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Atlas Energy (NYSE:ATLS)

Q4 2011 Earnings Call

February 28, 2012 9:00 am ET

Executives

Edward Cohen – President, Chief Executive Officer

Matthew Jones – Senior Vice President, President and Chief Operating Officer – E&P

Sean McGrath – Chief Financial Officer

Brian Begley – Director, Investor Relations

Analysts

Mario Barraza – Tuohy Brothers

Sharon Lui – Wells Fargo

Wayne Cooperman – Cobalt Capital

Operator

Good day ladies and gentlemen and welcome to the Q4 2011 Atlas Energy LP Earnings conference call. My name is Shanae 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 today’s conference. If at any time during the call you require assistance, please press star, zero and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today, Mr. Brian Begley, Director of Investor Relations. Please proceed, sir.

Brian Begley

Good morning everyone and thank you for joining us for today’s call. As we get started, I’d like to remind everyone that during this conference call we’ll make certain forward-looking statements, and in this context forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as expects, anticipates, and similar words or phrases. Forward-looking statements by their nature address matters that are uncertain and 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 to be filed later this week, particularly in Item 1. I’d also 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 update our forward-looking statements or to publicly release the results of any revisions to forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

Now in connection with the planned distribution of common units of our newly formed E&P MLP, Atlas Resource Partners, which will trade under the ticker symbol ARP on the New York Stock Exchange starting March 14, Atlas Resource Partners’ Form 10 registration statement was declared effective by the SEC earlier this month. The Form 10 registration statement contains important information about Atlas Research Partners and the planned distribution, including a discussion of risks and uncertainties. All Atlas Energy unitholders of record as of today will receive their proportionate share of common units of Atlas Research Partners on March 13.

In our earnings release, we provide a reconciliation from net income to adjusted EBITDA and distributable cash flow as we believe that these non-GAAP measures offer the best means of evaluating the results of our business. Lastly, Atlas Energy will be participating in several upcoming investor conferences, including the Morgan Stanley MLP Corporate Access Day on March 7 and 8, and the IPAA conference in New York on March 16 through 18.

With that, I’d like to turn the call over to our Chief Executive Officer, Ed Cohen for his remarks. Ed?

Edward Cohen

Hello everyone. First of all, let me assure you that this is no routine quarterly conference report. Today, we celebrate the completion of the reconstruction of Atlas Energy. One year and 10 days ago, after the sale of old Atlas to Chevron, we’re now launching our new E&P subsidiary, Atlas Resource Partners. All holders of ATLS stock as of today’s date will be entitled to receive on March 13 the proportionate share of the 19.6% of Atlas Resource Partners which is being distributed. ATLS will of course retain the remaining 80.4% and will retain all the incentive distribution rights – the so-called IDRs – in Atlas Resource Partners. These IDRs together with Atlas’ general partnership interest progress to a maximum split level of 50%.

Just as with Atlas’ pipeline where we are enjoying a crescendo of growth in distribution through our IDRs and from our common units, the ownership of incentive distribution rights – these IDRs – in Atlas Resource Partners will become increasingly more valuable when and as the distributable cash flow of Atlas Resource Partners increases in the future. Most importantly, such gains at APL and at ARP will occur without ATLS shareholders themselves suffering any dilution through the issuance of new shares and without ATLS itself borrowing any monies.

Now, you may remember that in an October call, we had set forth our expectations for the new ARP and the benefits that we thought it would bring to its own unitholders and to ATLS’ unitholders. All this is on the verge of being realized. I know that some observers thought that we were being overly optimistic in suggesting that we could move within three to four months from concept to reality, but the SEC has been quite efficient and our Form 10 filing was declared effective on February 14. We are now in a position to reaffirm our initial expectation that in the first 12 months of operation, ARP will be able to distribute $1.60 to its unitholders.

As you will hear in more detail from Matt Jones shortly, our new Marcellus wells, although being connected slightly later than originally anticipated, these wells have shown even greater initial test production than anticipated and greater volume should largely compensate for any shortfall in realized prices as against initial projections. I should note that in addition to the final wells completed in cooperation with Chevron on our old acreage in southwestern Pennsylvania and now about to be turned on, we have already moved into new areas of the Marcellus in West Virginia and northeastern Pennsylvania, areas not covered by the Chevron restrictions which, in any event, expire partly in February 2013 and fully in February 2014; and we anticipate highly favorable results from these fresh initiatives.

We continue to be highly hedged with over 90% of present E&P production. Although the fourth quarter of 2011 showed increased expense for G&A largely as a result of reduced payments from Chevron because of the winding down of the shared services agreement, we have been able to slash projected G&A for the next 12 months by at least $10 million since, among other items, we will not have to provide any appreciable services to Chevron on an ongoing basis. This again brings our present projections into accord with our original expectations.

Our business plan is also being confirmed by macro events in the real world. You may recall again our belief that as a result of the heated cash consuming competition to develop oil and gas plays in new basins, companies struggling to pursue these costly projects would often, we thought, be amenable to selling production and acreage in non-core plays on terms extremely attractive to buyers; and yet, there are relatively few purchasers for these undervalued assets and how much there is to choose from. ARP is currently reviewing over $1 billion of acquisition opportunities and that’s after we have passed on billions of dollars of additional available assets. The deals under review are primarily producing properties, often encompassing undeveloped acreage, sometimes in wet – that is, liquids-rich areas, a further bonus of drilling locations that will be very advantageous for our direct investment partnership programs and will offer us yet another means of maximizing distributable cash flow. And as expected, this production is being offered at historically favorable prices, whether we calculate on a price per proved Mcf or on a price per flowing Mcf.

These anticipated acquisitions, if achieved, will be immediately accretive to ARP unitholders and should move ARP well along toward initial payment to ATLS on its incentive distribution rights. That’s a real win-win situation, confirming once again happily the mutual alignment of general partner and limited partners in the master limited partnership format.

Now as a matter of interest, most of the acquisition opportunities are coming from two types of sellers: first, traditional E&P operations caught up in the expensive drilling of properties in fresh and exciting, burgeoning areas but who are loathe to issue equity or to further leverage their balance sheets in order to pursue their new hopes. The second group of sellers consists of private equity firms that are either disposing of properties at the natural termination of a fund raised earlier or that are paying part of the cost of recent large acquisitions through the sale of the conventional E&P portions of the assets purchased. As ARP closes on these initial acquisitions, I’m afraid to say that you’ll probably be subjected to more conference calls on a continuing and early basis.

Our just-completed annual due diligence conference for firms participating in our direct investment programs was a thrilling success, largely because of the excitement generated by our resumption of activity in the Marcellus and because of the expectation that much of the drilling for 2012 programs will occur in liquids-rich areas. The size of last year’s offerings was adversely affected by the limited acreage available to us after the Chevron acquisition and by technical factors that prevented us from offering programs while the Chevron deal was pending and during our subsequent lengthy reorganization. Now that our situation can be clearly described for securities offering purposes and in the context of participating firms’ enormously favorable response to our proposed offerings, I am pleased to confirm our expectation of a raise of not less than $250 million in 2012. And of course, our transportation and processing subsidiary, Atlas Pipeline Partners – APL – continues to enjoy unprecedented success in the liquids-rich booming areas of Texas and Oklahoma, where APL operates in the Woodford and Permian Basins and in the Mississippian Limestone.

Within the next 12 months or so as APL’s various expansion projects are realized, processing capacity and utilization will have more than doubled to over 1 billion cubic feet per day with appropriate increases in distributions on common units and on ATLS’ IDRs. Our new expansion at Velma, Oklahoma will be operational in May, adding 60 million cubic feet of processing capacity, and our new play in West Oklahoma providing another 200 million increase will enter service in June. The first phase of our West Texas expansion will be complete in early 2013, itself adding a total of 160 million cubic feet per day of processing capacity. APL’s product volumes are well-hedged through 2013. APL’s capital spending is protected by adequate liquidity, and takeaway capacity will be sharply increased with the completion of DPC’s new pipeline in early 2013.

As set forth by APL’s CFO in APL’s conference call last Wednesday, APL anticipates adjusted EBITDA in 2013, and now I quote, of up to $300 million using 2011 average commodity prices, potentially more than a 65% increase to 2011 distributable cash flow, end quote. Such an increase would provide ATLS in turn with about $50 million of distributions as against $16.5 million, which we were quite happy about for 2011, and only $2.5 million for 2010. In short, ATLS as general partner will obviously benefit enormously from the strong contributions we expect from our subsidiaries, the upstream E&P, midstream processing and transportation, and the direct investor programs. All these groups are self-funding, but as they grow and prosper they make increasing contributions to ATLS.

And now, Matt Jones, head of our E&P division and the new President of Atlas Resource Partners, will discuss E&P operations in greater detail; and Sean McGrath, our CFO, will thereafter cover financial matters. Matt?

Matthew Jones

Thank you, Ed, and thank you all for taking the time to join our call today. We’re very excited about the formation of Atlas Resource Partners and believe that we’re unusually well positioned to take advantage of an enormous opportunity. Today in our E&P company, we manage more than 8,500 producing oil and gas wells across basins located in Ohio, Pennsylvania, West Virginia, New York, Michigan, Tennessee, Indiana, and Colorado. Atlas is the largest issuer of energy investment programs in the United States.

We’ve built a world-class technical team with collectively more than 275 years of experience in conventional and unconventional reservoirs. We have an unlevered balance sheet with substantial liquidity and a robust hedge position. We have excellent relationships with some of the largest banks in the world who participate in our credit facility and provide hedging services to us. This is a bank group that we greatly respect and one that recognizes that we’re positioned for substantial and accretive acquisitions and organic value-added growth.

To build upon this foundation, we’ve continued to focus our efforts on several key areas of our business that we believe will add substantially to our future cash flow on a per-unit basis and maximize cash flow from our current drilling, completion and production activities. First, we expanded our organic leasing efforts under the direction of an outstanding land and geology team that we put together over the last several quarters. Our focused efforts in this area have already led to a fast ramp-up in attractive drilling locations available to Atlas and our partners in our energy investment programs in our northeast Pennsylvania focus area. In fact, we believe that we now control through our recent leasing efforts as many as 25 to 30 high-quality Marcellus horizontal drilling locations in this area, which provide solid economics even in today’s commodity price environment. We’ve already dug four of these horizontal lateral wells which are included in our most recent winter drilling program. We continue to expand our land position in this area and expect to continue to add meaningfully to our inventory of drilling locations here.

We’ve equally focused our land expansion efforts in land and liquids-rich areas that are logical extensions of our existing asset base, including the Utica shale play in eastern Ohio and additional areas that are well-known to us through the collective experience of our senior management and technical teams. We expect to announce the addition of attractive drilling locations in some of these areas in the very near future.

With respect to the expansion of our land positions and drilling locations in these highly competitive areas, our thanks go out to Brad Eubanks, who heads our land department and has done a tremendous job. Brad joined us following a very successful career of more than 30 years with Shell, where he led a variety of efforts over those years that resulted in the acquisition of oil and gas leases that covered more than 10 million acres. We’re very fortunate to have Brad leading our land effort, and he’s already added substantial value.

Second, we’ve accelerated our review of acquisition opportunities that make sense for ARP and will create substantial accretion to the interest of both Atlas Resource Partners and Atlas Energy through it’s GP. With the formation of Atlas Resource Partners, we’ll now have an equity currency and an unlevered balance sheet at ARP that will allow us to fund our E&P growth through the ARP enterprise. As Ed mentioned, these opportunities provide a diversity of reserves and production and, in most cases, low-risk drilling opportunities that fit our business model quite well. Our review of these opportunities are centered in geology and geoscience.

We’re quite fortunate to have Jerry Dominey, our Chief Geologist, leading this aspect of our acquisition and organic growth efforts. Jerry also joined us after a long and distinguished career at Shell, where he helped Shell find oil and gas in basins all over the world. Jerry was one of the leaders of Shell’s new ventures team that some years ago was given the assignment of evaluating the then-emerging shale opportunities in other emerging oil and gas areas in the United States, which include what we all now know as the Marcellus and Utica shale plays, the Mississippi Lime play, and other areas that are in development or are emerging across our country. Combing organic and acquisition growth opportunities, along with our unique ability to enhance and expedite financial returns through the monetization of drilling locations included in our partnership management fundraising segment, positions us extremely well to create substantial value for our Atlas Resource Partners and Atlas Energy common unitholders.

We’re also pleased to report that we’ve made great progress in completing and connecting our inventory of 16 horizontal Marcellus locations in southwestern Pennsylvania that we’ve mentioned on previous calls. We’ve targeted and prioritized our efforts, and within the next week we’ll commence production on eight high-quality Marcellus horizontal locations that we’ve worked diligently to drill and complete over the last several months. These wells were funded through a prior investment partnership program. All of the wells were drilled from a single pad location and we flowed each of these wells independently into a sales line prior to the completion of metering and other late-stage infrastructure work. Collectively, the wells flowed nearly 50 million a day into sales lines during the testing phase. This level exceeds our initial flow rate expectations, and while the initial flow rates are largely indicative levels and may differ from actual production levels when the wells are fully connected, we’re quite optimistic that the wells will produce volumetrically in close proximity to the testing phase levels.

We expect to connect all eight of these wells later this week and look forward to updating the market on our initial results sometime next week. Atlas’ working interest in these wells is roughly 30%, so compared to our existing base of net production of approximately 36 to 37 million a day equivalent, these wells will materially increase our production in the very near future. In the coming weeks, we’ll bring the remaining eight of the 16 Marcellus horizontal wells online that are located in southwestern Pennsylvania and are quite optimistic that their production levels will also meet or exceed our expectations.

In addition to these wells, we’re in various stages of drilling, completing and connecting additional wells associated with our investment partnership programs initiated during 2011. These include Marcellus wells in West Virginia, Niobrara gas wells in Colorado, a number of shallow oil locations in Ohio, and five Chattanooga shale wells in Tennessee.

Lastly, I’m pleased to report that we’ve expanded our environmental health and safety department with the addition of Jack Crook, who had a very distinguished career as a senior official in Pennsylvania’s Department of Environmental Protection. Jack earned a reputation of being a tough steward of the environment in Pennsylvania, and we look forward with Jack’s leadership to ensure that Atlas continues with best practices associated with our protection of the environment. Jack will manage our environmental health and safety area and will join Chris Walton in the oversight of this important area for our company. Chris has done an outstanding job for Atlas and was responsible in 2011 for overseeing the best safety record in our history at Atlas. We had the fewest report safety incidences per man hour worked on record last year, and we will continue to focus on our EHS objectives.

Looking forward, we’re determined to build Atlas Resource Partners in a manner that will create substantial value for our investors. The opportunities are abundant and our company is well positioned to accelerate growth.

Sean McGrath, our CFO, will now cover the financial elements of the business. Sean?

Sean McGrath

Thank you, Matt, and thank all of you for joining us on the call this morning. We appreciate your interest in Atlas Energy.

Overall, Atlas Energy generated adjusted EBITDA of 21.5 million and distributable cash flow of 19 million or $0.37 per unit for the fourth quarter of 2011. We distributed $0.24 per limited partner unit for the period based upon these results, representing a 1.5 times coverage ratio.

Production margin for the period of 10.7 million or $3.30 per Mcfa was impacted by lower natural gas prices during the period compared with the third quarter. Production margin was bolstered by our strong commodity hedge positions as we were protected on 80% of our natural gas production of $4.33 per Mcfa for the fourth quarter.

Lease operating expenses for the period were slightly higher compared with the third quarter due to the timing of certain maintenance activity and slightly higher labor costs due to wage increases. The majority of our LOE costs are relatively stable from period to period and we expect the 16 Marcellus horizontal wells that will be connected shortly will have a significant favorable impact on lowering lease operating expenses per Mcfa in 2012.

Partnership management margins for the period were approximately 15 million, a 40% increase from the third quarter 2011. As a reminder, we recognize well drilling and completion revenue as we invest our drilling partners’ capital and administrative and oversight revenues when the drilling program wells are slow. During the current quarter, we deployed 71 million of our drilling partners’ capital, a 100% increase from the third quarter, which generated an additional 4.9 million of well construction and completion margin. At the end of the quarter, we had approximately 71 million of funds raised that remained to be deployed, which we expect to deploy the majority during the first half of 2012.

With regard to Atlas Pipeline, our fourth quarter results reflect cash distributions from Atlas Pipeline of 5.2 million, a 5% increase from the third quarter of 2011 which includes incentive distributions of 1.4 million. This reflects APL’s recently declared $0.55 per unit distribution for the fourth quarter.

Moving on to general and administrative expense, net cash G&A was 9.8 million for the period compared with 5.1 million for the third quarter 2011. The increase was principally due to a 2.7 million decrease in transition service agreement reimbursements from Chevron, 0.7 million of third party costs incurred for prospective acquisitions, and other increases including adjustments for compensation and other expenses. Under the transition service agreement with Chevron, which was completed in November, Atlas received fees during 2011 for multiple administrative and operational services provided to Chevron. Going forward, subsequent to the launch of Atlas Resource Partners, the majority of our G&A expense will be assumed by ARP with a de minimis amount retained by ATLS. We expect ARP’s G&A expense to range between 32 million and 36 million for its first four full quarters, subject to changes in investment partnership syndication activity and other costs, including incentive compensation which will be substantially below the 44 million forecast in the Form 10 filed by ARP.

Gross capital expenditures for the period were 8.8 million compared with 19.6 million for the third quarter 2011. The decrease between periods was principally due to an 18 million decrease in our capital contributions made to the partnership programs due to timing of when the contributions were made, partially offset by 6 million of higher lease acquisition costs due principally to our acquisition of additional acreage in northeast Pennsylvania. Maintenance capital expenditures for the period reflects management’s estimated costs to maintain current levels of production.

Also during the fourth quarter, I wanted to note that we recognized a 7 million non-cash impairment of our Niobrara natural gas properties. This impairment reflects a decline in forward natural gas prices and certain service issues which restricted production and, as such, our reserve amounts. We are in the process of rectifying these service issues, which should improve the performance of these wells and reserve amounts in future periods.

With regard to risk management activities, we continue to be methodical yet opportunistic at adding to our hedge positions to significantly mitigate potential downside volatility associated with movements in natural gas and oil markets and provide us with better clarity with respect to anticipated cash flows. Currently, we have hedges covering 35.8 Bcfa of production for periods through 2016, consisting of a combination of swaps and collars to provide us with downside protection but upside potential in this low natural gas price environment. Over 65% of our forecasted natural gas production in 2012 is protected at an average floor price of $4.80 per Mcf. Furthermore, our effective average floor price over the next four years, which covers over 33 billion cubic feet of production, is approximately $5.10 per Mcf.

We are committed to adding protection to our business and will continue to do so as we have demonstrated in the past. Please view the tables within our press release for more information about our hedges.

Moving on to our debt position and liquidity, we ended the quarter with no amounts drawn on our revolving credit facility and a cash position of 72.2 million at period end with ample liquidity to fulfill our plans for 2012 for both ARP and ATLS.

With that, thank you for your time; and I’ll return the call to our President and CEO, Ed Cohen.

Edward Cohen

And I, in turn, will call on Shanae to open the line for questions.

Question and Answer Session

Operator

Ladies and gentlemen, if you wish to ask a question, please press star, one on your telephone. If your question has been answered or you’d like to withdraw your question, please press star, two. Please stand by for your first question.

Your first question comes from the line of Craig Shere with Tuohy Brothers. Please proceed.

Mario Barraza – Tuohy Brothers

Hey, good morning guys. This is Mario Barraza for Craig Shere. Just wanted to follow up a bit on the acquisition market. Thanks for those comments earlier. It seems like you guys have ample opportunities here. Are you seeing multiple parties outside of yourself interested in these acquisitions? It seems like it’s not going to be too difficult to make accretive opportunities here. Is that a correct way to read into the acquisition market now?

Edward Cohen

I think that’s a very good summary. To begin with, there are few parties who are actively involved in looking for these acquisitions; and of those who are, many are looking for gigantic blockbuster acquisitions. Hedge funds that have huge amounts of money are really not generally interested in the mere hundreds of millions of dollar categories, so we’re hopeful that at least for the foreseeable future, we will have this field to a large extent to ourselves and to a very few others.

Mario Barraza – Tuohy Brothers

Okay. And then as a follow-up, it also sounded like you’re being pretty aggressive here. Do you still expect to potentially announce an acquisition within, say, the next couple months of the ARP spinoff?

Edward Cohen

My mother would probably not like the term aggressive because she taught me to be opportunistic.

Mario Barraza – Tuohy Brothers

Okay.

Edward Cohen

But I think those who have followed us know that my mother is probably, God bless her, wrong on this. We are really pushing and, as I said, stay tuned.

Mario Barraza – Tuohy Brothers

Okay, well thanks very much.

Edward Cohen

Thank you.

Operator

Your next question comes from the line of Sharon Lui with Wells Fargo. Please proceed.

Sharon Lui – Wells Fargo

Hi, good morning. With regards to the amount of capital to be deployed in 2012, what’s your forecast versus the 250 million being raised?

Sean McGrath

Well Sharon, in the Form 10, we were planning to deploy $190 million of capital related to the drilling programs. Is that what you were asking for?

Sharon Lui – Wells Fargo

Yes. And then maybe if you could just talk about the current size or the amount of assets that can be placed in the partnership, your current portfolio?

Edward Cohen

There’s really no limitation on the amount of assets we can acquire, and of course we do take pride in confounding the expectations – that is, surpassing the expectations of commentators.

Sharon Lui – Wells Fargo

Okay. And then in terms of the acquisition opportunities, is the plan to initially make these transactions at ARP and eventually have them be funded through the partnership?

Edward Cohen

The plan is, as you indicate, of course to have all the acquisitions that we’re looking at for ARP be made directly by ARP, and then we will analyze the best place for them to remain. But we do anticipate that a good percentage of these assets will ultimately benefit the partnership programs.

Sharon Lui – Wells Fargo

Okay, great. And my last question, for Sean – if you can maybe just talk about your hedging position for 2013 in terms of gas?

Sean McGrath

Did you say 2015?

Sharon Lui – Wells Fargo

No, 2013 – next year.

Sean McGrath

Oh, 2013. Yeah, we have a strong position right now in terms of the amounts, and we haven’t given production guidance for 2013, Sharon; but for natural gas, we have 8.2 Bcf of hedges in place, mixed between swaps and collars, but essentially an effective floor price of $5.10. And then we have 60,000 barrels of crude hedged basically at $1.60 floor.

Sharon Lui – Wells Fargo

Okay, great. Thank you.

Operator

As a reminder ladies and gentlemen, if you would like to ask a question, please press star, one. Your next question comes from the line of Wayne Cooperman of Cobalt Capital. Please proceed.

Wayne Cooperman – Cobalt Capital

Hey guys. I guess you’ve probably answered this, but just—on ARP, do you have any specific—I mean, not a specific, but a strategy whether it’s gas, oil, existing regions, other regions, targeted, multiple or anything that you can kind of narrow it down for us what makes the most sense?

Edward Cohen

We really try to avoid getting ourselves into categories because we think that that reduces the opportunity to be opportunistic and really exploit the situation to its fullest. Very often, things that are seemingly less appealing than others are compensated by for the price being incredibly, incredibly low, so we try not to put ourselves into categories. But there’s such a flow of material coming across the transom and being sought out by ourselves and coming forward from our contacts that there really is a flavor for everyone. I don’t want to be like – who was it, Heinz – that had 57 different flavors, but it really is astonishing the mixture that one sees of liquids rich, oil productive areas, totally dry gas, which is coming at historically favorable prices. The variety is enormous and I think as long as its highly accretive for our shareholders and meets our other criteria, that we don’t rule anything out.

Wayne Cooperman – Cobalt Capital

Got you. And what—Ed, is the strategy to basically issue stock, stock at ARP and cash (inaudible) acquisitions, and if that’s the case at Atlas, doesn’t it make sense to just take all the cash flow and repurchase shares, or is there some reason that doesn’t make sense?

Edward Cohen

There’s no reason why any of what you said doesn’t make sense; however, those are three or four stages down the line. I think the essence of the case really is the one that you mentioned, that without any further expenditure by ATLS without the need to dilute our shareholders by the issuance of additional shares at ATLS, distributable cash flow and funds available will increase sharply. I certainly would not rule out following our prior path of opportunistically repurchasing our stock when appropriate, but we don’t have any plans right now, of course.

Wayne Cooperman – Cobalt Capital

Okay, but is there any adverse tax consequences for doing so?

Edward Cohen

Excuse me?

Wayne Cooperman – Cobalt Capital

Is there any reason from a tax perspective that you couldn’t buy back share at ATLS?

Edward Cohen

No reason at all.

Wayne Cooperman – Cobalt Capital

Okay, great. Thanks. Good luck.

Edward Cohen

But bear in mind that we are a partnership, so that does impact our reasoning.

Operator

You have a follow-up question from the line of Craig Shere. Please proceed.

Mario Barraza – Tuohy Brothers

Hi, thanks. Just a follow-up on your hedges. You guys added some production hedges for ’16 in the latest quarter. As you ramp up drilling on your existing properties and we’re looking at some acquisitions, how far out do you guys think about hedging production?

Sean McGrath

We’re generally looking out five years, so that’s our time frame. Depending upon how opportunistic the prices are in each period, we’ll look to put a little more on; but we’re on no such schedule to add a specific amount each period.

Mario Barraza – Tuohy Brothers

All right, thanks a lot, guys.

Operator

At this time, there are no additional questions. I would like to now turn the call over to Mr. Ed Cohen for closing remarks.

Edward Cohen

Thank you all for participating, and I’m hopeful that we will be speaking again sooner than three months from now. Thank you all.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.

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