Atlas Pipeline Partners, L.P. (APL)

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Atlas Pipeline Partners, L.P. (APL)

Q2 2008 Earnings Call

August 1, 2008 9:00 am ET

Executives

Brian Begley – Vice President, Investor Relations

Ed Cohen - Chairman and Chief Executive Officer

Bob Firth - President and CEO of Atlas Pipeline Mid-Continent, LLC

Mike Staines - President and Chief Operating Officer

Matt Jones – Chief Financial Officer

Analysts

Sharon Lui – Wachovia Securities

Carlos Rodriguez - Hartford Investment Management

Eric Kalamaras – Wachovia Securities

Yves Siegel - Aroya Capital, LLC

Helen Weir - Lehman Brothers

Presentation

Operator

Welcome to the quarter two 2008 Atlas Pipeline Partners earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today's call, Brian Begley, Vice President of Investor Relations.

Brian Begley

Before we begin our discussion on our second quarter 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.

Now I would like to turn the call over to our Chairman and Chief Executive Officer, Ed Cohen.

Ed Cohen

APL's 2008 second quarter saw a number of signal accomplishments. Even in a challenging economic environment, we have stuck successfully, I might say, to our fundamental businesses. We have totally rejected the kinds of marketing activities that sometimes exaggerate profits but at high risk and we have carefully maintained a strong financial position and we continue to cultivate carefully calibrated risk control policies and operations. Bob Firth will speak about these risk control policies and operations in detail a little bit later.

I am going to report now on the quarter itself. First of all, in a period when credit and equity markets have been frozen for virtually all companies, and quite cold even for energy businesses, we were able to raise in late June over $0.5 billion in additional long-term debt and equity financing.

We sold over 7 million shares of new commercial stock generating net proceeds of over $260 million. Partnership likewise issued $250 million of the 10-year 8.75% senior unsecured notes and we obtained a further $80 million of increased bank commitments for our senior secured revolving credit facility increasing the amount committed under that facility to $380 million.

At June 30, 2008, only $20 million of this revolver was in use leaving $360 million for the Company's ongoing and future needs. In an era when cash seems to be king, we should be part of royalty. I am pleased to salute the skill with which our financial officers headed by Matt Jones have handled the challenging and extraordinarily volatile environment.

We have actually been navigating, as you know, in hurricane force commodity and credit wins which have damaged and even sunk some other energy companies and I think we are all familiar with this in recent newspaper headlines. So we are very glad that we were able to get ahead of the wave, get cash in a difficult period and I think we stand strong right now. Our operations have been going very well. APL's Northern and Central Oklahoma processing plants have been operating at full capacity through the second quarter and have been forced to bypass a continual excess of gathered natural gas.

Fortunately, however, our new Sweetwater II expansion became operational at the end of the second quarter increasing our total Elk City/Sweetwater processing capability to 310 million cubic feet per day from only $250 million previously. That is very, very important for us because since gathered gas volume in the second quarter was already almost 293 million cubic feet per day, well beyond our prior processing capabilities at Elk City/Sweetwater, this increased capability promises increased profitability in future quarters especially as we are now able to process at the new Sweetwater II the excess gas gathered at our Waynoka and Chaney Dell complex. That is what we call our Western Oklahoma division.

During the second quarter 2008, Waynoka/Chaney Dell was forced to bypass about 17 million cubic feet per day because processing capacity there too was fully utilized even after the reopening in the first quarter of the previously idled Chaney Dell plant. Now because of the earlier completion of the new connector pipeline between these two facilities, a portion of this Western Oklahoma excess is already flowing to the expanded Sweetwater facility.

I should note that despite capacity constraints even during the second quarter because of innovative operational approaches, our West Oklahoma system that is Waynoka and Chaney Dell, still was able to increase NGL production by 8% over the prior quarter. And our new Nine Mile processing plant is scheduled to enter service at yearend 2008, a plant that will be positioned about equidistant between Waynoka/Chaney Dell and Elk City/Sweetwater.

With this additional 120 million cubic feet per day of processing capacity, revenue and profits should increase still further. Early reports, still provisional, suggest that distributable cash flow through our company in July 2008 was the best per unit in our Company's history, onward and upward as the prophet said. All of our divisions continue to prosper and expand. Appalachia is showing remarkable growth, an increase of 28% in gas throughput in the second quarter of 2008 as against the prior year period. Gas transmitted on the Ozark system averaged 402 million cubic feet per day, an increase of 25% from 322 million cubic feet per day in the second quarter of 2007. Processed volumes in West Texas increased by 5% over the prior quarter.

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