Atlas Energy, L.P. (ATLS)

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Atlas America Inc. (ATLS)

Q3 2008 Earnings Call

November 7, 2008 9:00 am ET


Brian Begley - Director of IR

Ed Cohen - Chairman and CEO

Matt Jones - CFO

Rich Weber - President and COO


Greg Alexander

Travis Anderson



Good day, ladies and gentlemen, and welcome to the third quarter 2008 Atlas America earnings conference call. My name is Emanuel, and I'll be your operator for today. (Operator Instructions).

I would now like to turn the call over to your host for today's Mr. Brian Begley, Director of Investor Relations. Please proceed, sir.

Brian Begley

Thank you and good morning, everyone. Thanks for joining today's call. Before we review Atlas America's third quarter 2008 results, I would like to remind everyone that when used in this conference call the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements. These statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected in the forward-looking statements. We discuss these risks in our quarterly report on Form 10-Q and our annual report also on Form 10-K, particularly in item one.

I would also like to caution you not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The company undertakes no obligations to publicly release the results of any revisions to forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

With that, let me turn the call over to our Chairman and CEO, Ed Cohen.

Ed Cohen

Hi, everyone. Once again, for the third quarter of 2008, Atlas America has reported record results, little surprise of course that they are well aware of the results previously reported by our two principal subsidiaries, Atlanta Energy and Atlanta Pipeline Partners.

But let me quickly summarize. Total revenues for ATLS reached $780.7 million, an increase of $369.1 million over revenues for the third quarter of 2007. Operating income was $265.3 million, as against only $37.7 million for the corresponding period last year. Net income was $24.1 million, up from the mere $7.1 million for the third quarter of 2007.

Of course, in the complex world of GAAP accounting and analyst calculations, our numbers and new derivation are complex. And Matt Jones, our CFO will shortly take us through the adjustment of GAAP numbers and through the non-GAAP results that analysts properly seem to thirst for.

Given the velocity of change in volatility recently afflicting the world, I hope that no major operation will have occurred in the few minutes that will separate my words here and Matt's opening remarks.

In fact, as you know for the energy industry, the world that we confront today is vastly different from the place that we inhabited just a few weeks ago, that is during most of the third quarter 2008. Hurricane Ike struck on September 12th, and we are still experiencing in the Mid-Continent the effects of that storm, albeit in now attenuated form. But more importantly, the worldwide financial tsunami that started in 2007 has finally come to afflict the energy industry and that started to occur during the third quarter 2008 and its effects, of course, are being felt increasingly right up to this minute.

That's why the quality of our assets, the strength of our systems, and the skills of our employees are so important to our continuing to achieve super accomplishments, and we seem on our way despite everything to some exceptional accomplishments. First, in the Marcellus Shale in Appalachian, Atlas Energy has now completed the drilling of 90 Marcellus wells, of which 90 currently have normalized production approaching 25 million cubic feet per day into a pipeline.

The aggregate production from these wells now exceeds 4 billion cubic feet, making Atlas the nation's largest producer to-date of natural gas from the Marcellus Shale, and our already fine results in the Marcellus are getting even better. The company's last 13 vertical wells have averaged initial rates of production of 1.3 million cubic feet per day, which is 30% higher than Atlas' prior average. We intend now to drill at least an additional 100 vertical Marcellus wells before the end of 2009 and we have an extensive Marcellus horizontal program now underway.

In short, we are now operating in four separate shale at place; the Marcellus in Pennsylvania, the Chattanooga in Tennessee, the Antrim in Michigan, and the New Albany in Indiana. In all of these areas, with the exception of the newest Indiana, we are the leading producer and older in our opinion of the best acreage. And we've gotten there without enormous expenditures for the mineral rights.

Now, the economy is rewarding our thriftiness. Just last Thursday, we announced the farm-out arrangement with Aurora Oil & Gas, pursuant to which we will acquire the right without any upfront payment including 21,000 gross acres at 70,000 net in the New Albany Shale of Southwest Indiana. Adding this acreage to our other Indiana mineral rights recently acquired, we are in a position to begin drilling in 2008 and to complete by the end of 2009 over 100 horizontal wells in Indiana and to continue to exploit this acreage for many years into the future.

Of course, we have this dichotomy while we expand many other companies in the energy field or cutting back, cutting back land acquisition, curtailing drilling budgets, and slashing development programs. We really are truly different, different. Different for better at a time like this and some might think for worse in a period when the big risk takers were being lionized. In frothy periods, there is little respect for our seeming inability, I don't mean to be a complainer but this is what we experienced. There was little respect for our seeming inability to advance blindly into the mine fields of incredible opportunity.

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