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Must-know: Atlas Pipeline’s first quarter earnings analysis

Avik Chowdhury

Must-know: Atlas Pipeline's 1Q14 earnings analysis (Part 2 of 7)

(Continued from Part 1)

Atlas Pipeline Partners (APL) released its financial information for 1Q14 on May 5, 2014. The company recorded total revenues of $700 million for 1Q14, up 20.6% from $580.1 million recorded in 4Q13. Gross margin from operations was $131 million for the first quarter 2014, as compared to $119.6 million for the fourth quarter 2013. The company recorded a much improved bottom-line; it recorded a net income of $7 million in 1Q14 versus a net loss of $48.6 million in 4Q13. In 4Q13, APL recognized a non-cash goodwill impairment charge related to the gas treating business of approximately $43.9 million as growth slowed down in the gas treatment business. In 1Q14, net income attributable to the limited partners recorded a loss of $21.4 million compared to net loss of $71.5 million in 4Q13. This was due to the effect of preferred unit imputed dividend of $11.3 million and dividend in kind payment of $9.7 million in 1Q14. During 1Q14, APL issued preferred units of approximately $122 million to pay down the revolving credit facility and to finance capex. Net loss per common units was $0.27 in 1Q14—an improvement from the net loss of $0.94 recorded in the last quarter of 2013.

The stock price of APL has gone down by 0.3% from $32.29 since the day of its latest earnings on May 5, 2014 to $32.18 on May 12, 2014. In the past year, the companys stock price has gone down by ~9%.

Total processed volumes of natural gas were approximately 1.4 billion cubic feet per day in 1Q14, almost unchanged from 1.4 billion cubic feet per day recorded in 4Q13. Average natural gas processing volume for the first quarter of 2014 in the SouthOK segment nearly doubled to 372.6 million cubic feet per day (or MCFD) from 151.9 million MCFD. In late April, the Stonewall plant, a new cryogenic processing facility, was brought on line to serve increased production in the Woodford Shale, South Central Oklahoma Oil Province (or SCOOP), the Arkoma Basin, and the Ardmore Basin. In the other segments of WestOK, SouthTx, and WestTx volumes decreased by approximately 5%, 30%, and 7%, respectively, in 1Q14 over 4Q13. In the SouthTX system, APL received an economic contribution due to the minimum volume commitments as a customer sharing agreement with TexStar Midstream Service L.P. APL has a joint-venture with TexStar in the Eagle Ford. According to the agreement, the economic interest from certain volumes processed by TexStar goes to APL.

Average processed natural gas liquid (or NGL) volume increased by ~63% to 28.3 thousand barrels per day in the SouthOK segment versus 17.2 thousand barrels per day in 4Q13. In the other segments of WestOK, SouthTX, and WestTX, NGL volumes decreased by 3%, 30%, and 8%, respectively, in 1Q14 over 4Q13. Higher production of NGL is the SouthOK system was achieved due to relatively lower removal of ethane from the raw natural gas stream in 1Q14 and higher volume of natural gas gathering. Lower NGL production in the other segments was due mainly to the current ethane pricing environment. Recently, the natural gas price has increased more than the price of ethane, making ethane production relatively uneconomical. This is known as ethane rejection.

Sales price for natural gas and NGL prices for 1Q14 have increased as compared to 4Q13. This positively impacted results for APL during the latest quarter. A portion of APL’s revenue is tied to the price of natural gas and NGLs. Higher oil and gas price usually leads to higher drilling and therefore higher volume for transportation for the pipelines.

Atlas Pipeline Partners (APL) is a master limited partnership operating in the midstream energy space. APL’s general partner is owned by Atlas Energy L.P. (ATLS). APL is a component of Alerian MLP ETF (AMLP), MLP ETF (MLPA). and Global X MLP & Energy Infrastructure ETF (MLPX).

Continue to Part 3

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