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AGP Atlas Growth Partners

Filed: 16 Aug 21, 3:26pm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

      

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to              

Commission file number: 000-55603

 

Atlas Growth Partners, L.P.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

80-0906030

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

2400 Market Street, Suite 230

Philadelphia, PA

 

19103

(Address of principal executive offices)

 

(Zip code)

 

Registrant’s telephone number, including area code: 800-674-2614

 

 

Former name, former address and former fiscal year, if changed since last report

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

N/A

N/A

 

Securities registered pursuant to Section 12(g) of the Act:

Common units representing limited partner interests; warrants to purchase common units at an exercise price of $10.00 per common unit

(Title of class)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes        No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  

 

Accelerated filer  

 

Non-accelerated filer 

 

Smaller reporting company  

 

 

 

 

��

 

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes       No 

The number of outstanding common limited partner units of the registrant on August 12, 2021 was 23,300,410.

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 


 

 

ATLAS GROWTH PARTNERS, L.P.

INDEX TO QUARTERLY REPORT

ON FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

 

PAGE

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Partners’ Capital for the Three and Six Months Ended June 30, 2021 and 2020

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

19

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

19

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

20

 

Item 6.

 

Exhibits

 

21

 

 

 

 

 

SIGNATURES

 

22

 

2


 

 

FORWARD-LOOKING STATEMENTS

The matters discussed within this report include forward-looking statements.  These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should,” or “will,” or the negative thereof or other variations thereon or comparable terminology.  In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this report are forward-looking statements.  We have based these forward-looking statements on our current expectations, assumptions, estimates and projections.  While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control.  These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.  Some of the key factors that could cause actual results to differ from our expectations include:

 

our ability to obtain long-term financing for our property acquisitions and drilling activities in a timely manner;

 

the suspension of our quarterly distribution;

 

our lack of ability to raise capital, in the capital markets or otherwise;

 

our ability to continue as a going concern;

 

our business and investment strategy;

 

the effect of general market, oil and gas market (including volatility of realized prices for oil, natural gas and natural gas liquids), and economic and political conditions;

 

uncertainties with respect to identified drilling locations and estimates of reserves;

 

our ability to generate sufficient cash flows to re-start distributions to our unitholders;

 

the ongoing COVID-19 outbreak and the related impact on oil and natural gas prices;

 

the degree and nature of our competition; and

 

the availability of qualified personnel at our general partner.

Other factors that could cause actual results to differ from those implied by the forward-looking statements in this report are more fully described under “Item 1A: Risk Factors” in this report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.  Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements.  The forward-looking statements included in this report are made only as of the date hereof.  We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any of these statements to reflect future events or developments.

Should one or more of the risks or uncertainties described in this report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this report are expressly qualified in their entirety by this cautionary statement.  This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

3


 

ATLAS GROWTH PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2021 (Unaudited)

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,559

 

 

$

1,380

 

Accounts receivable

 

 

934

 

 

 

669

 

Prepaid expenses and other

 

 

224

 

 

 

83

 

Total current assets

 

 

2,717

 

 

 

2,132

 

Property, plant and equipment, net

 

 

4,534

 

 

 

4,782

 

Total assets

 

$

7,251

 

 

$

6,914

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

593

 

 

$

623

 

Accrued liabilities

 

 

3,375

 

 

 

2,329

 

Total current liabilities

 

 

3,968

 

 

 

2,952

 

Asset retirement obligations

 

 

244

 

 

 

235

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

Partners’ Capital:

 

 

 

 

 

 

 

 

General partner’s interest

 

 

(3,987

)

 

 

(3,973

)

Common limited partners’ interests

 

 

3,890

 

 

 

4,564

 

Common limited partners’ warrants

 

 

3,136

 

 

 

3,136

 

Total partners’ capital

 

 

3,039

 

 

 

3,727

 

Total liabilities and partners’ capital

 

$

7,251

 

 

$

6,914

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

ATLAS GROWTH PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

2021

 

2020

 

 

2021

 

 

 

2020

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas revenue

 

$

12

 

$

10

 

$

42

 

 

$

23

 

Oil revenue

 

 

967

 

 

307

 

 

1,854

 

 

 

1,262

 

NGLs revenue

 

 

51

 

 

18

 

 

105

 

 

 

51

 

Total revenues

 

 

1,030

 

 

335

 

 

2,001

 

 

 

1,336

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas and oil production

 

379

 

 

308

 

 

629

 

 

 

742

 

General and administrative

 

299

 

 

656

 

 

663

 

 

 

783

 

General and administrative – affiliate

 

570

 

 

748

 

 

1,140

 

 

 

1,570

 

Depreciation, depletion and amortization

 

126

 

 

165

 

 

257

 

 

 

594

 

Asset impairment

 

 

 

 

 

 

 

 

4,020

 

Total costs and expenses

 

1,374

 

 

1,877

 

 

2,689

 

 

 

7,709

 

Net loss

 

$

(344

)

$

(1,542

)

$

(688

)

 

$

(6,373

)

Allocation of net loss attributable to common limited

   partners and the general partner:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common limited partners’ interest

 

 

(337

)

 

(1,511

)

 

(674

)

 

 

(6,246

)

General partner’s interest

 

(7

)

 

(31

)

 

(14

)

 

 

(127

)

Net loss attributable to common limited partners per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$

(0.01

)

$

(0.06

)

$

(0.03

)

 

$

(0.27

)

Weighted average common limited partner units outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

23,300

 

 

23,300

 

 

23,300

 

 

 

23,300

 

 

See accompanying notes to condensed consolidated financial statements.

5


 

ATLAS GROWTH PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(in thousands, except units and warrant data)

(Unaudited)

 

 

 

General

Partner’s Interest

 

 

Common Limited

Partners’ Interests

 

 

Common Limited

Partners’ Warrants

 

 

Total

 

 

 

Class A

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Warrants

 

 

Amount

 

 

 

Partners’

Capital

 

Balance at January 1, 2021

 

 

100

 

 

$

(3,973

)

 

 

23,300,410

 

 

$

4,564

 

 

 

2,330,041

 

 

$

3,136

 

 

$

3,727

 

Net loss

 

 

 

 

 

(7

)

 

 

 

 

 

(337

)

 

 

 

 

 

 

 

 

(344

)

Balance at March 31, 2021

 

 

100

 

 

$

(3,980

)

 

 

23,300,410

 

 

$

4,227

 

 

 

2,330,041

 

 

$

3,136

 

 

$

3,383

 

Net loss

 

 

 

 

 

(7

)

 

 

 

 

 

(337

)

 

 

 

 

 

 

 

 

(344

)

Balance at June 30, 2021

 

 

100

 

 

$

(3,987

)

 

 

23,300,410

 

 

$

3,890

 

 

 

2,330,041

 

 

$

3,136

 

 

$

3,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

 

100

 

 

$

(3,821

)

 

 

23,300,410

 

 

$

12,049

 

 

 

2,330,041

 

 

$

3,136

 

 

$

11,364

 

Net loss

 

 

 

 

 

(96

)

 

 

 

 

 

(4,735

)

 

 

 

 

 

 

 

 

(4,831

)

Balance at March 31, 2020

 

 

100

 

 

$

(3,917

)

 

 

23,300,410

 

 

$

7,314

 

 

 

2,330,041

 

 

$

3,136

 

 

$

6,533

 

Net loss

 

 

 

 

 

(31

)

 

 

 

 

 

(1,511

)

 

 

 

 

 

 

 

 

(1,542

)

Balance at June 30, 2020

 

 

100

 

 

$

(3,948

)

 

 

23,300,410

 

 

$

5,803

 

 

 

2,330,041

 

 

$

3,136

 

 

$

4,991

 

 

See accompanying notes to condensed consolidated financial statements.

6


 

ATLAS GROWTH PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

$

(688

)

 

$

(6,373

)

Adjustments to reconcile net loss to net cash provided by (used in)

   operating activities:

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

257

 

 

 

594

 

Asset impairment

 

 

 

 

4,020

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, prepaid expenses and other

 

(406

)

 

 

78

 

Advances to/from affiliates

 

 

 

 

486

 

Accounts payable and accrued liabilities

 

1,016

 

 

 

352

 

Net cash provided by (used in) operating activities

 

179

 

 

 

(843

)

Net change in cash and cash equivalents

 

179

 

 

 

(843

)

Cash and cash equivalents, beginning of period

 

1,380

 

 

 

2,239

 

Cash and cash equivalents, end of period

$

1,559

 

 

$

1,396

 

 

See accompanying notes to condensed consolidated financial statements.

7


 

ATLAS GROWTH PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – BASIS OF PRESENTATION

Atlas Growth Partners, L.P. (the “Company”) is a Delaware limited partnership and an independent developer and producer of natural gas, crude oil and NGLs with operations primarily focused in the Eagle Ford Shale in south Texas. Our general partner, Atlas Growth Partners GP, LLC owns 100% of our general partner units (which are entitled to receive 2% of the cash distributed by us without any obligation to make further capital contributions) and all of the incentive distribution rights through which it manages and controls us.

 

On July 12, 2021, the Company, through its wholly owned subsidiary, Atlas Growth Eagle Ford, LLC, a Texas limited liability company (“Seller”), entered into a purchase and sale agreement (the “PSA”) with Texas American Resources II, LLC, a Delaware limited liability company (“Buyer”), pursuant to which Seller will sell certain oil and gas properties, interests and related assets (the “Assets”) and will retain certain liabilities related to the Assets (the “Excluded Liabilities”), while Buyer will assume certain liabilities related to the Assets (the “Assumed Liabilities”) (the “Transaction”). The aggregate purchase price of the Assets is $4.8 million.

 

The PSA contains customary representations and warranties from the parties and each party has agreed to certain covenants, including providing certain post-closing indemnities related to the Excluded Liabilities, with respect to Seller, and the Assumed Liabilities, with respect to Buyer. 

 

Consummation of the transactions contemplated by the PSA is subject to customary mutual conditions of the respective parties. The PSA may be terminated at any time prior to the consummation of the Transaction by mutual written consent of Seller and Buyer and in certain other limited circumstances, including if the closing of the transactions contemplated in the PSA has not occurred by September 30, 2021. The PSA and the Transaction have been approved by the Board of Directors (the “Board”) of Atlas Growth Partners GP, LLC, a Delaware limited liability company and the general partner of the Company (the “General Partner”), and the sole member of the General Partner.

 

On July 12, 2021, prior to the execution of the PSA, the Board of the General Partner and the sole member of the General Partner, each determined that it was in the best interests of the Company and its limited partners that the Company be dissolved, wound up and terminated. Pursuant to the First Amended and Restated Partnership Agreement of Limited Partnership of the Company, dated as of April 5, 2016 (the “Partnership Agreement”), the General Partner of the Company has sole discretion to dissolve, wind up and terminate the Company.

 

The Board authorized and directed the General Partner, on behalf of itself and the Company, to take all necessary or advisable steps to dissolve, wind up and terminate the Company, including the execution and performance of the PSA.

 

The General Partner will act as liquidator of the Company and will carry out the dissolution, winding up and termination of the Company. The assets of the Company, including the proceeds received in the Transaction, will, after satisfaction of the Company’s liabilities, be distributed pursuant to the terms of the Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act.

Through May 1, 2020, Atlas Energy Group, LLC (“ATLS”), a Delaware limited liability company, managed and controlled us through its 2.1% limited partner interest in us and its 80% member interest in our general partner. Current and former members of ATLS management owned the remaining 20% member interest in our general partner.

On May 1, 2020, pursuant to an Exchange Agreement by and among Riverstone Credit Partners – Direct, L.P. (“Riverstone”) and other lenders (collectively, the “Lenders”), ATLS and New Atlas Holdings, LLC (the “Borrower”, and together with ATLS and the other guarantors, the “Loan Parties”), ATLS transferred (the “Debt Exchange”) assets to the Lenders that included (i) its 80.01% membership interest in the general partner of the Company, and (ii) 500,010 common units representing limited partner interests in the Company. As of the date of the Debt Exchange, approximately $108,431,309 in principal amount of loans remained outstanding, which obligation was terminated in the Debt Exchange.

As a result of the Debt Exchange and related transactions, Riverstone, in its capacity as a Lender, received an approximate 61% membership interest in our General Partner, and, as a result, now has the ability to control the Company’s management and operations and appoint all of the members of the Board of our General Partner.

The interests of our Limited Partners were not affected, altered or otherwise modified by the Debt Exchange.

8


 

At June 30, 2021, we had 23,300,410 common limited partner units issued and outstanding.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting and include all adjustments that are necessary for a fair presentation of our condensed consolidated results of operations, financial condition and cash flows for the periods shown, including normal, recurring accruals and other items. The condensed consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year. The year-end condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. For a more complete discussion of our accounting policies and certain other information, refer to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Principles of Consolidation

Our condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. Transactions between us and other ATLS managed operations have been identified in the condensed consolidated financial statements as transactions between affiliates, where applicable. All intercompany transactions have been eliminated.

Beginning May 1, 2020, we have no continuing common ownership or corporate affiliation with ATLS and its affiliates. We will continue to identify any transaction between us and other ATLS managed operations as transactions between affiliates for all historical periods.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities that exist at the date of our condensed consolidated financial statements, as well as the reported amounts of revenue and costs and expenses during the reporting periods. Our condensed consolidated financial statements are based on a number of significant estimates, including revenue and expense accruals and depletion of gas and oil properties. The oil and gas industry principally conducts its business by processing actual transactions as many as 60 days after the month of delivery. Consequently, the most recent two months’ financial results may be recorded using estimated volumes and contract market prices. Actual results may differ from those estimates.

Liquidity

For the six months ended June 30, 2021 and 2020, we had net losses of $0.7 million and $6.4 million, respectively, and cash provided by operating activities of $0.2 million and cash used in operating activities of $0.8 million, respectively. With the Company’s negative working capital of $1.3 million as of June 30, 2021, the Company may not have sufficient resources to fund operations into 2022.

Beginning in March 2020, significant price decline and price volatility for oil and gas products emerged in the market. We have been and could continue to be directly impacted by these price changes if demand and prices remain depressed for an extended period of time. Given the volatility and uncertainty, we may be at risk of being able to identify and secure a party to gather and purchase our products. A significant number of our product sales are short-term in nature with contract terms of one year or less, though generally subject to customary evergreen clauses. To date, we have been able to sell our production and we continue to identify multiple purchasers. However, should these parties become unwilling to purchase our production, we will need to work to identify other purchasers in the area to gather and purchase our oil and gas products. Failure to identify other purchasers and storage facilities, may result in the potential shut-in of the field. The financial statement impact, change in price and expected time for these changes is not estimable but could result in significant decreases in oil and gas operations.

Our primary sources of liquidity are cash generated by gas and oil production and their subsequent sale. Our primary cash requirements, in addition to normal operating expenses, are for management fees and capital expenditures, which we expect to fund through operating cash flow. Accordingly, our sources of liquidity are currently not sufficient to satisfy our current obligations.

The significant risks and uncertainties related to our inability to satisfy our current liabilities raise substantial doubt about our ability to continue as a going concern. If these liabilities are called, we will not have sufficient liquidity to repay all of our outstanding liabilities, and as a result, there would be substantial doubt regarding our ability to continue as a going concern.

9


 

As discussed above, on July 12, 2021 the Board authorized and directed the General Partner, on behalf of itself and the Company, to take all necessary or advisable steps to dissolve, wind up and terminate the Company, including the execution and performance of the PSA.

As the Board approval of the dissolution, wind up and termination and of the PSA occurred in July 2021, our condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If we cannot continue as a going concern, adjustments to the carrying values and classification of our assets and liabilities and the reported amounts of income and expenses could be required and could be material.

 

Property, Plant and Equipment

Property, plant and equipment are stated at cost or, upon acquisition of a business, at the fair value of the assets acquired. Maintenance and repairs which generally do not extend the useful life of an asset for two years or more through the replacement of critical components are expensed as incurred. Major renewals and improvements which generally extend the useful life of an asset for two years or more through the replacement of critical components are capitalized. Depreciation and amortization expense is based on cost less the estimated salvage value primarily using the straight-line method over the asset’s estimated useful life. When entire pipeline systems, gas plants or other property and equipment are retired or sold, any gain or loss is included in our results of operations. 

We follow the successful efforts method of accounting for oil and gas producing activities. Exploratory drilling costs are capitalized pending determination of whether a well is successful. Exploratory wells subsequently determined to be dry holes are charged to expense. Costs resulting in exploratory discoveries and all development costs, whether successful or not, are capitalized. Geological and geophysical costs to enhance or evaluate development of proved fields or areas are capitalized. All other geological and geophysical costs, delay rentals and unsuccessful exploratory wells are expensed. Oil and NGLs are converted to gas equivalent basis (“Mcfe”) at the rate of one barrel to six Mcf of natural gas. Mcf is defined as one thousand cubic feet.

Our depletion expense is determined on a field-by-field basis using the units-of-production method. Depletion rates for leasehold acquisition costs are based on estimated proved reserves, and depletion rates for well and related equipment costs are based on proved developed reserves associated with each field. Depletion rates are determined based on reserve quantity estimates and the capitalized costs of undeveloped and developed producing properties. We also consider the estimated salvage value in our calculation of depletion. Capitalized costs of developed producing properties in each field are aggregated to include our costs of property interests in proportionately consolidated joint venture wells, wells drilled solely by us for our interests, properties purchased and working interests with other outside operators.

Upon the sale or retirement of a complete field of a proved property, the cost is eliminated from the property accounts, and the resultant gain or loss is reclassified to our condensed consolidated statements of operations. Upon the sale of an individual well, we credit the proceeds to accumulated depreciation and depletion within our condensed consolidated balance sheet. Upon our sale of an entire interest in an unproved property where the property had been assessed for impairment individually, a gain or loss is recognized in our condensed consolidated statements of operations. If a partial interest in an unproved property is sold, any funds received are accounted for as a reduction of the cost in the interest retained.

Support equipment and other are carried at cost and consist primarily of pipelines, processing and compression facilities, and gathering systems and related support equipment. We compute depreciation of support equipment and other using the straight-line balance method over the estimated useful life of each asset type, which is 15-20 years.

Segment Reporting

We derive revenue from our gas and oil production. The production facilities associated with our oil and gas production have been aggregated into 1 reportable segment because the facilities have similar long-term economic characteristics, products and types of customers.

 Oil, Natural Gas, and NGL Revenues

 

Our revenues are derived from the sale of oil, natural gas, and NGLs, which is recognized in the period that the performance obligations are satisfied. We generally consider the delivery of each unit (Bbl or MMBtu) to be separately identifiable and the delivery of each unit represents a distinct performance obligation that is satisfied at a point-in-time once control of the product has been transferred to the customer upon delivery to an agreed upon delivery point. Transfer of control typically occurs when the products are delivered to the purchaser and title has transferred. Revenue is recognized net of royalties due to third parties in an amount that

10


 

reflects the consideration we expect to receive in exchange for those products. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by us from a customer, are excluded from revenue. Payment is generally received one month after the sale has occurred.

 

Our oil production is primarily sold under market-sensitive contracts that are typically priced at a differential to the New York Mercantile Exchange (“NYMEX”) price or at purchaser posted prices for the producing area. For oil contracts, we generally record sales based on the net amount received.

 

Our natural gas production is primarily sold under market-sensitive contracts that are typically priced at a differential to the published natural gas index price for the producing area due to the natural gas quality and the proximity to major consuming markets. For natural gas contracts, we generally record wet gas sales (which consist of natural gas and NGLs based on end products after processing) at the wellhead or inlet of the plant as revenues net of transportation, gathering and processing expenses if the processor is the customer and there is no redelivery of commodities to us at the tailgate of the plant. Conversely, we generally record residual natural gas and NGL sales at the tailgate of the plant on a gross basis along with the associated transportation, gathering and processing expenses if the processor is a service provider and there is redelivery of commodities to us at the tailgate of the plant. All facts and circumstances of an arrangement are considered and judgment is often required in making this determination.

 

Transaction Price Allocated to Remaining Performance Obligations

 

A significant number of our product sales are short-term in nature with contract terms of one year or less, though generally subject to customary evergreen clauses pursuant to which these contracts typically automatically renew under the same terms and conditions. For those contracts, we have utilized the practical expedient that exempts us from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

 

For product sales that have a contract term greater than one year, we have utilized the practical expedient that exempts us from disclosure of the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. Currently, our product sales that have a contractual term greater than one year have no long-term fixed consideration.

Contract Balances

Under our sales contracts, customers are invoiced once performance obligations have been satisfied, at which point our right to payment is unconditional. Accordingly, our product sales contracts do not give rise to contract assets or liabilities. Accounts receivable attributable to our revenue contracts with customers was $0.7 million and $0.5 million, respectively, at June 30, 2021 and December 31, 2020.

Net Loss Per Common Unit

Basic net loss attributable to common limited partners per unit is computed by dividing net loss attributable to common limited partners (which is determined after the deduction of the general partner’s interest) by the weighted average number of common limited partner units outstanding during the period.

The following is a reconciliation of net loss allocated to the common limited partners for purposes of calculating net loss attributable to common limited partners per unit (in thousands):

 

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

 

2021

 

 

2020

 

Net loss

 

$

(344

)

 

$

(1,542

)

 

$

(688

)

$

(6,373

)

Less: General partner’s interest

 

 

(7

)

 

 

(31

)

 

 

(14

)

 

(127

)

Net loss attributable to common limited partners

 

$

(337

)

 

$

(1,511

)

 

$

(674

)

$

(6,246

)

 

Diluted net loss attributable to common limited partners per unit is calculated by dividing net loss attributable to common limited partners by the sum of the weighted average number of common limited partner units outstanding and the dilutive effect of common limited partner warrants, as calculated by the treasury stock method.

11


 

The following table sets forth the reconciliation of our weighted average number of common units used to compute basic net loss attributable to common limited partners per unit with those used to compute diluted net loss attributable to common limited partners per unit (in thousands):

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Weighted average number of common units – basic

 

 

23,300

 

 

 

23,300

 

 

23,300

 

 

23,300

 

 

Add effect of dilutive awards(1)

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common units – diluted

 

 

23,300

 

 

 

23,300

 

 

23,300

 

 

23,300

 

 

 

(1)

For each of the three and six months ended June 30, 2021 and 2020, 2,330,000 common limited partner warrants were excluded from the computation of diluted earnings attributable to common limited partners per unit, because the inclusion of units issuable upon the exercise of the warrants would have been anti-dilutive.

 

NOTE 3 – PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant and equipment at the dates indicated (in thousands):

 

 

 

June 30, 2021

 

December 31, 2020

 

Natural gas and oil properties:

 

 

 

 

 

 

 

Proved properties

 

$

137,627

 

$

137,627

 

Support equipment and other

 

 

3,188

 

 

3,188

 

 

 

 

140,815

 

 

140,815

 

Less – accumulated depreciation, depletion, amortization and impairment

 

 

(136,281

)

 

(136,033

)

 

 

$

4,534

 

$

4,782

 

 

For the six months ended June 30, 2020, we recognized $4.0 million of impairment related to our proved oil and gas properties in the Eagle Ford operating area, which were impaired due to lower forecasted production performance and commodity prices. There was 0 impairment recorded during the three and six month period ended June 30, 2021 or the three month period ended June 30, 2020. During the six months ended June 30, 2021 and 2020, we did 0t have any non-cash investing activity capital expenditures.

 

NOTE 4 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

On June 19, 2020, affiliates of Titan (as defined below) closed on the sale of their Eagle Ford Shale assets with Texas American Resources Corporation II (“TARC”) for $13.2 million based on a May 1, 2020 effective date. In connection with the transaction, we entered into a contract operator agreement with TARC, whereby TARC operates certain oil and gas properties and provides other services to the Company related to our properties.

On May 1, 2020, pursuant to an Exchange Agreement by and among the Lenders and the Loan Parties, ATLS transferred assets to the Lenders that included (i) its 80.01% membership interest in the general partner of the Company, and (ii) 500,010 common units representing limited partner interests in the Company. As of the date of the Debt Exchange, approximately $108,431,309 in principal amount of loans remained outstanding, which obligation was terminated in the Debt Exchange.

As a result of the Debt Exchange and related transactions, Riverstone, in its capacity as a Lender, received an approximate 61% membership interest in our general partner, and, as a result, now has the ability to control the Company’s management and operations and appoint all of the members of the Board of our general partner.

The interests of the Limited Partners of the Company were not affected, altered or otherwise modified by the Debt Exchange.

In connection with the Debt Exchange, the Company entered into that certain engagement letter (the “Slotterback Engagement Letter”), dated as of April 29, 2020 by and between the Company and PhiCap Advisors, LLC (“PCA”), pursuant to which the Company pays PCA $25,000 per month and PCA provides financial, advisory and consultation services to the Company. The Slotterback Engagement Letter may be terminated at any time by either party upon seven days written notice. The Slotterback Engagement Letter also provides for a transaction fee equal to 2.0% of the gross purchase price of the sale of the Company’s Eagle Ford Assets provided PCA is still engaged at the time of the closing of such transaction.

12


 

In connection with the Debt Exchange, the Company entered into that certain engagement letter (the “Walker Engagement Letter”), dated as of April 30, 2020, by and between the Company and Westbrook Energy Partners, LLC (“Westbrook”), pursuant to which the Company pays Westbrook $8,000 per month and Westbrook provides technical and advisory services to the Company. The Walker Engagement Letter may be terminated by either party upon seven days written notice.

Relationship with general partner. Our general partner receives an annual management fee in connection with its management of us equivalent to 1% of capital contributions per annum. During both of the three months ended June 30, 2021 and 2020, we paid a management fee of $0.6 million to our general partner and during both of the six months ended June 30, 2021 and 2020 we paid a management fee of $1.1 million to our general partner. As of June 30, 2021, we had payables of $2.9 million related to the management fee which were recorded in accrued liabilities in the condensed consolidated balance sheets.

Relationship with ATLS. We do not directly employ any persons to manage or operate our business. These functions were historically provided by employees of ATLS and/or its affiliates, including Titan Energy, LLC (“Titan”). Our general partner receives an annual management fee in connection with its management of us equivalent to 1% of capital contributions per annum. Other indirect costs, such as rent for offices, were allocated by Titan at the direction of ATLS based on the number of its employees who devoted their time to activities on our behalf. Historically, we reimbursed ATLS at cost for direct costs incurred on our behalf and all necessary and reasonable costs allocated to us by ATLS. All of the costs paid or payable to ATLS and our general partner discussed above were included in general and administrative expenses – affiliate in the condensed consolidated statements of operations. As of June 30, 2021 and December 31, 2020, we had 0 payables to ATLS related to the management fee, direct costs or allocated indirect costs, which were recorded in advances from affiliates in the condensed consolidated balance sheets. Beginning May 1, 2020, we have no continuing common ownership or corporate affiliation with ATLS and its affiliates.

Relationship with Titan. Prior to May 1, 2020, at the direction of ATLS, we reimbursed Titan for direct costs, such as salaries and wages, charged to us based on ATLS employees who incurred time to activities on our behalf and indirect costs, such as rent and other general and administrative costs, allocated to us based on the number of ATLS employees who devoted their time to activities on our behalf. As of June 30, 2021 and December 31, 2020, we had 0 receivables from Titan related to the direct costs, indirect cost allocation, and timing of funding of cash accounts for reimbursement of operating activities and capital expenditures, which were recorded in advances to/from affiliates in the condensed consolidated balance sheets. Beginning May 1, 2020, we have no continuing common ownership or corporate affiliation with ATLS and its affiliates.

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

General Commitments

As of June 30, 2021, the Company has engagement letters to receive financial, advisory and consultation services and technical and advisory services. Each of these engagement letters can be terminated by either party upon seven days written notice.

As of June 30, 2021, we did 0t have any commitments related to our drilling and completion and capital expenditures.

Legal Proceedings

We and our subsidiaries are parties to various routine legal proceedings arising in the ordinary course of business. Our management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or results of operations.

Environmental Matters

We and our subsidiaries are subject to various federal, state and local laws and regulations relating to the protection of the environment. We have established procedures for the ongoing evaluation of our and our subsidiaries’ operations, to identify potential environmental exposures and to comply with regulatory policies and procedures. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. We and our subsidiaries maintain insurance which may cover in whole or in part certain environmental expenditures. We and our subsidiaries had 0 environmental matters requiring specific disclosure or requiring the recognition of a liability as of June 30, 2021 or December 31, 2020.

13


 

ITEM 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS OVERVIEW

Atlas Growth Partners, L.P. (the “Company”) is a Delaware limited partnership and an independent developer and producer of natural gas, crude oil and NGLs with operations primarily focused in the Eagle Ford Shale in south Texas. Our general partner, Atlas Growth Partners GP, LLC owns 100% of our general partner units (which are entitled to receive 2% of the cash distributed by us without any obligation to make further capital contributions) and all of the incentive distribution rights through which it manages and controls us.

 

On July 12, 2021, the Company, through its wholly owned subsidiary, Atlas Growth Eagle Ford, LLC, a Texas limited liability company (“Seller”), entered into a purchase and sale agreement (the “PSA”) with Texas American Resources II, LLC, a Delaware limited liability company (“Buyer”), pursuant to which Seller will sell certain oil and gas properties, interests and related assets (the “Assets”) and will retain certain liabilities related to the Assets (the “Excluded Liabilities”), while Buyer will assume certain liabilities related to the Assets (the “Assumed Liabilities”) (the “Transaction”). The aggregate purchase price of the Assets is $4.8 million.

 

The PSA contains customary representations and warranties from the parties and each party has agreed to certain covenants, including providing certain post-closing indemnities related to the Excluded Liabilities, with respect to Seller, and the Assumed Liabilities, with respect to Buyer. 

 

Consummation of the transactions contemplated by the PSA is subject to customary mutual conditions of the respective parties. The PSA may be terminated at any time prior to the consummation of the Transaction by mutual written consent of Seller and Buyer and in certain other limited circumstances, including if the closing of the transactions contemplated in the PSA has not occurred by September 30, 2021. The PSA and the Transaction have been approved by the Board of Directors (the “Board”) of Atlas Growth Partners GP, LLC, a Delaware limited liability company and the general partner of the Company (the “General Partner”), and the sole member of the General Partner.

 

On July 12, 2021, prior to the execution of the PSA, the Board of the General Partner and the sole member of the General Partner, each determined that it was in the best interests of the Company and its limited partners that the Company be dissolved, wound up and terminated. Pursuant to the First Amended and Restated Partnership Agreement of Limited Partnership of the Company, dated as of April 5, 2016 (the “Partnership Agreement”), the General Partner of the Company has sole discretion to dissolve, wind up and terminate the Company.

 

The Board authorized and directed the General Partner, on behalf of itself and the Company, to take all necessary or advisable steps to dissolve, wind up and terminate the Company, including the execution and performance of the PSA.

The General Partner will act as liquidator of the Company and will carry out the dissolution, winding up and termination of the Company. The assets of the Company, including the proceeds received in the Transaction, will, after satisfaction of the Company’s liabilities, be distributed pursuant to the terms of the Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act.

Through May 1, 2020, Atlas Energy Group, LLC (“ATLS”), a Delaware limited liability company, managed and controlled us through its 2.1% limited partner interest in us and 80% member interest in our general partner. Current and former members of ATLS management owned the remaining 20% member interest in our general partner.

On May 1, 2020, pursuant to an Exchange Agreement by and among Riverstone Credit Partners – Direct, L.P. (“Riverstone”) and other lenders (collectively, the “Lenders”), ATLS and New Atlas Holdings, LLC (the “Borrower”, and together with ATLS and the other guarantors, the “Loan Parties”), ATLS transferred (the “Debt Exchange”) assets to the Lenders that included (i) its 80.01% membership interest in the general partner of the Company, and (ii) 500,010 common units representing limited partner interests in the Company. As of the date of the Debt Exchange, approximately $108,431,309 in principal amount of loans remained outstanding, which obligation was terminated in the Debt Exchange.

As a result of the Debt Exchange and related transactions, Riverstone, in its capacity as a Lender, received an approximate 61% membership interest in our General Partner, and, as a result, now has the ability to control the Company’s management and operations and appoint all of the members of the Board of our General Partner.

The interests of the Limited Partners of the Company were not affected, altered or otherwise modified by the Debt Exchange.

14


 

In connection with and following the Debt Exchange, our general partner appointed Christopher Abbate, Daniel Flannery and Jack Maleh to serve as directors on the Board (collectively, the “New Directors”) replacing each of the previous directors of our general partner. The New Directors terms as directors began on May 1, 2020 and the former directors’ resignations were effective on May 1, 2020.

In connection with and following the Debt Exchange, our general partner appointed Jeffrey Slotterback, its previous Chief Financial Officer, to serve as Chief Executive Officer in addition to serving as Chief Financial Officer, and Christopher Walker, its previous Chief Operating Officer, to serve in that capacity (collectively, the “New Officers”) going forward. The respective terms of the New Officers as officers began on May 1, 2020 and the previous officers’ resignations were effective on May 1, 2020.

On June 19, 2020, affiliates of Titan closed on the sale of their Eagle Ford Shale assets with Texas American Resources Corporation II (“TARC”) for $13.2 million based on a May 1, 2020 effective date. In connection with the transaction, we entered into a contract operator agreement with TARC, whereby TARC operates certain oil and gas properties and provides other services to the Company related to our properties. We anticipate the TARC contract operator agreement will further reduce our general and administrative expenses.

LIQUIDITY AND ABILITY TO CONTINUE AS A GOING CONCERN

The significant risks and uncertainties related to our inability to satisfy our current liabilities raise substantial doubt about our ability to continue as a going concern. If these liabilities are called, we will not have sufficient liquidity to repay all of our outstanding liabilities, and as a result, there would be substantial doubt regarding our ability to continue as a going concern.

As discussed above, on July 12, 2021 the Board authorized and directed the General Partner, on behalf of itself and the Company, to take all necessary or advisable steps to dissolve, wind up and terminate the Company, including the execution and performance of the PSA.

As the Board approval of the dissolution, wind up and termination and of the PSA occurred in July 2021, our condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If we cannot continue as a going concern, adjustments to the carrying values and classification of our assets and liabilities and the reported amounts of income and expenses could be required and could be material.

MANAGEMENT OVERVIEW AND OUTLOOK

Since our inception in 2013, we have developed into a company with a core position in the Eagle Ford Shale in south Texas. While the energy markets continue to be marked by volatility, we are focused on refining our operations to reduce expenses. At June 30, 2021, we had $1.6 million of cash on our balance sheet and no long-term debt.

While we manage the Company on a daily basis to optimize operating results, we also continue to explore ways to strategically grow and transform the Company. Quarterly, we consider our ability to make distributions to unitholders; however, based on the Company’s financial position and cash flows, we have not yet elected to resume making distributions following the suspension in November 2016.

As discussed above, on July 12, 2021 the Board authorized and directed the General Partner, on behalf of itself and the Company, to take all necessary or advisable steps to dissolve, wind up and terminate the Company, including the execution and performance of the PSA.

GENERAL TRENDS AND OUTLOOK

We expect our business to be affected by key trends in natural gas and oil production markets. Our expectations are based on assumptions made by us and information currently available to us. To the extent our underlying assumptions or interpretations of available information prove to be incorrect, our actual results may vary materially from our expected results.

Since 2017, the natural gas, oil and natural gas liquids commodity price markets have been marked by volatility. While we anticipate high levels of exploration and production activities over the long-term in the area in which we operate, fluctuations in energy prices can greatly affect production rates and investments in the development of new natural gas, oil and NGL reserves. The economics of drilling new oil wells across our acreage position in the Eagle Ford Shale in south Texas have improved over the past few years, driven by both a rise in oil prices, as well as significant advancements in drilling and completion technology.

15


 

Beginning in March 2020, significant price decline and price volatility for oil and gas products emerged in the market. We have been and could continue to be directly impacted by these price changes if demand and prices remain depressed for an extended period of time. Given the volatility and uncertainty, we may be at risk of being able to identify and secure a party to gather and purchase our products. A significant number of our product sales are short-term in nature with contract terms of one year or less, though generally subject to customary evergreen clauses. To date, we have been able to sell our production and we continue to identify multiple purchasers. However, should these parties become unwilling to purchase our production, we will need to work to identify other purchasers in the area to gather and purchase our oil and gas products. Failure to identify other purchasers and storage facilities, may result in the potential shut-in of the field. The financial statement impact, change in price and expected time for these changes is not estimable but could result in significant decreases in oil and gas operations.

Our future gas and oil reserves, production, cash flow, our ability to make payments on our obligations and our ability to make distributions to our unitholders, depend on our success in producing our current reserves efficiently, developing our existing acreage and acquiring additional proved reserves economically. We face the challenge of natural production declines and volatile natural gas, oil and NGL prices. As initial reservoir pressures are depleted, natural gas and oil production from particular wells decrease. We attempt to overcome this natural decline by drilling to find additional reserves and acquiring more reserves than we produce. To the extent we would not have access to sufficient capital, our ability to drill and acquire more reserves would be negatively impacted. As of June 30, 2021, the Company does not have any immediate plans to drill new wells.

For additional information, please see “Liquidity and Ability to Continue as a Going Concern.”

RESULTS OF OPERATIONS

Gas and Oil Production

Production Profile. We have established a production position in the Eagle Ford Shale in south Texas, an oil-rich area, in which we acquired acreage in November 2014.

Production Volumes. The following table presents total net natural gas, crude oil and NGL production volumes and production volumes per day for the periods indicated:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

Total production volumes per day:

 

 

 

 

 

 

 

 

Natural gas (Boed)

 

15

 

27

 

16

 

30

Oil (Bpd)

 

165

 

211

 

170

 

220

NGLs (Bpd)

 

23

 

27

 

24

 

32

Total (Boed)

 

203

 

265

 

210

 

282

Total production volumes:

 

 

 

 

 

 

 

 

Natural gas (MBoe)

 

1

 

2

 

3

 

5

Oil (MBbls)

 

15

 

19

 

31

 

40

NGLs (MBbls)

 

2

 

3

 

4

 

6

Total (MBoe)

 

18

 

24

 

38

 

51

 

16


 

 

Production Revenues, Prices and Costs. Production revenues and estimated gas and oil reserves are substantially dependent on prevailing market prices for oil. The following table presents our production revenues and average sales prices for our natural gas, oil, and NGL production, along with our average production costs, which include lease operating expenses, taxes, and transportation and compression costs, for the periods indicated:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Production revenues (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas revenue

 

$

12

 

 

$

10

 

 

$

42

 

 

$

23

 

Oil revenue

 

 

967

 

 

 

307

 

 

 

1,854

 

 

 

1,262

 

NGLs revenue

 

 

51

 

 

 

18

 

 

 

105

 

 

 

51

 

Total production revenues

 

$

1,030

 

 

$

335

 

 

$

2,001

 

 

$

1,336

 

Average sales price, unhedged:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas (per Mcf)

 

$

1.46

 

 

$

0.69

 

 

$

2.46

 

 

$

0.72

 

Oil (per Bbl)

 

$

64.44

 

 

$

15.97

 

 

$

60.29

 

 

$

31.55

 

NGLs (per Bbl)

 

$

24.85

 

 

$

7.25

 

 

$

23.94

 

 

$

8.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Oil and Gas Costs (in thousands)

 

$

379

 

 

$

308

 

 

$

629

 

 

$

742

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and Gas Production costs (per Boe):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

$

16.69

 

 

$

11.12

 

 

$

12.89

 

 

$

11.61

 

Production taxes

 

 

3.42

 

 

 

0.62

 

 

 

3.21

 

 

 

1.89

 

Transportation and compression

 

 

0.46

 

 

 

1.04

 

 

 

0.46

 

 

 

0.98

 

Total production costs per Boe

 

$

20.57

 

 

$

12.78

 

 

$

16.56

 

 

$

14.48

 

 

Our oil and gas production revenues were higher in the current quarter as compared to the prior year period due to a $0.7 million increase in higher realized average sales prices, offset by a $0.1 million decrease in production volumes. Our oil and gas production revenues were higher in the six months ended June 30, 2021 as compared to the prior year period due to a $0.9 million increase in higher realized average sales prices, offset by a $0.3 million decrease in production volumes. For the six months ended June 30, 2020, as a result of economic conditions, the Company entered into agreements to sell May and June production at a fixed price for a fixed volume which negatively impacted our sold oil production volumes and realized average oil sales price.

 

Our oil and gas production costs were higher in the current quarter as compared to the prior year period due to a $0.1 million increase in workover expenses. Our oil and gas production costs were lower in the six months ended June 30, 2021 as compared to the prior year period due to a $0.2 million decrease in production costs resulting from lower volumes offset by a $0.1 million increase in workover expenses.

OTHER EXPENSES

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

General and administrative

 

$

869

 

 

$

1,404

 

 

$

1,803

 

 

$

2,353

 

Depreciation, depletion and amortization

 

126

 

 

165

 

 

257

 

 

 

594

 

Asset impairment

 

 

 

 

 

 

 

 

4,020

 

 

General and Administrative Expenses. The decrease in general and administrative expenses for the current quarter and the six months ended June 30, 2021 as compared to the prior year periods was primarily due to lower corporate activities and management’s plan to reduce general and administrative expenses.

Depreciation, Depletion and Amortization. The decrease in depreciation, depletion and amortization in the current quarter and the six months ended June 30, 2021 as compared to the prior year periods was primarily due to decreases in our depletion expense resulting from asset impairments recorded in previous periods, which lowered our depletable base, and lower production volumes.

17


 

Asset impairment. For the six months ended June 30, 2020, we recognized $4.0 million of impairment related to our proved oil and gas properties in the Eagle Ford operating area, which were impaired due to lower forecasted commodity prices and production performance. There was no comparable charge for the six months ended June 30, 2021.

LIQUIDITY AND CAPITAL RESOURCES

See “Liquidity and Ability to Continue as a Going Concern” section above for additional disclosures regarding our liquidity and financial condition.

General

We currently fund our operations through cash generated from operations. Our future cash flows are subject to a number of variables, including oil and natural gas prices.

As of June 30, 2021, we had $1.6 million of cash on our balance sheet and no long-term debt.

Cash Flows

 

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

 

 

(in thousands)

 

Net cash provided by (used in) operating activities

 

$

179

 

 

$

(843

)

 

Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020

Cash Flows from Operating Activities:

The change in cash flows provided by (used in) operating activities compared with the prior period was due to a $1.0 million increase in net cash provided by operating activities from cash receipts and disbursements attributable to our normal monthly operating cycle for gas and oil production revenues, and collections net of payments for royalties, lease operating expenses, severance taxes and general and administrative expenses.

Capital Requirements

As of June 30, 2021, we did not have any material accrued well drilling and completion and capital expenditures.

OFF BALANCE SHEET ARRANGEMENTS

There have been no material changes to our off balance sheet arrangements from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

There have been no material changes to our contractual obligations and commercial commitments outside the ordinary course of our business from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For a more complete discussion of the accounting policies and estimates that we have identified as critical in the preparation of our condensed consolidated financial statements, please refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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ITEM 3:

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in interest rates and commodity prices. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonable possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of the market risk-sensitive instruments were entered into for purposes other than trading.

General

All of our assets and liabilities are denominated in U.S. dollars, and as a result, we do not have exposure to currency exchange risks.

We are exposed to various market risks, principally changes in commodity prices. These risks can impact our results of operations, cash flows and financial position. We may manage these risks through regular operating and financing activities and periodic use of derivative financial instruments such as forward contracts and swap agreements. As of June 30, 2021, we did not have any commodity derivatives outstanding. The following analysis presents the effect on our results of operations, cash flows and financial position as if the hypothetical changes in market risk factors occurred on June 30, 2021. Only the potential impact of hypothetical assumptions was analyzed. The analysis does not consider other possible effects that could impact our business.

Commodity Price Risk. Our market risk exposures to commodities are due to the fluctuations in the commodity prices and the impact those price movements have on our financial results. For the three months ended June 30, 2021, we did not have any commodity derivatives outstanding.

Holding all other variables constant, a 10% change in average commodity prices would result in a change to our net loss for the twelve-month period ended June 30, 2021 of $0.3 million.

Realized pricing of natural gas, oil, and NGL production is primarily driven by the prevailing worldwide prices for crude oil and spot market prices applicable to United States natural gas, oil and NGL production. Pricing for natural gas, oil and NGL production has been volatile and unpredictable for many years.

ITEM 4:

CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer) has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to management (including the principal executive and financial officers) as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of June 30, 2021.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II

ITEM 1A:

RISK FACTORS

Factors that could cause our actual results to differ materially from those in this report are any of the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SEC, other than the risks described below:

We cannot assure you of the exact amount or timing of any distribution to our unitholders.

The liquidation and dissolution process is subject to numerous uncertainties, may fail to create value to our unitholders and may not result in any remaining capital for distribution to our unitholders. The precise nature, amount and timing of any distribution to our unitholders will depend on and could be delayed by, among other things, sales of our non-cash assets, including under the PSA, claim settlements with creditors, resolution of outstanding litigation matters, and unexpected or greater-than-expected expenses.

We will continue to incur claims, liabilities and expenses that will reduce the amount available for distribution out of the liquidation to unitholders.

Claims, liabilities and expenses from operations, such as operating costs, salaries, directors’ and officers’ insurance, payroll and local taxes, legal, accounting and consulting fees and miscellaneous office expenses, will continue to be incurred as we wind down. These expenses will reduce the amount of assets available for ultimate distribution to unitholders. If available cash and amounts received on the sale of non-cash assets, including under the PSA, are not adequate to provide for our obligations, liabilities, expenses and claims, we may not be able to make meaningful cash liquidation distributions, or any cash liquidation distributions at all, to our unitholders.

The payment of liquidation distributions, if any, to our unitholders could be delayed.

Although the Board has not established a firm timetable for liquidation distributions to our unitholders, the Board intends, subject to contingencies inherent in winding down our business, to make such liquidating distributions as promptly as practicable as creditor claims are paid or settled. However, we are currently unable to predict the precise timing of any such liquidating distributions. The timing of such liquidating distributions will depend on and could be delayed by, among other things, the timing of sales of our non-cash assets, including under the PSA, and claim settlements with creditors. Additionally, a creditor could seek an injunction against the making of such distributions to our unitholders on the ground that the amounts to be distributed were needed to provide for the payment of our liabilities and expenses. Any action of this type could delay or substantially diminish the amount available for such distribution to our unitholders.

 

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ITEM 6:

EXHIBITS

 

Exhibit No.

 

Description

 

 

 

  3.1

 

Certificate of Limited Partnership of Atlas Growth Partners, L.P. (incorporated by reference to the registration statement on Form S-1 (File No. 333-207537) filed on October 21, 2015).

 

 

 

  3.2

 

First Amended and Restated Limited Partnership Agreement of Atlas Growth Partners, L.P. (incorporated by reference to our Current Report on Form 8-K filed on April 6, 2016).

 

 

 

31.1*

 

Rule 13(a)-14(a)/15(d)-14(a) Certification

 

 

 

31.2*

 

Rule 13(a)-14(a)/15(d)-14(a) Certification

 

 

 

32.1*

 

Section 1350 Certification

 

 

 

101.INS*

 

Inline XBRL Instance Document(1)

 

 

 

101.SCH*

 

Inline XBRL Schema Document(1)

 

 

 

101.CAL*

 

Inline XBRL Calculation Linkbase Document(1)

 

 

 

101.LAB*

 

Inline XBRL Label Linkbase Document(1)

 

 

 

101.PRE*

 

Inline XBRL Presentation Linkbase Document(1)

 

 

 

101.DEF*

 

Inline XBRL Definition Linkbase Document(1)

 

 

 

104

 

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, has been formatted in Inline XBRL.

 

*

Filed herewith

(1)

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). The financial information contained in the XBRL-related documents is “unaudited” or “unreviewed.”

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ATLAS GROWTH PARTNERS, L.P.

 

By: Atlas Growth Partners GP, LLC, its General Partner

 

 

 

Date: August 16, 2021

 

By:

 

/s/ JEFFREY M. SLOTTERBACK

 

 

 

 

Jeffrey M. Slotterback

Chief Executive Officer and Chief Financial Officer

 

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