Atlas America (ATLS)

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John Seewoester

Atlas Energy is an gas exploration and production company formed in a 2009 merger between Atlas America and Atlas Energy Resources^[1]. Atlas Energy is based onshore and extracts natural gas from its two main fields in Appalachia and in Michigan, with 1,008.745 billion CFE (Billion cubic feet equivalent) of natural gas in proved reserves. The Appalachia region consists of reserves in New York, Pennsylvania, West Virginia, Tennessee, and Kentucky. The company is mostly exposed to natural gas, 99% of its proved reserves, and has little oil reserves, 1% of its reserves^[2]. Atlas Energy primarily sells its natural gas to energy wholesalers such as Hess and DTE Energy Company, and the rest to local distributors, gas marketers, and other large energy users^[3]. Rising gas and oil prices have increased the profit margins and the value of the territories Atlas Energy owns. The growing demand for energy from China, India, and other emerging markets have further elevated the price^[4].

Natural gas is often viewed as cleaner and more environmentally friendly then coal, and 3 large investment banks have announced that they will be unlikely to finance a coal powered electricity plant^[5]. Atlas encounters almost uniquely natural gas, and this switch in dependence will likely lead to future increases in the value of the hydrocarbon.

On November 9, 2010 Chevron openly discussed its offer to acquire Atlas Energy for $3.2 billion in cash while also taking on $1.1 billion in debt (the total price was 37% more than the company's market value).^[6]

Business Overview

Atlas Energy emerged from the merger between Atlas America and it former subsidiary Atlas Energy Resources, which the company now wholly owns^[7] The company owns two main sites:

• Appalachia(44% of production): has 7,930 operated wells working on 486.7 Bcfe (Barrels of Cubic feet equivalent) of proved natural gas. Appalachia operates an average of 43.1 Mmcfe per day (Million cubic feet equivalent) ^[8]. Atlas Energy owns approximately 1,600 miles of gathering systems and pipelines across eastern Ohio and Western Pennsylvania. This elaborate system allows Atlas Energy to move its own gas without incurring costs from third parties.^[9]
• Michigan/Indiana(56% of production): has 1,938 operating wells working on 522.1 Bcfe of proved natural gas reserves. Michigan operates on an average of 58.1 Mmcfe per day^[10]. Atlas Energy owns 61 CPFs (compression and dehydration facilities) that separate and dispose of water mixed in with natural gas. The natural gas wells produce a mix of natural gas and water for the first 3 to 12 months of production, and then they produce solely gas^[11].

References

1. ↑ http://quote.morningstar.com/stock-filing/Annual-Report/2009/12/31/t.aspx?t=XNAS%3aATLS&ft=10-K&d=064598b429b65739f042b4fa8457f6a3 Atlas Energy 10K – Page 16
2. ↑ http://quote.morningstar.com/stock-filing/Annual-Report/2009/12/31/t.aspx?t=XNAS%3aATLS&ft=10-K&d=064598b429b65739f042b4fa8457f6a3 Atlas Energy 10K – Page 44
3. ↑ http://quote.morningstar.com/stock-filing/Annual-Report/2009/12/31/t.aspx?t=XNAS%3aATLS&ft=10-K&d=064598b429b65739f042b4fa8457f6a3 Atlas Energy 10K – Page 17
4. ↑ Time "China's Quest for Oil"
5. ↑ Green Car Congress "Comparing Civics: Hybrid, Diesel, CNG, Gasoline"
6. ↑ Deal Profile: Chevron to Buy Atlas Energy (2010-11-10).
7. ↑ http://quote.morningstar.com/stock-filing/Annual-Report/2009/12/31/t.aspx?t=XNAS%3aATLS&ft=10-K&d=064598b429b65739f042b4fa8457f6a3 Atlas Energy 10K – Page 16
8. ↑ http://quote.morningstar.com/stock-filing/Annual-Report/2009/12/31/t.aspx?t=XNAS%3aATLS&ft=10-K&d=064598b429b65739f042b4fa8457f6a3 Atlas Energy 10K – Page 16
9. ↑ ATN 10-K 2008 Item 1 "Natural Gas Gathering" p.10-11
10. ↑ http://quote.morningstar.com/stock-filing/Annual-Report/2009/12/31/t.aspx?t=XNAS%3aATLS&ft=10-K&d=064598b429b65739f042b4fa8457f6a3 Atlas Energy 10K – Page 16
11. ↑ http://www.sec.gov/Archives/edgar/data/1368802/000114420408013683/v105743_10k.htm ATN 10-K 2008 Item 1 "Michigan" p.12