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APL brought Velma Expansion Online & Purchases of Gathering Systems

Source: 6/22/2012, Location: North America

Atlas Pipeline Partners, L.P. (APL, Atlas Pipeline, or the Partnership) announced that the Partnership has brought online the expansion at Velma, a new, state-of-the-art 60 mmcfd cryogenic facility that increases the total processing capacity to 160 mmcfd. This expansion supports the Partnership's long-term, fee-based agreement with XTO Energy Inc. (XTO), a subsidiary of ExxonMobil, to provide natural gas gathering and processing services for up to an incremental 60 million cubic feet per day (mmcfd) from the Woodford Shale.

Due to increased activity in the rich gas areas where the Velma system is located, the expansion is operating at 50% of capacity, well ahead of previously announced expectations. With additional compression work expected next week, the new plant could be expected to reach 75% of capacity shortly thereafter. The Partnership will continue to evaluate additional opportunities in Velma's areas of operation and work with its producer customers to continue to develop the area.

On the WestOK system in northern Oklahoma and southern Kansas, APL expects the 200 mmcfd expansion to be online next month. The drilling activity in the Mississippi Lime has continued to increase behind the system and volumes continue to grow in excess of current processing capacity. Once this expansion is completed, the WestOk system will have total processing capacity of 458 mmcfd. The Partnership also recently completed the purchase of gathering systems in Barber and Harper counties, Kansas which include approximately 60 miles of gathering pipelines and associated rights-of-way.

These gathering systems are already connected to the WestOk system and will allow the Partnership to further expand into these areas of Kansas. The WestOk system now includes approximately 5,100 miles of active gathering pipe and is currently moving approximately 340 mmcfd of gas. The Partnership will continue to look for opportunities to expand its leading presence in the Mississippian Lime area of Oklahoma and Kansas.

Atlas Pipeline is also announcing the purchase of the Mansfield gathering system in the Barnett Shale play in Tarrant County, Texas. The system consists of 19 miles of gathering pipeline that is used to facilitate gathering some of the newly acquired production for APL's affiliate, Atlas Resources Partners, L.P.

The system is currently moving approximately 26 mmcfd of production and is currently contracted under a fee-based arrangement to gather gas produced by the Partnership's affiliate, ARP. The Partnership is pleased to be entering a new geographic area and to provide gathering services to support production by Atlas Resource Partners, which has the ability to increase production in the area given their strong balance sheet and financial positioning.

The Partnership is also providing an update of its risk management program since the end of the previous quarter, which includes protection out into 2014. It is important to note that APL has approximately 76% of expected margin hedged (excluding ethane) for the remainder of 2012 and approximately 73% of expected margin hedged for 2013 (excluding ethane).

The Partnership will continue to add to its portfolio to protect its cash flows and maintain its strong balance sheet. Regarding the Partnership's ethane margin exposure, it is relevant to note that ethane encompasses a small percentage of NGL margin relative to the volume of each NGL gallon that ethane represents. In addition, APL has the ability, as a natural hedge, to reject ethane back into the natural gas residue stream at its' processing facilities.

Management continues to forecast Adjusted EBITDA for 2012 between $200 million and $225 million. The Partnership is adjusting growth capital expenditures, including previously announced major capital projects, the acquisitions noted above, and the Partnership's typical well connection and infrastructure programs, which are now forecasted to total approximately $320-350 million for 2012.

These forecasted amounts are based on various assumptions, including, among others, the Partnership's expected cost and timing for completion of its announced capital expenditure program, timing of incremental volumes on its gathering and processing systems, known contract structures, scheduled maintenance of facilities including those of third-parties that impact the Partnership's operations, estimated interest rates, and budgeted operating and general administrative costs.

Management does not forecast certain items, including GAAP revenues, depreciation, amortization, and non-cash changes in derivatives, and therefore is unable to provide forecasted Net Income, a comparable GAAP measure, for the periods presented. The reconciling items between these non-GAAP measures and Net Income are expected to be similar to those for the most recently completed quarterly period and are not expected to be significant to the Partnership's cash flows.

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