雪佛龍 (CVX) 2008 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the third quarter 2008 Atlas America earnings conference call.

My name is Lamanuel and I'll be your operator for today.

(OPERATOR INSTRUCTIONS)

I would now like to turn the call over to your host for today, Mr.

Brian Begley, Director of Investor Relations.

Please proceed, sir.

Thank you and good morning, everyone.

Thanks for joining today's call.

Before we review Atlas America's third quarter 2008 results, I'd like to remind everyone that when using this 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.

We discuss these risks in our quarterly report on Form 10-Q and our annual report, also on 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 of 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 to our Chairman and CEO, Ed Cohen.

Hi, everyone.

Once again, for the third quarter of 2008, Atlas America has reported record results.

Little surprise, of course, to those who are aware of the results previously reported by our two principal subsidiaries, Atlas Energy and Atlas Pipeline Partners.

But let me quickly summarize.

Total revenues for ATLS reached $780.7 million, an increase of $369.1 million over revenues for the third quarter of 2007.

Operating income was $265.3 million, as against only $37.7 million for the corresponding period last year.

Net income was $24.1 million, up from a mere $7.1 million for the third quarter of 2007.

Of course, in the complex world of GAAP accounting and analyst calculations, our numbers and their derivation are complex.

And Matt Jones, our CFO, will shortly take us through the adjustment of GAAP numbers into the non-GAAP results that analysts properly seem to thirst for.

Given the velocity of change and volatility recently afflicting the world, I hope that no major alteration will have occurred in a few minutes that will separate my words here and Matt's opening remarks.

In fact, as you know, for the energy industry, the world that we confront today is vastly different from the place we inhabited just a few weeks ago.

That is, during most of the third quarter of 2008.

Hurricane Ike struck on September 12th and we are still experiencing in the Mid-Continent the effects of that storm albeit in now attenuated form.

But more importantly, the worldwide financial tsunami that started in 2007 has finally come to afflict the energy industry and that started to occur during the third quarter of 2008 and its effects, of course, are being felt increasingly right up to this minute.

That's why the quality of our assets, the strength of our systems, and the skills of our employees are so important to our continuing to achieve super accomplishments.

We seem on our way, despite everything, to some exceptional accomplishments.

First, in the Marcellus Shale in Appalachia, Atlas Energy has now completed the drilling of 98 Marcellus wells, of which 90 currently have normalized production approaching 25 million cubic feet per day into a pipeline.

The aggregate production from these wells now exceeds 4 billion cubic feet, making Atlas the nation's largest producer to date of natural gas from the Marcellus Shale.

And our already fine results in the Marcellus are getting even better.

The Company's last 13 vertical wells have averaged initial rates of production of 1.3 million cubic feet per day, which is 30% higher than Atlas's prior average.

We intend now to drill at least an additional 100 vertical Marcellus wells before the end of 2009 and we have an extensive Marcellus horizontal program now underway.

In short, we're now operating in four separate Shale at plays, the Marcellus in Pennsylvania, the Chattanooga in Tennessee, the Antrim in Michigan, and the New Albany in Indiana.

In all of these areas, with the exception of the newest, Indiana, we are the leading producer and holder, in our opinion, of the best acreage, and we've gotten there without enormous expenditures for the mineral rights.

Now, the economy is rewarding our thriftiness.

Just last Thursday, we announced the farmout arrangement with Aurora Oil & Gas, pursuant to which we will acquire the right without any upfront payment (technical difficulty) 121,000 gross acres, that's 70,000 net in the New Albany Shale of southwestern Indiana.

Adding this acreage to our other Indiana mineral rights recently acquired, we're in a position to begin drilling in 2008 and to complete by the end of 2009 over 100 horizontal wells in Indiana and to continue to exploit this acreage for many years into the future.

Of course, we have this dichotomy, while we expand, many other companies in the energy field are cutting back.

Cutting back land acquisition, curtailing drilling budgets, slashing development programs.

We really are truly different.

Different for better at a time like this.

And some might think for worse in a period when the big risk takers were being lionized.

In frothy periods, there is little respect for our seeming inability.

I don't mean to be a complainer, but this is what we experienced.

There was little respect for our seeming inability to advance blindly into the mine fields of incredible opportunity.

Our carefulness, however, is a necessary concomitant of our constant worry about the downside.

In a market like the present, however, Atlas Energy benefits from our conservatism in not having borrowed hundreds of millions of dollars to acquire land rights.

Rather, our 555,000 acres of Marcellus Shale, so envied apparently by others.

All this has been acquired at a total cost of less than $50 million.

While that figure includes a good bit of legacy acreage obtained for very little.

Let me tell you that even since the beginning of 2007, at the height of the bubble, Atlas Energy still acquired 217,000 Marcellus acres primarily in southwestern Pennsylvania at a direct expense of only about $180 per acre.

As you know, others sometimes paid 10 or 15 times that amount per acre and occasionally more for land no better and often far less desirable.

And a lot of that hefty acquisition money apparently was borrowed.

Our thriftiness, abetted, the cynical might say, perhaps, by our relatively limited resources, our thriftiness leaves us now in an acreage and financial position in which we are quite comfortable.

Similarly, the risk lovers mocked Atlas Energy for selling its 2008 natural gas production at prices averaging only $9.19 per mcf for fixed price swaps.

Prices, of course, now far above today's spot level.

In fact, we now have some 80% of our present production levels protected for the full year 2009 at an average price of $8.80 for swaps, the great majority of our hedges, and $11.26 to $15.68 per mcf for our costless collar floors and ceilings.

And Atlas Energy is highly hedged at favorable prices for the full years of 2010 and 2011 and into 2012 and even in 2013, we are not unhedged, similarly, with oil.

And Atlas Energy has been extremely cautious in selecting counterparties.

About two-thirds of Atlas Energy's present counterparty obligations are with JPMorgan Chase and Wells Fargo banks, probably the two strongest banks in the world today.

These are the institutions which would be responsible for paying the $75 million to $80 million net hedge receivable position that Atlas Energy held as of late last week, a figure that has risen even further this week.

Then, there is Atlas Energy's syndication program, which allows us to minimize commodity price risk by continuing to take advantage of our dominant position in the investment partnership business.

As by far the world's largest provider of energy programs for individual investors, the SEC has just declared effective our latest $600 million raise.

Atlas Energy is far less dependent than other E&P companies on conventional financing, conventional financing that now is often unavailable, in order to maintain and to expand our reserves and production.

And because Atlas Energy receives large carry positions in these programs, as well as upfront fees and continuing management payments, we are far less vulnerable than conventional E&P companies to commodity price risk.

Our approach to the pipeline and processing business is no less conservative and no less out of tune with conventional approaches.

At Atlas Pipeline Partners, we've just had a very successful quarter, even after the corrosive effects of Hurricane Ike, which adversely affected operations and profits, especially in west Texas in the month of September.

As I explained Wednesday at the APL conference call at some length, some probably think at too much length, there are factors in play in the processing and pipeline businesses which could result in widespread decreases in prices and volumes.

Accordingly, despite the great success that APL has been enjoying in its actual operations, in the third quarter sharp increases in adjusted EBITDA, in distributable cash flow, in adjusted net income, large gains in system-wide volumes, continued success in our organic growth projects, and even increased coverage of our extraordinarily high quarterly distribution.

Despite all that success, we are in the process of taking steps intended to reduce APL's outstanding debt substantially and to increase APL's cash flow by cost-cutting measures already well advanced.

We're also evaluating strategic alternatives for APL, including the potential combination of the Partnership and Atlas Pipeline Holdings, LP, its general partner.

We will seek to delever through the sale of all or portions of individual pipeline and/or processing assets on a selective basis.

We will be open to participation in a consolidation process that many of us believe is imminent for the midstream gathering and processing sector.

Here again, some too consider our obsession with downside planning to be inconsistent with positive accomplishment.

Within a day after our announcement of defensive steps to protect APL from forces beyond our control and perhaps beyond anyone's anticipation, anyone's present anticipation, one analyst termed it "inconsistent" to both anticipate good operating results and to be taking steps to deal with possible adversity.

To us, to the contrary, it seems fundamental to our task as stewards of public assets.

That is, to excel at what we can control and to exercise extreme caution in dealing with any potential dangers.

I hope that we prove to be true Cassandras.

Remember, Cassandra in Homer is the one who's always prophesying doom and nobody listens to her.

Protecting against dangers, I hope, that never materialize.

But for better or worse, our natural mode is protective and anticipatory, especially in times like this.

By now, I'm sure you all would prefer to hear the financial details of our third quarter success, rather than further exegesis on the philosophical underpinnings of our conservatism.

And so to Matt Jones, our CFO.

Thanks, Ed.

Thank you all for joining us this morning.

In a moment, I'll quickly run through the financial presentation provided in our press release and expand upon some of the highlights.

First though, I will summarize our equity interests in our key subsidiaries and for simplicity and quick reference, we've provided a schedule of these interests in our press release.

At Atlas Energy, we hold just under 30 million common units, representing 46% of the total common units outstanding of that enterprise.

We also own all of the Class A units outstanding, totaling roughly 1.3 million units.

These units represent the general management interest in the enterprise and 100% of the management incentive interest, allowing Atlas America to receive incentive payments if certain threshold levels of distributions are achieved at Atlas Energy, measured for a 12 quarter period.

The Company has now satisfied 5 quarters of the 12 quarter period and has accumulated 6.3 million of receivable incentive payments.

Atlas Energy has achieved consecutive quarters of increased EBITDA in every quarter since its initial public offering in December of 2006.

Atlas Energy's two primary operating segments include natural gas and oil production and partnership management, and both have contributed to continued growth in cash flow per unit.

The Company has sufficiently increased cash flow over this period of time to allow it to increase its distributions and retain more of its internally generated cash to invest in the continued development of its very substantial Marcellus Shale position and other attractive drilling opportunities.

With respect to our common and Class A unit ownership in Atlas Energy, we will receive just under 19 million -- pardon me, just over $19 million in distributions in the third quarter as a result of Atlas Energy's distribution declaration of $0.61 per unit, an 11% increase compared to the third quarter of last year.

Year-to-date we've received over $56 million in distributions from our Atlas Energy interest.

This excludes the unpaid incentive distributions which total $4.6 million so far this year.

Moving to Atlas Pipeline Holdings.

We hold approximately 17.8 million common units, representing roughly 64% of total common units outstanding.

We also own 100% of the general partner of the enterprise.

Based on distributions that Atlas Holdings received from Atlas Pipeline Partners from its incentive distribution rights and common unit interest and ownership, Atlas Holdings declared a $0.51 distribution per common unit this quarter, a substantial increase compared to the $0.32 distributions paid in the third quarter of last year.

We will receive total distributions this quarter from our interest in Atlas Pipeline Holdings of $9.1 million.

This compares to $5.6 million in the third quarter of last year, a 62% increase.

We also hold a direct common unit ownership interest in Atlas Pipeline Partners totaling roughly 1.1 million units.

With Atlas Pipeline Partners' declaration of a $0.96 distribution, we'll receive cash distributions of roughly $1.1 million for these interests.

Year-to-date, we've received over $28 million in distributions from our interest in Atlas Pipeline and Atlas Holdings.

In total, then, and excluding the allocated management incentive awards from Atlas Energy, we will receive approximately $29.2 million in cash distributions from our primary subsidiaries this quarter.

This represents an 18% increase compared to the third quarter of 2007.

Quickly moving to our income statement presentation.

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

Minority interest accounts on our income statement and balance sheet reflect interest held by unrelated parties in these companies.

Our financial statements are influenced by mark-to-market adjustments to derivatives positions entered into by Atlas Pipeline Partners and Atlas Energy, which reflect non-cash or non-recurring charges at those companies and are not obligations of Atlas America.

The derivative positions are entered into at Atlas Energy and Pipeline Partners in connection with the respective production of natural gas, natural gas liquids, condensate and crude oil.

Because our reported results can be significantly influenced by these adjustments and others we list in our press release, we provide an estimate of pretax cash flow per share.

Pretax cash flow per share totaled $0.66 this quarter, which represents a 29% increase compared to the third quarter of 2007.

We estimate that we are unlikely to pay cash taxes in 2008, so pretax cash flow per unit is equivalent to net cash flow per share.

The derivation of our cash flow per share estimate simply includes distributions received from Atlas Energy and Atlas Pipeline Holdings and cash interest income received, netted against costs incurred during the quarter.

Also with respect to our income statement, the provision for income taxes in the quarter is composed entirely of deferred taxes that represent estimates of possible future payments.

Of course, we do not expect to pay cash taxes in 2008 and we continue to believe that cash tax payments in 2009 may be greatly reduced, if not eliminated, because of circumstances associated with equity offerings at Atlas Pipeline and Atlas Energy in 2007 and the beneficial effect of termination charges related to the elimination of certain crude oil hedges at Atlas Pipeline.

The general and administrative expense reported in the third quarter is largely attributable to our subsidiaries.

Interest expense is entirely attributable to our subsidiaries.

Of total G&A expense reported on our income statement, roughly $2.4 million was attributable to Atlas America.

The components of our G&A include $1.4 million of non-cash stock compensation expense and other expenses, including audit and directors' fees and office and salary expenses.

Moving quickly to our balance sheet.

Total debt at the end of the quarter was $2.3 billion and was entirely attributable to Atlas Energy and Atlas Pipeline and is not an obligation of ours.

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

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

Our Company remains entirely free of debt.

We had approximately $62 million of cash at the end of the quarter with the next significant cash inflow coming into our Company over the next ten days or so of approximately $29 million from the receipt of distributions from Atlas Energy, Atlas Holdings and Atlas Pipeline Partners.

Our cash balances remained invested totally in US Treasury money market funds, which invest solely in treasury bills and notes and provide us with overnight liquidity.

We generated approximately $400,000 of interest income during the quarter from these balances.

Interest income is included in the category labeled "Other Income" on our income statements.

This concludes my remarks.

We will turn the call to our Chairman, Ed Cohen.

Fine.

Lamanuel, we are ready for questions.

(OPERATOR INSTRUCTIONS) Our first question will come from the line of Greg Alexander.

Please proceed.

Hi.

Good morning.

I've just got -- I have a number of questions.

One, the Aurora acreage.

You're going to do 100 horizontals by the end of 2009?

Am I reading that right?

Yes.

How much are those?

What kind of F&D are you thinking of, and doesn't that seem like a lot?

You must be hiring a lot.

Rich, do you want to respond?

Yes.

Well, it's certainly something we can manage.

This is Rich Weber from Atlas Energy.

Certainly something we can manage.

Remember, we have a full operating team in Michigan that will be overseeing this process.

It's very, very similar to our operations in the Antrim Shale and we're going to add a small office and we've already hired almost everyone.

Many of these folks have already been working in the New Albany Shale.

It will be located in Vincennes, Indiana.

But no, we certainly have the capacity to manage that.

We're a Company that drilled 1,100 wells last year.

This is not a task that is beyond us.

Okay.

In terms of what you are thinking of in terms of F&D, and then does Aurora's past results -- I guess they were mostly in other horizons -- but does that have any implication for how good the horizon is for you in the New Albany?

Can you repeat that question please?

You cut out on me.

Oh, I'm sorry.

First of all, what kind of F&D are you thinking of?

And then secondly, does the fact that Aurora has variable success in some of the other horizons have any implication for the one you are looking at?

Okay.

First of all, from an F&D perspective, I think it's a little bit early for us to declare a finding and development cost.

But, what we are anticipating is a drilling complete cost of about $1.3 million per well.

And the wells that we have observed, and remember, that we were privy to over 33 successful wells that had been drilled in the last, call it, 18 months again to the New Albany Shale in this biogenic part of the play, which is what we're focused on and the average reserves or the average well had engineered reserves in excess of 1.2 BCF, so the finding and development costs here could be very attractive.

But remember, these are shale-type wells that are going to be -- they're not going to come on in huge gangbusters -- somewhere in the neighborhood of 300,000 to 500,000 a day, but they exhibit very shallow declines and so, therefore, create a fairly large reserve base and are very long-lived.

Okay, and then, one other -- two other questions, if I may.

Of the 271,000 acres that you guys have in the southeast of Pennsylvania, are those mostly all stuff that you think is pretty good?

And if those are indexed to 100, how good are the other ones in the rest of the state?

Well, I think what you are asking is, first of all, we have 550,000 acres that would be considered to be in the Marcellus Shale fairway.

We talked about our focus area, which as of September 30th, we had 271,000 acres.

This acreage is all in southwestern Pennsylvania and this acreage is largely delineated by existing -- by our drilling.

Remember, we have over 90 well bores that are producing currently as Ed mentioned in his remarks.

So, if you're asking our confidence level on our focus area, it's very, very high and we would consider it to be all very prospective.

To distinguish us from other companies that lay out Marcellus acreage, what we are talking about is our southwestern acreage has been largely delineated and largely proven.

And I think that makes us a little bit different.

That's great.

With the ones in the rest of the state, if the ones in the southeast are a ten, then, do you have a wild guess for what the rest of the state is?

You mean in the southwest, Greg?

(multiple speakers) but the other 280,000, how good are they compared to the --

Well, we think that that acreage will also be prospective and the Marcellus Shale formation is somewhat of a blanket formation that runs up along the western flank of the Allegheny Mountains.

We suspect that a good percentage of that other acreage will also be prospective, but we have chosen to focus our drilling efforts in one core area where we have had lot of success.

There are other operators that are talking about impressive results in the northeastern part of Pennsylvania as well as the central part of Pennsylvania, which we are watching very carefully and, obviously we'll move into the rest of our acreage after we have really consolidated and are in more of a development mode in southwestern Pennsylvania.

And then one last one, which is, how do you go about making an assumption for long-term gas prices?

Do you kind of look at the marginal cost of finding gas like everyone else seems to do or do you throw anything else in there like, thinking about wind, or anything else?

And then similarly, when you think about hedging, is it more governed by the amount you want to hedge or your abilities to withstand the accounting claim?

The hedging is driven by, as I indicated, this is Ed again, our natural conservatism.

We are careful not to sell production forward in excess of the amount we can produce under the most adverse circumstances that we stress test.

We don't believe that we can outguess the market and so, we're quite prepared to find that we've sold our gas at too low a price because we prefer to make sure that our investors are sleeping well and that we ourselves are sleeping well and it is a nice situation for a change, when the conservative guys, I almost called them the good guys, prevail over the more optimistic people who don't want to hedge.

We also, when it comes to cost, have this tremendous advantage because our method of drilling isn't one where we have to hope and pray that prices will be high in order for us to make money through our drilling programs, which we have been engaged in for some 30 plus years.

We have just a much lower cost since, in effect, the government is subsidizing our investors through very favorable tax treatment.

And, of course, we are all hopeful that the new world and the new administration will make this even better.

But, the investors are kind enough to share a good bit of their benefit with us.

And so, our true cost is a lot less than other people's when we operate through the programs and this gives us a tremendous advantage, especially in down markets.

So, whereas we are always reading these statements that below $6 or some people say $5 or some people even say $7 per 1,000 cubic feet per mcf, it just doesn't make sense to continue drilling and exploring and developing and so forth.

Our cost is much lower when we are doing it through the partnerships.

Rich, would you add anything to that?

There's more (inaudible), but otherwise not anything.

Thank you.

Our next question will come from the line of Travis Anderson.

Please proceed.

Hi, how are you?

I was wondering, when you look at southwestern Pennsylvania, the Marcellus, what you're thinking about in terms of potential horizontal development.

I realize that all the wells you've done and the ones you're talking about are mostly vertical, but does horizontal make sense from an economic standpoint down there, first of all.

And then secondly, in terms of infrastructure, I know southwestern Pennsylvania is much better equipped than other parts of the state.

Do you have any other issues there with water or other issues that would make horizontal tough?

I'm going to ask Rich to talk about the water.

I just want to point out that we are pursuing, as I think your question implied, horizontal development.

We've completed one well horizontally.

We're now pursuing four additional horizontal wells and perhaps Rich will explain to you what advantages we hope to get.

But simply put, we have had such success with our vertical wells that some analysts have noticed that on a per dollar invested basis, our vertical wells sometimes perform better than other people's -- sometimes, other people's horizontal wells, and the risk is a lot less with vertical wells.

Nonetheless, we are pushing forward and intend at our own expense outside the partnership programs to have a full horizontal development.

And your allusion to the fact that southwestern Pennsylvania has tremendous infrastructure is absolutely true, but you should bear in mind that that infrastructure is very largely Atlas Energy's infrastructure.

We have no doubt that other companies, such as Range, which is drilling extensively very close to us, will eventually have tremendous infrastructure.

They have an arrangement with MarkWest, which is going forward, apparently nicely, which will give them that infrastructure.

But at the present time, we are the only ones with really extensive functioning infrastructure in southwestern Pennsylvania and I think once others add to that infrastructure, southwestern Pennsylvania will really stand out because the rest of the Marcellus area in the northeast and in central Pennsylvania has absolutely no infrastructure for all practical purposes.

Rich, would you want to expand on that?

I think that was very well said, Ed.

And we are very excited about this new horizontal program that is going to be on top of our already successful vertical program.

We are currently drilling the horizontal leg on our second horizontal well.

I don't want to jinx us, but so far everything is going very, very well.

And so, we look forward to reporting results probably towards the end -- probably sometime in the first quarter.

But with regard to infrastructure in southwestern Pennsylvania, Ed laid it out very well.

Your question about water is a good one.

We're fortunate in southwestern Pennsylvania in that we have large and major river systems that run through the area.

But, there are issues with water.

We are working very closely with the DEP, Department of Environmental Protection, in Pennsylvania to find long-term solutions for both water sourcing as well as water treatment and disposal.

But for the time being, we are in fine shape.

We have access to both the water sources and treatment capacity to handle our program for the foreseeable future.

I know it depends heavily on what your production numbers are on the horizontal wells, but can you give us some idea of what the costs of the horizontals might look like versus the verticals?

Our verticals are coming in today north of $1.5 million.

We have been hit pretty hard over the last 12 months with increasing costs in the oil field, in particular, oil field tubulars.

We do see those costs abating as other drilling budgets -- drilling budgets of other companies have come in, as well as, the vastly declining price of steel.

So, we look forward to having lower costs over the next 12 months.

With regard to our horizontal wells, these wells that we are drilling and remember, we have 12 scheduled here in the next, let's call it, five to six months.

On average, these wells have [AFEs] in the $4.5 million to $5 million range.

And they are roughly what, 3,000 to 4,000 feet vertical -- horizontal lateral sections?

In the areas we are drilling in terms of vertical depth, it is anywhere from, let's say, 6,500 feet to, let's say, 8,100 feet, and in terms of vertical depth which, obviously, has a huge impact on cost.

And then we are designing 3,000-foot laterals.

Another question on the pipeline part of the business.

I realize it is very speculative, but was wondering if you could tell us what ideally would you like that business to look like, say, a year from now if you can get things straightened out there?

That's not a vague enough question.

I think we would like conditions to be what they were before, roughly July 1st, 2008.

Namely, all the producers being optimistic about results and while I was perhaps too light-humored about the optimistic people pursuing impossible dreams, that was what the business has been for the last five or six years and for somebody in the processing and pipeline part of it, that continued production was terrific.

And high prices for NGLs also would be fine.

We are operating, obviously, on contrarian expectations.

If things go well and if the utopian desires that I just expressed take place, we will be happy to enjoy the success of that and I hope we will be not envious of those who were more adventuresome and didn't do downside planning if they are enjoying even greater prosperity than we are.

But we'd like to get our costs going down, down, down.

And we'd like to pay our debts down to even more manageable levels.

Some think that we've been very cautious right along in always raising huge amounts of additional equity every time we made an acquisition.

But I don't think that the Lord is necessarily going to be influenced by my particular pleas or hopes and so, they say God helps those who help themselves and we are trying very hard to help ourselves there.

Given the credit situation, it seems pretty obvious that a lot of planned processing and pipeline plans aren't going to be built at the same time that the volumes that were dreamed about aren't going to be there either.

But, I am trying to get some idea.

You basically want to get out of the pipeline business or refocus it more on the Marcellus and other areas where you actually drill or what would be, not the ideal outcome, but a realistic --

We love the pipeline business.

We love the processing business and we love the E&P business.

It's sort of like asking which one of your children you would like to get rid of.

I think we all know that we would be extremely --

It depends on what day of the week it is.

-- not all of us, but most of us would be.

I am in the happy position of being a grandfather of six wonderful grandchildren.

So I never have bad moments with them because I can always send them back.

And in a way, we who work at the Atlas America parent company level are like grandparents in that we can really take pride in the capacity of our wonderful people in the pipeline and processing business as we watch them efficiently slash expenses that were appropriate to an expanding business, but are no longer appropriate to the kind of business that the world is seeing across the board.

But, I think that one has to remember, this always passes.

It is usually darkest before the dawn.

And as I indicated, the fact that we are taking defensive steps should not be taken in any way as incompatible with our expectation of fine continuing results.

In fact, I am hopeful that the world will see that companies like ours really prosper in down markets.

We prospered in up markets, but certainly not to the extent that the risk takers did.

Thanks.

Thanks, Travis.

Lamanuel, are there any other questions?

At this time, there are no more additional questions in the queue.

Okay, thank you all.

We will be speaking again in 90 days.

It will be interesting to see what the world is like at that time.

Perhaps there will be less velocity and less variability.

Thank you all.

Good-bye.