Atlas Energy: Following the Money

In a world where finding investment capital has become a fine art, Atlas Energy Resources (ATN) has shown its ability to do what no other energy company could even dream of undertaking in the current credit environment.

Unlike any of its competitors, Atlas Energy operates a partnership program that allows private investors to participate in its drilling activities, in return for giving up a portion of its drilling rights, the company receives a huge cost advantage and management fees that are highly accretive, in addition to the portion of the drilling interest that it keeps for itself. In using other people's money, Atlas Energy Resources is able to leverage its own capital position to garner projects that it would not otherwise be able to participate in if it were only operating off of its own balance sheet.

The company’s announcement this week that it has succeeded in raising over $201 million dollars in its end of year subscription program to investors shows that the company is poised to profit greatly from its competitors difficulties. As others seek to unload properties, Atlas Energy Resources will be there to scoop them up as it appears as if it will be largely unaffected by the credit crunch and the crises affect on the energy market.

The most recent example of this occurring is the company’s recent deal with Aurora Oil & Gas (AOG). Such opportunities will continue to come the company’s way, as it is one of the few that is still willing and able to expand its operations. Atlas Energy Resources’ partnership program brought the company over $437 million dollars in 2008, 20% more then in 2007 and significantly below what 2009 will likely bring. As investors seek a relative safe haven for their investment dollars in 2009, there is no doubt that Atlas Energy Resources’ unique and revolutionary partnership program will stand out as a beacon of stability and opportunity in a sea of turmoil.

Given the company’s vibrant capital sources, an extensive drilling backlog and a massive position in the Marcellus Shale, it is clear that the company stands alone as the stock to own in the natural gas industry. While its competitors are fighting debt loads, desperately seeking joint ventures and unloading assets at fire sale prices, Atlas Energy Resources is using an innovative funding structure to capitalize on the opportunities that the company currently has and those that will assuredly come its way.

Disclosure: Long ATN

Comments

[User 283977:]

Yes, when I dumped CHK because of the mercurial activities of their CEO, I looked for a substitute Marcellus Shale play. I picked Atlas Energy (ATN) because of their partnership program financing. I was also intrigued with their press releases about their successful completion of seven two-stage vertical facs in the Marcellus shale, and the associated high levels of production associated with that technique. They announced all their future vertical Marcellus wells would use multi-stage vertical facs.

The only thing that is a bit worrisome about the stock is its current dividend yield of 16.6%. Its clearly an accidental dividend yield at its current price of $14.69. My guess is if the stock price stays where its at for a bit, they are going to reduce the dividend to its normal historical range of 7% (.35 per quarter at $20 per share). I would not interpert the drop in the dividend yield particularly negatively. Oil and gas are down, and 7% is a great dividend.

My intention is to be long on ATN, although, given today's markets, being long on anything is a somewhat relative term.

Jan 14 10:46 AM

[munny:]

Bob, I don't think a reduction in the distribution is likely to happen unless there is a cash flow reduction. As with most MLPs, DCF is supposed to be distributed to unitholders under the operative agreements (whether LLC or partnership). ATN's "parent", ATLS, relies upon the distributions from its operating offspring (AHD, APL, ATN). ATLS may need the distributions from ATN more than ever due to cash crunch at APL/AHD, so I don't expect to see ATN trimming the distribution if cash flow holds up.

Jan 14 11:02 AM

[User 283977:]

Hey, your right Munny... I forgot it was an MLP... Thanks!

Jan 14 01:48 PM