The ongoing expansion of Atlas Pipeline Partners LP’s (APL) Velma system and similar projects on the partnership’s other systems must be completed before it can take on all of the production coming its way, APL said Tuesday.

“Until we complete our expansion projects we expect to continue to exceed our processing capacities and offload production to third-party plants,” COO Glenn Powell said during a conference call with analysts Tuesday.

Volumes on the Velma system increased due to production added on the Madill to Velma gathering system associated with activity in the liquids-rich portion of the Woodford Shale. The Velma system’s average natural gas processed volume was 96.6 MMcf/d in 2Q2011, an increase of 33% compared with 2Q2010. Gathered volumes were up 29.3% compared to 2Q2010 and average natural gas liquids (NGL) production increased to 11,367 b/d for 2Q2011, up approximately 38.1% compared to 8,230 b/d for 2Q2010. APL said it plans to expand the Velma system by adding a 60 MMcf/d cryogenic plant as producers look to take advantage of high NGL content gas in the Woodford Shale.

Increases on APL’s WestTX system were a result of additional development for oil drilling in the Permian Basin, and volume increases on the partnership’s WestOK system were related to expansion into Kansas and increased producer activity in the counties along the Oklahoma and Kansas borders, particularly in the Mississippian formations, APL said.

In response to significant growth of its Midcontinent gas midstream processing business, APL in May increased by $400 million its capital budget to expand its western Oklahoma and West Texas systems (see Daily GPI, May 16). The increased capital spending plan for 2011 and 2012 will pay for a $175 million expansion of the western Oklahoma (WestOK Chaney Dell) system and a $75 million expansion of the Velma system, among other things, APL said.

Processed natural gas volumes totaled 538 MMcf/d in 2Q2011, a 31% increase compared to 410 MMcf/d in 2Q2010, and the weighted average NGL price was $1.25/gallon for the quarter, a 42% increase from the year-ago period. But APL reported adjusted earnings before interest, income taxes, depreciation and amortization of $43.5 million for 2Q2011, compared with $63 million in 2Q2010.

APL is an affiliate of Atlas Energy Inc., which earlier this year approved a $4.3 billion merger with Chevron Corp. (see Shale Daily, Feb. 17). Atlas has close to 486,000 net acres in the Marcellus Shale. It also holds an estimated 623,000 acres in the Utica Shale, as well as close to 370,000 acres in Michigan in the Antrim Shale and the Collingwood/Utica play (see Daily GPI, May 10, 2010). In addition, Atlas has about 120,000 acres in the Chattanooga Shale of Tennessee and 123,000 acres in the New Albany Shale.