SOURCE: Atlas America, Inc.

November 07, 2006 20:41 ET

Atlas America, Inc. Reports Results for the Quarter and Nine Months Ended September 30, 2006

PHILADELPHIA, PA -- (MARKET WIRE) -- November 7, 2006 --Atlas America, Inc. (NASDAQ: ATLS) ("ATLS" - the "Company") reported earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA"), a non-GAAP measure, of $34.6 million for the quarter ended September 30, 2006, compared with $25.1 million for the prior year comparable quarter, an increase of $9.5 million, or approximately 38%. The increase in EBITDA reflected significant growth in production volumes and realized commodity prices, well construction and completion revenues and well service fees. Net loss for the quarter ended September 30, 2006 was $19.9 million. Adjusting for special items, adjusted net income was $10.2 million for the quarter ended September 30, 2006 as compared with $9.1 million for the prior year comparable quarter, an increase of $1.1 million, or approximately 12%. Adjusted net income per diluted common share was $0.51 for the quarter, an increase of $0.06 per share from the prior year comparable quarter, or approximately 13%. Total revenues reached $190.6 million for the quarter ended September 30, 2006, an approximate 22% increase from the prior year comparable quarter.

The Company generated record average natural gas production volumes of 26.0 million cubic feet ("mmcf") per day for the quarter ended September 30, 2006, representing an increase of 14% from the prior year comparable period and a 3% increase from the June 30, 2006 quarter.

Special items affecting the quarter ended September 30, 2006 are as follows:

--  The receipt of $74.1 million in proceeds associated with an initial
    public offering of Atlas Pipeline Holdings, L.P. (NYSE: AHD) ("Atlas
    Holdings") units on July 26, 2006. The Company received a cash distribution
    of $74.1 million as the result of the initial public offering. However, in
    accordance with generally accepted accounting principles, the Company did
    not record a gain from the receipt of these proceeds. Although the Company
    did not record an accounting gain, the distribution resulted in an
    extraordinary tax charge of $29.8 million, or $1.49 per share-diluted in
    the quarter ended September 30, 2006, resulting in a net loss of $19.9
    million. A schedule is provided at the end of this release to reconcile net
    income (loss) to EBITDA and adjusted net income.
    
--  The tentative settlement of a class action lawsuit filed in New York
    pertaining to the payment of royalty revenues to landowners. The settlement
    terms are subject to final approval by the court. Pursuant to the tentative
    settlement terms, the Company has agreed to pay $300,000, or $0.01 per
    share-diluted, to terminate this litigation.
    
Additionally after the end of the quarter, the Company undertook the following important strategic initiatives:
--  On November 1, 2006, the Company's wholly owned subsidiary, Atlas
    Energy Resources, LLC, filed its second amendment to its registration
    statement with the Securities and Exchange Commission for an initial public
    offering of 6,075,000 common units. After the offering, the Company expects
    to retain approximately 83% of the common units and all net proceeds (less
    $5.5 million of retained working capital) will be paid to the Company.
    
--  The Company commenced marketing for the Series 27 investment drilling
    partnership in October 2006. The Company expects to raise $71.0 million in
    this program and expects to recognize drilling revenues and management fees
    from this program through the remainder of 2006 and first quarter of 2007.
    
--  The Company filed a registration statement with the Securities and
    Exchange Commission for the Public 16 investment drilling partnership in
    October 2006. The Company expects to raise approximately $200.0 million in
    this program and expects to recognize drilling and management fees from
    this program through most of 2007.
    
--  In October 2006, the Company entered into additional hedging contracts
    covering future production through the end of 2010. A summary of the
    Company's hedge position is as follows:
    
Production                             Average
Period Ended     Hedged Volume      Hedge Price(b)   Percentage
December 31,   (mcf equivalent)(a)    (per mcf)       Hedged(c)
------------   ------------------  --------------   -----------
   2006             1,510,084      $       9.29          63%
   2007             7,433,647      $       9.88(d)       79%
   2008             7,009,800      $      10.10(e)       74%
   2009             6,098,902      $       9.72          64%
   2010             1,888,424      $       8.79          20%

(a)     In thousand cubic feet ("mcf")
(b)     Includes an estimated positive basis differential and Btu
        adjustment
(c)     Based upon average natural gas production volumes for the third
        quarter of 2006
(d)     Includes costless collar positions with an average floor of $8.31
        per mcf and an average cap of $9.45 per mcf
(e)     Includes costless collar positions with an average floor of $8.31
        per mcf and an average cap of $10.29 per mcf
"We are very pleased with our operating results for the quarter, most notably our 14% increase in natural gas production volumes to 26.0 million cubic feet per day, which is a record for the Company," said Edward E. Cohen, Chairman and Chief Executive Officer of the Company. "This increase follows a 19% increase in volumes in the quarter ended June 30, 2006 as compared to the June 2005 quarter."

Other Significant Developments

Atlas Pipeline Partners

On September 27, 2006, Atlas Pipeline Partners, L.P. (NYSE: APL) ("Atlas Pipeline") announced the commencement of operations of its new gas processing plant and gathering system ("Sweetwater plant") in Beckham County, Oklahoma. The Sweetwater plant, with a processing capacity of 120 MMcf/d, is located west of its Elk City gas plant, and was built to further access natural gas production actively being developed in western Oklahoma and the Texas panhandle.

Atlas Holdings

On July 26, 2006, Atlas Holdings, previously a wholly owned subsidiary of the Company, issued 3,600,000 common units, representing a 17.1% ownership interest, in an initial public offering at a price of $23.00 per unit. Substantially all of the net proceeds from this offering, approximately $74.1 million, have been paid to the Company.

Well Construction and Completion

--  Revenues generated by the Company's well drilling segment increased by
    approximately 42% compared to the similar quarter last year.
    
Acreage
--  The Company had approximately 516,000 net acres at September 30, 2006,
    an increase of 12% from the net acreage position at September 30, 2005.
    Additionally, the Company has a joint venture with Knox Energy, which
    provides an opportunity to drill 300 sites on approximately 200,000 acres
    in the state of Tennessee through June 2007.
    
--  Undeveloped acreage at September 30, 2006 was approximately 295,000
    net acres, up approximately 16% from the net acreage position at September
    30, 2005, exclusive of the joint venture with Knox Energy.
    
--  The Company has escalated its commitment to expand its undeveloped
    acreage position.  In the current quarter, the Company expensed
    approximately $2.4 million of costs associated with the expansion of its
    land department and leasing efforts. This compares to approximately
    $900,000 of similar costs in the quarter ended September 30, 2005. These
    costs are included within general and administrative expense on the
    consolidated statement of operations.
    
--  The Company has currently identified over 3,100 geologically favorable
    sites for additional well drilling.
    
Wells & Production
--  The Company had interests in over 7,000 gross wells at September 30,
    2006, an increase of approximately 9% from September 30, 2005, and operates
    approximately 85% of these wells.
    
--  Natural gas production was 26.0 mmcf for the three months ended
    September 30, 2006, an increase of 3.2 mmcf per day or approximately 14%
    from the prior year comparable period and an increase of 3% from the June
    30, 2006 quarter.
    
Transmission, Gathering and Processing
--  Transmission, gathering and processing revenues, which principally
    include the results of Atlas Pipeline, increased to $111.8 million for the
    quarter ended September 30, 2006, an increase of over 15% from the prior
    year comparable period, due primarily to the acquisition of the NOARK
    pipeline system.
    
--  Total transmission and gathering volumes were 637.4 mmcf per day for
    the quarter ended September 30, 2006, an increase of approximately 12% from
    the prior year comparable period.
    
--  We received $4.4 million in cash distributions for the quarter ended
    September 30, 2006 from our ownership interests in the general partner of
    Atlas Pipeline, which consists of our 83% ownership interest in Atlas
    Holdings.
    
Corporate and Other
--  General and administrative expenses, including amounts reimbursed to
    affiliate, increased to $12.8 million for the quarter ended September 30,
    2006 resulting from expenses associated with growth in the Company's
    drilling partnership fund raising and land acquisition activities and Atlas
    Pipeline's expansion of its Mid-Continent operations and non-cash
    compensation.
    
--  Interest expense increased to $5.9 million for the quarter ended
    September 30, 2006 due to borrowings associated with Atlas Pipeline's
    acquisitions. The majority of the interest expense this quarter relates to
    Atlas Pipeline's borrowings, which are solely obligations of Atlas
    Pipeline.
    
--  Depreciation, depletion and amortization expense increased to $12.4
    million for the quarter ended September 30, 2006 due to increases in Atlas
    Pipeline's fixed asset base associated with the acquisition of the NOARK
    pipeline system and increased depletion associated with the Company's
    additions to its oil and gas properties as a result of its investment in
    its drilling partnerships.
    
--  Other income includes a gain of $2.7 million from the sale of certain
    gathering pipelines within Atlas Pipeline's Velma gathering system during
    the quarter ended September 30, 2006.
    
Atlas America, Inc. is an energy company engaged primarily in the development and production of natural gas in the Appalachian Basin for its own account and for its investors through the offering of tax advantaged investment programs. Atlas America also owns an 83% interest in Atlas Pipeline Holdings, L.P., a limited partnership which owns a 2% general partner interest, all the incentive distribution rights and 1,641,026 common units of Atlas Pipeline Partners, L.P. For more information, please visit our website at www.atlasamerica.com, or contact Investor Relations at bbegley@atlasamerica.com.

Atlas Pipeline Partners, L.P. is active in the transmission, gathering and processing segments of the midstream natural gas industry. In the Mid-Continent region of Oklahoma, Arkansas, 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 1,500 miles of natural gas gathering pipelines in western Pennsylvania, western New York and eastern Ohio. For more information, visit our 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 of Atlas Pipeline. For more information, visit our 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 10Q, 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)
                                (Unaudited)


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
REVENUES
Well construction and
 completion                     $  50,641  $  35,580  $ 135,329  $ 103,780

Gas and oil production             21,888     18,830     66,696     48,840

Transmission, gathering and
 processing                       111,752     97,414    327,876    221,487

Administration and oversight        2,990      1,852      8,487      7,436

Well services                       3,346      2,532      9,498      7,304
                                ---------  ---------  ---------  ---------

                                  190,617    156,208    547,886    388,847
                                ---------  ---------  ---------  ---------
COSTS AND EXPENSES
Well construction and
 completion                        44,037     30,940    117,677     90,243

Gas and oil production              2,315      1,681      6,437      4,849

Transmission, gathering and
 processing                        96,205     86,189    270,981    194,136

Well services                       1,752      1,367      5,540      3,976

General and administrative         12,814      7,314     33,197     19,808

Net expense reimbursement -
 affiliate                            345          -      1,041        389

Depreciation, depletion and
 amortization                      12,442      7,736     33,158     19,023
                                ---------  ---------  ---------  ---------

                                  169,910    135,227    468,031    332,424
                                ---------  ---------  ---------  ---------
OPERATING INCOME                   20,707     20,981     79,855     56,423

OTHER INCOME (EXPENSE)
Interest expense                   (5,932)    (3,574)   (19,448)    (9,777)
Minority interests                 (2,021)    (3,806)   (12,987)    (7,553)

Other, net                          3,518        143      4,643        (29)
                                ---------  ---------  ---------  ---------

                                   (4,435)    (7,237)   (27,792)   (17,359)
                                ---------  ---------  ---------  ---------

Income before income taxes and
 extraordinary item                16,272     13,744     52,063     39,064

Provision for income taxes         (6,302)    (4,656)   (20,632)   (15,016)
                                ---------  ---------  ---------  ---------
Income before extraordinary
 item                               9,970      9,088     31,431     24,048

Extraordinary tax on gain on
 Atlas Pipeline Holdings, L.P.
 units                            (29,846)         -    (29,846)         -
                                ---------  ---------  ---------  ---------

Net income (loss)               $ (19,876) $   9,088  $   1,585  $  24,048
                                =========  =========  =========  =========

Net income (loss) per common
 share - basic
Net income before extraordinary
 item - basic                   $    0.51  $    0.45  $    1.58  $    1.20

Extraordinary item                  (1.52)         -      (1.50)         -
                                ---------  ---------  ---------  ---------
                                $   (1.01) $    0.45  $    0.08  $    1.20
                                =========  =========  =========  =========
Weighted average common shares
 outstanding - basic               19,597     20,001     19,839     20,000
                                =========  =========  =========  =========

Net income (loss) per common
 share - diluted
Net income before extraordinary
 item - diluted                 $    0.50  $    0.45  $    1.55  $    1.20

Extraordinary item                  (1.49)         -      (1.47)         -
                                ---------  ---------  ---------  ---------
                                $    (.99) $    0.45  $    0.08  $    1.20
                                =========  =========  =========  =========
Weighted average common shares
 outstanding - diluted             20,000     20,174     20,272     20,064
                                =========  =========  =========  =========







                            ATLAS AMERICA, INC.
                          FINANCIAL INFORMATION


                                                 September 30, December 31,
                                                      2006         2005
                                                  ------------ ------------
  BALANCE SHEET DATA:
   Cash and cash equivalents                      $     64,692 $     55,155
   Property and equipment, net                         840,518      658,347
   Total assets                                      1,186,962    1,056,180
   Total debt                                          299,730      298,781
   Total stockholders’ equity                          119,914      132,850



                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
  Reconciliation of net income  --------------------- ---------------------
   (loss) to EBITDA(1):            2006       2005       2006       2005
                                ---------  ---------- ---------- ----------
  Net income (loss)             $ (19,876) $    9,088 $    1,585 $   24,048
   Interest expense                 5,932       3,574     19,448      9,777
   Provision for income taxes      36,148       4,656     50,478     15,016
   Depreciation, depletion and
    amortization                   12,442       7,736     33,158     19,023
                                ---------  ---------- ---------- ----------
  EBITDA                        $  34,646  $   25,054 $  104,669 $   67,864
                                =========  ========== ========== ==========


(1) EBITDA is a non-GAAP financial measure under the rules of the
    Securities and Exchange Commission ("SEC"). 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.






                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  ---------------------
                                  2006       2005       2006       2005
                                ---------  ---------- ---------- ----------
Reconciliation of net income
 (loss) to adjusted net income:
   Net income (loss)            $ (19,876) $    9,088 $    1,585 $   24,048
   Extraordinary income tax
    charge (1)                     29,846           -     29,846          -

   Charge for lawsuit
    settlement, net of tax (2)        200           -        200          -
                                ---------  ---------- ---------- ----------
      Adjusted net income       $  10,170  $    9,088 $   31,631 $   24,048
                                =========  ========== ========== ==========

   Adjusted net income per
    common share - basic        $    0.52  $     0.45 $     1.59 $     1.20
                                =========  ========== ========== ==========
   Adjusted net income per
    common share - diluted      $    0.51  $     0.45 $     1.56 $     1.20
                                =========  ========== ========== ==========
   Weighted average common
    shares outstanding:
      Basic                        19,597      20,001     19,839     20,000
                                =========  ========== ========== ==========
      Diluted                      20,000      20,174     20,272     20,064
                                =========  ========== ========== ==========





                            ATLAS AMERICA, INC.
                      FINANCIAL INFORMATION (cont.)


                                    Three Months Ended  Nine Months Ended
                                      September 30,       September 30,
                                    ------------------  ------------------
                                      2006      2005      2006      2005
                                    --------  --------  --------  --------

Production revenues (in thousands):
   Gas (1)                          $ 19,402  $ 16,460  $ 59,332  $ 42,679
   Oil                              $  2,489  $  2,344  $  7,323  $  6,097

Production volume:
   Gas (mcf/day) (1) (2)(3)           25,955    22,724    24,064    21,097
   Oil (bbls/day)                        416       415       415       428
   Total (mcfe/day) (3)               28,451    25,214    26,554    23,665

Average sales prices:
   Gas (per mcf) (3) (4)            $   8.13  $   7.87  $   9.03  $   7.41
   Oil (per bbl) (3)                $  65.01  $  61.37  $  64.59  $  52.23

Production costs (5):
   As a percent of production
    revenues                              11%        9%       10%       10%
   Per mcfe (3)                     $    .88  $    .72  $    .89  $    .75

Depletion per mcfe (3)              $   2.14  $   1.65  $  2.04   $   1.47


(1) Excludes sales to landowners.
(2) Production quantities consist of the sum of (i) our proportionate share
    of production from wells in which we have a direct interest, based on
    our proportionate net revenue interest in such wells, and (ii) our
    proportionate share of production from wells owned by the investment
    partnerships in which we have an interest, based on our equity interest
    in each such partnership and based on each partnership's proportionate
    net revenue interest in these wells.
(3) "Mcf" and "mmcf" means thousand cubic feet and million cubic feet;
    "mcfe" and "mmcfe" means thousand cubic feet equivalent and million
    cubic feet equivalent, and "bbls" means barrels.  Bbls are converted to
    mcfe using the ratio of six mcfs to one bbl.
(4) Our average sales price before the effects of financial hedging was
    $7.32 and $8.10 for the three months and nine months ended September
    30, 2006.  We did not have any financial hedges in the three months
    and nine months ended September 30, 2005.
(5) 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.

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)