雪佛龍 (CVX) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2008 Atlas America Earnings Conference Call.

(Operator Instructions).

I would know like to turn the call over to Mr.

Brian Begley, Director of Investor Relations.

Please proceed.

Thank you and good morning everyone and thank you for joining today's call.

Before we begin our remarks on this quarter's results I want to remind everyone that when used in today's conference call the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements.

These statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected in the forward-looking statements.

Discuss these risks in our quarterly report in Form 10-Q and our annual report also in 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 the date hereof.

The Company undertakes no obligations 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.

With that, I'd like to turn the call over our Chairman and Chief Executive Officer, Ed Cohen.

Hello everybody.

For the first quarter of 2008, Atlas America is reporting record results and I know that's no surprise to those who have heard or read of the exciting accomplishments posted for the period by our two principal subsidiaries, Atlas Energy and Atlas Pipeline Partners.

But, for the record, let me quickly summarize.

Total revenues for ATLS reach $568.6 million, an increase of $351.4 million or 162%, and that's compared to the first quarter of 2007.

Adjusted EBITDA reached $174.1 million, again a big increase, $131.8 million, or over 300% from the first quarter 2007.

Matt Jones, our CFO, will shortly take us through the adjustment of GAAP numbers into results that analysts generally deem, I think, more transparent and more meaningful.

But of course, one would expect gross revenues and even EBITDA to increase sharply merely because of the transformance of acquisitions made during 2007 by both Atlas Energy and Atlas Pipeline Partners, which almost necessarily would have to led to larger numbers.

However, even after the issuance of huge amounts of shares by APL and ATN to provide funding for their 2007 purchases and even after the consequent reduction in Atlas's, Atlas America's ATLS's percentage ownership in each, adjusted diluted net income per each single ATLS share still rose 15% to $0.46 for the first quarter 2008 compared to the corresponding 2007 period.

Incidentally, this percentage reduction in our ownership of Atlas Energy was somewhat mitigated by our purchase on Monday, three days ago, of an additional 600,000 shares in Atlas Energy for $42.00 per share.

It cost us a little over $25 million and I'm confident that time will show that it was a very clever and helpful purchase.

It increases our ownership to approximately 51% of the outstanding equity, 49% of the common units that is, and all the Class A units.

We also own, of course, all the management incentive interests.

On a Corporate level, we have once again declared a cash dividend of $0.05 per common share as well as a stock dividend that equates to yet another three for two stock split.

Our ATLS stock price has been closing in recent days at or near record levels, a success obviously related to the exciting developments in our E&P and Pipeline and Processing Divisions.

Natural gas production in our traditional heartland, Appalachia, increased a smashing 28% during the first quarter of 2008.

That is daily production of over 30 million cubic feet per day for our own account, up from only 23.7 million cubic feet per day during the first quarter of 2007.

At the same time we've been able to enhance our position as the number one producer in both Tennessee and in Michigan while sharply expanding our drilling, acreage, and reserve positions in the Marcellus Shale, which as you know has increasingly become the focus of media and industry attention in American natural gas, natural gas circles.

We've now drilled 52 vertical wells into the Marcellus Shale and are currently producing 35 vertical wells into pipeline with the remaining 17 scheduled for rapid completion.

On average our vertical Marcellus Wells continue to achieve average peak daily rates of over 1 million cubic feet per well and our better wells are realizing peak daily rates over 2 million cubic feet per day.

Atlas Energy ensured is well on its way to drilling and completing at least 150 vertical Marcellus Shale wells by the summer of 2009.

And now we're working on our horizontal Marcellus wells.

We've now completed, with an industry partner, our first horizontal well with satisfactory results and we now anticipate at least a dozen additional horizontal wells into the Marcellus during the next 12 months and 2 dozen by the end of 2009.

These wells will be undertaken, usually we anticipate with industry partners, for Atlas Energy's own account.

They will not be part of our syndication program for outside investors.

In the meantime Atlas Energy continues to expand its Marcellus Reserves.

Just in the last three months, we've acquired an additional 30,000 areas or so, not an easy accomplishment in the super-heated, crazed competition for Marcellus acreage that has followed the arrival into Appalachia of new entrants from outside the basin from places with exotic names for us like Texas and Oklahoma, major companies with major company checkbooks.

However, they're starting somewhat behind.

Our Marcellus acreage now is approaching 515,000 acres and we, perhaps alone in the industry, possess the infrastructure-- I'm talking about pipelines and compressors and so forth-- that permit full, immediate exploitation of the core Marcellus acreage that we own.

Things are also going well throughout the world of APL, Atlas Pipeline Partners.

For the first quarter 2008, throughput on our FERC regulated NOARK system increased in volume by over 100 million cubic feet per day, or 36% as against the corresponding 2007 quarter.

With average quarterly transportation of 390.3 million cubic feet per day, and with firm orders for the rest of 2008 already accounting for virtually the full 400 million cubic feet of capacity certificated for this pipeline, we're now moving forward rapidly to effectuate yet a further increase in capacity and, of course, in revenue.

By the third quarter of 2008, we will have completed our standing raw compression project, which will allow us to increase transportation loads from our present 400 million cubic feet per day up to our FERC certified limit of 500 million cubic feet per day.

Ten days ago, on April 28, we commenced a non-binding open season for the proposed extension of 150 miles of 36-inch pipeline, which will bring NOARK into interconnections in Dyer County, Tennessee.

The burgeoning development of the Fayetteville and Woodford Shale plays provides great opportunity for our NOARK pipeline and it's a connector which occupies a critical point in our national transportation system for natural gas.

The new extension, when built, will offer suppliers a way around potential choke points, which increasingly impact existing and developing national pipeline systems.

In the meantime we've more than doubled throughput from the daily approximately 190 million cubic feet, which were going through this NOARK system when we acquired it less than three years ago.

Similarly, our Appalachian transportation system has begun to benefit from the enormous burgeoning of drilling in the Marcellus Shale.

Throughput volume there increased 21% to 75.6 million cubic feet per day for the first quarter 2008 and total revenue for the Appalachian segment was up about 34% from the corresponding 2007 quarter.

In April, by field estimates, total volumes increased to as high as 85 million cubic feet per day.

85 million cubic feet per day compared to only 62.5 million cubic feet per day during the first quarter 2007.

Our natural gas processing and treatment plants in the mid-continent have all enjoyed robust growth and strong profitability.

In one quarter alone, from the final three months of 2007 through the first quarter of 2008, production of natural gas liquids, NGLs, at the Elk City Sweetwater Processing Plants was up 11%.

This plant has been running at virtually full capacity, a pleasant problem that will be alleviated with the scheduled completion next month of yet another expansion intended to provide additional processing capacity there of 60 million cubic feet per day.

Our West Texas System, purchased last year from Anadarko, is another system operating virtually at capacity.

But, construction of yet another new cryogenic processing plant scheduled to be operational in about a year will increase our processing capability in West Texas by almost 30% to 190 cubic feet per day.

Our Velma Business unit has also seen recent substantial increases in processing.

Recent volumes have averaged approximately 65 million cubic feet per day, up from less than 60 million during the first quarter of 2008.

Finally, we have been using 100% of the capacity of our West Oklahoma processing operation, also acquired from Anadarko in July 2007.

As a result, we restarted in February 2008 the long idled Chaney Dell gas processing plant, thus adding approximately 20 million cubic feet per day of processing capability.

But this increase was immediately snapped up and we are once again forced to bypass another 6 to 8 million cubic feet per day on this system.

Help, however, is on the way.

The nine-mile processing plant scheduled for completion in December 2008 will add yet another 120 million cubic feet per day of processing capability and this capacity will be available to both our West Oklahoma and Elk City Sweetwater Divisions through our new connector pipeline, which links the two divisions.

This new connector pipeline also will increase our options for delivery of gathered gas for processing at either West Oklahoma or Elk City Sweetwater and for subsequent transportation of this gas to intra-state markets in Oklahoma, East and West Coast markets and Mid-west markets as business opportunities arise, again, an enormous competitive advantage for APL.

But, my friends, lest this round of success should appear too clear, I'm now going to ask our CFO, Matt Jones, to translate my comments into financial-ese.

Matt?

Great, thanks Ed.

I'll quickly run through the financial presentation included in our Press Release and expand upon some of the highlights.

Please recall that we consolidate a 100% of the operations and balance sheet accounts of Atlas Energy, Atlas Pipeline Holdings and Atlas Pipeline Partners.

Minority interest accounts on the balance sheet income state reflect equity interest held by unrelated parties in these Companies, our principle subsidiaries.

To reiterate our ownership interest include roughly 49% of the currently outstanding common units and all of the Class A and management incentive interest in Atlas Energy and approximately 64% of the outstanding common units and a 100% of the general partner interest in Atlas Pipeline Holdings.

In order to reflect certain non-cash charges of our two principle subsidiaries, we provided adjusted EBITDA and adjusted net income reconciliation in our Press Release.

The adjustments principally include a non-cash, mark-to-market derivates expense and non-cash compensation expense line item.

The non-cash derivatives expense relate primarily to non-qualified derivatives at the Atlas Pipeline subsidiary.

Mark-to-market valuation changes that are generated from our non-qualified hedges and that relate to estimates of future periods are non-cash.

Secondarily, the derivative adjustment relates to cash settlements of derivatives at the Atlas Energy subsidiary that are not run through the income statement but are generated from natural gas hedge positions that settled during the quarter.

The non-cash compensation expense category represents the collective net effect of non-cash stock and stock option compensation awards of Atlas Energy, Atlas Pipeline, Atlas Pipeline Holdings and of our Company.

After netting a minority interest allocation against these non-cash adjustments, reflecting again of course the ownership interest of unrelated parties and tax affecting the items, we generated adjusted net income in the quarter of $12.8 million or $0.46 per fully diluted share, a 15% increase compared to adjusted earnings per share in the first quarter of 2007 of $0.40.

Speaking of non-cash items in the period, our provision for income taxes in the quarter is composed entirely of deferred taxes, the represented estimate of future period payments.

As we've said in the recent past, we anticipate that on a cash basis we are not likely to be a taxpayer in 2008 because of events associated with equity offerings at Atlas Energy and Atlas Pipeline in 2007.

Back to adjustments in EBITDA and after making adjustments to that income including interest expense the provision for income taxes, depreciation, depletion, derivatives adjustments and non-cash stock compensation adjustments, we arrive at adjusted EBITDA for the quarter of $174 million compared to $42 million in the first quarter of last year, an increase of over 300%.

The first quarter of 2008 represents the fifth consecutive quarter since its initial public offering that Atlas Energy has reported increased adjusted EBITDA.

Because of impacting per unit cash flow growth generated at both of its primary business segments, including natural gas and oil production, and partnership management fee generation and following only 5 quarters as a public enterprise, for the third consecutive quarter Atlas Energy achieved and is comfortably exceeding the threshold level of distributions required to cause it to satisfy the first 3 quarters of a 12-quarter period test where cash flows will be allocated to us and ultimately paid to us upon the successful completion of the 12-quarter test.

These cash incentives, called management incentive payments, were roughly $1.2 million in the quarter and now total $3 million cumulatively since the incentive level was reached in the third quarter of 2007.

With respect to our common unit ownership in Atlas Energy, we'll receive distributions totaling $18.4 million for the first quarter as a result of Atlas Energy's distribution declaration of $0.59 per unit, a 37% increase compared to the first quarter of 2007.

At the same time Atlas Energy increased its coverage ratio to 1.4 times from 1.1 times in the comparable period last year.

Alas Pipeline Holdings declared a distribution of $0.43 per unit in the first quarter, a 72% increase compared to the first quarter of last year.

In the aggregate we'll receive $7.5 million in cash distributions this quarter from our ownership of 12.5 million common units in the Atlas Holdings enterprise.

Both Atlas Energy and Atlas Pipeline Holdings continue to benefit in the quarter from the advantaged location of their assets in a number of the fastest growing geological plays in the country, including the Marcellus Shale plant in Appalachia, the Woodford Shales and Fayetteville Shales in Oklahoma and Arkansas and the Spraberry region of West Texas.

A final quick point with respect to our income statement of total general and administrative expenses in the quarter roughly $2.8 million was attributable to us and the remainder to our subsidiaries.

Of the $2.8 million non-cash compensation expense represents about $1 million of that total and the remainder includes audit fees, bonus accrual and other general overhead expenses.

Moving lastly to our balance sheet, totaled debt of approximately $2.1 billion at the end of the quarter was entirely attributable to Atlas Energy and Atlas Pipeline and is not an obligation of our Company.

Atlas Energy and Atlas Pipeline fund their operations and the growth in their operations through their respective balance sheets.

Atlas Energy has no debt that matures before 2012 and Atlas Pipeline before 2013.

For our Company we had no debt outstanding at the end of the quarter.

We had about $123 million in cash and equivalents at the end of the quarter, including an inter-Company receivable from Atlas Energy that has been largely eliminated since the end of the quarter.

We use roughly $25 million of the cash balance to acquire an additional 600,000 common units at Atlas Energy earlier this week to increase our total common unit ownership to 29,952,000 units.

Of course, next week we'll receive total distributions of roughly $26 million from our subsidiary payments of their distributions declared for the first quarter.

These cash inflows will effectively serve to offset the cash used to increase our Atlas Energy ownership.

Our cash balances remain invested in US Treasury money market funds, which invests solely in Treasury Bills and notes and provide us with overnight liquidity.

And that concludes my summary and I'll return the call to our Chairman, Ed Cohen.

Thanks, Matt.

And, Lutasha, we're now ready for questions.

(Operator Instructions) Your first question comes from the line of Wayne Cooperman with Cobalt Capital.

Question for you, you guys are obviously pretty bullish in ATN.

You just bought shares and you're relatively positive on APL and AHD and everything else and Atlas, the parent, trades sort of at a discount to the sum of the parts, not even factoring in that all the parts are under valued and you've got a lot of cash and you're generating a lot of cash and you don't really have a lot of uses for your cash, so long way of asking a simple question, why are we buying back more stock at the parent Company?

I just want to correct if I might or comment on two of points you made.

We love APL just as much as ATN, not relatively because I don't want our APL employees who are doing so well to think that here in New York City their efforts are not equally appreciated.

And secondly, we do have we think lots of potential uses and opportunities likely for our cash but--

At the parent Company?

It seems like the subsidiaries have more use for the cash.

Well, we all have uses for the cash but that's not to say that at the present what we consider to be not the lowest but certainly very favorable prices for ATLS for the reason you indicated that if you add the sum of the parts up you should find a much, much higher price for ATLS.

We have been somewhat inhibited by the technicalities of securities regulation from pursuing in the past purchases of ATLS as vigorously as we would have liked but I don't think anybody should be surprised if when you consider the discount factor that you properly alluded to and, in fact, I think that's one case where the discount is not only a discount in terms of simply adding percentages together but a substantial discount in terms of the opportunities that are available to ATLS.

I think people should not be surprised if we are far more vigorous in the future in re-purchasing our stock.

Oh great.

Thanks.

(Operator Instructions) I show no further questions in the queue.

All right, we will be speaking with you in about three months.

Thanks.

Bye, bye.

This concludes the presentation and you may all now disconnect.

Good day.