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

⁽¹⁾

A reconciliation of GAAP net income (loss) to Distributable Cash Flow is provided in the financial tables of this release. Please see footnote 61 to the Financial Information table of this release.

ATLAS ENERGY GROUP, LLC AND SUBSIDIARIES

COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per unit data)

Three Months Ended

Six Months Ended

June 30,

June 30,

Revenues:

2015

2014

2015

2014

      Gas and oil production

$        99,077

$     110,694

$      205,637

$     211,519

      Well construction and completion

16,956

16,336

40,611

65,713

      Gathering and processing

2,177

3,758

4,361

8,226

      Administration and oversight

547

4,166

1,806

5,895

      Well services

6,102

6,365

12,726

11,844

      Gain (loss) on mark-to-market derivatives

(26,896)

—

78,689

—

  Other, net

284

285

216

554

          Total revenues

98,247

141,604

344,046

303,751

Costs and expenses:

      Gas and oil production

43,619

43,828

89,608

82,586

      Well construction and completion

14,745

14,206

35,315

57,142

      Gathering and processing

2,516

4,273

4,933

8,686

      Well services

2,139

2,426

4,337

4,908

      General and administrative

18,405

24,797

60,333

46,188

  Depreciation, depletion and amortization

43,276

60,406

87,732

112,445

          Total costs and expenses

124,700

149,936

282,258

311,955

Operating income (loss)

(26,453)

(8,332)

61,788

(8,204)

Gain (loss) on asset sales and disposal

97

12

86

(1,591)

Interest expense

(33,187)

(16,074)

(67,938)

(32,051)

Net loss

(59,543)

(24,394)

(6,064)

(41,846)

(Income) loss attributable to non-controlling interests

38,745

18,383

(19,558)

28,691

Net loss attributable to unitholders'/owner's interests

$       (20,798)

$        (6,011)

$       (25,622)

$      (13,155)

Allocation of net loss attributable to unitholders'/owner's interests:

Portion applicable to owner's interest (period prior to the transfer of assets on February 27, 2015)

$                —

$        (6,011)

$      (10,475)

$      (13,155)

Portion applicable to unitholders' interest (period subsequent to the transfer of assets on February 27, 2015)

(20,798)

—

(15,147)

—

Net loss attributable to unitholders' /owner's interests

$       (20,798)

$        (6,011)

$       (25,622)

$      (13,155)

Net loss attributable to unitholders per common unit:

Basic

$          (0.80)

$                —

$          (0.58)

$                —

Diluted

$          (0.80)

$                —

$          (0.58)

$                —

Weighted average common units outstanding:

Basic

26,011

—

26,011

—

Diluted

26,011

—

26,011

—

ATLAS ENERGY GROUP, LLC AND SUBSIDIARIES

COMBINED CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands)

June 30,

December 31,

ASSETS

2015

2014

Current assets:

      Cash and cash equivalents

$             40,077

$             58,358

      Accounts receivable

90,489

115,290

      Advances to affiliates

−

4,389

      Current portion of derivative asset

114,740

144,259

      Subscriptions receivable

34,675

32,398

      Prepaid expenses and other

25,016

26,789

          Total current assets

304,997

381,483

Property, plant and equipment, net

2,392,656

2,419,289

Intangible assets, net

574

691

Goodwill, net

13,639

13,639

Long-term derivative asset

150,180

130,602

Other assets, net

82,792

80,611

$        2,944,838

$        3,026,315

LIABILITIES AND UNITHOLDERS'/OWNER'S EQUITY

Current liabilities:

      Current portion of long-term debt

$             77,371

$               1,500

      Accounts payable

110,789

123,670

      Liabilities associated with drilling contracts

—

40,611

      Accrued interest

26,312

26,479

      Accrued well drilling and completion costs

37,368

92,910

      Accrued liabilities

80,740

170,786

          Total current liabilities

332,580

455,956

Long-term debt, less current portion

1,491,612

1,541,085

Asset retirement obligations and other

120,287

114,059

Commitments and contingencies

Unitholders'/owner's equity:

      Common unitholders' equity

105,649

—

      Series A preferred equity

38,999

—

      Owner's equity

—

147,308

      Accumulated other comprehensive income

32,626

54,008

177,274

201,316

      Non-controlling interests

823,085

713,899

Total unitholders'/owner's equity

1,000,359

915,215

$         2,944,838

$         3,026,315

ATLAS ENERGY GROUP, LLC

Financial and Operating Highlights

(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Net loss attributable to unitholders per common unit - basic

$           (0.80)

$             —

$       (0.58)

$             —

Production volume: ⁽¹⁾⁽²⁾

  ATLAS GROWTH:

Natural gas (Mcfd)

481

939

604

597

Oil (Bpd)

320

200

405

125

Natural gas liquids (Bpd)

62

118

81

75

Total (Mcfed)

2,773

2,847

3,516

1,800

  ATLAS RESOURCE:

Natural gas (Mcfd)

219,844

238,375

223,571

233,186

Oil (Bpd)

5,293

2,084

5,412

1,827

Natural gas liquids (Bpd)

3,194

3,689

3,340

3,556

Total (Mcfed)

270,761

273,014

276,083

265,488

  TOTAL:

Natural gas (Mcfd)

220,325

239,314

224,175

233,783

Oil (Bpd)

5,613

2,284

5,817

1,953

Natural gas liquids (Bpd)

3,256

3,808

3,421

3,631

Total (Mcfed)

273,534

275,861

279,599

267,288

Average realized sales prices:⁽²⁾

  ATLAS GROWTH:

Natural gas (per Mcf)

$          2.61

$          4.29

$          2.66

$       4.42

Oil (per Bbl) ⁽⁴⁾

$        56.01

$        96.53

$        49.79

$     93.77

Natural gas liquids (per Bbl)

$       12.76

$       31.13

$       13.06

$     30.75

  ATLAS RESOURCE:

Natural gas (per Mcf) ⁽³⁾

$          3.33

$          3.79

$          3.46

$       3.92

Oil (per Bbl)⁽⁴⁾

$        83.19

$        90.66

$        81.98

$     89.12

Natural gas liquids (per Bbl) ⁽⁵⁾

$       22.58

$       27.60

$       22.53

$     29.57

Production costs per Mcfe:⁽²⁾⁽⁶⁾

  ATLAS GROWTH:

Lease operating expenses per Mcfe

$          1.47

$          2.22

$          1.15

$          2.39

Production taxes per Mcfe

0.36

0.50

0.33

0.49

Transportation and compression expenses per Mcfe

0.09

—

0.05

—

Total production costs per Mcfe

$          1.92

$          2.72

$          1.53

$          2.88

  ATLAS RESOURCE:

Lease operating expenses per Mcfe

$          1.36

$          1.22

$          1.36

$          1.19

Production taxes per Mcfe

0.16

0.24

0.20

0.26

Transportation and compression expenses per Mcfe

0.24

0.27

0.24

0.28

Total production costs per Mcfe

$          1.77

$          1.73

$          1.79

$          1.73

  TOTAL:

Lease operating expenses per Mcfe

$          1.37

$          1.23

$          1.36

$          1.20

Production taxes per Mcfe

0.17

0.25

0.20

0.26

Transportation and compression expenses per Mcfe

0.24

0.26

0.23

0.28

Total production costs per Mcfe

$          1.77

$          1.74

$          1.79

$          1.74

⁽¹⁾  

Production quantities consist of the sum of (i) the proportionate share of production from wells in which AGP 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⁾  

ARP's average sales prices for natural gas before the effects of financial hedging were $2.14 per Mcf and $4.13 per Mcf for the three months ended June 30, 2015 and 2014, respectively, and $2.34 per Mcf and $4.39 per Mcf for the six months ended June 30, 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 $3.28 per Mcf ($2.09 per Mcf before the effects of financial hedging) and $3.77 per Mcf ($4.12 per Mcf before the effects of financial hedging) for the three months ended June 30, 2015 and 2014, respectively, and $3.40 per Mcf ($2.29 per Mcf before the effects of financial hedging) and $3.79 per Mcf ($4.26 per Mcf before the effects of financial hedging) for the six months ended June 30, 2015 and 2014, respectively.

⁽⁴⁾  

AGP's average sales price for oil before the effects of financial hedging was $55.84 per barrel and $96.53 per barrel for the three months ended June 30, 2015 and 2014, respectively, and $49.72 per barrel and $93.77 per barrel for the six months ended June 30, 2015 and 2014, respectively. ARP's average sales prices for oil before the effects of financial hedging were $53.35 per barrel and $98.95 per barrel for the three months ended June 30, 2015 and 2014, respectively, and $48.32 per barrel and $96.49 per barrel for the six months ended June 30, 2015 and 2014, respectively.

⁽⁵⁾  

ARP's average sales prices for natural gas liquids before the effects of financial hedging were $13.78 per barrel and $28.93 per barrel for the three months ended June 30, 2015 and 2014, respectively, and $13.95 per barrel and $32.15 per barrel for the six months ended June 30, 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 $1.34 per Mcfe ($1.75 per Mcfe for total production costs) and $1.23 per Mcfe ($1.74 per Mcfe for total production costs) for the three months ended June 30, 2015 and 2014, respectively, and $1.34 per Mcfe ($1.77 per Mcfe for total production costs) and $1.16 per Mcfe ($1.70 per Mcfe for total production costs) for the six months ended June 30, 2015 and 2014, respectively. Including the effects of these costs, total lease operating expenses per Mcfe were $1.34 per Mcfe ($1.75 per Mcfe for total production costs) and $1.24 per Mcfe ($1.75 per Mcfe for total production costs) for the three months ended June 30, 2015 and 2014, respectively, and $1.33 per Mcfe ($1.77 per Mcfe for total production costs) and $1.17 per Mcfe ($1.71 per Mcfe for total production costs) for the six months ended June 30, 2015 and 2014, respectively.

ATLAS ENERGY GROUP, LLC

Financial Information

(unaudited; in thousands except per unit amounts)

Three Months Ended

Six Months Ended

June 30,

June 30

Reconciliation of net income (loss) to non-GAAP measures⁽¹⁾:

2015

2014

2015

2014

Net loss

$       (59,543)

$     (24,394)

$       (6,064)

$ (41,846)

Distributable cash flow not attributable to unitholders prior to February 27, 2015 (the asset transfer date)⁽²⁾

—

(14,871)

(4,291)

(27,121)

Atlas Resource net (income) loss attributable to unitholders

10,162

2,044

(15,017)

3,045

Atlas Resource cash distributions earned by ATLS⁽³⁾

9,373

18,347

18,707

35,844

Atlas Growth net (income) loss attributable to unitholders

(50)

83

14

338

Atlas Growth cash distributions earned by ATLS⁽³⁾

88

43

160

82

Non-recurring spinoff and acquisition costs

—

—

17,174

77

Amortization of deferred finance costs and predecessor

    Term Loan interest expense

6,165

309

14,716

618

Non-cash stock compensation expense

926

—

946

—

Gain on asset sales and disposal

—

(3)

—

(3)

Preferred unit distributions

(1,004)

—

(1,337)

—

Other non-cash adjustments

127

59

684

275

(Income) loss attributable to non-controlling interests

38,745

18,383

(19,558)

28,691

Distributable Cash Flow attributable to unitholders⁽¹⁾

$          4,989

$            —

$      6,134

$         —

Supplemental Adjusted EBITDA and Distributable Cash Flow Summary:

Atlas Resource Cash Distributions Earned⁽³⁾:

Limited Partner Units

$          8,723

$        14,412

$        17,449

$   28,745

Series A Preferred Units (2%)

650

1,060

1,258

1,929

Incentive Distribution Rights

—

2,875

—

5,170

Total Atlas Resource Cash Distributions Earned⁽³⁾

9,373

18,347

18,707

35,844

per limited partner unit

$            0.325

$            0.583

$            0.650

$     1.163

Atlas Growth Cash Distributions Earned⁽³⁾

88

43

160

82

Total Cash Distributions Earned

9,461

18,390

18,867

35,926

Cash general and administrative expenses⁽⁴⁾

(1,996)

(1,416)

(5,361)

(4,660)

Other, net

834

399

1,565

837

Adjusted EBITDA⁽¹⁾

8,299

17,373

15,071

32,103

Cash interest expense⁽⁵⁾

(2,306)

(2,502)

(3,309)

(4,982)

Preferred unit distributions

(1,004)

—

(1,337)

—

Distributable Cash Flow⁽¹⁾

$          4,989

$        14,871

$        10,425

$   27,121

Distributable cash flow not attributable to unitholders prior to February 27, 2015 (the asset transfer date)⁽²⁾

—

(14,871)

(4,291)

(27,121)

Distributable Cash Flow attributable to unitholders⁽¹⁾

$          4,989

$               —

$          6,134

$          —

⁽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' 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 AGP 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 AGP within 45 days after the end of each quarter, based upon the distributable cash flow generated during the respective quarter.

⁽⁴⁾

Excludes non-cash stock compensation expense and certain non-recurring spinoff costs and acquisition and related costs.

⁽⁵⁾

Excludes non-cash amortization of deferred financing costs.

ATLAS ENERGY GROUP, LLC

CAPITALIZATION INFORMATION

(unaudited; in thousands)

June 30, 2015

Atlas

Atlas

Energy

Resource

Consolidated

Total debt

$        77,371

$  1,491,612

$     1,568,983

Less:  Cash

(39,470)

(607)

(40,077)

Total net debt

37,901

1,491,005

1,528,906

Unitholders' equity

314,446

924,301

      1,000,359⁽¹⁾

Total capitalization

$        352,347

$2,415,306

$    2,529,265

Ratio of net debt to capitalization

0.11x

⁽¹⁾        Net of eliminated amounts.

December 31, 2014

Atlas

Atlas

Energy

Resource

Consolidated

Total debt

$        148,125

$1,394,460

$   1,542,585

Less:  Cash

(43,111)

(15,247)

(58,358)

Total net debt

105,014

1,379,213

1,484,227

Owner's equity

267,637

947,537

      915,215⁽²⁾

Total capitalization

$        372,651

$2,326,750

$    2,399,442

Ratio of net debt to capitalization

0.28x

⁽²⁾        Net of eliminated amounts.

ATLAS ENERGY GROUP, LLC

CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited; in thousands)

Three Months Ended June 30, 2015

Atlas

Atlas

Energy

Resource

Eliminations

Consolidated

Revenues:

      Gas and oil production

$          1,817

$        97,260

$                 −

$        99,077

      Well construction and completion

−

16,956

−

16,956

      Gathering and processing

−

2,177

−

2,177

      Administration and oversight

−

547

−

547

      Well services

−

6,102

−

6,102

      Gain (loss) on mark-to-market derivatives

48

(26,944)

−

(26,896)

   Other, net

257

27

−

284

          Total revenues

2,122

96,125

−

98,247

Costs and expenses:

      Gas and oil production

484

43,135

−

43,619

      Well construction and completion

−

14,745

−

14,745

      Gathering and processing

−

2,516

−

2,516

      Well services

−

2,139

−

2,139

      General and administrative

5,118

13,287

−

18,405

         Depreciation, depletion and amortization

782

42,494

−

43,276

          Total costs and expenses

6,384

118,316

−

124,700

Operating loss

(4,262)

(22,191)

−

(26,453)

Gain on asset sales and disposal

−

97

−

97

Interest expense

(8,471)

(24,716)

−

(33,187)

Net loss

(12,733)

(46,810)

−

(59,543)

  Loss attributable to non-controlling interests

−

−

38,745

38,745

Net loss attributable to unitholders

$       (12,733)

$       (46,810)

$        38,745

$       (20,798)

ATLAS ENERGY GROUP, LLC

CONSOLIDATING STATEMENTS OF OPERATIONS

 (unaudited; in thousands)

Three Months Ended June 30, 2014

Atlas

Atlas

Energy

Resource

Eliminations

Consolidated

Revenues:

      Gas and oil production

$          2,457

$      108,237

$                 −

$      110,694

      Well construction and completion

−

16,336

−

16,336

      Gathering and processing

−

3,758

−

3,758

      Administration and oversight

−

4,166

−

4,166

      Well services

−

6,365

−

6,365

   Other, net

250

35

−

285

          Total revenues

2,707

138,897

−

141,604

Costs and expenses:

      Gas and oil production

706

43,122

−

43,828

      Well construction and completion

−

14,206

−

14,206

      Gathering and processing

−

4,273

−

4,273

      Well services

−

2,426

−

2,426

      General and administrative

3,482

21,315

−

24,797

   Depreciation, depletion and amortization

726

59,680

−

60,406

          Total costs and expenses

4,914

145,022

−

149,936

Operating loss

(2,207)

(6,125)

−

(8,332)

Gain on asset sales and disposal

3

9

−

12

Interest expense

(2,811)

(13,263)

−

(16,074)

Net loss

(5,015)

(19,379)

−

(24,394)

  Loss attributable to non-controlling interests

−

−

18,383

18,383

Net loss attributable to owner

$         (5,015)

$       (19,379)

$        18,383

$         (6,011)

ATLAS ENERGY GROUP, LLC

CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited; in thousands)

Six Months Ended June 30, 2015

Atlas

Atlas

Energy

Resource

Eliminations

Consolidated

Revenues:

      Gas and oil production

$          4,128

$      201,509

$                 −

$      205,637

      Well construction and completion

−

40,611

−

40,611

      Gathering and processing

−

4,361

−

4,361

      Administration and oversight

−

1,806

−

1,806

      Well services

−

12,726

−

12,726

      Gain on mark-to-market derivatives

48

78,641

−

78,689

   Other, net

156

60

−

216

          Total revenues

4,332

339,714

−

344,046

Costs and expenses:

      Gas and oil production

975

88,633

−

89,608

      Well construction and completion

−

35,315

−

35,315

      Gathering and processing

−

4,933

−

4,933

      Well services

−

4,337

−

4,337

      General and administrative

29,911

30,422

−

60,333

        Depreciation, depletion and amortization

2,247

85,485

−

87,732

          Total costs and expenses

33,133

249,125

−

282,258

Operating income (loss)

(28,801)

90,589

−

61,788

Gain on asset sales and disposal

−

86

−

86

Interest expense

(18,025)

(49,913)

−

(67,938)

Net income (loss)

(46,826)

40,762

−

(6,064)

  Income attributable to non-controlling interests

−

−

(19,558)

(19,558)

Net income (loss) attributable to unitholders/owner

$       (46,826)

$        40,762

$       (19,558)

$       (25,622)

ATLAS ENERGY GROUP, LLC

CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited; in thousands)

Six Months Ended June 30, 2014

Atlas

Atlas

Energy

Resource

Eliminations

Consolidated

Revenues:

      Gas and oil production

$         3,025

$      208,494

$                 −

$      211,519

      Well construction and completion

−

65,713

−

65,713

      Gathering and processing

−

8,226

−

8,226

      Administration and oversight

−

5,895

−

5,895

      Well services

−

11,844

−

11,844

  Other, net

472

82

−

554

          Total revenues

3,497

300,254

−

303,751

Costs and expenses:

      Gas and oil production

939

81,647

−

82,586

      Well construction and completion

−

57,142

−

57,142

      Gathering and processing

−

8,686

−

8,686

      Well services

−

4,908

−

4,908

      General and administrative

8,418

37,770

−

46,188

  Depreciation, depletion and amortization

946

111,499

−

112,445

          Total costs and expenses

10,303

301,652

−

311,955

Operating loss

(6,806)

(1,398)

−

(8,204)

Gain (loss) on asset sales and disposal

3

(1,594)

−

(1,591)

Interest expense

(5,600)

(26,451)

−

(32,051)

Net loss

(12,403)

(29,443)

−

(41,846)

  Loss attributable to non-controlling interests

−

−

28,691

28,691

Net loss attributable to owner

$       (12,403)

$       (29,443)

$        28,691

$       (13,155)

ATLAS ENERGY GROUP, LLC

CONDENSED CONSOLIDATING BALANCE SHEETS

(unaudited; in thousands)

June 30, 2015

Atlas

Atlas

ASSETS

Energy

Resource

Eliminations

Consolidated

Current assets:

      Cash and cash equivalents

$        39,470

$            607

$                 −

$          40,077

      Accounts receivable

4,451

89,169

(3,131)

90,489

      Receivable from (advances from)

          affiliates

(24,856)

24,856

−