Atlas Pipeline Partners LP, which serves producers in West Texas, Oklahoma and Kansas, surpassed a record for processed natural gas volumes in 3Q2012, which were up 36% from a year ago, executives said Wednesday.

“Atlas is participating in a wave of new energy development,” CEO Eugene Dubay said during a conference call. “The results of the resurgence are illustrated by our operations in the third quarter. The volumes of gas continued to increase across all operating areas,” with 3Q2012 volumes up overall by 25% from 3Q2011. “Producer activity around our systems continues unabated in Texas, Oklahoma and Kansas.”

However, “the industry and Atlas are continuing to play catch-up,” Dubay explained, noting that processing capacity has been somewhat overwhelmed by new production. In addition, “we had liquids constrained” on the WestTX system during 3Q2012, “which should be resolved” with the recent completion of DCP Midstream’s Sand Hills Pipeline, which is taking Eagle Ford Shale and Permian Basin volumes to Gulf Coast markets (see Shale Daily, Oct. 29; Aug. 19, 2011).

Adjusted earnings before interest, income taxes, depreciation and amortization were $55.9 million in 3Q2012. Processed gas volumes averaged 769 MMcf/d, which was more than one-third higher year/year. Profits in the latest period were impacted by lower gas prices, with the weighted average natural gas liquids (NGL) price at 87 cents/gal, a 32% decrease from a year earlier. Distributable cash flow was $37.6 million (70 cents/unit) versus $37.3 million. A net loss was $6.4 million was recorded in the quarter, versus a loss of $50.3 million in 3Q2011.

“While NGL prices remain significantly lower than year-ago levels, our volumes continue to grow and we continue to execute on our previously announced expansion program,” said Dubay.

Among other things, he said, the partnership’s “WestOK expansion is up, operating, and already over half full. We are working diligently to complete our WestTX expansion in 2013.” The 200 MMcf/d expansion of the WestOK system came online in July (see Shale Daily, June 25). WestOK extends into the Midcontinent of northern Oklahoma and southern Kansas, figuring prominently in Mississippian Lime growth.

The WestOK system had average natural gas processed volume of 380.1 MMcf/d in the quarter, which was 44.2% higher than a year earlier. Average NGL production was 12,998 b/d, down almost 3%, in part because the facilities rejected ethane as a result of low ethane prices as well as allocations on the NGL pipeline, according to the company.

In September the partnership completed its expansion of the WestOK system by adding a 200 MMcf/d cryogenic plant at Waynoka (Waynoka II), which was constructed to meet the drilling plans of its existing producers.

“The Waynoka II plant is currently processing in start-up mode,” and volumes are expected to increase “as producers in Oklahoma, along with others in Kansas, continue to add to the system via development in the oil-rich Mississippian Limestone formation.”

APL three months ago completed a 60 MMcf/d expansion of the Velma system in the Woodford Shale of Oklahoma, which increased capacity to 160 MMcf/d. The expansion was part of an agreement with ExxonMobil Corp. subsidiary XTO Energy Inc. (see Shale Daily, Dec. 6, 2011).

Average natural gas processed volumes at Velma jumped almost 27% year/year to 133.2 MMcf/d, mostly because of the additional output gathered on the Madill to Velma pipeline from continued producer activity in the liquids-rich portion of the Woodford Shale, said CFO Robert W. Karlovich III.

Average NGL production at Velma was up almost 22% to 14,866 b/d from the increased processed volumes. The Velma facilities currently are processing at about 83% of the newly expanded 160 MMcf/d capacity, Karlovich told analysts.

APL’s third big system, WestTX, saw its processed natural gas volumes increase from a year ago by nearly 22% to 255.7 MMcf/d. The increase primarily resulted from growing output in the Spraberry and Wolfberry trends, the partnership said. Average NGL production volumes were 28,499 b/d, versus 27,387 b/d a year ago. Although quarterly volumes were higher, NGL output were negatively impacted by reduced operating capacity at the Mont Belvieu, TX fractionator, Dubay said.

“The downtime resulted in the partnership’s plants being placed on a reduced NGL allocation causing the partnership’s facilities to operate in ethane rejection,” said the CEO. “The issue has been resolved, and the partnership’s NGL allocation returned to previous levels beginning in October.”

The WestTX system’s processed volumes are forecast to increase as producers “continue to pursue their drilling plans over the coming years,” said Dubay. “The first phase of construction of the previously announced Driver plant, which will increase processing capacity by 100 MMcf/d, is expected to be completed in the first quarter of 2013. The second phase, involving placement of additional compression and refrigeration equipment to increase the plant’s capacity to 200 MMcf/d, is scheduled to be operational by the end of the first quarter of 2014, or earlier as capacity is needed.”

Once Driver is completed, APL’s processing capacity “will exceed 1.1 Bcf/d.”