Atlas Energy Group LLC (ATLS)

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Atlas America Inc. (ATLS)

Q4 2008 Earnings Call

March 3, 2009 9:00 am ET


Brian Begley – Investor Relations

Edward E. Cohen – Chairman & Chief Executive Officer

Matthew A. Jones – Chief Financial Officer


Leon G. Cooperman - Omega Advisors, Inc.



Good day ladies and gentlemen and welcome to the fourth quarter 2008 Atlas America Incorporated earnings conference call. My name is [Shanel] and I’ll be your coordinator for today. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today’s call, Mr. Brian Begley. Please proceed.

Brian Begley

Thank you and good morning everyone. Before we get started I wanted to remind everyone that when used in this conference call the words believe, anticipate, 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’d 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.

And with that I’d like to turn the call over to our Chairman and CEO, Ed Cohen.

Edward E. Cohen

Thanks Brian and hello everyone. Conditions are so negatively volatile these days that reporting on last year even 62 days into 2009 seems to me an exercise in ancient history. Therefore I want to speak primarily about the present and the future and about the challenges and opportunities facing our two principal subsidiary enterprises, APL and ATN; our processing; and D&P divisions in reverse order.

But first for the record, ATLS, Atlas America, has reported adjusted net income of $49.5 million for 2008 compared with $48.5 million for the prior year, an increase of $1 million or 2.1%. Adjusted diluted net income per share was $1.18 for the full year 2008 and that compares with $1.14 per share for 2007. The year-over-year increase was principally attributable to Atlas Energy’s higher production volumes and increased fees from partnership management sources and from APL’s increase in production volume.

Now after a non-cash goodwill charge at APL and other non-cash and non-recurring technical derivative gains and losses, the company recognized on a GAAP basis a net loss of $6.2 million for the full year 2008 compared with net income of $35.3 million for the prior year. But pretax cash flow of $2.34 per basic common share for 2008 represented an increase of $0.66 per common share or 39% from the prior year.

You should note as the company was not a taxpayer on a cash basis in 2008 and they anticipates it will have a reduced 2009 cash tax liability, or possibly no cash tax liability in 2009, and that’s because of events associated with equity offerings at ATN and APL in 2007 and the termination of certain derivative instruments by APL in 2008. Matt Jones, our CFO, will speak far more fully in a little while about the financial results for 2008 and for the fourth quarter of that year.

As for the decline in our stock price needless to say it’s more than disturbing to all of us but we hope that good performance in 2009 will be the best answer to naysayers and so let’s discuss the near future prospects for 2009. As to Atlas Energy, ATN has two major advantages over most of the E & P Industry; access to drilling funds on a favorable basis through its direct investment business and ownership of a premier platform in the Marcellus Shale.

In 2008, the year of frozen funding, we took in $437 million in the direct investment program business, an increase of more than 20% over 2007’s record breaking results. Most satisfying to us and reassuring, I assume, to those who may have worried about the continued viability of this program in present economic circumstances, growth in our year-end program completed less than two months ago was 25% higher year-over-year than in the program done in the first half of 2008.

In particular, December 2008 saw a cascade of money flowing in, a flood so great that once again we were forced to return excess monies. Even so we started this present 2009 quarter with some $140 million of investor funds still to be spent from the 2008 program. This excess should jumpstart 2009.

Atlas Energy already has had considerable success in exploiting the Marcellus Shale, an area which has been called, “The most exciting natural gas play in the contemporary world.” And we’re only at the beginning. As of the last days of February we had drilled over 125 vertical Marcellus wells and we plan to expand this development sharply in 2009.

We’ve now fraced some 112 Marcellus wells and placed 105 online. Our actual production from the Marcellus now has exceeded 6.7 billion cubic feet. While we believe that our horizontal well program as it develops and expands will obtain results second to none, our vertical wells have achieved results beyond our most optimistic expectations.

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