SOURCE: Atlas America, Inc.

March 01, 2007 22:38 ET

Atlas America, Inc. Reports Results for the Quarter and Year Ended December 31, 2006

Company Reports Record Revenue, Earnings and Production for the Year Ended December 31, 2006

PHILADELPHIA, PA -- (MARKET WIRE) -- March 1, 2007 -- Atlas America, Inc. (NASDAQ: ATLS) reported record earnings before interest, income taxes, depreciation and amortization ("EBITDA"), a non-GAAP measure, of $146.1 million for the year ended December 31, 2006, compared with $102.9 million for the prior year, an increase of $43.2 million, or approximately 42%. Adjusted net income for the year ended December 31, 2006 was $42.0 million, compared with $35.8 million for the prior year, an increase of approximately 17%. Adjusted net income per diluted common share was $2.08 for 2006, an increase of $0.30 per share from the prior year, or approximately 17%. The increase in adjusted net income reflected significant growth in production volumes at Atlas Energy Resources (NYSE: ATN) ("Atlas Energy"), revenues and fees from our drilling programs and midstream operations at Atlas Pipeline Partners, L.P. (NYSE: APL) ("Atlas Pipeline"). A schedule is provided at the end of this release to reconcile net income to adjusted net income and EBITDA. Net income for the year ended December 31, 2006 was $16.0 million. Total revenues reached $749.3 million for the year ended December 31, 2006, or approximately a 27% increase from the prior year. Please see Atlas Energy's and Atlas Pipeline's earnings releases regarding their fourth quarter 2006 earnings for further information regarding their results.

On December 13, 2006, the Company contributed its natural gas and oil exploration and production assets to Atlas Energy. Concurrent with this transaction, Atlas Energy issued approximately 20% of its common units in an initial public offering of 7.3 million units at a price of $21.00 per common unit. Net proceeds of approximately $140 million from the offering, after underwriting commissions and other transaction costs, were distributed to the Company. At December 31, 2006, the Company owns 29,352,996 common units and all of the Class A and management incentive interests in Atlas Energy, representing an overall 80% ownership interest.

On July 26, 2006, the Company contributed its ownership interests in Atlas Pipeline Partners GP, LLC, its then wholly owned subsidiary and general partner of Atlas Pipeline, to Atlas Pipeline Holdings, L.P. (NYSE: AHD) ("Atlas Pipeline Holdings"). Concurrent with this transaction, Atlas Pipeline Holdings issued 3.6 million common limited partner units, representing a 17.1% ownership interest, in an initial public offering at a price of $23.00 per unit. Net proceeds of this offering of approximately $74 million were distributed to the Company. At December 31, 2006, the Company owned 17.5 million common units in Atlas Pipeline Holdings, representing an 83% ownership interest.

At December 31, 2006, the Company's principal operating activities consist of its active management of both Atlas Energy and Atlas Pipeline Holdings, and its cash flows consist of distributions received from the Company's ownership interests in them. The financial information presented reflects the consolidated results of the Company, which include the accounts of Atlas Energy and Atlas Pipeline Holdings. Atlas Pipeline Holdings results also include the consolidated financial results of Atlas Pipeline. The non-controlling limited partner interests in Atlas Energy and Atlas Pipeline Holdings are reflected as an expense in the Company's consolidated results of operations.

"We have completed a notable year, highlighted by our initial public offerings of Atlas Pipeline Holdings and Atlas Energy Resources, and we expect these businesses to grow profitably under our continuing management," stated Edward E. Cohen, Chairman and Chief Executive Officer of the Company. "Our recent announcement of our tender offer for up to 10% of our outstanding common stock shows our recognition of the strong value currently in our shares. Finally, our investment in Lightfoot Capital demonstrates that our Company continues to seek additional ways to provide value for our shareholders, and we look forward to helping grow the Lightfoot business in the future."

Subsequent to the completion of the year, the Company undertook the following strategic initiatives:

--  On February 23, 2007, Atlas Energy filed an amendment to its
    registration statement with the Securities and Exchange Commission for its
    Public 16 drilling program. Atlas Energy expects to raise $200 million in
    this program, the initial offering of the year, and expects to recognize
    drilling and management fees from this program through most of 2007.
    
--  On February 21, 2007, the Company announced the formation of Lightfoot
    Capital Partners, LP ("Lightfoot"), an equity investment management
    partnership created in conjunction with Magnetar Capital, The Global
    Principal Strategies Group of Lehman Brothers, Goldman Sachs & Co. and the
    Lightfoot management team. Lightfoot will focus on investments in assets
    that are qualified to place within a master limited partnership ("MLP"),
    such as infrastructure, coal, and other asset categories.  Lightfoot
    intends to form new MLPs in partnership with premier management teams in
    sectors that have been under-utilized by the MLP structure. The Company
    will own, directly and indirectly, approximately 18% of Lightfoot Capital
    Partners GP LLC, the general partner of Lightfoot, and it will invest $20
    million in the Lightfoot entities.
    
--  On February 8, 2007, the Company announced that it commenced a "Dutch
    Auction" tender offer for up to 1,950,000 shares, or approximately 10%, of
    its then outstanding common stock.  Under terms of the offer, the Company
    will invite shareholders to tender their shares at prices specified by the
    tendering shareholders at a purchase price not in excess of $54.00 or less
    than $52.00 per share. The tender offer period concludes on March 9, 2007.
    During the year ended December 31, 2006, the Company repurchased more than
    660,000 of its shares for approximately $29.9 million at an average price
    of approximately $45 per share.
    
Cash Distributions from Affiliates

On January 24, 2007, Atlas Energy, of which the Company owns an 80% common unit interest, declared its initial quarterly cash distribution for the fourth quarter 2006 of $0.06 per common unit, which was paid on February 14, 2007 to common unitholders of record as of February 7, 2007. This represented a pro-rated distribution of $0.42 per common unit for the period from December 18, 2006, the date of Atlas Energy's initial public offering, through December 31, 2006. The Company received approximately $1.8 million in aggregate cash distributions from its ownership interests in Atlas Energy with regard to this pro-rated quarterly distribution.

Atlas Pipeline Holdings, of which the Company owns an 83% limited partner interest, declared its quarterly cash distribution on January 24, 2007 for the fourth quarter 2006 of $0.25 per common limited partner unit, which was paid on February 19, 2007 to common unitholders of record as of February 7, 2007. This represented the first full quarterly distribution declared by Atlas Pipeline Holdings subsequent to its initial public offering on July 26, 2006. The Company received approximately $4.4 million in cash distributions from its ownership interest in Atlas Pipeline Holdings with regard to this distribution.

Atlas Energy

--  Proved reserves of natural gas equivalents net to Atlas Energy's
    interest grew to 180.9 billion cubic feet ("bcfe") at December 31, 2006, up
    approximately 5% from 171.5 bcfe at December 31, 2005.
    
--  For the year ended December 31, 2006, Atlas Energy generated record
    average natural gas and oil production volumes of 27.0 million cubic feet
    equivalents ("mmcfe") per day, representing an increase of 18% from the
    prior year comparable period. Natural gas and oil production was 28.3 mmcfe
    per day for the three months ended December 31, 2006, an increase of
    approximately 17% from the prior year comparable quarter.
    
--  During the fourth quarter of 2006 and the first quarter of 2007, Atlas
    Energy and its investment partnerships drilled three vertical wells to the
    Marcellus Shale in Western Pennsylvania. Two of these wells have been
    completed and management is pleased with the results. Leases are currently
    held on 157,500 acres, up from 105,000 acres in December 2006, all of which
    management believes is prospective for the Marcellus Shale.  Management
    expects to drill several more vertical wells within the Marcellus Shale
    over the next two quarters and is planning a full development program
    beginning in the fourth quarter of 2007.
    
--  Atlas Energy controlled mineral rights to approximately 547,000 net
    acres at December 31, 2006, an increase of approximately 17% from the net
    acreage position at December 31, 2005 and an approximate 6% increase from
    September 30, 2005.  Undeveloped acreage at December 31, 2006 was
    approximately 323,000 net acres, up approximately 25% from the net acreage
    position at December 31, 2005. These amounts are exclusive of the joint
    venture with Knox Energy, which has now been extended through December
    2007. Atlas Energy has currently identified over 3,100 geologically
    favorable sites for additional well drilling, not including any locations
    within the Marcellus Shale.
    
--  Fund raising for investment drilling partnerships, which is utilized
    to finance well drilling, reached $218.5 million in 2006, an increase of
    approximately 39% from the prior year comparable period.  Atlas Energy
    expects to raise approximately $270 million from investment drilling
    partnerships in calendar year 2007.
    
--  Atlas Energy had interests in over 7,200 gross wells at December 31,
    2006, an increase of approximately 11% from December 31, 2005, and operates
    approximately 85% of these wells.
    

Atlas Pipeline

--  Atlas Pipeline's Mid-Continent segment recognized total revenue of
    $433.8 million for the year ended December 31, 2006, an increase of $87.1
    million from the prior year comparable period.  This increase was
    principally attributable to a full year of revenue contribution from the
    acquisitions of the NOARK Pipeline system ("NOARK"), of which a 100%
    ownership interest was acquired in two separate transactions in October
    2005 and May 2006, and the Elk City system, which was acquired in April
    2005. Total system volume in the Mid-Continent region averaged 587.3
    million cubic feet ("mmcf") per day for the full year 2006, an increase of
    approximately 3% compared to the prior year comparable period, and 641.9
    mmcf per day for the fourth quarter 2006, or 10% higher than the prior year
    comparable quarter.
    
--  Total revenue for Atlas Pipeline's Appalachia system increased to
    $30.9 million for the year ended December 31, 2006, a 25% increase from the
    prior year comparable period, due principally to higher throughput volume
    and an increase in realized natural gas prices between periods.  Throughput
    volume increased to 61.9 mmcf per day for calendar year 2006 compared with
    55.2 mmcf per day for calendar year 2005 due to new wells connected to the
    Appalachia gathering system.  Average transportation rate per mcf was $1.34
    for the year ended December 31, 2006, an 11% increase from $1.21 per mcf
    for the prior year comparable period. Atlas Pipeline's Appalachia system's
    principal customer is Atlas Energy, of which the Company owns an 80%
    interest.
    
--  Atlas Pipeline has announced it will begin efforts on several organic
    growth projects to strengthen its asset base in the Mid-Continent region.
    First, Atlas Pipeline will commence construction of an additional 60 mmcf
    per day expansion of its 120 mmcf per day Sweetwater processing facility.
    Concurrent with this expansion, the Partnership will significantly expand
    its gas gathering system in western Oklahoma and the Texas Panhandle, with
    the project expected to be completed by the first quarter 2008.
    Additionally, Atlas Pipeline will increase compression and loop certain
    existing pipelines on NOARK, the combination of which will increase
    throughput capacity to approximately 450 mmcf per day and is targeted for
    completion in early 2008.
    
Atlas America, Inc. owns an 80% common unit interest and all of the Class A and management incentive interests in Atlas Energy Resources, LLC. Also, Atlas America owns approximately 83% of the limited partner interest in Atlas Pipeline Holdings, L.P. For more information, please visit our website at www.atlasamerica.com, or contact Investor Relations at bbegley@atlasamerica.com.

Atlas Energy Resources, LLC is an energy concern focused on the development and production of natural gas and, to a lesser extent, oil principally in the Appalachian Basin. Atlas Energy sponsors and manages tax advantaged investment partnerships, in which it co-invests, to finance the exploitation and development of its acreage. For more information, visit its website at www.atlasenergyresources.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, northern Texas and the Texas panhandle, Atlas Pipeline owns and operates approximately 1,900 miles of active intrastate gas gathering pipeline and a 565-mile interstate natural gas pipeline. Atlas Pipeline also operates three gas processing plants and a treating facility in Velma, Elk City, Sweetwater and Prentiss, Oklahoma where natural gas liquids and impurities are removed. In Appalachia, it owns and operates approximately 1,600 miles of natural gas gathering pipelines in western Pennsylvania, western New York and eastern Ohio. For more information, visit its website at www.atlaspipelinepartners.com or contact bbegley@atlaspipelinepartners.com.

Atlas Pipeline Holdings, L.P. is the parent company of Atlas Pipeline Partners, L.P.'s general partner, which owns the incentive distribution rights and 1,641,026 units of limited partner interest in Atlas Pipeline. For more information, visit its website at www.atlaspipelineholdings.com or contact investor relations at bbegley@atlasamerica.com.

Certain matters discussed within this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Atlas America, Inc. 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 the Company'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.


                         ATLAS AMERICA, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands, except per share data)


                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
REVENUES
Well construction and
 completion                     $  63,238  $  42,145  $ 198,567  $ 145,925
Gas and oil production             21,753     24,086     88,449     72,926
Transmission, gathering and
 processing                       109,699    128,740    437,575    350,227
Administration and oversight        3,275      2,964     11,762     10,400
Well services                       3,455      2,561     12,953      9,865
                                ---------  ---------  ---------  ---------
                                  201,420    200,496    749,306    589,343
                                ---------  ---------  ---------  ---------
COSTS AND EXPENSES
Well construction and
 completion                        54,989     36,648    172,666    126,891
Gas and oil production              2,062      1,721      8,499      6,570
Transmission, gathering and
 processing                        90,064    109,889    361,045    304,025
Well services                       1,797      1,487      7,337      5,463
General and administrative         13,320      9,453     46,517     29,261
Net expense reimbursement -
 affiliate                            196        163      1,237        552
Depreciation, depletion and
 amortization                      12,485     10,324     45,643     29,347
                                ---------  ---------  ---------  ---------
                                  174,913    169,685    642,944    502,109
                                ---------  ---------  ---------  ---------
OPERATING INCOME                   26,507     30,811    106,362     87,234

OTHER INCOME (EXPENSE)
Interest expense                   (7,865)    (6,147)   (27,313)   (15,924)
Minority interests                 (5,296)    (6,745)   (18,283)   (14,298)
Other, net                          3,921        691      8,564        662
                                ---------  ---------  ---------  ---------
                                   (9,240)   (12,201)   (37,032)   (29,560)
                                ---------  ---------  ---------  ---------
Income before income taxes and
 cumulative impact of change in
 accounting policy                 17,267     18,610     69,330     57,674
Provision for income taxes         (6,676)    (6,886)   (27,308)   (21,902)
Tax on gain on Atlas Pipeline
 Holdings, L.P.                         -          -    (29,846)         -
                                ---------  ---------  ---------  ---------
Net income before cumulative
 effect of accounting change       10,591     11,724     12,176     35,772
Cumulative effect of accounting
 change (net of tax of $2,530)      3,825          -      3,825          -
                                ---------  ---------  ---------  ---------
Net income                      $  14,416  $  11,724  $  16,001  $  35,772
                                =========  =========  =========  =========

Net income per common share -
 basic:
   Net income before cumulative
    effect of accounting change $    0.55  $    0.59  $    0.62  $    1.79
   Cumulative effect of
    accounting change                0.20          -       0.19          -
                                ---------  ---------  ---------  ---------
       Net income               $    0.75  $    0.59  $    0.81  $    1.79
                                =========  =========  =========  =========

   Weighted average common
    shares outstanding - basic     19,348     20,003     19,716     20,001
                                =========  =========  =========  =========

Net income per common share -
 diluted:
   Net income before cumulative
    effect of accounting change $    0.53  $    0.58  $    0.60  $    1.78
   Cumulative effect of
    accounting change                0.20          -       0.19          -
                                ---------  ---------  ---------  ---------
       Net income               $    0.73  $    0.58  $    0.79  $    1.78
                                =========  =========  =========  =========

   Weighted average common
    shares outstanding -
    diluted                        19,813     20,213     20,157     20,101
                                =========  =========  =========  =========



                         ATLAS AMERICA, INC.
                        FINANCIAL INFORMATION
                (in thousands, except per share data)


                                                        December 31,
                                                  -------------------------
                                                      2006         2005
                                                  ------------ ------------
BALANCE SHEET DATA:
  Cash and cash equivalents                       $    185,401 $     55,155
  Property and equipment, net                          884,812      658,347
  Total assets                                       1,376,926    1,056,180
  Total debt                                           324,151      298,781
  Total stockholders’ equity                           132,246      130,425


                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------- ---------------------
                                  2006       2005       2006       2005
                                ---------  ---------- ---------  ----------
Reconciliation of net income
 to adjusted EBITDA (1):
  Net income                    $  14,416  $   11,724 $  16,001  $   35,772
  Interest expense                  7,865       6,147    27,313      15,924
  Provision for income taxes        6,676       6,886    27,308      21,902
  Depreciation, depletion and
   amortization                    12,485      10,324    45,643      29,347
  Tax on gain on Atlas Pipeline
   Holdings, L.P.(2)                    -           -    29,846           -
                                ---------  ---------- ---------  ----------
  EBITDA                           41,442      35,081   146,111     102,945
  Cumulative effect of
   accounting change (3)           (3,825)          -    (3,825)          -
                                ---------  ---------- ---------  ----------
    Adjusted EBITDA             $  37,617  $   35,081 $ 142,286  $  102,945
                                =========  ========== =========  ==========

Reconciliation of net income
 to adjusted net income:
  Net income                    $  14,416  $   11,724 $  16,001  $   35,772
  Plus: Tax on gain on Atlas
   Pipeline Holdings, L.P.(2)           -           -    29,846           -
  Less: Cumulative effect of
   accounting change (3)           (3,825)          -    (3,825)          -
                                ---------  ---------- ---------  ----------
    Adjusted net income         $  10,591  $   11,724 $  42,022  $   35,772
                                =========  ========== =========  ==========

    Adjusted net income per
     common share:
      Basic                     $    0.55  $     0.58 $    2.13  $     1.78
                                =========  ========== =========  ==========
      Diluted                   $    0.53  $     0.58 $    2.08  $     1.78
                                =========  ========== =========  ==========

    Weighted average common
     shares outstanding:
      Basic                        19,348      20,003    19,716      20,001
                                =========  ========== =========  ==========
      Diluted                      19,813      20,213    20,157      20,101
                                =========  ========== =========  ==========

(1)  EBITDA is a non-GAAP financial measure under the rules of the
     Securities and Exchange Commission.  Management of the Company
     believes that EBITDA provides additional information with respect to
     the Company’s ability to meet its debt service, capital expense and
     working capital requirements.  EBITDA is a commonly used measure by
     commercial banks, investment bankers, rating agencies and investors
     in evaluating an entity’s performance relative to its peers.  It is
     also a financial measurement that, with certain negotiated
     adjustments, is utilized within the Company’s financial covenants
     under its credit facility.  EBITDA is not a measure of financial
     performance under GAAP and, accordingly, should not be considered as
     a substitute for net income or cash flows from operating activities
     prepared in accordance with GAAP.

(2)  The Company received approximately $74.3 million in proceeds
     associated with the initial public offering of Atlas Pipeline Holdings
     on July 26, 2006. Although this transaction did not generate a gain in
     accordance with generally accepted accounting principles, the
     distribution of the net proceeds of $74.1 million to the Company
     generated a taxable gain which resulted in an additional tax charge of
     $29.8 million during the quarter ended September 30, 2006.

(3)  The cumulative effect of accounting change relates to the adoption by
     Atlas Energy of Financial Accounting Standards Board interpretation
     No. 47, "Accounting for Conditional Asset Retirement Obligations"
     ("FIN 47"). FIN 47 required Atlas Energy to disregard any probability
     factor that is applied to either the timing and/or method of
     settlement of its asset retirement obligations related to the plugging
     and abandonment liabilities of its oil and gas properties.


                         ATLAS AMERICA, INC.
                         OPERATING HIGHLIGHTS


                                          Three Months      Twelve Months
                                              Ended             Ended
                                          December 31,      December 31,
                                        ----------------- -----------------
                                          2006     2005     2006     2005
                                        -------- -------- -------- --------
Atlas Energy

  Production revenues (in thousands):
    Gas (1)                             $ 19,684 $ 21,852 $ 79,016 $ 64,531
    Oil                                 $  2,060 $  2,227 $  9,384 $  8,324

  Production volume per day(3):
    Gas (mcf/day) (1) (2)                 25,835   21,468   24,511   21,190
    Oil (bbls/day)                           405      431      413      429
                                        -------- -------- -------- --------
    Total (mcfe/day)                      28,264   24,056   26,989   23,761

  Average sales prices (3):
    Gas (per mcf) (4)                   $   8.28 $  11.06 $   8.83 $   8.34
    Oil (per bbl)                       $  55.31 $  56.13 $  62.30 $  53.22

  Production costs (per mcfe) (3) (5)   $   0.79 $   0.78 $   0.86 $   0.76

---------------------------------------------------------------------------

Atlas Pipeline Partners

  Appalachia system throughput volume
   (Mcf/day) (3)                          63,134   56,391   61,892   55,204

  Velma system gathered gas volume
   (Mcf/day) (3)                          57,835   61,093   60,682   67,075

  Elk City/Sweetwater system gathered
   gas volume (Mcf/day) (3)              295,181  266,280  277,063  250,717

  NOARK Ozark Gas Transmission
   throughput volume (Mcf/day) (3)       288,897  255,777  249,581  255,777
                                        -------- -------- -------- --------

  Combined throughput volume (Mcf/day)
   (3)                                   705,047  639,541  649,218  628,773
                                        ======== ======== ======== ========

(1)  Excludes sales to landowners.
(2)  Production quantities consist of the sum of (i) Atlas Energy’s
     proportionate share of production from wells in which it had a direct
     interest, based on its proportionate net revenue interest in such
     wells, and (ii) Atlas Energy’s proportionate share of production from
     wells owned by the investment partnerships in which it has an
     interest, based on Atlas Energy’s equity interest in each such
     partnership and based on each partnership’s proportionate net revenue
     interest in these wells.
(3)  "Mcf" and "mmcf" means thousand cubic feet and million cubic feet,
     respectively, "mcfe" and "mmcfe" means thousand cubic feet equivalent
     and million cubic feet equivalent, respectively, and "bbls" means
     barrels.  Barrels are converted to mcfe using the ratio of six mcfs to
     one barrel.
(4)  Atlas Energy’s average natural gas sales price before the effects of
     financial hedging was $7.35 and $7.90 for the three and twelve months
     ended December 31, 2006.  Atlas Energy did not have any natural gas
     financial hedges for the three and twelve months ended December 31,
     2005.
(5)  Production costs include labor to operate the wells and related
     equipment, repairs and maintenance, materials and supplies, property
     taxes, severance taxes, insurance, production overhead.

Contact Information

  • CONTACT:

    Brian J. Begley
    Investor Relations
    Atlas America, Inc.
    1845 Walnut Street - Suite 1000
    Philadelphia, PA 19103
    215/546-5005
    215/546-5388 (facsimile)