Executives
Brian Begley - Director of IR
Ed Cohen - Chairman and CEO
Matt Jones - CFO
Rich Weber - President and COO
Analysts
Greg Alexander
Travis Anderson
Atlas America Inc. (ATLS) Q3 2008 Earnings Call November 7, 2008 9:00 AM ET
Operator
Good day, ladies and gentlemen, and welcome to the third quarter 2008 Atlas America earnings conference call. My name is Emanuel, and I'll be your operator for today. (Operator Instructions).
I would now like to turn the call over to your host for today's Mr. Brian Begley, Director of Investor Relations. Please proceed, sir.
Brian Begley
Thank you and good morning, everyone. Thanks for joining today's call. Before we review Atlas America's third quarter 2008 results, I would like to remind everyone that when used in 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 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, let me turn the call over to our Chairman and CEO, Ed Cohen.
Ed Cohen
Hi, everyone. Once again, for the third quarter of 2008, Atlas America has reported record results, little surprise of course that they are well aware of the results previously reported by our two principal subsidiaries, Atlanta Energy and Atlanta 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 the 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 new derivation are complex. And Matt Jones, our CFO will shortly take us through the adjustment of GAAP numbers and through the non-GAAP results that analysts properly seem to thirst for.
Given the velocity of change in volatility recently afflicting the world, I hope that no major operation will have occurred in the 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 that we inhabited just a few weeks ago, that is during most of the third quarter 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 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, and we seem on our way despite everything to some exceptional accomplishments. First, in the Marcellus Shale in Appalachian, Atlas Energy has now completed the drilling of 90 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' 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 are now operating in four separate shale at place; 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 older 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 farm-out arrangement with Aurora Oil & Gas, pursuant to which we will acquire the right without any upfront payment including 21,000 gross acres at 70,000 net in the New Albany Shale of Southwest Indiana. Adding this acreage to our other Indiana mineral rights recently acquired, we are 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 or cutting back, cutting back land acquisition, curtailing drilling budgets, and slashing development programs. We really are truly different, 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 for a less desirable. And a lot of that hefty acquisition money apparently was borrowed.
Our thriftiness have bedded 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 levers mocked Atlas Energy for selling its 2008 natural gas production at prices averaging only $9.19 per Mcf per 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 color floors and ceilings.
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. Atlas Energy is being 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 last week, a figure that's risen even further this week. And then, there is Atlas Energy 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 early to $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 carried positions in these programs as well as up front 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 Energy pipeline partners, we've just had a very successful quarter. Even after the corrosive affects of Hurricane Ike which adversely effected operations and profits, especially in west Texas in the month of September.
As I explained Wednesday at the APL conference call, 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 into actual operations in the third quarter; sharp increases in adjusted EBITDA; in distributable cash flow; in adjusted net income; large gains and 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 are with banks.
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 the 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 and anyone's present day 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 add 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 the [homer] is the one who is always professing, doomed 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 am sure you all would prefer to hear the financial details of our third quarter success rather than further [extra thesis] on the philosophical underpinnings of our conservatism. And so, to Matt Jones, our CFO.
Matt Jones
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, I'll summarize our equity intersect in our key subsidiaries. And for simplicity and quick reference, we 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 had all the Class A units outstanding totalling roughly 1.3 million units.
These units represent the general management interest in the enterprise and a 100% of management incentive interest allowing Atlas America to receive incentive payments at certain threshold levels of distributions that are achieved at Atlas Energy measured for a 12-quarter period.
The company has now satisfied five quarters of the 12-quarter period and has accumulated 6.3 million of receivables incentive payments.
Atlas Energy has achieved consecutive quarter 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 in 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 us 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'll receive 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 received over $56 million in distributions from our Atlas Energy interest. This excludes the unpaid incentive distributions, which totaled $4.6 million so far this year.
Moving to Atlas Pipeline Holdings. We hold approximately 17.8 million common units representing roughly 64% total common units outstanding. We also own a 100% of the general partner of the enterprise.
Based on distributions at Atlas Holdings received from Atlas Pipeline Partners from it's incentive distribution rights and common unit interest ownership, Atlas Holdings declared a $0.51 distribution per common unit this quarter, a substantial increase compared to the $0.32 distribution paid in the third quarter of last year.
We'll receive total distribution 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 1.5 million units.
With Atlas Pipeline Partners declaration of a $0.96 distribution, we'll receive cash distributions of roughly $1.1 million for these interest. Year-to-date, we received over $28 million in distributions from our interest in Atlas Pipeline and Atlas Holdings.
In total then and excluding the allocated management incentive [rewards] from Atlas Energy, we'll 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 adjustment to derivatives' positions entered into by Atlas Pipeline partners and Atlas Energy, which refect non-cash or non-recurring charges at those companies and are not obligations of Atlas America.
The derivatives positions are entered into at Atlas Energy and Pipeline Partners in connection with the respective production of natural gas, natural gas liquid, 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 provide an estimate of pre-tax cash flow per share.
Pre-tax cash flow per share totaled $0.66 this quarter, which represents a 29% increase compared to third quarter of 2007. We estimate that we are unlikely to pay cash taxes in 2008. So, pre-tax cash flow per unit is equivalent to net cash flow per share.
The derivation of our cash flow per share estimates simply includes distributions received from Atlas Energy and Atlas Pipeline Holdings and cash interest income received netted against cost incurred during the quarter.
Also, with respect to the income statement, the provision for income taxes in the quarter is composed entirely a 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 payment in 2009 maybe greatly reduced if not eliminated because the circumstances are associated with equity offerings at Atlas Pipeline and Atlas Energy in 2007 and the beneficial effect of it's 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 attributed 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 ends of the quarter was $2.3 billion and was entirely attributable to Atlas Energy and Atlas Pipeline 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 and 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 the company over the next 10 days or so, of approximately $29 million from the receipt of distributions from Atlas Energy, Atlas Holdings and Atlas Pipeline Partners.
Our cash balances remain 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 and I'll turn the call to our Chairman, Ed Cohen.
Ed Cohen
Fine. Emanuel, we are ready for questions.
Question-and-Answer Session
Operator
(Operator Instructions). And our first question will come from the line of Greg Alexander. Please proceed.
Greg Alexander
Hi. Good morning. I have got a number of questions. One, the Aurora acreage, if you could assume a 100 horizontals by the end of 2009? Am I reading that right?
Ed Cohen
Yes.
Greg Alexander
How much are those? What kind of F&D are you thinking of and [I am not] stressing out too like a lot, you must be hiring a lot?
Matt Jones
Ed, do you want to respond?
Ed Cohen
Yes. If certainly something we can manage this [stretch] lever on Atlas Energy. Certainly, something we can manage. Remember, we have a full operating team in Michigan that will be overseeing its 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 Indiana. But no, we certainly have the capacity to manage that. We're a company that drilled 1,100 wells last year. And this is not a task that is beyond us.
Greg Alexander
Okay. And in terms of what you are thinking of, in terms of F&D and then does Aurora's past result, I guess, they were mostly in other horizons, so [did that] have any implications for good that horizon is for you and the New Albany?
Ed Cohen
Can you repeat the question please? You cut out on me.
Greg Alexander
I am sorry. First of all, what kinds of F&D are you thinking of and then secondly, does the fact that Aurora had variable successes onto the other horizons have any implication for the one you are looking at.
Ed Cohen
Okay. First of all, from a 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've 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 its biogenic part of the play, which is what we're focused on.
And the average reserves or average well had engineered reserves in excess of 1.2 Bcf. So the finding and development cost here could be very, very attractive. But remember, these are shale type well that are going to be, they are not going to come on in huge gang busters, somewhere in the neighborhood of 300,000 to 500,000 a day, but they the exhibit very shallow declines. And so, therefore, create a fairly large reserve base and a very long lived.
Greg Alexander
Okay. And then 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 a 100, how good are they ones in the rest of the state?
Matt Jones
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. And we talked about our focus area, which as of September 30th, we had 271,000 acres. This acreage is on southwestern Pennsylvania and this acreage is largely delineated by exist, by our (journey). Remember, we have over 90 well boars that are producing currently, as Ed mentioned in his remarks.
So, if you are asking our confidence level and our focus area is very, very high and we will consider to be all very perspective. I think if you distinguish us from other companies that lay out Marcellus acreage, what we're talking about is our southwestern acreage has been largely delineated and largely proven. And I think that makes us a little bit different.
Greg Alexander
Okay, that's great. So with the ones in the rest of the state, if it's the one in the southeast are [a ton]. Then, do you have a wild guess for what the rest of the state is?
Matt Jones
You mean in the southwest, Greg?
Greg Alexander
You've all…
Matt Jones
The one that we have in the southwest.
Greg Alexander
…270,000 [you like], but the other 280,000, how good are they compared to…
Matt Jones
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 perspective, but we've chosen to focus our drilling efforts in one core area, where we've had a lot of success.
There are other operators that are talking about impressive results in the northeastern part of Pennsylvania as well as central part of Pennsylvania, which we're watching very carefully and obviously, will move into the rest of our anchorage after we've really consolidated and are in more of a development mode in southwestern Pennsylvania.
Greg Alexander
Okay. And then one last one, which is how do you go about making an assumption for long-term gas prices. Do you look at the marginal cost of finding gas like everyone else seems to do or do you throw anything out in there, like, while thinking about wind or anything. And then similarly, when you think about hedging, is it more governed by the amount that you want to hedge or the abilities to withstand the accounting claims?
Ed Cohen
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 that we can produce under the most adverse circumstances that stress test. But we don't believe that we can outguess the market. And so, we're quite prepared to find that we sold our gas at too lower price because we prefer to make sure that our investors are sleeping well and that we ourselves are sleeping well.
And it's a nice situation for a change when the conservative guys, I almost call them good guys, prevail over the more optimistic people who that 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 the prices will be high in order for us to make money through our drilling programs, which we've been engaged in for some 30 plus years.
We have just a much lower cost, since an effect the government is subsidizing our investors through very favorable tax treatment. And, of course, we're 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 we're as we're always reading these statements that below $6, or some people say $5, or some people can say $7 per thousand cubic feet per Mcf, it's just doesn't make sense to continue drilling in, 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?
Rich Weber
No. There is (inaudible) but otherwise no.
Ed Cohen
Thank you.
Operator
And our next question comes from the line of Travis Anderson. Please proceed.
Travis Anderson
Hi. How are you? I was wondering when you look at southwestern Pennsylvania, the Marcellus, what you are thinking about in terms of potential horizontal development? I realize that all the well 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?
Matt Jones
I am 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've had such success with our vertical well that some analysts have noticed that on a per dollar invested basis. Our vertical wells sometimes perform better than 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 illusion 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 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're 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 and the northeastern and central Pennsylvania has absolutely no infrastructure for all practical purposes.
Rich, would you want to expand on that?
Rich Weber
That was very well said, Ed. And we're very excited about this horizontal program that is going to be on top of our already successful vertical program. We are currently drilling a horizontal leg on our second horizontal well. And 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 good one. We're fortunate southwestern Pennsylvania, in that we have large and major river systems that run through the area.
But there are issues with water. We're 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're in fine shape. We have access to both the water sources and treatment capacity to handle our program for the foreseeable future.
Travis Anderson
I know it depends heavily on what your production numbers are on the horizontal wells, but could you give us some idea of what the cost for the horizontals might look like versus verticals?
Matt Jones
Our verticals are coming in today north of $1.5 million. We have been hit pretty hard over the last 12 months with increasing cost in the oilfield, in particular oilfield tubulars. We do see those costs abating as other drilling budgets of other companies have come in, as well as the vastly declining price of steel. So we look forward to having lower cost over the next 12 months.
With regard to our horizontal wells, these wells that we're drilling, remember, we have 12 scheduled here in the next five to six months on average. These wells have AFEs in the $4.5 million to $5 million range.
Travis Anderson
They are roughly, what, 3,000, 4,000 feet horizontal, lateral sections?
Matt Jones
In the areas we're drilling in terms of vertical depth, it's anywhere from, let's say, 6,500 feet to, let's say, 8,100 feet in terms of vertical depth, which obviously has a huge impact on cost. And then, we're designing 3,000 foot laterals.
Travis Anderson
Another question on the pipeline part of the business. I realize it's is very speculative, but I 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.
Ed Cohen
I think we'd like conditions to be what they were before roughly July 1 in 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 fine.
We're operating obviously on a contrarian expectations. If things go well and if utopian desires that I just expressed take place, we'll be happy to enjoy the success of that. I hope we'll be not envious of those who were more adventuresome and did not do downside planning if they are enjoying even greater prosperity than we are. But we like to get our costs going down, down, down and we like to pay our debts down to even more manageable levels, something that we've been very cautious right along, and always raising huge amounts of additional equity every time we made an acquisition.
But I don't think that the world is necessarily going to be influenced by my particular pleas or hopes. And so, they say, God helps those who help themselves, and we're trying very hard to help ourselves there.
Travis Anderson
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, the volumes that we've dreamed about aren't going to be there either. But I'm 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. What would be not the ideal outcome, but would be the realistic…
Matt Jones
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'd like to get rid of. I think we all know that we would be extremely, not all of us but most of us.
I'm in a happy position of being a grandfather of six wonderful grandchildren. And so, I never have bad moments with them. And in a way, we work at the Atlas America parent company level like grandparents and we can really take pride in the capacity of our wonderful people in the pipeline of processing business as we watch them efficiently/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's 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 prospers in down markets. We prospered in up markets, but certainly not to the extent that the risk takers did.
Travis Anderson
Thanks.
Matt Jones
Thanks Travis. Emanuel, are there any other questions?
Operator
And at this time, there are no more additional questions in queue.
Ed Cohen
Okay. Thank you all. We'll 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. Goodbye.
Operator
Thank you for participation in today's conference. This concludes the presentation. You may now disconnect. Good day.
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