging were $100.41 per barrel and $87.39 per barrel for the three
months ended March 31, 2012 and 2011, respectively.
(9)
Production costs include labor to operate the wells and related
equipment, repairs and maintenance, materials and supplies, property
taxes, severance taxes, insurance and production overhead. These
amounts exclude the effects of ARP's proportionate share of lease
operating expenses associated with subordination of production
revenue to investor partners within ARP's investor partnerships.
Including the effects of these costs, lease operating expenses per
Mcfe were $0.84 per Mcfe ($0.95 per Mcfe for total production costs)
and $0.69 per Mcfe ($0.80 per Mcfe for total production costs) for
the three months ended March 31, 2012 and 2011, respectively.
(10)
First quarter 2011 amount was adjusted to reflect current period
classification resulting from the misclassification of amounts lease
operating production expenses and transportation production expenses.
ATLAS RESOURCE PARTNERS, L.P.
CAPITALIZATION INFORMATION
(unaudited; in thousands)
March 31, 2012
December 31, 2011
Total debt
$
17,000
$
--
Less: Cash
(33,681
)
(54,708
)
Total net debt/(cash)
(16,681
)
(54,708
)
Partners' capital/equity
468,161
457,175
Total capitalization
$
451,480
$
402,467
Ratio of net debt to capitalization
0.00x
0.00x
ATLAS RESOURCE PARTNERS, L.P.
CAPITAL EXPENDITURE DATA
(unaudited; in thousands)
Three Months Ended
March 31,
2012
2011
Maintenance capital expenditures
$
1,750
$
1,666
Expansion capital expenditures
17,208
6,066
Total
$
18,958
$
7,732
ATLAS RESOURCE PARTNERS, L.P.
Financial Information
(unaudited; in thousands)
Three Months Ended
March 31,
Adjusted EBITDA and Distributable Cash Flow Summary:
2012
2011
Gas and oil production margin
$
12,659
$
13,539
Well construction and completion margin
6,024
2,704
Administration and oversight margin
2,831
1,361
Well services margin
2,576
2,926
Gathering
(1,360
)
(1,235
)
Gross Margin
22,730
19,295
Cash general and administrative expenses
(9,287
)
(4,242
)
Other, net
18
(53
)
Adjusted EBITDA(1)
13,461
15,000
Cash interest expense(2)
(58
)
?
Maintenance capital expenditures
(1,750
)
(1,666
)
Distributable Cash Flow(1)
11,653
13,334
Distributable cash flow not attributable to common limited
partners and the general partner prior to March 5, 2012 (the date
of transfer of assets)(4)
(7,880
)
(13,334
)
Distributable Cash Flow attributable to common limited partners(1)
$
3,773
$
?
Distributions Paid(3)
$
3,208
$
?
per limited partner unit
$
0.12
$
?
Reconciliation of non-GAAP measures to net income (loss)(3):
Distributable cash flow attributable to common limited partners and
the general partner
$
3,773
$
?
Distributable cash flow not attributable to common limited partners
and the general partner prior to March 5, 2012 (the date of transfer
of assets)(4)
7,880
13,334
Acquisition and related costs
(2,455
)
?
Depreciation, depletion and amortization
(9,108
)
(7,701
)
Amortization of deferred finance costs
(92
)
?
Maintenance capital expenditures
1,750
1,666
Loss on asset disposal
(7,005
)
?
Non-cash impact of derivatives
(951
)
?
Other non-cash adjustments(5)
?
166
Net income (loss)
$
(6,208
)
$
7,465
1)
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 ARP
believes that adjusted EBITDA and distributable cash flow provide
additional information for evaluating ARP'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 ARP'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.
2)
Excludes non-cash amortization of deferred financing costs.
3)
Represents the cash distributions declared for the respective period
and paid by ARP within 45 days after the end of each quarter, based
upon the distributable cash flow generated during the respective
quarter. The cash distribution declared of $0.12 per limited partner
unit for the 1st quarter 2012 reflects a prorated cash
distribution for the 27-day period from March 5, 2012, the date of
transfer of the assets to ARP, to March 31, 2012.
4)
In accordance with prevailing accounting literature, ARP has
adjusted its historical financial statements to present them
combined with the historical financial results of the spin-off
assets for all periods prior to its spin-off date of March 5, 2012.
5)
Includes $0.2 million of Pennsylvania impact fee for the three
months ended March 31, 2011. The fee was instituted by the state
of Pennsylvania subsequent to December 31, 2011 for the full year
2011. ARP allocated the fee prorata to each of the quarterly
periods during 2011.
Atlas Resource Partners, L.P. Brian J. Begley Vice President -
Investor Relations 877-280-2857 215-405-2718 (fax)
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