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Must-know: Introduction to Atlas Pipeline Partners

Avik Chowdhury

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

Atlas Pipeline Partners L.P. operates in the gathering and processing segments of the midstream natural gas industry. The company has its assets located primarily in the Anadarko, Arkoma, and Permian Basins located in the southwestern and middle regions of the United States. It also has assets in the Eagle Ford Shale in south Texas and the Appalachian Basin in the northeast region. APL also provides natural gas liquids (or NGL) transportation services in the southwestern region of the United States. Atlas Pipeline Partners GP, LLC is the general partner of APL. Atlas Pipeline GP is a wholly-owned subsidiary of Atlas Energy L.P. (ATLS). ATLS owned 2% general partner interest and 6% limited partner interest in APL as of December 31, 2013.

Atlas Pipeline Partners operates through two segments, gathering and processing; and transportation, treating, and other. The gathering and processing segment has two operations in both Texas (WestTX and SouthTX systems) and Oklahoma (WestOK and SouthOK systems). The segment has 14 natural gas processing plants with an aggregate capacity of approximately 1,500 million cubic feet per day; a gas treating facility; and approximately 11,200 miles of active natural gas gathering systems located in Oklahoma, Kansas, Tennessee, and Texas. Its gas gathering assets also serve the Barnett Shale play in Texas, Eagle Ford Shale in south Texas, Spraberry Trend in the Permian Basin, and the Appalachian Basin in Tennessee.

The transportation, treating, and other segment owns 17 gas treating facilities to the producers located in Arkansas, Louisiana, Oklahoma, and Texas. The transportation and treating assets provide contract drilling services to the natural gas drillers and producers. Its 17 treatment plants are located in the Avalon, Eagle Ford, Granite Wash, Haynesville, Fayetteville, and Woodford Shale plays. APL has 20% interest in West Texas LPG Pipeline Limited Partnership (or WTXLPG), which transports natural gas liquids (or NGLs) from New Mexico and Texas to Mont Belvieu, Texas for fractionation. On May 5, 2014, APL entered into a definitive agreement to sell its stake in WTXLPG to Chevron Corporation (CVX).

APL has a market cap of ~$2.6 billion and an enterprise value of ~$4.2 billion (as of May 12, 2014). The company’s adjusted EBITDA for the last 12 months was $288.2 million. APL is currently trading at the previous 12 months EV–to–EBITDA of ~14.5x. Distribution per unit declared on April 22, 2014, was $0.62 per unit, or $2.48 per unit annualized. This amounts to a distribution yield of ~7.7% for a stock price of $32.33 as of May 12, 2014.

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 2

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