05.05.2008 12:30:00

Atlas Pipeline Partners, L.P. Reports Record First Quarter 2008 Results

Atlas Pipeline Partners, L.P. (NYSE: APL) (the "Partnership”) today reported record financial results for the first quarter 2008. The results of the first quarter 2008 include: Adjusted EBITDA (1) of $74.4 million compared with $19.8 million for the prior year first quarter, an increase of $54.6 million, or over 275%. The quarter-over-quarter results were favorably impacted by contributions from the Chaney Dell and Midkiff/Benedum systems, which the Partnership acquired in July 2007, and higher volumes on all of its other systems. A reconciliation of non-GAAP measures, including adjusted EBITDA, distributable cash flow, and adjusted net income, is provided within the financial tables of this release; Distributable cash flow, a non-GAAP measure, of $53.0 million, an increase of $40.2 million or over 300%, compared to the prior year first quarter. The Partnership declared a record quarterly cash distribution for the first quarter 2008 of $0.94 per common limited partner unit. This distribution represented an increase of $0.08 per unit, or 9.3%, compared to the prior year first quarter. The Partnership’s distribution coverage ratio for the first quarter 2008 was 1.2x; Adjusted net income, a non-GAAP measure, of $28.2 million for the first quarter 2008, an increase of $21.7 million, or over 330%, compared to the prior year first quarter. However, because of $76.9 million of non-cash derivative losses recognized in the current quarter, on a GAAP basis the Partnership recognized a net loss of $45.8 million for the first quarter 2008 compared with net income of $2.5 million for the prior year first quarter; System-wide volumes of over 1.2 billion cubic feet per day ("bcfd”) for the first quarter 2008 compared to volumes of approximately 0.7 bcfd for the prior year quarter, an increase of approximately 76%. Mid-Continent Segment Results Mid-Continent segment total revenue increased $257.8 million, or approximately 230%, to $369.8 million for the first quarter 2008, excluding the effect of non-cash derivative expenses. This increase principally reflects a $219.9 million contribution from the acquisition of the Chaney Dell and Midkiff/Benedum systems and higher volumes and commodity prices on its other systems. The NOARK system’s throughput volume increased 103.4 million cubic feet per day ("MMcfd”), or 36%, to 390.3 MMcfd for the first quarter 2008. The Elk City/Sweetwater system’s average natural gas processed volume increased 29.1 MMcfd, or approximately 14%, to 236.4 MMcfd for the first quarter 2008. The Partnership connected 21 new wells to the Elk City/Sweetwater system during the first quarter 2008. The Velma system’s average processed natural gas volume increased 1.4 MMcfd, or approximately 2%, to 59.9 MMcfd for the first quarter 2008. The Partnership connected 7 new wells to its Velma system during the first quarter 2008. The Chaney Dell system’s average processed natural gas volume was 247.9 MMcfd for the first quarter 2008. The Partnership connected 109 new wells to its Chaney Dell system during the first quarter 2008. The Midkiff/Benedum system’s average processed natural gas volume was 136.7 MMcfd for the first quarter 2008. The Partnership connected 43 new wells to its Midkiff/Benedum system during the first quarter 2008. Appalachia Segment Results Total revenue for the Appalachia segment increased $2.7 million, or approximately 34%, to $10.5 million for the first quarter 2008, due principally to higher throughput volume, higher natural gas prices and $1.0 million of natural gas and liquids sales associated with the Irishtown processing plant, which was acquired in August 2007. Throughput volume increased 13.1 MMcfd, or 21%, to 75.6 MMcfd for the first quarter 2008 resulting from the connection of new wells to the Appalachia gathering system, primarily through its relationship with Atlas Energy Resources, LLC (NYSE: ATN) ("Atlas Energy”), and throughput associated with the gathering system acquired in connection with the Irishtown processing plant. During the first quarter 2008, 204 new wells were connected to the Appalachia gathering system compared with 121 new wells for the prior year first quarter. On February 22, 2008, the Partnership purchased a gas gathering system and related facilities located in northeastern Tennessee for $9.1 million. The system serves several counties northwest of Knoxville, an area of active drilling and production including that of Atlas Energy. In conjunction with the acquisition of the gathering system, the Partnership has also announced that it intends to construct a new 20 Mmcf per day cryogenic processing facility that will service natural gas produced in this northeastern Tennessee area. Corporate and Other General and administrative expense, including amounts reimbursed to affiliates, decreased $0.8 million to $5.5 million for the first quarter 2008 compared with $6.3 million for the prior year first quarter. This decrease was primarily related to a $4.6 million decrease in non-cash compensation expense, partially offset by higher costs of managing the Partnership’s operations, including the Chaney Dell and Midkiff/Benedum systems acquired in July 2007. The decrease in non-cash compensation expense was principally attributable to a mark-to-market gain recognized during the first quarter for certain common unit awards for which the ultimate amount to be issued will be determined after the completion of the Partnership’s 2008 fiscal year. The mark-to-market gain was the result of a decrease in the Partnership’s common unit market price at March 31, 2008 when compared with the December 31, 2007 price, which is utilized in the estimate of the non-cash compensation expense for these awards. Depreciation and amortization increased $19.3 million to $25.8 million for the first quarter 2008 due primarily to the depreciation associated with the Chaney Dell and Midkiff/Benedum assets acquired by the Partnership in July 2007, the Partnership’s expansion capital expenditures incurred subsequent to the first quarter 2007, and a $4.0 million write-off of costs related to a pipeline expansion project. The costs incurred consisted of a vendor deposit for the manufacture of pipeline which expired in accordance with a contractual arrangement. Interest expense increased $13.6 million to $20.4 million for first quarter 2008 compared with the prior year first quarter primarily related to interest associated with the Partnership’s $830.0 million term loan, and secondarily, from additional borrowings under the Partnership’s $300.0 million revolving credit facility. The increased borrowings were partially offset by lower interest rates. During the first quarter 2008, the Partnership executed interest rate swap contracts for a notional principal amount of $200.0 million. These contracts convert $200.0 million of the Partnership’s LIBOR-based floating rate exposure to a fixed LIBOR rate of 2.88%, plus the applicable margin as defined under the terms of its credit facility. The contracts became effective beginning in the first quarter 2008 and expire in the first quarter 2010. During April 2008, the Partnership entered into additional interest rate swap contracts having an aggregate notional principal amount of $250.0 million. These contracts convert an additional $250.0 million of the Partnership’s LIBOR-based floating rate exposure to a fixed LIBOR rate of 3.14%, plus the applicable margin as defined under the terms of its credit facility. The contracts became effective beginning in the second quarter 2008 and expire in the second quarter 2010. At March 31, 2008, the Partnership had $1.3 billion of total debt, including its $830.0 million term loan that matures in 2014, $294.4 million of senior unsecured notes that mature in 2015 and $165.0 million of outstanding borrowings under its revolving credit facility that matures in 2013. (1) Adjusted EBITDA represents adjusted earnings before interest, income taxes, depreciation and amortization ("Adjusted EBITDA"), a non-GAAP (generally accepted accounting principles) measure Interested parties are invited to access the live webcast of an investor call with management regarding the Partnership’s first quarter 2008 results on Monday, May 5, 2008 at 2:00 pm ET by going to the Investor Relations section of the Partnership’s website at www.atlaspipelinepartners.com. An audio replay of the conference call will also be available beginning at 4:00 pm ET on Monday, May 5, 2008. To access the replay, dial 1-888-286-8010 and enter conference code 63969074. Atlas Pipeline Partners, L.P. is active in the transmission, gathering and processing segments of the midstream natural gas industry. In the Mid-Continent region of Oklahoma, Arkansas, northern and western Texas and the Texas panhandle, the Partnership owns and operates eight gas processing plants and a treating facility, as well as approximately 7,900 miles of active intrastate gas gathering pipeline and a 565-mile interstate natural gas pipeline. In Appalachia, it owns and operates approximately 1,600 miles of natural gas gathering pipelines in western Pennsylvania, western New York, eastern Ohio and northeastern Tennessee. For more information, visit our website at www.atlaspipelinepartners.com or contact bbegley@atlaspipelinepartners.com. Atlas Pipeline Holdings, L.P. is a limited partnership which owns and operates the general partner of Atlas Pipeline Partners, L.P., through which it owns a 2% general partner interest, all the incentive distribution rights and approximately 5.5 million common units of Atlas Pipeline Partners. Atlas Energy Resources, LLC develops and produces domestic natural gas and to a lesser extent, oil. Atlas Energy is one of the largest independent energy producers in the Appalachian Basin and northern Michigan. The Company sponsors and manages tax-advantaged investment partnerships, in which it co-invests, to finance the exploration and development of the Company’s acreage in the Appalachian Basin. Atlas Energy is active principally in Pennsylvania, Michigan and Tennessee. For more information, visit Atlas Energy’s website at www.atlasenergyresources.com or contact investor relations at bbegley@atlasamerica.com. Atlas America, Inc. (NASDAQ: ATLS) owns an approximate 64% limited partner interest in Atlas Pipeline Holdings, L.P. and an approximate 48% common unit interest and all of the Class A and management incentive interests in Atlas Energy Resources, LLC. For more information, please visit our website at www.atlasamerica.com, or contact Investor Relations at bbegley@atlasamerica.com. Certain matters discussed within this press release are forward-looking statements. Although Atlas Pipeline Partners, L.P. believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from expectations include financial performance, inability of the Partnership to successfully integrate the operations at the acquired systems, regulatory changes, changes in local or national economic conditions and other risks detailed from time to time in Atlas Pipeline’s reports filed with the SEC, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES Financial Summary (in thousands, except per unit amounts)   Three Months Ended March 31, STATEMENTS OF OPERATIONS   2008       2007     Revenue: Natural gas and liquids $ 366,119 $ 102,176 Transportation, compression, and other fees – affiliates 9,159 7,720 Transportation, compression, and other fees – third parties 14,862 9,838 Other loss, net   (86,754 )   (2,197 ) Total revenue and other loss, net   303,386     117,537     Costs and expenses: Natural gas and liquids 276,664 87,810 Plant operating 14,935 4,530 Transportation and compression 3,812 3,112 General and administrative 4,370 5,703 Compensation reimbursement – affiliates 1,129 630 Depreciation and amortization 25,825 6,534 Interest 20,381 6,759 Minority interest   2,090     -   Total costs and expenses   349,206     115,078     Net income (loss) (45,820 ) 2,459 Preferred unit dividend effect (137 ) - Preferred unit imputed dividend cost   (505 )   (499 ) Net income (loss) attributable to common limited partners and the general partner   $ (46,462 ) $ 1,960     Allocation of net income (loss) attributable to common limited partners and the general partner:   Common limited partners’ interest $ (52,387 ) $ (1,884 ) General partner’s interest   5,925     3,844   Net income (loss) attributable to common limited partners and the general partner   $ (46,462 ) $ 1,960     Net income (loss) attributable to common limited partners per unit: Basic $ (1.35 ) $ (0.14 ) Diluted $ (1.35 ) $ (0.14 )   Weighted average common limited partner units outstanding: Basic   38,763     13,080   Diluted   38,763     13,080     Capital expenditure data: Maintenance capital expenditures $ 1,619 $ 772 Expansion capital expenditures   82,450     15,857   Total $ 84,069   $ 16,629     March 31,   December 31, Balance Sheet Data (at period end): 2008 2007 Cash and cash equivalents $ 2,555 $ 11,980 Total assets 2,942,899 2,877,614 Total debt 1,289,391 1,229,426 Total partners’ capital 1,220,331 1,273,960 ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES Segment Information (in thousands)   Three Months Ended March 31,   2008       2007   Mid-Continent Revenue: Natural gas and liquids $ 365,159 $ 102,176 Transportation, compression, and other fees 14,615 9,819 Other loss, net   (86,865 )   (2,279 ) Total revenue and other loss, net   292,909     109,716     Costs and expenses: Natural gas and liquids 276,182 87,810 Plant operating 14,935 4,530 Transportation and compression 1,498 1,720 General and administrative 2,530 3,894 Depreciation and amortization 24,443 5,460 Minority interest   2,090     -   Total costs and expenses   321,678     103,414   Segment profit (loss) $ (28,769 ) $ 6,302     Appalachia Revenue: Natural gas and liquids $ 960 $ - Transportation, compression, and other fees – affiliates 9,159 7,720 Transportation, compression, and other fees – third parties 247 19 Other income   111     82   Total revenue and other income   10,477     7,821     Costs and expenses: Natural gas and liquids 482 - Transportation and compression 2,314 1,392 General and administrative 1,484 1,220 Depreciation and amortization   1,382     1,074   Total costs and expenses   5,662     3,686   Segment profit $ 4,815   $ 4,135     Reconciliation of segment profit (loss) to net income (loss): Segment profit (loss): Mid-Continent $ (28,769 ) $ 6,302 Appalachia   4,815     4,135   Total segment profit (loss) (23,954 ) 10,437 Corporate general and administrative expense (1,485 ) (1,219 ) Interest expense   (20,381 )   (6,759 ) Net income (loss) $ (45,820 ) $ 2,459   ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES (in thousands)   Three Months Ended March 31, 2008   2007 Reconciliation of net income (loss) to adjusted net income(1): Net income (loss) $ (45,820 ) $ 2,459 Non-cash derivative expense 76,856 2,277 Non-cash compensation expense (income)   (2,795 )   1,795   Adjusted net income $ 28,241 $ 6,531 Preferred unit dividend effect (137 ) - Preferred unit imputed dividend cost   (505 )   (499 ) Adjusted net income attributable to common limited partners and the general partner   $ 27,599   $ 6,032     Allocation of adjusted net income attributable to common limited partners and the general partner:   Common limited partners’ interest $ 20,185 $ 2,025 General partner’s interest   7,414     4,007   Adjusted net income attributable to common limited partners and the general partner   $ 27,599   $ 6,032     Adjusted net income attributable to common limited partners per unit:   Basic $ 0.52   $ 0.15   Diluted $ 0.51   $ 0.15     Weighted average common limited partner units outstanding: Basic   38,763     13,080   Diluted   39,742     13,325     Reconciliation of net income (loss) to other non-GAAP measures(1): Net income (loss) $ (45,820 ) $ 2,459 Depreciation and amortization 25,825 6,534 Interest expense   20,381     6,759   EBITDA 386 15,752 Non-cash derivative expense 76,856 2,277 Non-cash compensation expense (income)   (2,795 )   1,795   Adjusted EBITDA 74,447 19,824 Interest expense (20,381 ) (6,759 ) Amortization of deferred financing costs 679 534 Preferred unit dividend effect (137 ) - Maintenance capital expenditures   (1,619 )   (772 ) Distributable cash flow(2) $ 52,989   $ 12,827   (1) Adjusted net income, EBITDA, adjusted EBITDA and distributable cash flow are non-GAAP (generally accepted accounting principles) financial measures under the rules of the Securities and Exchange Commission. Management of the Partnership believes that adjusted net income, EBITDA, adjusted EBITDA and distributable cash flow provide additional information for evaluating the Partnership's ability to make distributions to its common unitholders and the general partner, among other things. These measures are widely used by commercial banks, investment bankers, rating agencies and investors in evaluating performance relative to peers and pre-set performance standards. EBITDA and adjusted EBITDA are also financial measurements that, with certain negotiated adjustments, are utilized within the Partnership's financial covenants under its credit facility. Adjusted net income, EBITDA, adjusted EBITDA and distributable cash flow are not measures of financial performance under GAAP and, accordingly, should not be considered as a substitute for net income, operating income, or cash flows from operating activities in accordance with GAAP.   (2) In connection with the acquisition of control of the Chaney Dell and Midkiff/Benedum systems, the Partnership's general partner, which holds all of the incentive distribution rights in the Partnership, agreed to allocate up to $5.0 million of its incentive distribution rights per quarter back to the Partnership through the quarter ended June 30, 2009, and up to $3.75 million per quarter thereafter. The general partner also agreed that the resulting allocation of incentive distribution rights back to the Partnership would be allocated after the General Partner receives the initial $3.7 million per quarter of incentive distribution rights through the quarter ended December 31, 2007, and $7.0 million per quarter thereafter. ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARES Operating Highlights   Three Months Ended March 31, 2008   2007 Mid-Continent – Velma System Natural Gas Gross natural gas gathered – mcfd(1) 62,400 61,017 Gross natural gas processed – mcfd(1) 59,867 58,508 Gross residue natural gas – mcfd(1) 47,138 45,689 Natural Gas Liquids Gross NGL sales – bpd(1) 6,688 6,247 Condensate Gross condensate sales – bpd(1) 254 200   Mid-Continent – Elk City/Sweetwater System Natural Gas Gross natural gas gathered – mcfd(1) 305,377 287,892 Gross natural gas processed – mcfd(1) 236,403 207,253 Gross residue natural gas – mcfd(1) 213,130 190,940 Natural Gas Liquids Gross NGL sales – bpd(1) 10,677 8,515 Condensate Gross condensate sales – bpd(1) 363 322   Mid-Continent – Chaney Dell System Natural Gas Gross natural gas gathered – mcfd(1) 251,487 - Gross natural gas processed – mcfd(1) 247,861 - Gross residue natural gas – mcfd(1) 220,194 - Natural Gas Liquids Gross NGL sales – bpd(1) 12,401 - Condensate Gross condensate sales – bpd(1) 707 -   Mid-Continent – Midkiff/Benedum System Natural Gas Gross natural gas gathered – mcfd(1) 142,542 - Gross natural gas processed – mcfd(1) 136,654 - Gross residue natural gas – mcfd(1) 96,612 - Natural Gas Liquids Gross NGL sales – bpd(1) 20,349 - Condensate Gross condensate sales – bpd(1) 720 -   Mid-Continent – NOARK system Ozark Gas Transmission throughput – mcfd(1) 390,293 286,891   Appalachia Throughput – mcfd(1) 75,632 62,532 (1) "Mcf" represents thousand cubic feet; "Mcfd" represents thousand cubic feet per day; "Bpd" represents barrels per day. ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES Current Mid-Continent Segment Hedge Positions (as of May 5, 2008) Natural Gas Liquids Sales – Fixed Price Swaps     Production Period Average Ended December 31, Volumes Fixed Price (gallons) (per gallon) 2008 23,940,000 $ 0.697 2009 8,568,000 0.746 Crude Oil Sales Options (associated with NGL volume)         Production Period Associated Average Ended Crude NGL Crude December 31, Volume (barrels) Volume (gallons) Strike Price (per barrel) Option Type 2008 3,517,200 240,141,888 $ 60.00 Puts purchased 2008 3,517,200 240,141,888 79.08 Calls sold 2009 5,184,000 354,533,760 60.00 Puts purchased 2009 5,184,000 354,533,760 78.88 Calls sold 2010 3,127,500 213,088,050 61.08 Puts purchased 2010 3,127,500 213,088,050 81.09 Calls sold 2011 606,000 34,869,240 70.59 Puts purchased 2011 606,000 34,869,240 95.56 Calls sold 2012 450,000 25,893,000 70.80 Puts purchased 2012 450,000 25,893,000 97.10 Calls sold Natural Gas Sales – Fixed Price Swaps     Production Period Average Ended December 31, Volumes Fixed Price (mmbtu)(1) (per mmbtu) (1) 2008 4,113,000 $ 8.804 2009 5,724,000 8.611 2010 4,560,000 8.526 2011 2,160,000 8.270 2012 1,560,000 8.250 Natural Gas Basis Sales     Production Period Average Ended December 31, Volumes Fixed Price (mmbtu)(1) (per mmbtu)(1) 2008 4,113,000 $ (0.732) 2009 5,724,000 (0.558) 2010 4,560,000 (0.622) 2011 2,160,000 (0.664) 2012 1,560,000 (0.601) ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES Current Mid-Continent Segment Hedge Positions (as of May 5, 2008) Natural Gas Purchases – Fixed Price Swaps     Production Period Average Ended December 31, Volumes Fixed Price (mmbtu)(1) (per mmbtu)(1) 2008 12,195,000 $ 8.978(2) 2009 15,564,000 8.680 2010 8,940,000 8.580 2011 2,160,000 8.270 2012 1,560,000 8.250 Natural Gas Basis Purchases     Production Period Average Ended December 31, Volumes Fixed Price (mmbtu)(1) (per mmbtu)(1) 2008 12,195,000 $ (1.114) 2009 15,564,000 (0.654) 2010 8,940,000 (0.600) 2011 2,160,000 (0.700) 2012 1,560,000 (0.610) Crude Oil Sales     Production Period Average Ended December 31, Volumes Fixed Price (barrels) (per barrel) 2008 45,300 $ 59.664 2009 33,000 62.700 Crude Oil Sales Options       Production Period Average Ended December 31, Volumes Strike Price (barrels) (per barrel) Option Type 2008 204,900 $ 60.000 Puts purchased 2008 204,900 78.128 Calls sold 2009 306,000 60.000 Puts purchased 2009 306,000 80.017 Calls sold 2010 234,000 61.795 Puts purchased 2010 234,000 83.027 Calls sold 2011 30,000 60.000 Puts purchased 2011 30,000 74.500 Calls sold 2012 30,000 60.000 Puts purchased 2012 30,000 73.900 Calls sold (1) Mmbtu represents million British Thermal Units.   (2) Includes the Partnership's premium received from its sale of an option for it to sell 936,000 mmbtu of natural gas at an average price of $15.50 per mmbtu for the year ended December 31, 2008.

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