雪佛龍 (CVX) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the fourth quarter 2008 Atlas America Incorporated earnings conference call.

My name is Shanell and I'll be your coordinator for today.

At this time, all participants are in listen-only mode.

We will be facilitating a question-and-answer session towards the end of this conference.

(Operator Instructions) .

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation to your host for today's call, Mr Brian Begley.

Please

Thank you.

Good morning everyone.

Before we get started, I want to remind everyone that when used in this conference call the words believes, anticipates, expect 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 also 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.

Thanks, Brian.

Hello, everyone.

Conditions are so negatively volatile these days that reporting on last year, even 62 days into 2009, seems to me an exercise in ancient history.

Therefore, I want to speak primarily about the present and the future and about the challenges and opportunities facing our two principle subsidiary enterprises, APL and ATN, our processing and B&P Divisions in reverse order.

But first, for the record, ATLS, Atlas America, has reported adjusted net income of $49.5 million for 2008, compared with $48.5 million for the prior year, an increase of $1 million or 2.1%.

Adjusted diluted net income per share was $1.18 for the full year 2008, and that compares with $1.14 per share for 2007.

The year-over-year increase was principally attributable to Atlas Energy's higher production volumes and increased fees from partnership management sources and from APL's increase in production volume.

Now, after a non-cash goodwill charge at APL and other non-cash and non-recurring technical derivative gains and losses, the Company recognized on a GAAP basis a net loss of $6.2 million for the full year 2008, compared with net income of $35.3 million for the prior year.

But pretax cash flow of $2.34 per basic common share for 2008 represented an increase of $0.66 per common share or 39% from the prior year.

You should note that the Company was not a tax payer on a cash basis in 2008 and anticipates will have a reduced 2009 cash tax liability or possibly no cash tax liability in 2009 and that's because of events associated with equity offerings at ATN and APL in 2007 and the termination of certain derivative instruments by APL in 2008.

Matt Jones, our CFO, will speak March for fully in a little while about the financial results for 2008 and for the fourth quarter of that year.

As for the decline in our stock price, needless to say, it's more than disturbing to all of us.

But we hope that good performance in 2009 will be the best answer to nay-sayers.

So lets discuss the future prospects for 2009.

As to Atlas Energy, ATN has two major advantages over most of the E&P industry, access to drilling funds on a favorable basis through its direct investment business, and ownership of a premier platform in the Marcellus Shale.

In 2008, the year of frozen funding, we took in $437 million in the direct investment program business, an increase of more than 20% over 2007's record-breaking results.

Most satisfying to us and reassuring, I assume, to those who may have worried about the continued viability of this program in present economic circumstances, growth in our year-end program completed less than two months ago was 25% higher, 25% higher year-over-year than in the program done in the first half of 2008.

In particular, December 2008 saw a cascade of money flowing in.

A flood so great that once again we were forced to return excess monies.

Even so, we started this present 2009 quarter with some $140 million of investor funds still to be spent from the 2008 program.

This excess should jump start 2009.

Atlas Energy already has had considerable success in exploiting the Marcellus Shale, an area which has been called the most exciting natural gas play in the contemporary world and we're only at the beginning.

As of the last days of February, we had drilled over 125 vertical Marcellus wells and we plan to expand this development sharply in 2009.

We've now fracked some 112 Marcellus wells and placed 105 online.

Our actual production from the Marcellus now has exceeded 6.7 billion cubic feet.

While we believe that our horizontal well program as it develops and expands will obtain results second to none, our vertical wells have achieved results beyond our most optimistic expectations.

Many of you have followed our discovery and practical perfection of multi-stage fracking of Marcellus wells.

We have now completed some 13 such multi-stage wells and they have generated average initial 24-hour production of almost 2 million cubic feet per day, with average production of over 52,000 Mcfs, that's 53 million cubic feet during the first two months of production.

These are awesome totals and we're cautiously optimistic that we may see further improvement this year.

As for Atlas Pipeline.

Gene Dubay and CEO, discussed in yesterday's call for APL, the many reasons for cautious optimism for 2009.

And detailed progress on deleveraging and in particular, he discussed three potential asset sales, all of which are expected to be accretive to APL's debt covenants and cumulatively should have significant deleveraging impact.

We expect to be reporting in the next few weeks on fresh developments at APL.

And now, for far greater detail on the 2008 Atlas America results, Matt Jones, our CFO.

Thank you, Ed and thank you all for joining us this morning.

I'll be brief.

Let me first call to your attention a summary of the various interests we hold in Atlas Energy Resources, Atlas Pipeline Holdings, Atlas Pipeline Partners, and Lightfoot Capital Partners, all contained in the schedule included in our press release.

We provide the schedule at the end of each quarter for quick reference.

From here, let me quickly move to a summary of our balance sheet.

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.

So our financial statements present an amalgamation of those enterprises with the property of attribution given to equity interest held by shareholders other than Atlas America shareholders through the minority interest accounts on our income statement.

With respect to our balance sheet, there's really one key element that I'd like to remind listeners of today.

The debt on our balance sheet totaling $2.4 billion at quarter end is entirely attributable to Atlas Energy.

Atlas Pipeline Partners and Atlas Pipeline Holdings and is not an obligation of ours.

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

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

Again, our Company remains entirely free of debt.

Our financial statements are also influenced by mark-to-market adjustments to derivatives positions and other intermittent and occasionally significant adjustments of t Atlas Energy and Atlas Pipeline, which reflect non-cash and non recurring charges or gains at these companies.

The derivatives positions are entered into at those Companies in connection with 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 that we list in our press release, we provided a pretax cash flow per share amount.

Pretax cash flow per share in 2008 totaled $2.34, compared to $1.68 in 2007.

A 39% increase.

Much of the increase was associated with increased distributions, received from Atlas Energy and Atlas Pipeline Holdings.

We're happy to report, as we expected, that we will not be a cash tax payer for the 2008 tax year.

So pretax cash flow per share is equivalent to net cash flow per share.

The cash flow per share estimates simply include the distributions we received from Atlas Energy and Atlas Pipeline Holdings and to a lesser extent distributions that we receive from our direct ownership interest in Atlas Pipeline Partners and Light Foot Capital Partners and interest income, netted against costs incurred during the year.

With respect to our estimate of 2009 cash taxes, we're happy the to report that we believe that it's unlikely that we'll pay cash taxes again this year.

Net operating loss carry-forwards associated with equity offerings at Atlas Energy and Atlas Pipeline Holdings in 2007, the beneficial effect of termination charges related to the elimination of certain crude oil hedges at Atlas Pipeline Partners last year have combined to create our operating loss carry forward position.

So, likely good news again, on a tax front in 2009.

That summarizes our results for 2008 and I will turn the call back to our Chairman, Ed Cohen.

I think we are ready for questions.

Shanell.

(Operator Instructions).

Your first question comes from the line of Lee Cooperman of Omega Advisors.

Hi, good morning.

Hi, Lee.

Two questions.

One, could you review significance of any of President Obama's tax plan as regards in tangible drilling cost, the significance to attractiveness of ATN's offering to the public.

And then secondly and equally importantly, your capital management plans.

I went back, I looked at the record and all of us to some degree were drinking Kool-Aid but in 2006, you spent.

2909 million on repurchase.

In 2007, you spent $80.4 million on repurchase.

In 2008, for the first nine months, you spent $34.9 million.

Early on in that period, probably the Marcellus Shale was at best a glint in your eye, probably not even a consideration.

I think the average price paid was somewhere between 35 and 36.

We're sitting on a debt free balance sheet with about $2.50 a share in cash, significant cash flow generation, significant asset value and the stock is down about 70% or thereabouts from what you previously had bought it back at.

So I would like to kind of understand -- I understand the environment is a bit different, to put it mildly than you envisioned a year, year and-a-half ago but kind of what the plans are.

So those two questions.

Thanks very much, Lee.

First of all, with regard to the deficit reduction press release and text that was put out toward the end of last week and disseminated over the weekend, it actually contains six elliptical words, 2011, eliminate expenses of intangible drilling cost.

Our expectation is that if that did lead to legislation, it's unlikely that the government would be able to express the legislation in the eight words that they put onto their release.

So the legislation is likely to have the usual complexity and conditions and targeting of particular targets, if it ever were to be enacted.

Our sources suggest that as the President had indicated in his campaigning, that its majors like Exxon and others who are the target of this aspect, because the independent drilling companies like ourselves, who are responsible for most of US production of natural gas, it's hard to imagine that an effort would actually be pressed into legislation to discourage at this time US production of the clean fuel natural gas.

But assuming that the legislation actually were enact, if not in eight words, in 80 words with no conditions and no targeting, you have to bear in mind that all that's calling for is eliminating expensing of IDC.

The tax advantages, therefore, would not be eliminated, but they would be taken in over a longer period of time.

We would adjust our program accordingly.

The programs, for example, could be adjusted to emphasize income and in fact, income it would seem is something that people as you indicated, these are strange times, are really crying for.

And a program like ours, which for 30 years has consistently, whether prices were low or prices were high, produced a steady stream of income would be an extremely desirable product.

And finally, let's remember that in those eight words we had not only expensing but also the important words, 2011.

This was only a release dealing with how they proposed to cut down sharply on the deficit.

There are those who would be skeptical as to whether the deficit actually is going to be reduced, especially at this time.

But bear in mind, that often people don't appreciate what they've had available to them until someone threatens to take it away.

So if people feel that in 2011 this great benefit could be reduced, the next two years should be fantastic for our program.

Our hope would be that at the end of two years, by the time we get into 2011, somebody would have figured out a way in which our competitors would be able to get funding from banks and from other natural sources and under the worst of circumstances, perhaps in 2011, we would be no worse off than everybody else has been for the last five years and is at present.

So we may be looking forward to a great two years that are coming forward.

I hope that's responsive to the fact that I think the significance of those eight words has been overblown, but I think from a marketing point of view for the present time, it may be extremely helpful to our programs.

But we're not counting on that.

We think the programs will do extremely well, as they did in December, without regard to any aid we may get from the Obama administration.

As far as the question about possible stock buybacks and capital management, it's obvious that our stock is enormously undervalued, as I indicated in my text and as I answered that we think the primary response is good performance.

On the other hand, it's hard not to be strongly committed to buying back stock at these ridiculously or seemingly ridiculously low prices.

We know one thing, stock can't go down as far as it already has in the future because there's not a lot of room for it to fall.

So it is extremely tempting to pursue stock repurchase plans and actual stock repurchases as we've done, as you pointed out, consistently over the last three years.

However, these are not ordinary times and I think it's incumbent upon us and our Boards to give very careful attention.

So stand by.

(Operator Instructions).

There are no further questions.

I would now like to turn the call back over to Mr.

Ed Cowen, CEO and Chairman.

I think I've already given my finishing words.

Just two words, stand by.

We hope to do a really good job this year.

Thank you all.

Ladies and gentlemen, that concludes the presentation.

Thank you for your participation.

You may now disconnect.

Have a great day.