Atlas Energy Group, LLC Reports Operating And Financial Results For The First Quarter 2015

PITTSBURGH, May 5, 2015 /PRNewswire/ -- Atlas Energy Group, LLC (NYSE: ATLS) ("Atlas Energy", "the Company" or "ATLS") today reported operating and financial results for the first quarter 2015.

• Atlas Resource Partners, L.P. (NYSE: ARP), Atlas Energy's E&P subsidiary, paid monthly cash distributions totaling $0.325 per common limited partner unit for the first quarter 2015. The most recent ARP distribution for March 2015 will be paid on May 15, 2015 to holders of record as of May 8, 2015. Atlas Energy received $9.3 million in cash distributions in the first quarter 2015 from its common and preferred unit ownership in ARP. ATLS expects to pay a full quarterly distribution in August 2015 for the second quarter 2015. ATLS began trading publicly on March 2, 2015 following the spin-off from its former parent, Atlas Energy, L.P., which was sold to Targa Resources Corp. in the first quarter 2015.
• ATLS had net production of approximately 10.7 million cubic feet equivalents per day ("Mmcfed") in the first quarter 2015 from its Arkoma assets, with production margin of approximately $2.0 million in the period. Production in the Arkoma region was partially affected by the severe winter weather which occurred during the current period.
• Arc Logistics Partners, LP (NYSE: ARCX), a master limited partnership of which 16% of its general partner is owned by ATLS through the Company's interest in Lightfoot Capital Partners, acquired certain crude oil terminal assets in Joliet, IL through a joint venture with GE Energy Financial Services for $216 million in February 2015. ATLS received $455,000 in cash distributions in the first quarter 2015 from Lightfoot Capital.

Recent Events

ATLS Term Loan and Preferred Private Placement

In February 2015, ATLS paid $150 million owed to its former parent, Atlas Energy, L.P., to facilitate the closing of the merger transaction between Atlas Energy and Targa Resources Corp. These repayment funds were generated from $116 million of term loan facilities ("Term Loan") and a private placement of $40 million of newly-issued ATLS Class A Preferred Units ("Preferred Units").

The Term Loan, which bears interest at LIBOR (1% floor) + 7.5%, matures in February 2016. The Term Loan also calls for repayment of $30 million within six months from February 26, 2015, the date of issuance. Under the terms of the Preferred Unit agreement, the Company issued approximately 1,600,000 Preferred Units with a liquidation preference of $25, which will be convertible into ATLS common units by the holders following the later of February 27, 2016 and receipt of unitholder approval for such conversion.

ARP's First Quarter 2015 Highlights

• ARP's average net daily production for the first quarter 2015 was 270.8 million cubic feet equivalents per day ("Mmcfed"), approximately 10% higher than the prior year first quarter. The increase in net production from the prior year first quarter was due primarily to the acquisition of the Eagle Ford assets in November 2014, as well as the Rangely Field assets in June 2014 and the GeoMet natural gas production assets in May 2014.
• ARP's net realized price for natural gas including the effect of hedge positions was $3.59 per thousand cubic feet ("mcf") for the first quarter 2015, compared to $3.66/mcf for the fourth quarter 2014. Net realized oil prices including the effect of hedge positions averaged $80.81 per barrel ("bbl") for the first quarter 2015, compared to $84.81/bbl for the fourth quarter 2014.
• Investment partnership margin at ARP contributed $8.8 million to Adjusted EBITDA and distributable cash flow for the first quarter 2015, compared with $11.1 million for the prior year comparable quarter.  The decrease in investment partnership margin was due to higher amounts of capital deployed during the prior year quarter from the acceleration of drilling activity in the first quarter 2014.
• On February 23, 2015, ARP obtained $250 million in second lien financing from GSO Capital, which matures in 2020. The second lien has an effective annual interest rate of LIBOR + 9%, and is subordinate to the Company's senior secured credit facility. ARP also reached an agreement with its lending group to amend to its senior secured credit facility in order to increase certain leverage covenants as a result of the recent commodity environment. Both the second lien financing and the credit facility amendment have provided ARP with additional financial flexibility and liquidity.
• ARP continued to expand its commodity hedge positions on its existing production. During the first quarter 2015, ARP was approximately 89% hedged on its net oil production and approximately 80% hedged on its net natural gas production. In addition, ARP is approximately hedged 72%, 68% and 63% for its natural gas production at an average price of $4.23/mcf, and hedged approximately 94%, 77% and 56% for oil in 2015, 2016 and 2017, respectively, at an average price of $82/bbl, based on first quarter 2015 average production.

ATLS owns 100% of the general partner Class A units and the incentive distribution rights, and an approximate 28% limited partner interest in ARP.  ATLS' financial results are presented on a consolidated basis with those of ARP.  Non-controlling interests in ARP are reflected as an adjustment to net income in ATLS' consolidated statements of operations and as a component of unitholders' equity on its consolidated balance sheets.  A consolidating statement of operations and balance sheet have also been provided in the financial tables to this release for the comparable periods presented.  Please refer to the ARP first quarter 2015 earnings release for additional details on its financial results.

Corporate Expenses

• Cash general and administrative expense, excluding amounts attributable to the Development Subsidiary and ARP, was $3.4 million for the first quarter 2015, relatively consistent with $3.2 million for the prior year comparable quarter. The slight increase in expense from the prior year quarter was due primarily to certain public company costs incurred subsequent to ATLS's unit distribution, which were applicable to ATLS' parent company, Atlas Energy, L.P., in the prior year quarter.  Please refer to the consolidating statements of operations provided in the financial tables of this release.
• Cash interest expense subsequent to ATLS's unit distribution on February 27, 2015, excluding amounts attributable to ARP, was $1.0 million for the first quarter 2015, compared to $2.5 million allocated by Atlas Energy, L.P. to ATLS for the prior year comparable quarter. The lower amount of interest expense compared to the prior year was due primarily to interest expense on Atlas Energy. L.P.'s $240 million term loan credit facility, which was repaid in conjunction with Atlas Energy, L.P.'s merger with Targa Resources Corp. in February 2015. As of March 31, 2015, ATLS had approximately $116 million of total debt, and a cash position of approximately $6 million.

Interested parties are invited to access the live webcast of an investor call with management regarding Atlas Energy Group, LLC's first quarter 2015 results on Wednesday, May 6, 2015 at 9:00 am ET by going to the Investor Relations section of Atlas Energy's website at www.atlasenergy.com.  For those unavailable to listen to the live broadcast, the replay of the webcast will be available following the live call on the Atlas Energy website and telephonically beginning at 1:00 p.m. ET on May 6, 2015 by dialing 855-859-2056, passcode: 33615010.

Atlas Energy Group, LLC (NYSE: ATLS) is a limited liability company which owns the following interests: all of the general partner interest, incentive distribution rights and an approximate 28% limited partner interest in its upstream oil & gas subsidiary, Atlas Resource Partners, L.P.; the general partner interests, incentive distribution rights and limited partner interests in its private E&P Development Subsidiary; and a general partner interest in Lightfoot Capital Partners, an entity that invests directly in energy-related businesses and assets. For more information, please visit our website at www.atlasenergy.com, or contact Investor Relations at [email protected].

Atlas Resource Partners, L.P. (NYSE: ARP) is an exploration & production master limited partnership which owns an interest in over 14,500 producing natural gas and oil wells, located primarily in Appalachia, the Eagle Ford Shale (TX), the Barnett Shale (TX), the Mississippi Lime (OK), the Raton Basin (NM), the Black Warrior Basin (AL) and the Rangely Field in Colorado.  ARP is also the largest sponsor of natural gas and oil investment partnerships in the U.S. For more information, please visit our website at www.atlasresourcepartners.com, or contact Investor Relations at [email protected].

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.  ATLS cautions readers that any forward-looking information is not a guarantee of future performance.  Such forward-looking statements include, but are not limited to, statements about future financial and operating results, resource and production potential, planned expansions of capacity and other capital expenditures, distribution amounts, ATLS' plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties that could cause actual results to materially differ from the forward-looking statements include, but are not limited to, those associated with general economic and business conditions; ability to realize the benefits of its acquisitions; changes in commodity prices and hedge positions; changes in the costs and results of drilling operations; uncertainties about estimates of reserves and resource potential; inability to obtain capital needed for operations; ATLS' level of indebtedness; changes in government environmental policies and other environmental risks; the availability of drilling equipment and the timing of production; tax consequences of business transactions; and other risks, assumptions and uncertainties detailed from time to time in ATLS' and ARP's reports filed with the U.S. Securities and Exchange Commission, including quarterly reports on Form 10-Q, current reports on Form 8-K and annual reports on Form 10-K. Forward-looking statements speak only as of the date hereof, and ATLS assumes no obligation to update such statements, except as may be required by applicable law.

 

 

 

⁽¹⁾   Production quantities consist of the sum of (i) the proportionate share of production from wells in which ATLS and ARP have a direct interest, based on the proportionate net revenue interest in such wells, and (ii) ARP's proportionate share of production from wells owned by the investment partnerships in which ARP has an interest, based on its equity interest in each such partnership and based on each partnership's proportionate net revenue interest in these wells.

⁽²⁾   "Mcf" and "Mcfd" represent thousand cubic feet and thousand cubic feet per day; "Mcfe" and "Mcfed" represent thousand cubic feet equivalents and thousand cubic feet equivalents per day, and "Bbl" and "Bpd" represent barrels and barrels per day.  Barrels are converted to Mcfe using the ratio of six Mcf's to one barrel.

⁽³⁾   ATLS' average sales price for natural gas before the effects of financial hedging was $2.64 per Mcf and $4.49 per Mcf for the three months ended March 31, 2015 and 2014, respectively. ARP's average sales prices for natural gas before the effects of financial hedging were $2.53 per Mcf and $4.68 per Mcf for the three months ended March 31, 2015 and 2014, respectively. ARP's amounts exclude the impact of subordination of ARP's production revenues to investor partners within its investor partnerships.  Including the effects of this subordination, ARP's average natural gas sales prices were $3.53 per Mcf ($2.48 per Mcf before the effects of financial hedging) and $3.80 per Mcf ($4.42 per Mcf before the effects of financial hedging) for the three months ended March 31, 2015 and 2014, respectively. 

⁽⁴⁾   ARP's average sales prices for oil before the effects of financial hedging were $43.46 per barrel and $93.18 per barrel for the three months ended March 31, 2015 and 2014, respectively.

⁽⁵⁾   ARP's average sales prices for natural gas liquids before the effects of financial hedging were $14.10 per barrel and $35.65 per barrel for the three months ended March 31, 2015 and 2014, respectively.

⁽⁶⁾   Production costs include labor to operate the wells and related equipment, repairs and maintenance, materials and supplies, property taxes, severance taxes, insurance, production overhead and transportation and compression expenses.  These amounts exclude the effects of ARP's proportionate share of lease operating expenses associated with subordination of production revenue to investor partners within ARP's investor partnerships.  Including the effects of these costs, ARP's lease operating expenses per Mcfe were $1.35 per Mcfe ($1.81 per Mcfe for total production costs) and $1.10 per Mcfe ($1.66 per Mcfe for total production costs) for the three months ended March 31, 2015 and 2014, respectively. Including the effects of these costs, total lease operating expenses per Mcfe were $1.32 per Mcfe ($1.79 per Mcfe for total production costs) and $1.09 per Mcfe ($1.67 per Mcfe for total production costs) for the three months ended March 31, 2015 and 2014, respectively.

⁽¹⁾EBITDA and Distributable Cash Flow is relevant and useful because it helps ATLS' investors understand its operating performance, allows for easier comparison of its results with other master limited partnerships ("MLP"), and is a critical component in the determination of quarterly cash distributions. As a MLP, ATLS is required to distribute 100% of available cash, as defined in its limited partnership agreement ("Available Cash") and subject to cash reserves established by its general partner, to investors on a quarterly basis.  ATLS refers to Available Cash prior to the establishment of cash reserves as DCF. EBITDA, Adjusted EBITDA and DCF should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. While ATLS's management believes that its methodology of calculating EBITDA, Adjusted EBITDA and DCF is generally consistent with the common practice of other MLPs, such metrics may not be consistent and, as such, may not be comparable to measures reported by other MLPs, who may use other adjustments related to their specific businesses. EBITDA, Adjusted EBITDA and DCF are supplemental financial measures used by ATLS' management and by external users of ATLS' financial statements such as investors, lenders under its credit facilities, research analysts, rating agencies and others to assess its:

• Operating performance as compared to other publicly traded partnerships and other companies in the upstream and midstream energy sectors, without regard to financing methods, historical cost basis or capital structure;
• Ability to generate sufficient cash flows to support its distributions to unitholders;
• Ability to incur and service debt and fund capital expansion;
• Viability of potential acquisitions and other capital expenditure projects; and
• Ability to comply with financial covenants in its debt facility, which is calculated based upon Adjusted EBITDA

DCF is determined by calculating EBITDA, adjusting it for non-cash, non-recurring and other items to achieve Adjusted EBITDA, and then deducting cash interest expense and maintenance capital expenditures.  ATLS defines EBITDA as net income (loss) plus the following adjustments:

• Interest expense;
• Income tax expense;
• Depreciation, depletion and amortization

ATLS defines Adjusted EBITDA as EBITDA plus the following adjustments:

• Cash distributions paid by ARP and the Development Subsidiary within 45 days after the end of the respective quarter, based upon their distributable cash flow generated during that quarter;
• Asset impairments;
• Acquisition and related costs;
• Non-cash stock compensation;
• (Gains) losses on asset disposal;
• Cash proceeds received from monetization of derivative transactions;
• Amortization of premiums paid on swaption derivative contracts; and
• Other items

ATLS adjusts DCF for non-cash, non-recurring and other items for the sole purpose of evaluating its cash distribution for the quarterly period, with EBITDA and Adjusted EBITDA adjusted in the same manner for consistency.  ATLS defines DCF as Adjusted EBITDA less the following adjustments:

• Cash interest expense; and
• Maintenance capital expenditures

⁽²⁾In accordance with prevailing accounting literature, ATLS has adjusted its historical financial statements to present them combined with the historical financial results of the spin-off assets for all periods prior to its spin-off date of February 27, 2015

⁽³⁾Represents the cash distribution paid by ARP and its new Development Subsidiary within 45 days after the end of each quarter, based upon the distributable cash flow generated during the respective quarter

⁽⁴⁾Production from oil and gas assets naturally decline in future periods and, as such, ATLS recognizes the estimated capitalized cost of stemming such decline in production margin for the purpose of stabilizing its DCF and cash distributions, which it refers to as maintenance capital expenditures. ATLS calculates the estimate of maintenance capital expenditures by first multiplying its forecasted future full year production margin by its expected aggregate production decline of proved developed producing wells.  Maintenance capital expenditures are then the estimated capitalized cost of wells that will generate an estimated first year margin equivalent to the production margin decline, assuming such wells are connected on the first day of the calendar year.  ATLS does not incur specific capital expenditures expressly for the purpose of maintaining or increasing production margin, but such amounts are a hypothetical subset of wells it expects to drill in future periods on undeveloped acreage already leased.  Estimated capitalized cost of wells included within maintenance capital expenditures are also based upon relevant factors, including utilization of public forward commodity exchange prices, current estimates for regional pricing differentials, estimated labor and material rates and other production costs.  Generally, estimates for maintenance capital expenditures in the current year are the sum of the estimate calculated in the prior year plus estimates for the decline in production margin from wells connected during the current year and production acquired through acquisitions.  ATLS considers expansion capital expenditures to be any capital expenditure costs expended that are not maintenance capital expenditures – generally, this will include expenditures to increase, rather than maintain, production margin in future periods, as well as land, gathering and processing, and other non-drilling capital expenditures

⁽⁵⁾Excludes non-cash stock compensation expense and certain non-recurring spinoff costs and acquisition and related costs

⁽⁶⁾Excludes non-cash amortization of deferred financing costs

 

 

 

 

 

 

 

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SOURCE Atlas Energy Group, LLC