Atlas Energy's CEO Discusses Q3 2012 Results - Earnings Call Transcript

| About: Atlas Energy (ATLS)

Atlas Energy, L.P. (NYSE:ATLS)

Q3 2012 Earnings Conference Call

November 1, 2012 09:00 ET

Executives

Brian Begley - Head of Investor Relations

Ed Cohen - Chief Executive Officer

Matt Jones - President, Atlas Resource Partners

Sean McGrath - Chief Financial Officer

Analysts

Craig Shere - Tuohy Brothers

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Atlas Energy Limited Partners and Atlas Resource Partners Third Quarter Earnings Conference Call. My name is Juanita, and I will be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Mr. Brian Begley, Head of Investor Relations. Please proceed.

Brian Begley - Head of Investor Relations

Good morning, everyone, and thank you for joining us for today's call to discuss our third quarter results. And as we get started, I'd like to remind everyone that during this 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 can 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 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 of 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 and maybe made to reflect the events or circumstances after the date hereof or reflect the occurrence of unanticipated events.

In both our Atlas Energy and Atlas Resource earnings releases, we provide a reconciliation from net income to adjusted EBITDA as well as distributable cash flow, as we believe these non-GAAP measures offer the best means for evaluating the results of our business.

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

Ed Cohen - Chief Executive Officer

Thank you and hello everyone. First of all, I'd like to thank all of our East Coast employees who have continued the function at a high level throughout these days of trauma from the Middle Atlantic states and New York. And I'd also like of course to thank all of our employees throughout the United States who have contributed individually to the surging success of our new company, which was of course reconstituted only last March with the launch of Atlas Resource Partners.

Simply put, ATLS and ARP continue successfully on a path that in eight months has already produced considerable accomplishment, and that puts the companies now in take off position for extraordinary increases in distributable cash flow in the coming months, and especially during 2013. Already as you know, ARP has increased its quarterly distribution per unit to $0.43, and our parent company, ATLS has declared a cash distribution of $0.27 per limited partner unit for the third quarter of 2012, and that represents a $0.02 per unit increase or 8% over the second quarter of 2012 and a 13% increase over the prior year quarter. In fact, the things are going so well in Atlas Resource Partners operations, but I am pleased to confirm our guidance for the second half of 2012 and to confirm expectations of distributions in 2013 of at least $2.30 per unit subject of course to no adverse surprises in future commodity prices, fundraising, or production results from new wells drilled.

Let me speak initially however, concerning Atlas Pipeline Partners. ATLS is gathering in processing, we'll call it, the midstream subsidiary, which itself has been enjoying considerable success and contributing substantially to ATLS' success and favorable prospects. APL's gathered volumes for the September 2012 quarter reached 860 million cubic feet a day and that’s up from 621 million cubic feet a day in the third quarter of last year, that’s an increase of about 40% in a single year. Processed gas volumes also grew by approximately 40%. APL’s adjusted EBITDA for the third quarter 2012 was $55.9 million, a 13% increase year-over-year powering a rise in APL’s distribution for the quarter to $0.57 per common limited partner unit and that’s APL’s eight increase in distribution in the past nine quarters.

Now, happy is we have been with the results today, for APL truly sharp increases in distributable income should be forthcoming only in the near future as a result of the completion and proliferation of projects now underway, but not yet productive of distributable income. APL during this quarter, the third quarter placed in the service a new West Oklahoma plant which immediately added 200 million cubic feet a day of processing capacity and APL is in the process of building yet another plant in West Texas and that plant on completion in the first quarter of 2013 will add yet a further 200 million cubic feet a day of processing capacity. By early 2013 processing capacity will reach 1.1 billion cubic feet per day, almost double APL’s processing capacity at the beginning of 2012 and that growth has been achieved entirely organically. Even in this greatly increased processing capacity will barely meet the burgeoning natural gas intake available to these plants.

Nonetheless, we will see further explosive increases in net revenues only when new takeaway lines become available by early in the second quarter of 2013. APL has already spent hundreds of millions of dollars presently expanding processing facilities and what have proven to be three of the world’s best fields of wet natural gas, the Permian Basin in West Texas, the Mississippi Limestone in West Oklahoma and the adjacent areas, and the Ardmore, Woodford field in Southern Oklahoma. But APL is only beginning to see after all that expenditure on some of which we are paying interest, we’re only beginning to see the first cash returns from this investment. But by 2013 distributable cash flow should increase sharply as third-party infrastructure takeaway lines in particular and enter service.

I’ll turn now to the focus of today’s call, the extraordinary accomplishments of and extraordinary prospects for our E&P operation Atlas Resource Partners which I have been referring to as ARP. ARP during the September 2012 quarter achieved record average net production of 96.3 million cubic feet of gas equivalent per day of 54% increase from the prior three months and more than 175% increase from the old Atlas Energy’s natural gas production during the corresponding 2011 quarter. Much of this increase has been generated by the three acquisitions completed in the first six months of ARP’s existence. Of course we continue to work diligently on additional purchases and I remain confident that ARP will achieve its minimum goal of $1 billion in acquisitions within ARP’s initial year of operation.

Like APL, ARP has also successfully anticipated market developments and is also expecting sharp increases in distributable cash flow. I know all too painfully that many observers were skeptical when we purchased and completed the Titan, Carrizo and Equal Energy acquisitions at a time when natural gas spot prices were floating with record low levels, even briefly plummeting below $2 per Mcf. But weak expectations for natural gas prices were in fact the background to the favorable acquisition prices in terms that we were able to negotiate on these acquisitions. By hedging existing production immediately on completion of these purchases, we protected our downside leaving us free to benefit from rising prices through the drilling of new wells and through the reworking of old wells.

In effect, we had purchased free options on hundreds of in fact approximately 600 future drilling sites and free options on billions of cubic feet of potential oil and gas reserves. As you know, both strip and spot prices have increased sharply from their nadirs, and we are now beginning to reap the bonus benefits of these acquisitions. As a result of these price increases and very satisfactory drilling results, returns on our new wells in the Barnett shale are already providing IRRs in excess of 40%. And of course, this return can be further increased by the inclusion of new wells in our 2012 direct investment program, a program that's currently underway, and that at $250 million constitutes the largest single private offering that we have ever undertaken. Prospects are even better in the exceptionally wet Mississippi Limestone.

In the quarter ending September 30, we acquired Equal Energy's remaining 50% interest in the joint venture, of which ARP had acquired the first half during the prior quarter. ARP's expansion bonus from this two-part purchase comes to approximately 20,000 net acres in the core of the Mississippi Lime, and ARP has already begun to exploit this. A dozen wells are already in various stages of development. The first two have already been completed. And I am pleased to report that average initial production has considerably exceeded our expectations. In fact, initial production has been approximately 50% higher from the 250 barrels of oil equivalent per day that we had somewhat ambitiously projected. Activities in the Utica and in the Marcellus are also exciting and satisfying.

For a full report on ARP's E&P activities, I turn to Matt Jones, President of Atlas Resource Properties. Matt?

Matt Jones - President, Atlas Resource Partners

Thank you, Ed and good morning everyone. First, I'd like to say that following the violent storms that caused such immense damage to areas in the Northeastern region of the country, I am happy to report that we had no reportable injuries to our people or reported damages to our facilities. Our people are safe. Our wells continued to produce. And our drilling operations across our company continue as planned. Our environmental and safety precautions and systems are working well. And I'd like to extend a special thanks to Jack Crook, our Head of Environmental Health and Safety and his team for protecting the safety of our people, the safety of those in close proximity to our operations, and the continuity of our business.

We continue to expeditiously move forward with the expansion of our company. We substantially increased oil and natural gas production during the quarter through our acquisition and exploitation strategy in the organic development of our highly desirable acreage positions. We successfully expanded into a number of the most coveted basins in place in the U.S.

Today, we estimate that we have as many as 600 potential drilling locations across our acreage positions perspective for the Mississippi Lime, Utica shale, Barnett shale, and Marcellus shale. We increased well drilling completion and well connection activities, including the completion of our first wells in our Mississippi Lime program and on our Barnett shale acreage. We advanced the development of our Marcellus acreage in Lycoming County arguably the most productive dry gas region in the country, where we now have a number of pad sites constructed and where we are in various stages of drilling wells and we'll soon move to completions on a number of those wells.

We initiated drilling on our Utica acreage in Harrison County, the heart of the Utica/Point Pleasant play having recently completed a 5-well pad site. Also, we remain focused on minimizing operating cost, then maximizing production from existing wells in all the areas where we operate. All of these targeted actions led to higher cash flow generations per unit at an increased distribution per unit for the quarter. The credit, of course, goes to our outstanding people who are determined to make Atlas Resource Partners a great investment for all of our stakeholders.

Our operating teams have worked diligently to expand our current business and to position our company for meaningful growth. In Texas, we focused on the maximization of our Barnett shale position that includes over 50 million a day of current production and substantial drilling opportunities on our 28,000 acre position that is largely held by production. Many of our drilling opportunities in the Barnett shale exist on currently constructed pad sites with adequate infrastructure in place to readily accommodate additional development. That are still some of these pad sites and drilling opportunities are located in the wet gas area of the Barnett shale, where returns on capital are significantly enhanced. Because our acreage position is largely held by production, we are able to concentrate our capital and our efforts on wells that provide the highest rates of return.

We currently have two rigs running in the Barnett to exploit these opportunities and bring forward cash flow and value. We connected the first two wells in our Barnett program during the third quarter and are very pleased with the initial results. Both of these wells are located in the wet gas window and that average initial rates of production in excess of 3.5 million cubic feet equivalent per day, significantly exceeding our expectations. We'll continue to add producing Barnett wells to our system during the fourth quarter and into 2013, and we anticipate meaningful increases in our Barnett production from this activity. Also because of the focus and talent of our Barnett team, we have been able to increase production from existing wells by more than 5% since we acquired these assets several months ago.

We continue to focus on additional work-over opportunities with these assets and are hopeful that we'll have similar results moving forward. The increased production and the resulting cash flow generated from drilling and work-over activity in the Barnett is further enhanced by the very positive upward movement in current spot natural gas prices in recent weeks. Importantly, the upward movement of future spot prices on the forward curve should significantly enhance cash flows and returns generated from our current and future drilling programs in the Barnett. Our exceptionally talented acquisitions and strategy team led by Daniel Herz put in place for our company the Barnett assets from which today we so greatly benefit.

Our acquisitions in the Barnett brought to us an outstanding management team led by Mark Schumacher. A solid base of proved developed reserves, existing natural gas and natural gas liquids production, and numerous drilling locations, many located on developed pad sites creating the opportunity for expedited development. The integration and assimilation of the Barnett assets led by our acquisitions group and the operating team has been excellent and serves as a model for future expansion and development. We are equally pleased with our growing Mississippi Lime development program, where we now have under lease nearly 20,000 net acres in the core area of the play. Our acreages located in Alfalfa, Grant and Garfield counties in Oklahoma, the home of some of the best performing wells in one of the most coveted plays in the United States.

Nearly, all of our acreage is held by production. And with the acquisition in the third quarter of the remaining interest in the Mississippi Lime properties formally held by Equal Energy. We now control all of the developed infrastructure associated with the property, including saltwater disposal, electrical grid, and takeaway capacity. Included in the recently completed acquisition of the remainder of Equal Energy's interest, we acquired Equal's existing liquids-rich production from wells drilled into the Hunton formation that lies beneath the Mississippi Lime formation within our 20,000 acres.

Importantly, along with the production, I am very pleased to report that the key senior field personnel who had operated these assets for Equal Energy agreed to join our company. We welcome them to our exciting company. We are confident that they will be instrumental with the efficient operations of our newly acquired Hunton production and current and forthcoming Mississippi Lime production. We currently have one rig running in the Mississippi Lime program. And we have scheduled our first 12 wells for drilling, completion, and connection. All of these wells are scheduled for inclusion in our partnership drilling program.

I am very happy to report that we have completed and connected on our first two wells, as Ed mentioned, in the average initial production rate for these wells is in excess of 375 BOE per day per well. It is meaningfully exceeding our projections. We are very pleased with the initial results from these wells and we are considering adding a second rig to the program before the end of the fourth quarter to enhance development for our company and those who invest in the wells through our partnership drilling program. In addition, we have several wells that are in various stages of drilling and completion that will begin producing later in the fourth quarter and early next year. With more than 100 potential drilling sites on our current acreage, we are very excited about the value creation potential for our Mississippi Lime program.

In Appalachia, we continue to lever our longstanding and successful operating history and significant presence in the region, beginning with Eastern Ohio, where we have several field offices and roughly 2,500 producing wells. We currently have under lease roughly 4,500 acres of Utica shale perspective properties located in Harrison, Tuscarawas and Stark counties. Many who have followed recent and past developments in the Utica play will recognize these counties as very desirable areas for Utica prospects. Perhaps Northern area is more prominent and promising than Harrison County where excellent initial results have been announced by Chesapeake, Gulfport and others and permitting and drilling activity is quickly escalating.

Accordingly, we have initiated development of our Harrison County, Utica/Point Pleasant position from a single pad site, which will accommodate the efficient development of five wells with average lateral lengths of more than 5,000 feet. As many of you know drilling multiple wells from a single pad site and extending lateral lengths and horizontal drilling are two of the key components of maximizing returns on invested capital. With efficient development and highly encouraging geology is evidenced by recent results in and around Harrison County in particular, we are quite excited about our Harrison County well program. These wells are scheduled for inclusion in our partnership drilling program.

On our Marcellus shale acreage located in Lycoming County in Northeastern Pennsylvania, we have now completed three pad sites that will each accommodate multiple wells. To-date, we have concentrated our drilling activity on the first pad, where we will drill five wells in total. In fact we’ve drilled to total depth the first three wells, we’ll nearly complete drilling on the fourth well and we’ll begin drilling the fifth well shortly. These wells will also be included in our partnership drilling programs. Our acreage in Lycoming County is close to some of the most productive natural gas wells in the U.S. And we are very excited about the prospects for this area and the many potential drilling locations that we hold.

In total we’ve meaningfully increased our production through acquisitions and through the exploitation of high quality drilling locations. We’ve greatly expanded our platform and are accelerating our efforts across the company and remain focused on our primary objective and that is to add stability in growth to our cash flow per unit.

Thank you all for joining our call. And now for a detailed review of our financial results, I’ll turn the call over to our CFO, Sean McGrath, Sean?

Sean McGrath - Chief Financial Officer

Thank you, Matt, and thank all of you for joining us on the call this morning. First regarding ARP, we generated adjusted EBIDTA of $22.7 million or $0.56 per unit, and distributable cash flow of $18.5 million or $0.45 per unit for the third quarter of 2012. We distributed $0.43 per limited partner unit for the period based upon these results, representing 1.1 times coverage ratio.

Production margin for the period of $20.1 million represented a 65% increase compared with $12.1 million for the prior year third quarter and a 20% increase from the second quarter of 2012, excluding $3.9 million of second quarter gains recognized from rebalancing our hedge portfolio in outer years. The third quarter included volumes from our acquisition of Piken in the Barnett shale, representing over 25 million per day of equivalents from the state of acquisition and a 13% increase or almost 5 million per day of equivalents in Appalachia production volume from the second quarter due to significant contributions form 16 legacy, Southwest and Pennsylvania, Marcellus horizontal wells connected during the second and third quarters.

Lease operating expenses for the period of $0.75 per Mcfe were over 33% lower compared with the prior year third quarter as our low cost Barnett production and the higher Appalachia production volumes drove cost per Mcfe significantly downward. LOE for the third quarter included $0.5 million or approximately $0.05 per Mcfe of Appalachian water hauling cost from our earlier periods due to delays in billing from Chevron who handles our water hauling in the area. Excluding this catch up lease, operating expenses for the period would have been $0.70 per Mcfe or a $0.01 decrease from the second quarter of 2012.

Partnership management margin for the period was approximately $12 million, 105% increase from the second quarter of 2012, as we accelerated our capital deployment activity for the 2012 partnership program. We initiated drilling on 10 wells during the period for the 2012 program including five in Utica shale, three in the Marcellus shale and two in the Mississippi Lime. During the current quarter, we deployed $36 million of our joint partners’ capital. As a reminder we’ve recognized well drilling and completion revenue as we invested drilling partners’ capital and administrative and other side revenues on the drilling program wells are spud.

Moving on to general and administrative expense, net cash G&A was $9 million for the period, which represented a slight increase from the $8.8 million for the second quarter of 2012, due to timing of certain minor third-party costs. I also want to take a moment to note that we recognized a $7.7 million non-recurring charge on our income statement for the third quarter 2012, regarding the so-called reconciliation process in connection with the multi-billion dollar transaction with Chevron in February 2011, whereby our predecessor enterprise under Atlas Energy received cash by $120 million for certain liabilities assumed. In our earlier filings, we previously estimated the loss with regard to this matter to be as much as $45 million, whereas now we expect it to be approximately $7.7 million. We expect this matter to be finalized shortly.

Gross capital expenditures up $24 million for the third quarter were relatively consistent with the second quarter of 2012. The third quarter included $8 million of CapEx for Barnett shale wells and we are in the process of drilling for our own account, which we expect to positively impact our production margin in future periods.

With regard to risk management activities, our strategy of methodically yet opportunistically mitigating potential downside commodity volatility was clearly embodied during the third quarter hedging activity, as we utilized the beneficial rise in natural gas prices during the period tendering into over 27 Bcf of hedges at an average price of approximately $4.25 per Mcf for future periods through 2017.

Overall, we have hedge positions covering over 85 billion cubic feet of natural gas production at an average floor price of almost $4.35 per Mcf for periods through 2017, consisting of a combination of puts, swaps, and collars, to provide us with downside protection, but upside potential for natural gas prices. In addition, we have hedged in average of approximately 60% to 65% of our current run rate crude oil production from the next four years at an average floor price in excess of $90 per barrel. We are committed to adding protection to our business and providing better clarity with respect to anticipated cash flows. And we'll continue to do so as we have demonstrated in the past. Please see the tables within our press release for more information about our hedges.

Moving on to our liquidity position, we have approximately $110 million available liquidity at September 30, 2012, including approximately $90 million available capacity under our revolver. With regard to Atlas Energy LP, we generated distributable cash flow of $14.1 million and distributed $0.27 per unit for the period, representing a one-time coverage ratio. Going forward, we expect the ATLS to maintain minimum coverage on its cash distributions, as ARP and APL both expect to maintain ample coverage ratios in future periods.

Atlas Energy Bcf included $5.7 million of cash distributions from APL, including $1.7 million from its incentive distribution rates, representing a 15% increase from the prior year third quarter, as APL significantly grew its cash flow over the last 12 months. Atlas Energy Bcf for the period also included $9.4 million of cash distributions from ARP, an 8% increase from the second quarter of 2012.

Cash G&A expense for Atlas Energy on a standalone basis was $1.4 million for the period, compared with $2.1 million for the second quarter of 2012. The decrease in cash G&A expense compared with the prior quarter reflects the moderation of the number of seasonal expenses incurred in the second quarter of 2012.

Finally, I would like to quickly mention ATLS' strong standalone balance sheet, which has no debt outstanding under its $50 million credit facility.

With that, thank you for your time. And I'll return the call to our CEO, Ed Cohen.

Ed Cohen - Chief Executive Officer

Juanita, I think we are now ready for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from the line of Craig Shere with Tuohy Brothers. Please proceed.

Craig Shere – Tuohy Brothers

Good morning guys.

Ed Cohen

Hi, Craig.

Craig Shere – Tuohy Brothers

So, Ed, let me just make sure I understand this $1 billion comment in the first 12 months correctly. You started trading ARP in March, so is it in the next four months, we expect over $500 million an additional M&A to be announced in the ARP?

Ed Cohen

I think its $600 million approximately, maybe $550 million. Yes, we are confident that we will reach at least that amount.

Craig Shere – Tuohy Brothers

Okay. And presumably, you may have lost out on one or two bidding processes thus far, has your temperature of the markets than what's happening in various basins and for various commodities adjusted where you are focusing your efforts in terms of new acquisitions?

Ed Cohen

Craig, making an acquisition is only a win if you make it on the right terms. So, we don't feel that we have lost out on anything. One of the nice things about there being so many opportunities available and so relatively few competitors is that we don’t have any obligation or interest in doing deals that don’t meet our requirements. When we do a deal we are very eager that the fans come off the bleachers cheering. So not only do we expect to make announcements, but we’re hopeful that people will be very happy with those announcements.

Craig Shere – Tuohy Brothers

Understood, one of the headwinds for the story is the lack of press so to speak, which is partly driven by very wise, but limited amount of institutional following and not much retail since your significant success with the prior sell down and your prior business life. If you do announce $500 million or $600 million and plus an incremental acquisitions for the next four months, is it fair to say, it might be reasonable to start tapping the retail market with your shale filing?

Ed Cohen

Your comments are really right on target. As you know this is a complex business, we’re cautious and conservative but we also try not to miss opportunities. So, we will role all those considerations together and in due course the picture will become clear.

Craig Shere – Tuohy Brothers

And do you still expect $180 million of partnership capital to be deployed this year and affirming next year, are you still assuming flat year-over-year deployment of partnership capital?

Ed Cohen

I think I made clear that the present program at $250 million is the largest single private placement we have ever done. And we are enthusiastic about how it’s going and about the expectations for the future. But because it is a private program I don’t think it’s appropriate and really not permissible for me to say anything more.

Craig Shere – Tuohy Brothers

Understood. Your prior guidance for distributions in next year did assume flat year-over-year partnership endorsement, is that correct?

Ed Cohen

That’s not an indication of what we actually expect, because that’s an accounting projection. I don’t want to comment further but I think I would not be overly enthusiastic with accounting projections.

Craig Shere – Tuohy Brothers

Understood and last question historically you said your resource constrained more than constrained on the ability to raise money for your successful partnership programs with 600 current drillable locations, probably ranging from $3 million to $7 million a piece, do you still see yourself as significantly resource constrained and how does that fit into your potential to digest significant new acquisitions.

Ed Cohen

No, I don’t think that we are resource constrained, but Matt Jones perhaps you’d like to comment further on any constrains you may see.

Matt Jones

We’re very happy with the portfolio of drilling opportunities that we have in the company today not only do we have balance and balanced among the hydrocarbons that we believe we’ll be producing across our business, but we have balance across basins today. We have drilling opportunities in some of the best areas of the country, so we’re very excited about the position that we are in to continue incrementally and more aggressively attack our drilling program. Going forward, we have the advantage in many of these basins of having drilling opportunities where infrastructure is already in place, pad sites are developed, which has the affect of reducing the capital investment we need to make from here forward to cause our production to increase in those areas. Many of those areas are in locations where we believe we can generate great returns from the drilling that we intend to undertake. So, we’re very pleased with the portfolio of wells that we have today. The opportunity to expand organically the acreage positions that we have in the various basins where we operate, I think is prevalent. And I think that as we continue expand through acquisition, we’ll be able to even further add to our well drilling opportunities.

Craig Shere – Tuohy Brothers

Is there any way to quantify the organic growth opportunity year-over-year without more acquisitions, I mean, could you double your CapEx spend?

Ed Cohen

Craig, this is Ed. I don't mean to cut you off and we will come back to you, but I'd like to let Juanita give someone else a chance.

Craig Shere – Tuohy Brothers

Fair enough, sorry.

Operator

(Operator Instructions)

Ed Cohen

I think perhaps we should go back to Craig.

Operator

Would you like to go ahead and open his lines, I do not show any further questions in the queue.

Ed Cohen

Yes. I hope Craig has three or four more questions. Craig, if I may, I think let me respond to the last question, if you total all of the capital that we could deploy with our existing inventory of opportunities, we probably have give or take couple of billion dollars of drilling opportunities across our systems. The ability to drill more rapidly because of infrastructure advantages that we have in certain areas can bring forward the drilling opportunities more quickly than we otherwise could bring them forward. Yeah, I will say one other thing we are benefiting greatly in some of the basins, where we have invested from other companies, other E&P companies, investing very heavily in R&D and research in the areas, where we are operating today. Mississippi Lime is an example. Utica is an example, where we are just benefiting greatly from the science and R&D work that has been done over a period of time in those areas. So, we have a great advantage in being able to benefit from all of the science and research, that's already taking place and the great results that have taken place in those areas. So, we feel very good about our positions today and our ability to exploit those opportunities in an efficient manner.

Operator

Your next question comes from the line of (indiscernible). Please proceed.

Unidentified Analyst

Hi, guys. It's (indiscernible).

Ed Cohen

Hi.

Unidentified Analyst

When you look at gas versus oil basins, how do you think about those decisions and how would you rank the opportunities that now say Barnett, Mississippi, Utica, what’s your order of preference?

Ed Cohen

This is Ed. I am going to make a short comment and then go to Matt for a more technical response, but basically we don't look at things on any absolute basis. And that's why we are saying that I was painfully aware of the fact that people at one point and probably the present time don’t instinctively, because of pricing considerations like gas. But if you can buy opportunities cheaply enough because of this prejudice or this well-founded thought, the gas can become very attractive. Obviously, pricing suggest that if you could buy all properties at the same price as gas properties, nobody would be buying gas properties, but we seem to be almost alone in our recognition that this is a comparative matter. So, the prices at which we were able to buy gas properties previously and at which we are still seeing them being offered makes a compelling case in many situations, but oil on the other hand can also be extremely attractive, because once again, there maybe elements. Sometimes, it's just a fact that something is in a complex corporate form or something requires a tremendous amount of financial analysis or analysis that people whose training is strictly on the technical side aren’t prepared or it won't choose to do. So, there are many reasons why a particular property can be very attractive and we try to exploit these incongruities. Matt, do you want to comment further?

Matt Jones

Yeah. We always do what we believe is in the best interest of our common unit holders and for those who invest in our drilling programs. And I think the best way I can answer your question is to just make reference to the drilling that we are undertaking today and we are drilling in the Mississippi Lime, where we have had great success early on. We are drilling in the Barnett shale, where we have had great success. We are drilling in the Utica, where some of the best wells that I think perhaps have ever been drilled in the United States in terms of returns. We are drilling in Harrison County, which is in the heart of the great activity that’s taking place in the Utica. And then lastly in the dry gas area and this adds some balance to the totality of what we are doing. We are drilling wells in Lycoming County. If you follow the industry closely, you’ll recognize Lycoming and particularly the area in Lycoming, where we are drilling is one of the great areas to develop dry gas assets. So, we are approaching this from a balance point of view, I’ll say that our program and our drilling efforts today are more heavily weighted to wet gas and oil areas, but we think we have a great balance within our drilling portfolio today for the wells that we are drilling now and those that are forthcoming.

Unidentified Analyst

Great, thank you. And from a guidance perspective, you guys have very good clarity from APL in terms of their project backlog and you seemed very confident in terms of a minimum number of acquisitions at the ARP level. Would you contemplate putting some kind of dividend target or distribution target out there for ATLS like you do for ARP or just some minimum growth target like if we think it’s between 60% and 150% for next year, you could at least give some clarity and say minimum like 50% or whatever, whatever the numbers are? Would you ever get to the point where you feel comfortable enough providing those things?

Ed Cohen

It’s not I think that we feel uncomfortable, it’s that perhaps we have overly assumed that the math can be done if you have information on ARP’s policies on and on APL’s policies and know that we don’t see the need for additional coverage at ATLS and you probably can do the math, but we will give consideration for that. That might be a good point that we are so close to it.

Unidentified Analyst

Okay.

Ed Cohen

That we assume people understand.

Unidentified Analyst

Great, great. We have done the math, but sometimes (indiscernible). Thank you, guys. I really appreciate it.

Ed Cohen

Thank you.

Operator

And at this time, I am showing we have no further questions. I would now like to turn the call back over to Mr. Ed Cohen, CEO for any closing remarks.

Ed Cohen - Chief Executive Officer

Obviously, I am very much looking forward to the next quarterly conference call and especially to the quarterly conference call after that. Somehow when you are on an upward trajectory, the future always seems very desirable and especially future conference calls. So, I hope you all join us for the next one and for the one after that and maybe for further ones. Thank you.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!