Atlas Energy Resources, LLC company history: the story so far

History

Atlas Energy Resources listed in 2006, bought Michigan gas assets with debt and new units, was absorbed by its parent in 2009, and by November 2010 faced a Chevron takeover of that parent.

2006-2007: Listing and the Michigan purchase

Atlas Energy Resources, LLC was cleared by the New York Stock Exchange to begin trading on December 11, 2006. On December 18 it signed the underwriting agreement for its initial public offering: 6,250,000 common units at $21.00 each, led by UBS Securities. The board also adopted a Long-Term Incentive Plan allowing up to 3,742,000 units to be awarded, which could dilute existing holders.

With the offering done, parent Atlas America contributed its natural gas and oil development and production businesses. In return the company distributed to Atlas America the $121,730,000 net proceeds, 30,301,746 common units, 748,456 Class A units and the management incentive interests. Atlas Energy Management would run the business under an agreement it could not end before December 18, 2016.

The next step was far larger. In May 2007 the company agreed to buy DTE Gas & Oil Company, which held interests in about 2,150 Antrim Shale gas wells in Michigan, for about $1.225 billion in cash. The deal closed on June 29, 2007 at about $1.258 billion. It was paid for with a new $850 million revolving credit facility from JPMorgan ($713.9 million drawn on the day) and a $600 million private placement of 7,298,181 common units and 16,702,828 non-voting Class D units at a weighted average $25.00. The Class D units would convert to common only if unitholders approved.

2008-2009: More debt, then a merger with the parent

The company kept borrowing. In January 2008 it placed $250 million of 10.75% senior unsecured notes due 2018, and in May it added $150 million more. That month it also sold 2,070,000 common units to underwriters, diluting existing holders. The filings do not say how this money was used.

In April 2009 the lenders cut the revolver's borrowing base to $650 million, down from $735.0 million. Days later, on April 27, the company signed a merger agreement with Atlas America (ATLS), under which each common unit not held by ATLS would become 1.16 ATLS shares. ATLS and its subsidiaries owned about 47.26% of the company. In June 2009, new gathering agreements dedicated the company's Appalachian gas to Laurel Mountain Midstream, a joint venture involving a Williams Partners subsidiary. In July it sold $200 million of 12.125% senior notes due 2017, with net proceeds of about $190.9 million. Part repaid revolver debt, and the borrowing base fell to $600 million.

Unitholders approved the merger on September 25, 2009 with about 99.5% of votes cast, and it closed on September 29. Public unitholders were bought out, four directors left the board, and the company became a wholly owned subsidiary. It asked the NYSE to delist its units, and by January 2010 it had ended its registration of the securities.

2010: The Reliance joint venture and the Chevron deal

As a subsidiary of Atlas Energy, Inc., the company turned to its undeveloped Marcellus Shale acreage in Pennsylvania and West Virginia. On April 20, 2010 it sold Reliance Marcellus, LLC a 40% interest in about 300,000 gross acres for about $339.4 million in cash, keeping 60%. Reliance also agreed to pay 75% of the company's share of certain development costs, up to about $1.36 billion, backed by a $300 million letter of credit and an $850 million guarantee from Reliance Industries.

On November 8, 2010, the parent agreed to be acquired by Chevron. Alongside it, the company agreed to buy the 49% of Laurel Mountain Midstream it did not own for $403 million in cash. A separate agreement would sell Atlas Energy's investment partnership business and other assets to Atlas Pipeline Holdings for $30 million cash plus 23,379,384 units. As of November 12, 2010, all of these deals were cross-conditioned and unfinished, with an outside date of September 30, 2011.

Written from the 21 story beats below (2006 to 12 Nov 2010), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2010

12 Nov
On November 8, 2010 the company's parent, Atlas Energy, Inc., agreed to be acquired by Chevron (Merger Agreement described in the parent's separate 8-K). Alongside it, the company entered two cross-conditioned agreements: a Laurel Mountain Purchase Agreement under which it will buy APL Sub's 49% interest in Laurel Mountain Midstream, LLC for $403 million cash (subject to adjustment), and an AHD Transaction Agreement under which Atlas Energy's investment partnership business and certain other assets will be sold to Atlas Pipeline Holdings for $30 million cash plus 23,379,384 AHD units. The Laurel Mountain stake continues the 2009 Laurel Mountain gathering relationship. Outside dates are September 30, 2011.
business combination
21 Apr
The Reliance sale announced April 9 closed on April 20, 2010: Reliance paid about $339.4 million in cash for the 40% interest, and the Participation and Development Agreement took effect (company holds 60%, Reliance 40%). Reliance bears 75% of the company's share of certain development capital costs, up to about $1.36 billion, backed by a $300 million letter of credit and an $850 million Reliance Industries guarantee. ATLS guaranteed the company's obligations for up to 7.5 years. This resolves the pending sale from the April 13 filing.
asset acquisition disposition
13 Apr
On April 9, 2010 the company, now a wholly owned subsidiary of Atlas Energy, Inc. (ATLS), agreed to sell Reliance Marcellus, LLC (a subsidiary of Reliance Industries) a 40% undivided interest in about 300,000 gross acres of undeveloped Marcellus-area acreage in Pennsylvania and West Virginia for about $340 million cash. Reliance would also pay 75% of the company's share of certain development capital costs, up to about $1.36 billion, under a development agreement. Closing needs consent from lenders under the company's secured credit facility. This is a new thread; the company continues to file as a subsidiary after the 2009 merger.
material agreement
29 Jan
Atlas Energy Resources, LLC terminated the registration of a class of securities, ending its reporting obligation for them.
listing compliance notice

2009

20 Oct
Atlas Energy Resources, LLC terminated the registration of a class of securities, ending its reporting obligation for them.
listing compliance notice
30 Sept
The merger with Atlas America (now Atlas Energy, Inc.) closed on September 29, 2009, after unitholders approved it on September 25 (about 99.5% of votes cast). Each common unit not held by Atlas America was converted into 1.16 shares of Atlas America common stock, so public unitholders were bought out and the company is now a wholly owned subsidiary. The company asked the NYSE to remove its common units from listing, four directors (Davis, Jones, Warren, Wolf) left the board, and the operating agreement was amended. This resolves the merger thread from the April 2009 agreement and the September 30 delisting filing.
business combination
30 Sept
Atlas Energy Resources, LLC's exchange filed to remove a class of its securities from listing.
listing compliance notice
25 Aug
The definitive joint proxy statement, dated August 21, 2009, asks unitholders to vote on the April 2009 merger with Atlas America at special meetings on September 25, 2009. Each common unit not held by Atlas America would convert into 1.16 ATLS shares, a fixed ratio not adjusted for price changes; about 38.8 million ATLS shares would be issued, leaving former unitholders with about 49.6% of ATLS. Class A units and management incentive interests held by Atlas Energy Management stay outstanding. The board, on its special committee's unanimous recommendation, backs the deal; the filing text is truncated.
business combination
17 July
On July 13, 2009 the company's subsidiaries sold $200 million of 12.125% senior notes due 2017 to underwriters led by J.P. Morgan, issued July 16, 2009 under a new indenture with U.S. Bank, with estimated net proceeds of about $190.9 million. The notes are unsecured and rank equally with the 10.75% notes due 2018, and holders can require repurchase at 101% on a change of control. Part of the proceeds repaid revolver borrowings, and the revolver's borrowing base falls from $650.0 million to $600.0 million as a result.
debt financing
5 June
On June 1, 2009, after Atlas Pipeline Partners sold its Appalachian operating subsidiaries to Laurel Mountain Midstream (a joint venture of a Williams Partners subsidiary and an APL subsidiary), the company and its subsidiaries signed new gas gathering agreements with Laurel Mountain. These replace the 2000 and 2002 agreements with Atlas Pipeline, and the company's Appalachian gas is dedicated to Laurel Mountain. Fees are generally the same as before, but Atlas America will no longer guarantee the company's fee obligations, and the company must pay any shortfall if an investment partnership pays a lower competitive fee (currently 13% of gross sales price). The company also got an option to fund APL's share of a Laurel Mountain capital contribution and a right of first refusal on any sale of APL's interest.
material agreement termination
28 Apr
The merger agreement of April 27, 2009 sets the terms: each common unit not held by ATLS or its subsidiaries (which own about 47.26%) will be cancelled and converted into 1.16 shares of ATLS common stock. Unit options and restricted and phantom units convert into equivalent ATLS awards. Completion needs a majority vote of ATN common units, ATLS shareholder approval of the share issuance and a charter amendment, and lender consent under the June 2007 credit agreement; the ATN board and its independent special committee recommend approval. Distributions may not be paid while the deal is pending.
business combination
27 Apr
On April 27, 2009 the company, parent Atlas America (ATLS) and Atlas Energy Management signed a merger agreement under which a new ATLS subsidiary will merge into the company, leaving it a wholly owned subsidiary of ATLS. The filing furnishes the investor call transcript, presentation materials and press release; the terms are set out in the companion filing.
business combination
17 Apr
Effective April 9, 2009 the company amended its JPMorgan credit agreement (the June 2007 facility) a second time, setting the borrowing base at $650 million, down from the $735.0 million set in October 2007. The amendment also adds the Adjusted LIBO Rate as a rate alternative, requires cash collateral for letters of credit if a lender defaults, and sets the Eurodollar loan margin at 200 to 300 basis points depending on the amount drawn.
material agreement

2008

21 May
On May 15, 2008 the company agreed to sell 1,800,000 common units to underwriters led by UBS Investment Bank and Wachovia Securities, with an option for 270,000 more; the underwriters exercised that option in full on May 19, 2008, so 2,070,000 units in total. The sale is under an existing shelf registration, and the filing does not state a price, the proceeds or their use. It adds to the units outstanding, diluting existing holders' share of the company (inference).
material agreement
9 May
On May 6, 2008, the company's subsidiaries sold a further $150 million of 10 3/4% senior notes due 2018 to initial purchasers led by JP Morgan Securities in a private placement, adding to the $250 million sold in January 2008; the two batches are treated as a single class of notes. A registration rights agreement dated May 9, 2008 was also signed, and the filing attaches the January 2008 purchase agreement, which it says was inadvertently left out of the Q1 2008 10-Q. The filing does not state how the proceeds will be used.
debt financing
24 Jan
The company's subsidiaries signed the indenture, dated January 23, 2008, with U.S. Bank as trustee for the $250 million of 10.75% senior unsecured notes due 2018, which were privately placed. They also signed a registration rights agreement with J.P. Morgan Securities, for the purchasers, giving them registration rights. The filing does not say how the proceeds will be used.
debt financing

2007

29 June
The DTE Gas & Oil acquisition closed on June 29, 2007 at about $1.258 billion including initial adjustments (subject to final adjustment), completing the deal announced in May. It was funded by a new $850 million five-year revolving credit facility (JPMorgan as agent; $713.9 million borrowed that day, which also repaid the December 2006 Wachovia facility) and the completed $600 million private placement of 7,298,181 common units and 16,702,828 Class D units at a weighted average $25.00. The Class D units are non-voting and subordinated to common units, and convert one-for-one to common only if unitholders approve, with a meeting or consent due by November 11, 2007; Atlas America and Atlas Management, holding about 67.3% of voting units, agreed to vote in favour. Richard Redmond was hired to run the Michigan business under an employment agreement with Atlas America, and the company agreed to register the placed units for resale. The filing text is truncated.
asset acquisition disposition
21 May
The company agreed on May 18, 2007 to buy DTE Gas & Oil Company from MCN Energy Enterprises and DTE Energy for about $1.225 billion in cash. DGO holds interests in about 2,150 Antrim Shale gas wells in Michigan (about 228,000 net developed and 66,000 net undeveloped acres), with closing expected around June 30, 2007. To pay for it, the company got a commitment for an $850 million five-year revolving credit facility from JPMorgan and agreed a $600 million private placement of about 7.3 million common units and 16.7 million Class D units at a weighted average $25.00. Class D units are non-voting and rank behind common units, and would convert to common only if unitholders approve; Atlas America (about 80% owner) was to vote for it. The press release says reserves would rise from 181 to 794 Bcfe and guides 2008 distributions of $2.20-$2.40 per common unit, versus the current $0.43 per quarter; these are management's expectations.
capital raising announcement

2006

22 Dec
With the IPO completed on December 18, 2006, parent Atlas America contributed its natural gas and oil development and production subsidiaries and assets to the company. In return the company distributed to Atlas America the $121,730,000 net offering proceeds, 30,301,746 common units, 748,456 Class A units and the management incentive interests, and redeemed 948,750 common units from Atlas America in connection with the over-allotment option. Atlas America agreed to indemnify for certain pre-closing environmental liabilities (capped at $25.0 million, after $500,000 of losses) and title defects, Atlas Energy Management will run the business under a management agreement it cannot terminate before December 18, 2016, and an omnibus agreement gives the company first right on certain gas and oil opportunities. The company also joined Atlas Pipeline's gathering agreement, with Atlas America assuming the gathering fees payable. The filing text is truncated, so further items (including debt, equity and governance items listed in the headers) are not covered here.
asset acquisition disposition
18 Dec
Atlas Energy Resources signed the underwriting agreement for its initial public offering: 6,250,000 common units at $21.00 each ($19.6875 net of the underwriting discount), led by UBS Securities, with an option for the underwriters to buy 948,750 more units. The board also adopted a Long-Term Incentive Plan allowing up to 3,742,000 common units to be awarded to officers, directors and employees/consultants of the company and its manager and affiliates, which could dilute existing unitholders as awards are made.
material agreement
11 Dec
the New York Stock Exchange certified Atlas Energy Resources, LLC's securities for listing, clearing them to begin trading.
listing compliance notice