Atlas Energy, L.P. (ATLS)

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Atlas Energy, Inc. (ATLS)

Q4 2009 Earnings Call Transcript

February 26, 2010 9:00 am ET

Executives

Brian Begley – VP, IR

Ed Cohen – Chairman and CEO

Rich Weber – President and COO

Matt Jones – CFO and EVP

Analysts

Scott Hanold – RBC Capital Markets

Mike Hall – Wells Fargo

Mike Scialla – Thomas Weisel Partners

Marshall Carver – Capital One Southcoast

Ray Deacon – Pritchard Capital

Lee Cooperman – Omega Advisors

Wayne Cooperman – Cobalt Capital

Jack Aydin – KeyBanc Capital Markets

Presentation

Operator

Good day, ladies and gentlemen and welcome to the fourth quarter, 2009, Atlas Energy Incorporated earnings conference call. My name is Tuanda and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of today's conference. (Operators Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Mr. Brian Begley, Director of Investor Relations. Please proceed, sir.

Brian Begley

Thanks and good morning, everyone. Thank you for joining us today for our call. As we get started, I would like to remind everyone of the following. During this conference call, we make certain forward-looking statements and in this context, forward-looking statements often address our expected future business and financial performance and financial condition and often contains words such as expects, anticipates and similar words or phrases.

Forward-looking statements by their nature address matters that are uncertain and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. We discussed these risks in our quarterly report on form 10-Q and our annual report also on form 10-K, particularly in Item 1.

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 obligation to publicly update our forward-looking statement or publicly release the results of any revisions to forward-looking statements and may be made to reflect events or circumstances after the date thereof or reflect the occurrence of unanticipated events.

Now, as we introduced in the third quarter, we have provided several additional financial disclosures, incorporated in our earnings release, in order to segregate our E&P operations from our consolidated GAAP financial statements. Consolidating income statements and balance sheets provided for all applicable periods that separate Atlas Energy's core E&P operations from the financial results from Atlas Pipeline. These results are required by GAAP to be consolidated in Atlas energy's results to our controlling interest in Atlas pipeline.

We also provided reconciliation from net income on a GAAP basis to adjusted net income, adjusted EBITDA and discretionary cash flow from our E&P operations. As we believe, these non-GAAP measures offer the best means of evaluating results of our business. With that, I will turn the call over to our Chairman and Chief Executive Officer, Ed Cohen, for his remarks.

Ed Cohen

Hello everyone and welcome to our year-end 2009 conference call. Rather than a mere periodic update, however, most of you, I suspect, may be more interested in what life or color management can offer on the possible Marcellus joint venture that I mentioned in our last quarterly call in November. Since then, of course, Mitsui has announced its $1.4 billion joint venture with Anadarko at a notional price of $14,000 per acre.

And on our part, we have retained Jefferies & Company and are well along in processing the possibilities available to us. Confidentiality agreements and common sense, however, limit what I can share with you at this point and therefore this call will focus on quarterly and annual achievements but actually, both subjects, the proposed joint venture and our 2009 accomplishments are both closely related.

Since we have spent the last year in transforming Atlas Energy away from being a cash flow emphasizing master limited partnership, whose basic purpose was to maximize ever larger distributions to outside limited partners, moneys that came from conventional shallow production, instead, we have now totally changed the nature of Atlas Energy.

We have dramatically increased with sophistication and size of our staff of geological, engineering and other specialists, adding dozens of highly skilled individuals, during the past two years. Simultaneously, we have largely ended conventional drilling, transferring our efforts to shale plays in Pennsylvania, Michigan, Indiana and Tennessee but our overwhelming focus is on the Pennsylvania Marcellus where we have already brought our gross Marcellus production up to $60 million cubic feet per day while taking steps to upgrade infrastructure to accommodate the much higher production we now anticipate.

In short, I think it is fair to say we have become a sophisticated world class developer of the Marcellus shale to whom major energy companies should be pleased to entrust operating control of huge amounts of investment into accelerated development of the Marcellus shale. Last year's Marcellus pipeline joint venture with Williams, we didn't expect, will only be the first such industry venture as we move rapidly to develop our core Marcellus position in southwest Pennsylvania.

And as we continue to develop the extremely valuable Marcellus acreage which we hold outside – outside our core southwest Pennsylvania area, in fact, more than half of the approximately 584,000 Marcellus acres which we control is outside southwestern Pennsylvania and we continue to add to our holdings. 2009 was much more than mere preparation for the accelerated success we anticipate in 2010.

By year-end, 2009, we had identified with specificity, over 3150 horizontal Marcellus shale drilling locations on our acreage and we had increased our estimated incremental net recoverable reserves from these locations to 13 trillion cubic feet net to our interest. And don't forget, this is over and above the some trillion cubic feet that we have in our existing reserve, 13 trillion and that's up from our earlier 9 trillion.

And of course, down spacing could result in additional horizontal locations and reserve potential. Year-end 2009 proved reserves as I indicated, total over 1 trillion cubic feet equivalent and that was driven by 34% growth, improved Appalachian reserves, all of which our President, Rich Weber, will discuss in greater detail shortly.

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