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Atlas Pipeline Pursuing Sale of Assets

Atlas Pipeline Partners expects to announce three definitive deals for the sale of all of its Ozark assets, including the 565-mile, 400 MMcf/d interstate Ozark Gas Transmission, 50% of its new Nine Mile processing plant, and an interest in its Appalachia system within the next few weeks, which will "have significant deleveraging impact," company officials said Tuesday.

Discussions on all three transactions are progressing well, Eugene N. Dubay, Atlas' new president and CEO, said in an earnings conference call. "With the asset sales we will be in good shape with our covenants." While the they have been approached about selling other assets, they are focusing on the three pending negotiations, as being adequate. Dubay declined to disclose any figures for the deals while negotiations are in progress.

Going forward the company sees its margin and cash flow as sustainable with the prospect of throughput in 2009 exceeding that of 2008. Systemwide volumes averaged 1,346 MMcf/d for 4Q2008, compared to volumes of approximately 1,211 MMcf/d for 4Q2007. In an open season Atlas essentially sold all the firm transportation for its Ozark pipeline expansion. It is seeing increased drilling and well connects in its Appalachia area, which includes the Marcellus shale.

Atlas reported earnings before interest, income taxes, depreciation and amortization (adjusted EBITDA), a non-GAAP measure, of $98.3 million in 4Q2008, compared to $73.6 million for the prior year fourth quarter. Distributable cash flow, also a non-GAAP measure, was $75.8 million, compared to $45.5 million in 4Q2007. Adjusted net income for the quarter was $31.7 million, compared to $27.1 million the prior year 4Q.

Standard & Poor's Ratings Services (S&P) lowered the company's credit rating to B from B+, at the same time it lowered its senior secured rating to "B+" from "BB-" and senior unsecured rating to "CCC+," saying it has continued concerns about the "partnership's constrained liquidity, high leverage ratio, tight bank leverage covenant and low hedge position for 2009 natural gas." The ratings continue to be on Creditwatch with negative implications.

While completion of the asset sales should ease the situation to some degree, S&P still has concerns that with the sales Atlas would be giving up fee-based gathering and transmission revenue, as well as asset and geographic diversity, leaving it more at risk to low commodity prices in its remaining businesses.

In the Midcontinent regions of Oklahoma, Arkansas, Kansas and Texas, Atlas owns and operates 7,900 miles of active gathering pipeline, eight gas processing plants and one treatment facility. In the Appalachian Basin it owns and operates more than 1,600 miles of gas gathering pipelines in Pennsylvania, New York, Ohio and Tennessee, to which more than 6,900 wells are connected.

The predominant source of gas that Atlas gathers in the Appalachian Basin is wells operated by Atlas Energy Resources LLC.

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