SOURCE: Atlas Pipeline Partners, L.P.

July 31, 2006 20:45 ET

Atlas Pipeline Partners, L.P. Reports Second Quarter and Six Month 2006 Results

PHILADELPHIA, PA -- (MARKET WIRE) -- July 31, 2006 -- Atlas Pipeline Partners, L.P. (NYSE: APL) (the "Partnership") today reported earnings before interest, taxes, depreciation and amortization ("EBITDA"), a non-GAAP measure, of $20.8 million for the second quarter 2006 compared with $10.9 million for the prior year second quarter, an increase of $9.9 million or over 90%. Net income for the second quarter 2006 was $9.7 million, or $0.41 per common limited partner unit, compared with $3.6 million for the second quarter 2005, or $0.20 per common limited partner unit. The period over period increase in EBITDA and net income was principally related to contributions from the acquisitions of NOARK Pipeline System, Limited Partnership ("NOARK"), of which the Partnership acquired a 75% ownership interest in October 2005 and the remaining 25% ownership interest in May 2006, and ETC Oklahoma Pipeline, Ltd. ("Elk City") in April 2005, as well as continued growth in the Partnership's Appalachian operations. Total revenues, EBITDA, and net income for the six months ended June 30, 2006 were $227.3 million, $41.0 million, and $19.2 million, respectively, representing increases of approximately 72%, 125%, and 145%, respectively, compared with the prior year comparable period.

Excluding the effect of certain prior period entries recorded during the period and solely for the purpose of comparing the second quarter 2006 to the prior year second quarter, the Partnership's Adjusted EBITDA for the second quarter 2006 was $22.0 million, an $11.1 million or over 100% increase from the second quarter 2005. Adjusted net income was $10.9 million, or $0.50 per basic common limited partner unit, representing an increase of $7.3 million or over 200% from the second quarter 2005. A schedule is provided at the end of this release to reconcile net income to adjusted net income and Adjusted EBITDA.

On July 26, 2006, the Partnership declared a record quarterly cash distribution for the second quarter 2006 of $0.85 per common limited partner unit, to be paid August 14, 2006 to common unitholders of record as of August 7, 2006. The distribution declared for the quarter represents a 10% increase compared with the distribution declared per common limited partner unit for the quarter ended June 30, 2005.

"We are pleased with our second quarter 2006 results, and this has enabled us to increase our cash distribution to our limited partners for the eighth consecutive quarter," said Edward E. Cohen, Chairman and Chief Executive Officer of the Partnership's general partner. "Our Mid-Continent acquisitions are providing us with solid cash flow, and we are looking for opportunities to grow our presence in this region in the future. The Sweetwater processing facility is near completion and will be a key component of our continuing internal growth initiatives. The Appalachia system showed greatly improved operating results this quarter, and we expect to expand our operations as our affiliate, Atlas America (NASDAQ: ATLS), continues to expand its drilling in the region."

On May 2, 2006, the Partnership acquired the remaining 25% equity ownership interest in NOARK from Southwestern Energy Pipeline Company ("Southwestern"), a wholly owned subsidiary of Southwestern Energy Company (NYSE: SWN), for total net consideration of $65.5 million, consisting of $69.0 million in cash to the seller, less the seller's interest in NOARK's working capital (including cash on hand and net payables to the seller) at the date of acquisition of $3.5 million, which was funded through borrowings under the Partnership's credit facility. The Partnership acquired its initial 75% ownership in NOARK in October 2005.

Subsequent to the May 2, 2006 acquisition and its initial funding under the Partnership's credit facility, the Partnership completed the following transactions to refinance these borrowings:

--  On May 12, 2006, the Partnership (a) issued $35.0 million of
    additional senior unsecured notes due 2015 in a private placement at 103%
    of par value, with a resulting effective yield of approximately 7.6%, for
    net proceeds of $36.6 million, including accrued interest and net of the
    initial purchaser's discount and other transaction costs, and (b) sold
    500,000 common units to Wachovia Securities, which has offered the common
    units to public investors.  The common units, which were issued under the
    Partnership's previously filed shelf registration statement, resulted in
    net proceeds of approximately $19.8 million after underwriting fees and
    other transaction costs. As of June 30, 2006, the Partnership had
    13,049,266 common limited partnership units outstanding.
    
--  On May 19, 2006, the Partnership sold an additional 10,000 6.5%
    cumulative convertible preferred units to Sunlight Capital Partners for
    $10.0 million, pursuant to the Partnership's right to require Sunlight
    Capital Partners to purchase such additional units under the purchase
    agreement with Sunlight. Terms of this issuance are similar to those for
    the issuance of the initial 30,000 preferred units on March 13, 2006,
    including that the units are entitled to receive dividends of 6.5% per
    annum commencing on March 13, 2007.  As of June 30, 2006, the Partnership
    had 40,000 $1,000 par value cumulative convertible preferred limited
    partnership units outstanding.
    
On July 26, 2006, Atlas Pipeline Holdings, L.P. (NYSE: AHD), our general partner, issued 3,600,000 common units in an initial public offering at a price of $23.00 per unit, representing a 17.1% ownership interest. Our general partner continues to hold 1,641,026 common limited partnership units in our Partnership, which it has held since our initial public offering in January 2000.

Segment Analysis

Mid-Continent

The Mid-Continent segment recognized total revenue of $101.4 million for the second quarter 2006, an increase of $21.7 million from the second quarter 2005. This increase principally reflects the contributions from the acquisitions of NOARK of $14.4 million and the Elk City system of $10.8 million, partially offset by a $3.5 million decrease in Velma system revenue due to volume decreases. For the Elk City system, gross natural gas gathered volume for the second quarter 2006 averaged 275.9 million cubic feet per day ("MMcfd"), a 13.0% increase from the second quarter 2005. The Elk City system connected 20 new wells to its gathering system during the second quarter 2006 and 41 new wells for the six months ended June 30, 2006. Velma's gross natural gas gathered volume averaged 62.1 MMcfd for the second quarter 2006, a decrease of 15.9% from the prior year's comparable quarter of 73.8 MMcfd due to a decline in low margin volume. For the six months ended June 30, 2006, the Velma system connected 35 new wells to its gas gathering system, compared with 38 new wells connected during the prior year comparable period. For the NOARK system, average throughput volume was 243.0 MMcfd during the second quarter 2006.

The Mid-Continent results include the consolidated financial statements of NOARK. Minority interest in NOARK represents Southwestern's 25% ownership interest in the net income of NOARK for the period prior to May 2, 2006, the date the Partnership acquired the remaining 25% interest in NOARK, and is classified within costs and expenses on the consolidated statements of income.

Appalachia

Total revenue for the Appalachia system increased to $8.1 million for the second quarter 2006, a 48.5% increase from $5.5 million for the second quarter 2005. Appalachia segment profit was $4.9 million for the second quarter 2006, or 29% of total segment operating profit for the period, compared with $3.5 million, or 41% of total segment operating profit for the prior year second quarter. Throughput volume increased to 63.1 MMcfd for the second quarter 2006 compared with 54.7 MMcfd for the second quarter 2005 due to capacity expansion resulting from two major transmission line connections completed during the first quarter 2006. Average transportation rate per thousand cubic feet ("mcf") increased to $1.34 for the second quarter 2006 from $1.08 for the prior year second quarter due mainly to a rise in realized natural gas prices, principally related to the higher prices associated with hedge transactions entered into by Atlas America. During the second quarter 2006, 183 new wells were connected to the gathering system compared with 116 wells connected during the comparable prior year period. Overall, 614 new wells were connected to the gathering system for the twelve months ended June 30, 2006 as compared with 370 wells connected for the twelve months ended June 30, 2005.

Corporate and Other

General and administrative expense, including amounts reimbursed to affiliates, increased $1.0 million to $4.8 million for the second quarter 2006 from $3.8 million for the second quarter 2005. This increase was primarily related to higher costs associated with managing the Partnership, including management of the 2005 acquisitions and capital raising opportunities. Depreciation and amortization increased $2.1 million to $5.3 million for the second quarter 2006 due primarily to the depreciation and amortization related to the Elk City and NOARK assets acquired during 2005.

Interest expense increased to $6.2 million for the second quarter 2006, an increase of $2.0 million from the prior year second quarter. This increase was primarily related to interest associated with the Partnership's May 2006 and December 2005 issuances of 10-year senior unsecured notes, partially offset by a decrease in interest associated with borrowings under the credit facility. At June 30, 2006, the Partnership had $286.2 million of total debt, including $285.0 million of senior unsecured notes. The Partnership had no amounts outstanding under its $225.0 million credit facility at June 30, 2006.

Interested parties are invited to access the live webcast of an investor call with management regarding our second quarter results on Tuesday morning, August 1, 2006 at 9:00 am EDT by going to the home page of the Partnership's website at www.atlaspipelinepartners.com. An audio replay of the conference call will also be available beginning at 11:00 am EDT on Tuesday, August 1, 2006 until 11:59 pm on Friday, September 1, 2006. To access the replay, dial 1-888-286-8010 and enter conference code 80500345.

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, the Partnership owns and operates approximately 2,565 miles of intrastate gas gathering pipeline and a 565-mile interstate natural gas pipeline. The Partnership also operates two gas processing plants and a treating facility in Velma, Elk City and Prentiss, Oklahoma where natural gas liquids and impurities are removed. An additional processing plant located in Sweetwater, Oklahoma is scheduled for completion during the third quarter of 2006. 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 and owner of 1,641,026 units of limited partner interest of APL. For more information, please visit our website at www.atlaspipelineholdings.com or contact investor relations at bbegley@atlasamerica.com.

Atlas America, Inc., the parent company of Atlas Pipeline Holdings, L.P.'s general partner and owner of 17,500,000 units of limited partner interest of AHD, 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. For more information, please visit our website at www.atlasamerica.com, or contact investor relations at bbegley@atlasamerica.com.

Statements made in this release include forward-looking statements, which involve substantial risks and uncertainties. The Partnership's actual results, performance or achievements could differ materially from those expressed or implied in this release as a result of certain factors, including competition within the energy industry, climactic conditions and the price of gas in the Appalachian and Mid-Continent areas, actual versus projected volumetric production from wells connected to the Partnership's gas-gathering pipeline system, and the cost of supplies and services in the energy industry.


              ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
                            Financial Summary
                  (in thousands, except per unit amounts)
                                (unaudited)


                                 Three Months Ended     Six Months Ended
INCOME STATEMENT                       June 30,              June 30,
                                --------------------  --------------------
                                   2006       2005       2006       2005
                                ---------  ---------- ---------  ----------
Revenue:
  Natural gas and liquids       $  96,006  $   79,700 $ 197,023  $  122,034
  Transportation and
   compression - affiliates         7,834       5,352    15,708      10,199
  Transportation and
   compression - third parties      5,379          23    14,156          38
  Interest income and other           282         124       424         205
                                ---------  ---------- ---------  ----------
    Total revenue and other
     income                       109,501      85,199   227,311     132,476
                                ---------  ---------- ---------  ----------

Costs and expenses:
  Natural gas and liquids          77,006      66,582   162,898     102,041
  Plant operating                   3,926       3,293     7,153       4,497
  Transportation and
   compression                      3,134         622     5,456       1,298
  General and administrative        3,896       3,357     7,865       5,332
  Compensation reimbursement -
   affiliates                         885         440     1,605         953
  Depreciation and amortization     5,258       3,128    10,533       5,057
  Interest                          6,154       4,177    12,491       5,312
  Minority interest in NOARK         (451)          -       118           -
  Other                                 -          11         -         147
                                ---------  ---------- ---------  ----------
    Total costs and expenses       99,808      81,610   208,119     124,637
                                ---------  ---------- ---------  ----------

Net income                          9,693       3,589    19,192       7,839
Preferred unit imputed dividend
 cost                                (540)          -      (635)          -
                                ---------  ---------- ---------  ----------
Net income attributable to
 common limited partners
 and the general partner        $   9,153  $    3,589 $  18,557  $    7,839
                                =========  ========== =========  ==========

Allocation of net income
 attributable to common
 limited partners and the
 general partner:
  Common limited partners'
   interest                     $   5,299  $    1,573 $  11,105  $    4,403
  General partner's interest        3,854       2,016     7,452       3,436
                                ---------  ---------- ---------  ----------
    Net income attributable to
     common limited
     partners and the general
     partner                    $   9,153  $    3,589 $  18,557  $    7,839
                                =========  ========== =========  ==========

Net income attributable to
 common limited partners
 per unit:
    Basic                       $    0.41  $     0.20 $    0.88  $     0.58
                                =========  ========== =========  ==========
    Diluted                     $    0.41  $     0.20 $    0.87  $     0.58
                                =========  ========== =========  ==========

Weighted average common limited
 partner units outstanding:
    Basic                          12,824       7,938    12,687       7,573
                                =========  ========== =========  ==========
    Diluted                        12,979       7,990    12,833       7,609
                                =========  ========== =========  ==========

Capital expenditure data:
  Maintenance capital
   expenditures                 $     917  $      336 $   2,078  $      728
  Expansion capital
   expenditures                    21,333      16,470    33,734      22,155
                                ---------  ---------- ---------  ----------
    Total                       $  22,250  $   16,806 $  35,812  $   22,883
                                =========  ========== =========  ==========


Balance Sheet Data (at period end):

                                 June 30,  December 31,
                                   2006       2005
                                ---------  ----------
    Cash and cash equivalents   $  12,561  $   34,237
    Total assets                  751,914     742,726
    Total debt                    286,195     298,625
    Total partners' capital       368,989     329,510



              ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
                            Segment Information
                        (in thousands - unaudited)


                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
Mid-Continent
 Revenue:
  Natural gas and liquids       $  96,006  $  79,700  $ 197,023  $ 122,034
  Transportation and
   compression                      5,360          -     14,110          -
  Interest income and other            17         31         18         17
                                ---------  ---------  ---------  ---------
    Total revenue and other
     income                       101,383     79,731    211,151    122,051
                                ---------  ---------  ---------  ---------

 Costs and expenses:
  Natural gas and liquids          77,006     66,582    162,898    102,041
  Plant operating                   3,926      3,293      7,153      4,497
  Transportation and
   compression                      1,817          -      3,171          -
  General and administrative        2,710      2,298      5,632      3,049
  Minority interest in NOARK         (451)         -        118          -
  Depreciation and amortization     4,375      2,503      8,834      3,858
                                ---------  ---------  ---------  ---------
    Total costs and expenses       89,383     74,676    187,206    113,445
                                ---------  ---------  ---------  ---------
 Segment profit                 $  12,000  $   5,055  $  23,345  $   8,606
                                =========  =========  =========  =========

Appalachia
 Revenue:
  Transportation and
   compression - affiliates     $   7,834  $   5,352  $  15,708  $  10,199
  Transportation and
   compression - third parties         19         23         46         38
  Interest income and other           265         93        406        188
                                ---------  ---------  ---------  ---------
    Total revenue and other
     income                         8,118      5,468     16,160     10,425
                                ---------  ---------  ---------  ---------

 Costs and expenses:
  Transportation and
   compression                      1,317        622      2,285      1,298
  General and administrative        1,035        741      1,919      1,609
  Depreciation and amortization       883        625      1,699      1,199
                                ---------  ---------  ---------  ---------
    Total costs and expenses        3,235      1,988      5,903      4,106
                                ---------  ---------  ---------  ---------
 Segment profit                 $   4,883  $   3,480  $  10,257  $   6,319
                                =========  =========  =========  =========

Reconciliation of segment
 profit to net income:
 Segment profit:
  Mid-Continent                 $  12,000  $   5,055  $  23,345  $   8,606
  Appalachia                        4,883      3,480     10,257      6,319
                                ---------  ---------  ---------  ---------
    Total segment profit           16,883      8,535     33,602     14,925
  Corporate general and
   administrative expenses         (1,036)      (758)    (1,919)    (1,627)
  Interest expense                 (6,154)    (4,177)   (12,491)    (5,312)
  Other                                 -        (11)         -       (147)
                                ---------  ---------  ---------  ---------
 Net income                     $   9,693  $   3,589  $  19,192  $   7,839
                                =========  =========  =========  =========



              ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
                        (in thousands - unaudited)



                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2006      2005      2006      2005
                                    --------  --------  --------  --------
Reconciliation of net income to
 adjusted net income(1):
  Net income                        $  9,693  $  3,589  $ 19,192  $  7,839
  Effect of prior period items(2)      1,227         -     1,090         -
                                    --------  --------  --------  --------
    Adjusted net income             $ 10,920  $  3,589  $ 20,282  $  7,839
                                    ========  ========  ========  ========

Reconciliation of net income to
 non-GAAP measures(1):
  Net income                        $  9,693  $  3,589  $ 19,192  $  7,839
  Depreciation and amortization        5,258     3,128    10,533     5,057
  Minority interest share of
   depreciation and amortization
   and interest expense for NOARK       (327)        -    (1,200)        -
  Interest expense                     6,154     4,177    12,491     5,312
                                    --------  --------  --------  --------
    EBITDA                            20,778    10,894    41,016    18,208
  Effect of prior period items(2)      1,227         -     1,090         -
                                    --------  --------  --------  --------
    Adjusted EBITDA                   22,005    10,894    42,106    18,208
  Interest expense                    (6,154)   (4,177)  (12,491)   (5,312)
  Minority interest share of
   interest expense for NOARK            230         -       938         -
  Non-cash compensation expense        1,183     1,709     2,502     2,158
  Amortization of deferred
   financing costs (included within
   interest expense)                     612     1,293     1,205     1,475
  Maintenance capital expenditures      (917)     (473)   (2,078)     (865)
                                    --------  --------  --------  --------
    Distributable cash flow         $ 16,959  $  9,246  $ 32,182  $ 15,664
                                    ========  ========  ========  ========
________________________________
(1) EBITDA and distributable cash flow are non-GAAP (generally accepted
    accounting principles) financial measures under the rules of the
    Securities and Exchange Commission ("SEC"). Management of the
    Partnership believes that EBITDA and distributable cash flow provide
    additional information for evaluating the Partnership's ability to make
    distributions to its unitholders and the general partner, among other
    things. These measures are widely used by commercial banks, investment
    bankers, rating agencies and investors in evaluating performance
    relative to peers and pre-set performance standards. EBITDA is also a
    financial measurement that, with certain negotiated adjustments, is
    utilized within the Partnership's financial covenants under its credit
    facility. 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) During June 2006, the Partnership identified measurement reporting
    inaccuracies on three newly installed pipeline meters. To adjust for
    such inaccuracies, which relate to natural gas volume gathered during
    the third and fourth quarters of 2005 and first quarter of 2006, the
    Partnership recorded an adjustment of $1.2 million during the second
    quarter of 2006 to increase natural gas and liquids cost of goods sold.
    If the $1.2 million adjustment had been recorded when the inaccuracies
    arose, reported net income would have been reduced by approximately
    2.7%, 8.3%, and 1.4% for the third quarter of 2005, fourth quarter of
    2005, and first quarter of 2006, respectively. Management of the
    Partnership believes that the impact of these adjustments is immaterial
    to its current and prior financial statements.



              ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
                           Operating Highlights

                                        Three Months Ended  Six Months Ended
                                              June 30,         June 30,
                                           ---------------  ---------------
                                            2006    2005     2006    2005
                                           ------- -------  ------- -------

Mid-Continent - Velma System
  Natural Gas
     Gross natural gas gathered - mcf/day   62,079  73,810   61,401  69,407
     Gross natural gas processed - mcf/day  59,823  68,326   59,179  65,670
     Gross residue natural gas - mcf/day    46,647  54,160   46,203  52,082
  Natural Gas Liquids
     Gross NGL sales - barrels/day           6,674   7,149    6,505   6,779
  Condensate
     Gross condensate sales - barrels/day      237     278      212     256

Mid-Continent - Elk City System
  Natural Gas
     Gross natural gas gathered - mcf/day  275,865 244,088  264,093 244,088
     Gross natural gas processed - mcf/day 135,394 117,602  133,187 117,602
     Gross residue natural gas - mcf/day   122,644 107,653  120,840 107,653
  Natural Gas Liquid
     Gross NGL sales - barrels/day           6,237   5,537    5,999   5,537
  Condensate
     Gross condensate sales - barrels/day      147     119      159     119

Mid-Continent - NOARK
     Throughput - mcf/day                  243,014       -  241,093       -

Appalachia
  Natural Gas
     Throughput - mcf/day                   63,113  54,694   60,235  53,539
     Average transportation rate per mcf   $  1.34 $  1.08  $  1.44 $  1.06
________________________________
Mcf – thousand cubic feet

Contact Information

  • Contact:
    Brian J. Begley
    Vice President, Investor Relations
    1845 Walnut Street
    Philadelphia, PA 19103
    (215) 546-5005
    (215) 546-4785 (facsimile)