Atlas Pipeline Partners, L.P. (APL)

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Atlas Pipeline Partners, L.P. (APL)

Q3 2012 Earnings Call

October 31, 2012 10:00 AM ET

Executives

Matthew Skelly – Head, IR

Gene Dubay – President and CEO

Pat McDonie – SVP and COO

Tery Karlovich – CFO

Analysts

Ben Wyatt – Stephens

James Spicer – Wells Fargo

Sharon Lui – Wells Fargo

Derek Walker – Bank of America

Helen Ryoo – Barclays

Presentation

Operator

Good day, ladies and gentlemen and welcome to the Third Quarter 2012 Atlas Pipeline Partners’ Earnings Conference Call. My name is Karris, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. (Operator Instructions)

As a reminder, this call is being recorded for replay purposes. And I would now like to hand the call over to your host for today, Mr. Matt Skelly, Head of Investor Relations. Please proceed, sir.

Matthew Skelly

Thank you very much. Good morning, and thank you for joining us on today’s third quarter 2012 earnings call. Before management team provides comments on our third quarters’ results, I’d like to remind everyone of the following Safe Harbor provision.

During this conference call, we may make certain forward-looking statements that is statements related to future, and not past events. In this context, forward-looking statements often address are expected future business and financial performance and financial condition and often contain words such as expect, anticipate, intend, believe, and similar words or phrases.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain and 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 on Form 10-K, particularly in Item one. I would 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 update our forward-looking statements, or 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.

Lastly, management’s discussion this morning includes references to such items as adjusted EBITDA and distributable cash flow, which represent non-GAAP measures. A reconciliation of these non-GAAP measures is provided in the financial tables of our quarterly earnings release as well as our Form 10-Q.

With that, I will turn the call over to our Chief Executive Officer, Gene Dubay, for his remarks. Gene?

Gene Dubay

Thank you, Matt. Good morning, ladies and gentlemen, and thank you for your interest in Atlas Pipeline Partners. Atlas Pipeline is participating in a wave of new energy development, which is transforming our industry and greatly benefiting our country. The results of this resurgence are illustrated by our operations in the third quarter. The volumes of gas produced have continued to increase across all of our operating areas. We completed the new plant at Waynoka, which added 200 billion cubic feet per day of capacity to our WestOK system. We now have approximately 860 million cubic feet per day of processing capacity online.

Our third quarter volumes, our gathered volumes in the quarter were at 860 million cubic feet per day, up from 621 million cubic feet per day in the third quarter of last year, an increase of 25% from the prior year. However, the industry and Atlas Pipeline are continuing to play catch up.

Our liquids production has been constrained at WestOK and West Texas by a lack of pipeline takeaway capacity. But we believe that the DCP pipelines are on track to be completed by the second quarter of 2013. The completion of these pipelines will allow us to maximize the production of our liquids. We have begun the construction of our new Driver plant in West Texas. And we anticipate that it will be completed in the first quarter of 2013. The addition of this plan will add another 200 million cubic feet per day of processing capacity in West Texas.

Our total processing capacity will exceed 1 BCF per day with the completion of this plan. We continue to hedge our production forward in an effort to reduce our commodity sensitivity and stabilize our distribution. Our balance sheet is strong. We refinanced $325 million in our revolving credit facility in the quarter and ended the quarter with over $500 million in liquidity. The producer activity around our systems continues unabated. We are fortunate to operate in the states; Texas, Oklahoma and Kansas that have supported the energy industry in the development of the energy resource in responsible manner with strong oversight.

As we look ahead to the next two quarters, we expect to see the results in line with or incrementally better than those results of the third quarter. And then we anticipated significant lift to margin upon completion of the DCP pipelines in 2013. We are pleased with the progress of our business and we will endeavor to build on the success that we have experienced the last couple of years.

Today, Trey Karlovich, our Chief Financial Officer will speak in greater detail to our financial results and Pat McDonie, our Chief Operating Officer will speak to our operating results. We also have with us today, Denny Latham, our Vice President in Charge of West Texas Operations. Denny is available to answer questions after our prepared remarks. I think that hearing from the individual most involved on a daily basis with West Texas will provide you with insight as to the energy and excitement being experienced in our field operations.

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