**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**








(Mark
      One)


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








For
      the
      quarterly period ended March 31, 2007





**OR**





**o**
            **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: **001-32169**








**ATLAS
      AMERICA, INC.**





(Exact
      name of registrant as specified in its charter)





**Delaware**
            **51-0404430**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)**311
                Rouser Road****Moon
                Township, PA**
            **15108**(Address
                of principal executive offices)
            (Zip
                code)





Registrant's
      telephone number, including area code: **(412)
      262-2830**





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 x  No o





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


Large accelerated filer x
      Accelerated filer   o
      Non-accelerated filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o No x





The
      number of outstanding shares of the registrant’s common stock on May 1, 2007 was
      17.9 million shares.














**ATLAS
      AMERICA, INC.**


**INDEX
      TO QUARTERLY REPORT ON FORM 10-Q**





**Page****PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Financial
                Statements (Unaudited)Consolidated
                Balance Sheets - March 31, 2007 and December 31, 2006
            3Consolidated
                Statements of Income for the Three Months Ended March 31, 2007 and
                2006
            4Consolidated
                Statement of Changes in Stockholders’ Equity for the Three Months Ended
                March 31, 2007
            5Consolidated
                Statements of Cash Flows for the Three Months Ended March 31, 2007
                and
                2006
            6Notes
                to Consolidated Financial Statements
            7
                -
                24Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            25-
                33Item
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            33-
                37Item
                4.
            Controls
                and Procedures
            38**PART
                II**
            **OTHER
                INFORMATION**Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            38Item
                6.
            Exhibits
            38**SIGNATURES**
            39














**PART
      I. FINANCIAL INFORMATION**





**Item
      1.**   **Financial
      Statements**


**ATLAS
      AMERICA, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


(in
      thousands, except share data)


(Unaudited)


**March
                31,**
            
            **December
                31,****2007**
            
            **2006****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            88,381
            
            $
            185,401Accounts
                receivable
            
            
            71,987
            
            
            82,954Current
                portion of derivative asset
            
            
            11,103
            
            
            33,150Prepaid
                expenses
            
            
            9,161
            
            
            13,738Deferred
                tax asset
            
            
            234
            
            
            5,022Total
                current assets
            
            
            180,866
            
            
            320,265Property
                and equipment, net
            
            
            913,014
            
            
            884,812Intangible
                assets, net
            
            
            29,934
            
            
            30,741Other
                assets, net
            
            
            34,725
            
            
            42,501Goodwill
            
            
            98,607
            
            
            98,607$
            1,257,146
            
            $
            1,376,926**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Current
                portion of long-term debt
            
            $
            81
            
            $
            109Accounts
                payable
            
            
            46,048
            
            
            56,438Liabilities
                associated with drilling contracts
            
            
            19,681
            
            
            86,765Accrued
                producer liabilities
            
            
            30,534
            
            
            32,766Accrued
                hedge liability
            
            
            24,834
            
            
            17,535Accrued
                liabilities
            
            
            32,331
            
            
            49,035Advances
                from affiliate
            
            
            447
            
            
            117Total
                current liabilities
            
            
            153,956
            
            
            242,765Long-term
                debt
            
            
            395,498
            
            
            324,042Deferred
                tax liability
            
            
            17,456
            
            
            30,190Other
                liabilities
            
            
            56,771
            
            
            52,996Minority
                interest
            
            
            581,004
            
            
            594,687Commitments
                and contingenciesStockholders’
                equity:Preferred
                stock, $0.01 par value: 1,000,000 authorized shares
            
            
            -
            
            
            -Common
                stock, $0.01 par value: 49,000,000 authorized shares
            
            
            200
            
            
            200Additional
                paid-in capital
            
            
            78,041
            
            
            77,447Treasury
                stock, at cost
            
            
            (109,396
            )
            
            (29,349
            )ESOP
                loan receivable
            
            
            (472
            )
            
            (490
            )Accumulated
                other comprehensive income (loss)
            
            
            (2,172
            )
            
            8,426Retained
                earnings
            
            
            86,260
            
            
            76,012Total
                stockholders’ equity
            
            
            52,461
            
            
            132,246$
            1,257,146
            
            $
            1,376,926




See
      accompanying notes to consolidated financial statements








3





**ATLAS
      AMERICA, INC.**


**CONSOLIDATED
      STATEMENTS OF INCOME**


(in
      thousands, except per share data)


(Unaudited)


**Three
                Months Ended****March
                31,****2007**
            
            **2006****REVENUES**Well
                construction and completion
            
            $
            72,378
            
            $
            50,883Gas
                and oil production
            
            
            21,260
            
            
            22,866Transmission,
                gathering and processing
            
            
            113,012
            
            
            112,635Administration
                and oversight
            
            
            4,544
            
            
            3,309Well
                services
            
            
            3,721
            
            
            2,766214,915
            
            
            192,459**COSTS
                AND EXPENSES**Well
                construction and completion
            
            
            62,932
            
            
            44,246Gas
                and oil production
            
            
            2,034
            
            
            1,905Transmission,
                gathering and processing
            
            
            95,475
            
            
            91,437Well
                services
            
            
            2,043
            
            
            1,766General
                and administrative
            
            
            14,457
            
            
            12,908Net
                expense reimbursement - affiliate
            
            
            308
            
            
            415Depreciation,
                depletion and amortization
            
            
            12,401
            
            
            10,102189,650
            
            
            162,779**OPERATING
                INCOME**
            
            
            25,265
            
            
            29,680**OTHER
                INCOME (EXPENSE**)Interest
                expense
            
            
            (7,256
            )
            
            (6,721
            )Minority
                interests
            
            
            (3,186
            )
            
            (6,255
            )Other,
                net
            
            
            1,444
            
            
            1,329(8,998
            )
            
            (11,647
            )Income
                before income taxes
            
            
            16,267
            
            
            18,033Provision
                for income taxes
            
            
            6,019
            
            
            6,672**Net
                income**
            
            $
            10,248
            
            $
            11,361**Net
                income per common share - basic**Net
                income per common share-basic
            
            $
            .54
            
            $
            .57Weighted
                average common shares outstanding
            
            
            18,924
            
            
            20,001**Net
                income per common share - diluted**Net
                income per common share - diluted
            
            $
            .53
            
            $
            .56Weighted
                average common shares outstanding
            
            
            19,478
            
            
            20,453











See
      accompanying notes to consolidated financial statements








4





**ATLAS
      AMERICA, INC.**


**CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY**


**THREE
      MONTHS ENDED MARCH 31, 2007**


(in
      thousands, except share data)


(Unaudited)





**Accumulated****Additional**
            
            
            
            **ESOP**
            
            **other**
            
            
            
            **Total****Common
                stock**
            
            **paid-in**
            
            **Treasury
                stock**
            
            **loan**
            
            **comprehensive**
            
            **Retained**
            
            **stockholders’****Shares**
            
            **Amount**
            
            **capital**
            
            **Shares**
            
            **Amount**
            
            **receivable**
            
            **income
                (loss)**
            
            **earnings**
            
            **equity****Balance,
                January 1, 2007**
            
            
            20,008,419
            
            $
            200
            
            $
            77,447
            
            
            (659,135
            )
            $
            (29,349
            )
            $
            (490
            )
            $
            8,426
            
            $
            76,012
            
            $
            132,246Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,248
            
            
            10,248Other
                comprehensive income (loss)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (10,598
            )
            
            
            
            
            (10,598
            )Issuance
                of common stock
            
            
            3,750
            
            
            -
            
            
            227
            
            
            6,607
            
            
            304
            
            
            
            
            
            
            
            
            
            
            
            531Repurchase
                of common stock, at cost
            
            
            
            
            
            
            
            
            
            
            
            (1,486,605
            )
            
            (80,351
            )
            
            
            
            
            
            
            
            
            
            
            (80,351
            )Repayment
                of ESOP loan
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            18
            
            
            
            
            
            
            
            
            18Stock
                option compensation
            
            
            
            
            
            
            
            
            367
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            367**Balance,
                March 31, 2007**
            
            
            20,012,169
            
            $
            200
            
            $
            78,041
            
            
            (2,139,133
            )
            $
            (109,396
            )
            $
            (472
            )
            $
            (2,172
            )
            $
            86,260
            
            $
            52,461




















See
      accompanying notes to consolidated financial statements








5





**ATLAS
      AMERICA, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(in
      thousands)


(Unaudited)








**Three
                Months Ended****March
                31,****2007**
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                income
            
            $
            10,248
            
            $
            11,361Adjustments
                to reconcile net income to net cash used in operating
                activities:Depreciation,
                depletion and amortization
            
            
            12,401
            
            
            10,102Amortization
                of deferred finance costs
            
            
            571
            
            
            738Non-cash
                loss on derivative value
            
            
            2,277
            
            
            512Non-cash
                compensation on long-term incentive plans
            
            
            4,036
            
            
            2,747Minority
                interests
            
            
            3,186
            
            
            6,255Distributions
                paid to minority interests
            
            
            (11,174
            )
            
            (9,054
            )Gain
                on asset dispositions
            
            
            (26
            )
            
            (26
            )Deferred
                income taxes
            
            
            (1,221
            )
            
            1,001Changes
                in operating assets and liabilities:(Increase)
                decrease in accounts receivable and prepaid expenses
            
            
            15,543
            
            
            (5,881
            )Decrease
                in accounts payable and accrued liabilities
            
            
            (83,098
            )
            
            (66,795
            )Increase
                in accounts payable/receivable from affiliates
            
            
            330
            
            
            859Net
                cash used in operating activities
            
            
            (46,927
            )
            
            (48,181
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Investment
                in Lightfoot Capital Partners, L.P.
            
            
            (931
            )
            
            -Capital
                expenditures
            
            
            (40,454
            )
            
            (30,233
            )Proceeds
                from sale of assets
            
            
            35
            
            
            30Decrease
                (increase) in other assets
            
            
            (73
            )
            
            84Net
                cash used in investing activities
            
            
            (41,423
            )
            
            (30,119
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Borrowings
            
            
            117,000
            
            
            65,250Principal
                payments on debt
            
            
            (45,572
            )
            
            (28,771
            )Issuance
                of Atlas Pipeline Partners, L.P. common and preferred
                units
            
            
            -
            
            
            29,994Treasury
                shares purchased
            
            
            (80,351
            )
            
            (475
            )Other
            
            
            253
            
            
            (55
            )Net
                cash provided by (used in) financing activities
            
            
            (8,670
            )
            
            65,943Decrease
                in cash and cash equivalents
            
            
            (97,020
            )
            
            (12,357
            )Cash
                and cash equivalents at beginning of period
            
            
            185,401
            
            
            55,155Cash
                and cash equivalents at end of period
            
            $
            88,381
            
            $
            42,798





See
      accompanying notes to consolidated financial statements





6





**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2007**


(Unaudited)





**NOTE
      1 — BASIS OF PRESENTATION**





**Company
      Overview and Principles of Consolidation**




The
      consolidated financial statements include the accounts of Atlas America, Inc.
      (the “Company” or “ATLS”) and its subsidiaries, all of which are wholly owned
      except for Atlas Pipeline Holdings, L.P. (“AHD”), Atlas Pipeline Partners, L.P.
      (“Atlas Pipeline”) and Atlas Energy Resources, LLC (“Atlas Energy”).




In
      July
      2006, the Company contributed its ownership interests in Atlas Pipeline Partners
      GP, LLC, its then wholly-owned subsidiary, and the general partner of Atlas
      Pipeline, to AHD. Concurrent with this transaction, AHD issued 3,600,000 common
      units, representing a 17.1% ownership interest in it, in an initial public
      offering. AHD, through its ownership of Atlas Pipeline GP, owns a 2% general
      partner interest and 1,641,026 common units constituting an 11.4% limited
      partner interest for a total partnership interest of 13.4% in Atlas Pipeline.
      Because AHD controls the decisions and operations of Atlas Pipeline, Atlas
      Pipeline is consolidated in the Company’s financial statements.




In
      December 2006, the Company contributed substantially all of its natural gas
      and
      oil assets and its investment partnership management business to Atlas Energy,
      a
      then wholly-owned subsidiary. Concurrent with this transaction, Atlas Energy
      issued 7,273,750 common units, representing a 19.4% ownership interest, in
      an
      initial public offering. After completion of the offering, the Company owns
      approximately 80.6% of Atlas Energy.





The
      consolidated financial statements and the information and tables contained
      in
      the notes to the consolidated financial statements as of March 31, 2007 and
      for
      the three months ended March 31, 2007 and 2006 are unaudited except that the
      balance sheet at December 31, 2006 is derived from audited financial
      statements.  Certain information and footnote disclosures normally included
      in financial statements prepared in accordance with accounting principles
      generally accepted in the United States of America have been condensed or
      omitted in these statements pursuant to the rules and regulations of the
      Securities and Exchange Commission.  However, in the opinion of management,
      these interim financial statements include all the necessary adjustments to
      fairly present the results of the interim periods presented.  The results
      of operations for the three months ended March 31, 2007 may not necessarily
      be
      indicative of the results of operations for the full fiscal year ending December
      31, 2007. Certain reclassifications have been made to the consolidated financial
      statements as of December 31, 2006 and for the three months ended March 31,
      2006
      to conform to the presentation as of and for the three months ended March 31,
      2007.




**NOTE
      2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





Reference
      is hereby made to the Company's Annual Report on Form 10-K/A for the fiscal
      year
      ended December 31, 2006, which contains a summary of significant accounting
      policies followed by the Company in the preparation of its consolidated
      financial statements.  These policies were also followed in preparing the
consolidated
      financial statements as of March 31, 2007 and for the three months ended March
      31, 2007 and 2006.





**Use
      of Estimates**





Preparation
      of the financial statements in conformity with accounting principles generally
      accepted in the United States of America requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      the disclosure of contingent assets and liabilities as of the date of the
      consolidated financial statements and the reported amounts of revenues and
      costs
      and expenses during the reporting period. Actual results could differ from
      these
      estimates.


7





**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
      (Continued)**





**Receivables**





In
      evaluating its allowance for possible losses, the Company performs ongoing
      credit evaluations of its customers and adjusts credit limits based upon payment
      history and the customers’ current creditworthiness, as determined by the
      Company’s review of its customers’ credit information. The Company extends
      credit on an unsecured basis to many of its customers. At March 31, 2007 and
      December 31, 2006, the Company’s credit evaluation indicated that it has no need
      for an allowance for possible losses.





**Revenue
      Recognition**





Because
      there are timing differences between the delivery of natural gas, natural gas
      liquids ("NGLs") and oil and the Company’s receipt of a delivery statement, the
      Company has unbilled revenues. These revenues are accrued based upon volumetric
      data from the Company’s records and the Company’s estimates of the related
      transportation and compression fees which are, in turn, based upon applicable
      product prices. The Company had unbilled trade receivables at March 31, 2007
      and
      December 31, 2006 of $29.9 million and $40.2 million which are included in
      accounts receivable on its Consolidated Balance Sheets.





**Recently
      Issued Financial Accounting Standards**




In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities,* (“SFAS
      159”). SFAS 159 permits entities to choose to measure eligible financial
      instruments and certain other items at fair value. The objective is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions. The Statement will be effective as of the beginning of an entity’s
      first fiscal year beginning after November 15, 2007. The Statement offers
      various options in electing to apply the provisions of this Statement, and
      at
      this time the Company has not made any decisions on its application to its
      financial position or results of operations.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, *Fair
      Value Measurement* ,
      (“SFAS
      157”). SFAS 157 addresses the need for increased consistency in fair value
      measurements, defining fair value as the price that would be received to sell
      an
      asset or paid to transfer a liability in an orderly transaction between market
      participants at the measurement date. It also establishes a framework for
      measuring fair value and expands disclosure requirements. SFAS 157 is effective
      for the Company beginning January 1, 2008. The Company is currently
      evaluating the impact of the adoption of SFAS 157 on its financial position
      and
      results of operations.





The
      Company adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes,* (“FIN
      48”), on January 1, 2007. Previously,
      the Company had accounted for tax contingencies in accordance with Statement
      of
      Financial Accounting Standards No.5,*Accounting
      for Contingencies.* FIN
      48
      clarifies the accounting for income taxes, by prescribing a minimum recognition
      threshold a tax position is required to meet before being recognized in the
      financial statements. FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. As
      a
      result of the implementation of FIN 48, the Company determined that it had
      no
      liability for unrecognized income tax benefits, upon adoption and through March
      31, 2007.





The
      Company files numerous consolidated and separate income tax returns in the
      United States Federal jurisdiction and in many state jurisdictions. The Company
      is no longer subject to United States Federal income tax examinations for
      periods ending before September 30, 2003 and is no longer subject to state
      and
      local income tax examinations by tax authorities for periods ending before
      September 30, 2002.





The
      Company’s policy is to recognize potential accrued interest and penalties
      related to unrecognized tax benefits in income tax expense.





The
      Company does not anticipate that total unrecognized tax benefits will
      significantly change within the next twelve months.







8





**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
      (Continued)**





**Earnings
      Per Share**





Basic
      earnings per share are determined by dividing net income by the weighted average
      number of shares of common stock outstanding during the period.  Earnings
      per share - diluted is computed by dividing net income by the sum of the
      weighted average number of shares of common stock outstanding and dilutive
      potential shares issuable during the period.  Dilutive potential shares of
      common stock consist of the excess of shares issuable under the terms of the
      Company’s stock incentive plan over the number of such shares that could have
      been reacquired (at the weighted average price of shares during the period)
      with
      the proceeds received from the exercise of the options. The following table
      sets
      forth the reconciliation of the Company’s weighted average number of common
      shares at the dates indicated (in thousands):





**Three
                Months Ended****March
                31,****2007**
            
            **2006**Weighted
                average common shares outstanding-basic
            
            
            18,924
            
            
            20,001Dilutive
                effect of stock option and award plan
            
            
            554
            
            
            452Weighted
                average common shares-diluted
            
            
            19,478
            
            
            20,453





**NOTE
      3 — COMPREHENSIVE INCOME (LOSS)**





Comprehensive
      income (loss) includes net income and other gains and losses affecting
      stockholders’ equity from non-owner sources that, under accounting principles
      generally accepted in the United States of America, have not been recognized
      in
      the calculation of net income. For the Company, this includes changes in the
      fair values, net of taxes, of unrealized hedging gains and losses and
      post-retirement plan liabilities. The following table reconciles net income
      to
      comprehensive income (loss) (in thousands):





**Three
                Months Ended****March
                31,****2007**
            
            **2006**Net
                income
            
            $
            10,248
            
            $
            11,361Other
                comprehensive income (loss):Unrealized
                holding gain (loss) on hedging contracts, net of tax of $7,155 and
                ($1,476)
            
            
            (11,320
            )
            
            2,515Less:
                reclassification adjustment for (gains) losses realized in net income,
                net
                of tax of ($400) and $155
            
            
            680
            
            
            (266
            )Plus:
                amortization of additional post-retirement liability recorded upon
                adoption of SFAS 158, net of taxes of ($27)
            
            
            42
            
            
            -(10,598
            )
            
            2,249Comprehensive
                income (loss)
            
            $
            (350
            )
            $
            13,610





Components
      of Accumulated other comprehensive income (loss) at the dates indicated are
      as
      follows (in thousands):





**March
                31,**
              **2007**
            
            **December
                31, 2006**Unrealized
                holding gain (loss) on hedging contracts
            
            $
            (1,798
            )
            $
            8,842Additional
                post-retirement liability
            
            
            (374
            )
            
            (416
            )$
            (2,172
            )
            $
            8,426





9





**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      4 — PROPERTY AND EQUIPMENT**





Property
      and equipment is stated at cost. Depreciation, depletion and amortization are
      based on cost less estimated salvage value primarily using the
      unit-of-production or straight-line methods over the asset's estimated useful
      lives. Maintenance and repairs are expensed as incurred. Major renewals and
      improvements that extend the useful lives of property are
      capitalized.





Property
      and equipment consists of the following at the dates indicated (in
      thousands):





**March
                31,**
            
            **December
                31,****2007**
            
            **2006**Mineral
                interests:Proved
                properties
            
            $
            4,765
            
            $
            1,290Unproved
                properties
            
            
            1,002
            
            
            1,002Wells
                and related equipment
            
            
            365,526
            
            
            348,592Pipelines,
                processing and compression facilities
            
            
            628,664
            
            
            611,212Rights-of-way
            
            
            30,984
            
            
            30,401Land,
                building and improvements
            
            
            8,598
            
            
            8,451Support
                equipment
            
            
            6,044
            
            
            5,604Other
            
            
            10,288
            
            
            9,9021,055,871
            
            
            1,016,454Accumulated
                depreciation, depletion and amortization:Oil
                and gas properties and pipelines
            
            
            (136,381
            )
            
            (125,550
            )Other
            
            
            (6,476
            )
            
            (6,092
            )(142,857
            )
            
            (131,642
            )$
            913,014
            
            $
            884,812





**NOTE
      5 — OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL**





**Other
      Assets**





The
      following table provides information about Other assets at the dates indicated
      (in thousands):





**March
                31,**
            
            **December
                31,****2007**
            
            **2006**Deferred
                finance costs, net of accumulated amortization of $7,433 and
                $6,862
            
            $
            12,617
            
            $
            13,040Investments
            
            
            2,641
            
            
            1,553Security
                deposits
            
            
            1,485
            
            
            1,538Long-term
                hedge receivable from Partnerships
            
            
            6,476
            
            
            2,131Unrealized
                hedge gain-long term
            
            
            11,445
            
            
            24,148Other
            
            
            61
            
            
            91$
            34,725
            
            $
            42,501





Deferred
      finance costs are recorded at cost and are amortized over the terms of the
      related loan agreements which range from three to ten years. Investments include
      Atlas America’s investment in Lightfoot Capital Partners, L.P. (“Lightfoot”).
      Long-term hedge receivable from Partnerships represents the portion of the
      long-term unrealized loss on contracts that has been allocated to affiliated
      oil
      and gas partnerships.





10


**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      5 — OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL -
      (Continued)**





**Intangible
      Assets**





*Customer
      contracts and relationships.* At
      March
      31, 2007, Atlas Pipeline had $24.9 million of intangible assets, net of
      accumulated amortization of $4.7 million which was recorded in connection with
      natural gas gathering contracts and customer relations assumed in its
      acquisitions of Elk City and NOARK. Statement of Financial Accounting Standard
      No. 142, *Goodwill
      and Other Intangible Assets* (“SFAS
      142”), requires that intangible assets such as these gas gathering contracts and
      customer relations with finite useful lives be amortized over their respective
      estimated useful lives. If an intangible asset has a finite useful life, but
      the
      precise length of that life is not known, that intangible asset shall be
      amortized over the best estimate of its useful life. At a minimum, Atlas
      Pipeline will assess the useful lives and residual values of all intangible
      assets on an annual basis to determine if adjustments are required. Amortization
      expense on the customer contract and relationship intangible assets, which
      have
      estimated lives of eight and twenty years, respectively, and are being amortized
      on a straight-line basis, was $603,000 and $1.2 million for the three months
      ended March 31, 2007 and 2006, respectively.





*Partnership
      management and operating contracts.* Included
      in intangible assets are partnership management and operating contracts acquired
      by Atlas Energy through acquisitions which are recorded at fair value on
      their acquisition dates.  Atlas Energy amortizes contracts acquired on the
      declining balance and straight-line methods, over their respective estimated
      lives, ranging from five to thirteen years.  Amortization expense for these
      contracts for the three months ended March 31, 2007 and 2006 was $204,000 and
      $220,000, respectively.





Aggregate
      estimated annual amortization expense for all of the contracts described above
      for the next five years ending March 31 is as follows: 2008 - $3.2 million;
      2009
      - $3.2 million; 2010 - $3.1million; 2011 - $3.1 million and 2012 - $2.9
      million.





The
      following table provides information about the Company’s intangible assets at
      the dates indicated (in thousands):





**March
                31,**
            
            **December
                31,****2007**
            
            **2006****Accumulated**
            
            
            
            **Accumulated****Cost**
            
            **Amortization**
            
            **Cost**
            
            **Amortization**Customer
                contracts and relationships
            
            $
            29,650
            
            $
            (4,723
            )
            $
            29,650
            
            $
            (4,120
            )Partnership
                management and operating contracts
            
            
            14,343
            
            
            (9,336
            )
            
            14,343
            
            
            (9,132
            )Intangible
                assets, net
            
            $
            43,993
            
            $
            (14,059
            )
            $
            43,993
            
            $
            (13,252
            )





**Goodwill**




The
      Company applies the provisions of Statement of Financial Accounting Standards,
      ("SFAS") No. 142 which requires that goodwill no longer be amortized, but
      instead evaluated for impairment at least annually. The evaluation of impairment
      under SFAS 142 requires the use of projections, estimates and assumptions as
      to
      the future performance of the Company’s operations, including anticipated future
      revenues, expected future operating costs and the discount factor used. Actual
      results could differ from projections, resulting in revisions to the Company’s
      assumptions and, if required, recognition of an impairment loss. The Company’s
      evaluation of goodwill at December 31, 2006 (the most recent valuation date)
      indicated there was no impairment loss and no impairment indicators have arisen
      since that date. The Company will continue to evaluate its goodwill at least
      annually or when impairment indicators arise, and will reflect the impairment
      of
      goodwill, if any, within the Consolidated Statements of Income in the period
      in
      which the impairment is indicated. At March 31, 2007 and December 31, 2006
      the
      Company had goodwill of $98.6 million, net of accumulated amortization of $4.5
      million.








11





**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      6 — ASSET RETIREMENT OBLIGATIONS**





The
      Company accounts for its estimated plugging and abandonment of its oil and
      gas
      properties in accordance with SFAS 143, *Accounting
      for Asset Retirement Obligations* and FASB
      Interpretation No. 47, *Accounting
      for Conditional Asset Retirement Obligations* .
      A
      reconciliation of the Company’s liability for well plugging and abandonment
      costs for the periods indicated is as follows (in thousands):





**Three
                Months Ended****March
                31,****2007**
            
            **2006**Asset
                retirement obligations, beginning of period
            
            $
            26,726
            
            $
            18,499Liabilities
                incurred
            
            
            520
            
            
            676Liabilities
                settled
            
            
            (21
            )
            
            -Accretion
                expense
            
            
            365
            
            
            124Asset
                retirement obligations, end of period
            
            $
            27,590
            
            $
            19,299





The
      above
      accretion expense is included in depreciation, depletion and amortization in
      the
      Company’s Consolidated Statements of Income and the asset retirement obligation
      liabilities are included in “Other liabilities” in the Company’s Consolidated
      Balance Sheets.





**NOTE
      7 — DEBT**


Total
      debt consists of the following at the dates indicated (in
      thousands):





**March
                31,**
            
            **December
                31,****2007**
            
            **2006**Senior
                notes - Atlas Pipeline
            
            $
            285,950
            
            $
            285,977Revolving
                credit facility - Atlas Pipeline
            
            
            53,000
            
            
            38,000Revolving
                credit facility - Atlas Energy
            
            
            56,500
            
            
            -Other
                debt
            
            
            129
            
            
            174395,579
            
            
            324,151Less
                current maturities
            
            
            81
            
            
            109$
            395,498
            
            $
            324,042





*Atlas
      Pipeline Credit Facility.* Atlas
      Pipeline has a $225.0 million credit facility with a syndicate of banks which
      matures in June 2011. The credit facility bears interest, at Atlas Pipeline’s
      option, at either (i) adjusted London Interbank Offered Rate (“LIBOR”) plus
      the applicable margin, as defined, or (ii) the higher of the federal funds
      rate plus 0.5% or the Wachovia Bank, National Association’s (“Wachovia”) prime
      rate (each plus the applicable margin). The weighted average interest rate
      on
      the outstanding credit facility borrowings at March 31, 2007 was 7.4%. Up to
      $50.0 million of the credit facility may be utilized for letters of credit,
      of
      which $7.1 million was outstanding at March 31, 2007. These outstanding
      letter of credit amounts were not reflected as borrowings on the Company’s
      consolidated balance sheets. Borrowings under the credit facility are secured
      by
      a lien on and security interest in all of Atlas Pipeline’s property and that of
      its subsidiaries, and by the guaranty of each of its subsidiaries. The credit
      facility contains customary covenants, including restrictions on Atlas
      Pipeline’s ability to incur additional indebtedness; make certain acquisitions,
      loans or investments; make distribution payments to its unitholders if an event
      of default exists; and enter into a merger or sale of assets, including the
      sale
      or transfer of interests in its subsidiaries. Atlas Pipeline is in compliance
      with these covenants as of March 31, 2007.





12





**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      7 — DEBT - (Continued)**





The
      events which constitute an event of default are also customary for loans of
      this
      size, including payment defaults, breaches of representations or covenants
      contained in the credit agreements, adverse judgments against Atlas Pipeline
      in
      excess of a specified amount and a change of control of the general partner.




*Atlas
      Pipeline Senior Notes.* In
      December 2005, Atlas Pipeline, issued $250.0 million of 10-year, 8.125% senior
      unsecured notes (“Senior Notes”) in a private placement transaction pursuant to
      Rule 144A and Regulation S under the Securities Act of 1933 for net proceeds
      of
      $243.1 million, after underwriting commissions and other transaction costs.
      In
      May 2006, Atlas Pipeline issued an additional $35.0 million of senior unsecured
      notes at 103% par value, with a resulting effective yield of approximately
      7.6%,
      for net proceeds of $36.6 million including accrued interest and net of initial
      purchaser’s discount and other transaction costs. Interest on the Senior Notes
      is payable semi-annually in arrears on June 15 and December 15. The
      Senior Notes are redeemable at any time on or after December 15, 2010 at
      certain redemption prices, together with accrued unpaid interest to the date
      of
      redemption. In addition, prior to December 15, 2008, Atlas Pipeline may
      redeem up to 35% of the aggregate principal amount of the Senior Notes with
      the
      proceeds of certain equity offerings at a stated redemption price. The Senior
      Notes are also subject to repurchase by Atlas Pipeline at a price equal to
      101%
      of their principal amount, plus accrued and unpaid interest, upon a change
      of
      control or upon certain asset sales for which the net proceeds are not
      reinvested into Atlas Pipeline within 360 days. The Senior Notes are junior
      in
      right of payment to Atlas Pipeline’s secured debt, including Atlas Pipeline’s
      obligations under its credit facility. At March 31, 2007, all of Atlas
      Pipeline’s outstanding Senior Notes have been registered with the Securities and
      Exchange Commission.




The
      indenture governing the Senior Notes contains covenants, including limitations
      of Atlas Pipeline’s ability to: incur certain liens; engage in sale/leaseback
      transactions; incur additional indebtedness; declare or pay distributions if
      an
      event of default has occurred; redeem, repurchase or retire equity interests
      or
      subordinated indebtedness; make certain investments; or merge, consolidate
      or
      sell substantially all of its assets. Atlas Pipeline is in compliance with
      these
      covenants as of March 31, 2007.





*Atlas
      Pipeline Holdings Credit Facility* .
      On
      July 26, 2006, AHD, as borrower, and Atlas Pipeline GP, as guarantor,
      entered into a $50.0 million revolving credit facility (no outstanding
      borrowings at March 31, 2007) with Wachovia as administrative agent and
      issuing bank, and a syndicate of banks. AHD’s credit facility matures in April
      2010 and bears interest, at its option, at either (i) adjusted LIBOR (as
      defined in the credit facility) or (ii) the higher of the federal funds
      rate plus 0.5% or the Wachovia prime rate, except that no more than five LIBOR
      loans may be outstanding at any time. Borrowings under the credit facility
      are
      secured by a first-priority lien on a security interest in all of the AHD’s
      assets, including a pledge of Atlas Pipeline GP’s interests in Atlas Pipeline,
      and are guaranteed by Atlas Pipeline GP and AHD’s other subsidiaries (excluding
      Atlas Pipeline and its subsidiaries). The credit facility contains customary
      covenants, including restrictions on its ability to incur additional
      indebtedness; make certain acquisitions, loans or investments; make distribution
      payments to AHD’s unitholders if an event of default exists or would result from
      such distribution; or enter into a merger or sale of substantially all of AHD’s
      property or assets, including the sale or transfer of interests in its
      subsidiaries. AHD is in compliance with these covenants as of March 31, 2007.
      AHD may borrow under its credit facility (i) for general business purposes,
      including for working capital, to purchase debt or limited partnership units
      of
      Atlas Pipeline, to fund general partner contributions from AHD to Atlas Pipeline
      and to make permitted acquisitions, (ii) to pay fees and expenses related to
      its
      credit facility and (iii) for letters of credit.





*Atlas
      Energy Resources Credit Facility.* In
      December 2006, Atlas Energy entered into a new $250.0 million credit facility,
      which is led by Wachovia. The revolving credit facility has a current borrowing
      base of $175.0 million which may be redetermined subject to changes in Atlas
      Energy’s oil and gas reserves. Up to $50.0 million of the facility may be in the
      form of standby letters of credit. The facility is secured by Atlas Energy’s
      assets and bears interest at either the base rate plus the applicable margin
      or
      at adjusted LIBOR plus the applicable margin, elected at Atlas Energy’s option.
      At March 31, 2007, the weighted average interest rate on outstanding borrowings
      was 8.5%.




The
      base
      rate for any day equals the higher of the federal funds rate plus 0.50% or
      the
      Wachovia prime rate. Adjusted LIBOR is LIBOR divided by 1.00 minus the
      percentage prescribed by the Federal Reserve Board for determining the reserve
      requirement for Euro currency funding. The applicable margin ranges from 0.0%
      to
      0.75% for base rate loans and 1.00% to 1.75% for LIBOR loans.


13


**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      7 — DEBT - (Continued)**




The
      Wachovia credit facility requires Atlas Energy to maintain specified ratios
      of
      current assets to current liabilities, interest coverage (as defined), and
      debt
      to earnings before interest, taxes, depreciation, depletion and amortization
      (“EBITDA”). In addition, the facility limits sales, leases or transfers of
      assets and the incurrence of additional indebtedness. The facility limits the
      dividends payable by Atlas Energy if an event of default has occurred and is
      continuing or would occur as a result of such distribution. Atlas Energy is
      in
      compliance with these covenants as of March 31, 2007. The facility
      terminates in December 2011, when all outstanding borrowings must be repaid.
      At
      March 31, 2007 and December 31, 2006, $ 56.5
      million and $0, respectively, were outstanding under this facility. In addition,
      letters of credit of $495,000 were outstanding at each date which are not
      reflected as borrowings on the Company’s Consolidated Balance Sheets.





Annual
      debt principal payments over the next five years ending March 31 are as follows
      (in thousands):





2008
            
            
            812009
            
            
            482010
            
            
            —2011
            
            
            —2012
                and thereafter
            
            
            395,450$
            395,579





**NOTE
      8 — DERIVATIVE INSTRUMENTS**




*Atlas
      Energy Resources.* From
      time to time, Atlas Energy enters into natural gas futures, option, and
      collar contracts to hedge its exposure to changes in natural gas prices
      which are classified as cash flow hedges in accordance with SFAS No.
      133 *,
      Accounting for Derivative Instruments and Hedging Activity* .
      At any
      point in time, such contracts may include regulated New York Mercantile Exchange
      (“NYMEX”) futures and options contracts and non-regulated over-the-counter
      futures contracts with qualified counterparties. NYMEX contracts are generally
      settled with offsetting positions, but may be settled by the delivery of natural
      gas.





Atlas
      Energy formally documents all relationships between hedging instruments and the
      items being hedged, including the risk management objective and strategy for
      undertaking the hedging transactions. This includes matching the natural gas
      futures and options contracts to the forecasted transactions. Atlas Energy
      assesses, both at the inception of the hedge and on an ongoing basis, whether
      the derivatives are highly effective in offsetting changes in the fair value
      of
      hedged items. Historically these contracts have qualified and been designated
      as
      cash flow hedges and recorded at their fair values. Gains or losses on future
      contracts are determined as the difference between the contract price and a
      reference price, generally prices on the New York Mercantile Exchange ("NYMEX").
      Such gains and losses are charged or credited to Accumulated Other Comprehensive
      Income (Loss) and recognized as a component of sales revenue in the month the
      hedged gas is sold. If it is determined that a derivative is not highly
      effective as a hedge or it has ceased to be a highly effective hedge, due to
      the
      loss of correlation between changes in gas reference prices under a hedging
      instrument and actual gas prices, Atlas Energy will discontinue hedge accounting
      for the derivative and subsequent changes in fair value for the derivative
      will
      be recognized immediately into earnings. A
      portion
      of Atlas Energy’s future natural gas sales is periodically hedged through the
      use of swaps and collar contracts. Realized gains and losses on the derivative
      instruments that are classified as effective hedges are reflected in the
      contract month being hedged as an adjustment to revenue.




At
      March
      31, 2007 and December 31, 2006, Atlas Energy had net hedging assets of $687,000
      and $47.4 million, respectively. At March 31, 2007, Atlas Energy had 293 open
      natural gas futures contracts related to natural gas sales covering 60.8 million
      MMBtu, or Million British Thermal Units ("MMBtu"), of natural gas, maturing
      through March 31, 2012 at a combined average settlement price of $8.31 per
      MMBtu. Atlas Energy recognized a gain of $2.4 million and $1.4 million on
      settled contracts covering natural gas production for the three months ended
      March 31, 2007 and 2006, respectively. There were no gains or losses recognized
      during the three months ended March 31, 2007 or 2006 for hedge ineffectiveness
      or as a result of the discontinuance of these cash flow hedges. Of the $687,000
      net unrealized hedge gain at March 31, 2007, Atlas Energy’s portion is $292,000
      and $395,000 has been reallocated to the investment partnerships.




14


**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      8 — DERIVATIVE INSTRUMENTS - (Continued)**





*Atlas
      Pipeline.* Atlas
      Pipeline also enters into certain financial swaps and option instruments, which
      qualify as cash flow hedges in accordance with SFAS No. 133, to hedge its
      forecasted natural gas, NGLs and condensate sales against the variability in
      expected future cash flows attributable to changes in market prices. The swap
      instruments are contractual agreements between counterparties to exchange
      obligations of money as the underlying natural gas, NGLs and condensate is
      sold.
      Under these swap agreements, Atlas Pipeline receives a fixed price and remits
      a
      floating price based on certain indices for the relevant contract period.




Atlas
      Pipeline formally documents all relationships between hedging instruments and
      the items being hedged, including its risk management objective and strategy
      for
      undertaking the hedging transactions. This includes matching the natural gas
      futures and options contracts to the forecasted transactions. Atlas Pipeline
      assesses, both at the inception of the hedge and on an ongoing basis, whether
      the derivatives are effective in offsetting changes in the forecasted cash
      flow
      of hedged items. If it is determined that a derivative is not effective as
      a
      hedge or that it has ceased to be an effective hedge due to the loss of
      correlation between the hedging instrument and the underlying commodity, Atlas
      Pipeline will discontinue hedge accounting for the derivative and subsequent
      changes in the derivative fair value, which is determined through the
      utilization of market data, will be recognized immediately within its
      consolidated statements of income. A
      portion
      of Atlas Pipeline’s future natural gas sales is periodically hedged through the
      use of swaps and collar contracts. Realized gains and losses on the derivative
      instruments that are classified as effective hedges are reflected in the
      contract month being hedged as an adjustment to revenue.




At
      March
      31, 2007 and December 31, 2006, Atlas Pipeline had a net hedging liability
      of
      $28.0 million and $20.1 million, respectively. Ineffective hedge gains or losses
      recorded by Atlas Pipeline are included in the Company’s Consolidated Statements
      of Income while the hedge contracts are open and may increase or decrease until
      settlement of the contract. Atlas Pipeline recognized losses of $3.0 million
      and
      $2.4 million, for the three months ended March 31, 2007 and 2006,
      respectively, related to the settlement of qualifying hedge instruments. Atlas
      Pipeline also recognized losses of $1.3 million and a gain of $1.0 million
      for
      the three months ended March 31, 2007 and 2006, respectively, related to
      the change in market value of non-qualifying or ineffective hedges. Such gains
      and losses are included within transmission, gathering and processing in the
      Company’s Consolidated Statements of Income.




Derivatives
      are recorded on the Company’s Consolidated Balance Sheets as assets or
      liabilities at fair value. At March 31, 2007 and December 31, 2006, the Company
      reflected a net hedging liability and asset on its balance sheets of $27.3
      million, respectively, when combining the above hedges of Atlas Energy and
      Atlas
      Pipeline. Of the $1.8 million net loss in accumulated other comprehensive income
      at March 31, 2007, the Company will reclassify $1.2 million of losses to
      its Consolidated Statements of Income over the next twelve month period as
      these
      contracts expire, and $600,000 of losses will be reclassified in later periods
      if the fair values of the instruments remain at current market values. Actual
      amounts that will be reclassified will vary as a result of future price changes.


15







**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      8 — DERIVATIVE INSTRUMENTS - (Continued)**





As
      of
      March 31, 2007, the Company had the following financial hedges in
      place:





**ATLAS
      ENERGY RESOURCES HEDGES**


**Natural
      Gas Fixed Price Swaps**





**Twelve
                    Month**
                **Period
                  Ending**
              **March
                31**
            
            **Volumes**
            
            **Average**
              **Fixed
                Price**
            
            **Fair
                  Value**Asset/(Liability)**(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2008
            
            
            16,380,000
            
            $
            8.676
            
            $
            1,3422009
            
            
            16,080,000
            
            
            8.599
            
            
            6112010
            
            
            14,040,000
            
            
            8.195
            
            
            1,1332011
            
            
            7,950,000
            
            
            7.572
            
            
            (1,440
            )2012
            
            
            3,600,000
            
            
            7.365
            
            
            (46
            )$
            1,600





**Natural
      Gas Costless Collars**





**Twelve
                Month****Period
                Ending**
            
            
            
            
            
            **Average**
            
            **Fair
                Value****March
                31**
            
            **Option
                Type**
            
            **Volumes**
            
            **Floor
                and Cap**
            
            **Asset/(Liability)****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2008
            
            
            Puts
                purchased
            
            
            1,200,000
            
            $
            7.500
            
            $
            —2008
            
            
            Calls
                sold
            
            
            1,200,000
            
            
            8.600
            
            
            (364
            )2008
            
            
            Puts
                purchased
            
            
            390,000
            
            
            7.500
            
            
            —2008
            
            
            Calls
                sold
            
            
            390,000
            
            
            9.400
            
            
            (465
            )2009
            
            
            Puts
                purchased
            
            
            1,170,000
            
            
            7.500
            
            
            —2009
            
            
            Calls
                sold
            
            
            1,170,000
            
            
            9.400
            
            
            (84
            )$
            (913
            )Total
                Atlas Energy Resources net asset
            
            
            
            $
            687







**ATLAS
      PIPELINE HEDGES**


**Natural
      Gas Fixed - Price Swaps (Liquids Sales)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Asset/(Liability)****(2)****(gallons)**
            
            **(per
                gallon)**
            
            **(in
                thousands)**2007
            
            
            71,631,000
            
            $
            0.901
            
            $
            (9,221
            )2008
            
            
            33,012,000
            
            
            0.697
            
            
            (9,076
            )2009
            
            
            8,568,000
            
            
            0.746
            
            
            (2,113
            )$
            (20,410
            )





**Natural
      Gas Fixed - Price Swaps (Sales)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Asset/(Liability)****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            810,000
            
            $
            7.255
            
            $
            (798
            )2008
            
            
            240,000
            
            
            7.270
            
            
            (395
            )2009
            
            
            480,000
            
            
            8.000
            
            
            (162
            )$
            (1,355
            )






16


**ATLAS
        AMERICA, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**
 **March
        31, 2007**
 (Unaudited)


**Natural
      Gas Basis Swaps (Sales)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Asset****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            810,000
            
            $
            (0.535
            )
            $
            3622008
            
            
            240,000
            
            
            (0.555
            )
            
            1502009
            
            
            480,000
            
            
            (0.540
            )
            
            50$
            562





**Natural
      Gas Fixed Price (Purchase)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Liability****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            5,220,000
            
            $
            8.854
            **(4)**
            $
            (4,926
            )2008
            
            
            4,056,000
            
            
            8.719
            **(5)**
            
            (733
            )2009
            
            
            2,088,000
            
            
            8.343
            
            
            (19
            )$
            (5,678
            )


**Natural
      Gas Basis (Purchase)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Liability****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            5,220,000
            
            $
            (0.907
            )
            $
            (322
            )2008
            
            
            4,056,000
            
            
            (1.028
            )
            
            (211
            )2009
            
            
            2,880,000
            
            
            (0.592
            )
            
            (150
            )$
            (683
            )


**Crude
      Oil Fixed - Price Swaps (Sales)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Liability****(3)****(barrels)**
            
            **(per
                barrel)**
            
            **(in
                thousands)**2007
            
            
            57,800
            
            $
            56.192
            
            $
            (717
            )2008
            
            
            65,400
            
            
            59.424
            
            
            (689
            )2009
            
            
            33,000
            
            
            62.700
            
            
            (207
            )$
            (1,613
            )


**Crude
      Oil Options (Sales)**





**Production****Period
                Ended**
            
            
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Option
                Type**
            
            **Volumes**
            
            **Strike
                Price**
            
            **Asset/(Liability)****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            Puts
                purchased
            
            
            9,900
            
            $
            60.000
            
            $
            132007
            
            
            Calls
                sold
            
            
            9,900
            
            
            73.380
            
            
            (27
            )2008
            
            
            Puts
                purchased
            
            
            43,800
            
            
            60.000
            
            
            (25
            )2008
            
            
            Calls
                sold
            
            
            43,800
            
            
            79.544
            
            
            (166
            )2009
            
            
            Puts
                purchased
            
            
            30,000
            
            
            60.000
            
            
            1222009
            
            
            Calls
                sold
            
            
            30,000
            
            
            71.250
            
            
            (196
            )$
            (279
            )











17





**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      8 — DERIVATIVE INSTRUMENTS - (Continued)**





**Crude
      Oil Sales Options (associated with NGL volumes)**





**Production**
              
              
              
              
              
              
              
              
              
              **Fair
                  Value****Period
                  Ended**
              
              
              
              **Crude**
              
              **Associated**
              
              **Average
                  crude**
              
              **Asset/****December
                  31,**
              
              **Option
                  Type**
              
              **Volumes**
              
              **NGL
                  Volumes**
              
              **Strike
                  Price**
              
              **(Liability)****(3)****(barrels)**
              
              **(gallons)**
              
              **(per
                  barrel)**
              
              **(in
                  thousands)**2008
              
              
              Puts
                  purchased
              
              
              693,600
              
              
              38,744,000
              
              $
              60.000
              
              
              2,5262008
              
              
              Calls
                  sold
              
              
              693,600
              
              
              38,744,000
              
              
              84.000
              
              
              (2,570
              )2009
              
              
              Puts
                  purchased
              
              
              720,000
              
              
              40,219,000
              
              
              60.000
              
              
              3,3142009
              
              
              Calls
                  sold
              
              
              720,000
              
              
              40,219,000
              
              
              81.000
              
              
              (1,838
              )$
              1,432Total
                  Atlas Pipeline net liability
              
              
              
              
              
              
              
              
              
              
              $
              (28,024
              )Total
                  Atlas America net liability
              
              
              
              
              
              
              
              
              
              
              $
              (27,337
              )





(1)
            
            MMBtu
              represents million British Thermal Units.(2)
            
            Fair
                value based upon management estimates, including forecasted forward
                NGL
                prices as a function of forward NYMEX natural gas and light crude
                prices.(3)
            
            Fair
                value based on forward NYMEX natural gas and light crude prices,
                as
                applicable.(4)
            
            Includes
                Atlas Pipeline’s premium received from its sale of an option for it to
                sell 3,600,000 mmbtu of natural gas at an average price of $14.33
                per
                MMBtu for the year ended December 31, 2007.(5)
            
            Includes
                Atlas Pipeline’s premium received from its sale of an option for it to
                sell 936,000 MMBtu of natural gas for the year ended
                December 31, 2008 at $15.50 per MMBtu.The
                following table sets forth the book and estimated fair values of
                derivative instruments at the dates indicated (in
                thousands):








**March
                  31, 2007**
              
              **December
                  31, 2006****Book
                  Value**
              
              **Fair
                  Value**
              
              **Book
                  Value**
              
              **Fair
                  Value**AssetsDerivative
                  instruments
              
              $
              18,684
              
              $
              18,684
              
              $
              57,203
              
              $
              57,203$
              18,684
              
              $
              18,684
              
              $
              57,203
              
              $
              57,203LiabilitiesDerivative
                  instruments
              
              $
              (46,021
              )
              $
              (46,021
              )
              $
              (29,874
              )
              $
              (29,874
              )$
              (46,021
              )
              $
              (46,021
              )
              $
              (29,874
              )
              $
              (29,874
              )$
              (27,337
              )
              $
              (27,337
              )
              $
              27,329
              
              $
              27,329





18





**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      9 — OPERATING SEGMENT INFORMATION**





The
      Company’s operations include three reportable operating segments.  These
      operating segments reflect the way the Company manages its operations and makes
      business decisions. The Company does not allocate income taxes to its operating
      segments.  Operating segment data for the periods indicated are as follows
      (in thousands):





**Three
                Months Ended March 31,****2007**
            
            **2006****Gas
                and oil production**Revenues
            
            $
            21,260
            
            $
            22,866Costs
                and expenses
            
            
            (2,034
            )
            
            (1,905
            )Segment
                profit
            
            $
            19,226
            
            $
            20,961**Well
                construction and completion**Revenues
            
            $
            72,378
            
            $
            50,883Costs
                and expenses
            
            
            (62,932
            )
            
            (44,246
            )Segment
                profit
            
            $
            9,446
            
            $
            6,637**Atlas
                Pipeline**Revenues
            
            $
            109,724
            
            $
            110,348Revenues
                - affiliates
            
            
            7,733
            
            
            7,894Costs
                and expenses
            
            
            (95,451
            )
            
            (91,342
            )Segment
                profit
            
            $
            22,006
            
            $
            26,900**Reconciliation
                of segment profit to net income before taxes**Segment
                profitGas
                and oil production
            
            $
            19,226
            
            $
            20,961Well
                construction and completion
            
            
            9,446
            
            
            6,637Atlas
                Pipeline
            
            
            22,006
            
            
            26,900Total
                segment profit
            
            
            50,678
            
            
            54,498General
                and administrative expenses
            
            
            (14,457
            )
            
            (12,908
            )Compensation
                reimbursement - affiliate
            
            
            (308
            )
            
            (415
            )Depreciation,
                depletion and amortization
            
            
            (12,401
            )
            
            (10,102
            )Other
                income (expense) - net (a)
            
            
            (7,245
            )
            
            (13,040
            )Net
                income before taxes
            
            $
            16,267
            
            $
            18,033**Capital
                expenditures**Gas
                and oil production
            
            $
            21,494
            
            $
            14,881Well
                construction and completion
            
            
            -
            
            
            -Atlas
                Pipeline
            
            
            18,377
            
            
            14,943Corporate
                and other
            
            
            583
            
            
            409$
            40,454
            
            $
            30,233**March
                31, 2007**
            
            
            **December
                31, 2006****Balance
                sheet**GoodwillGas
                and oil production
            
            $
            21,527
            
            $
            21,527Well
                construction and completion
            
            
            6,389
            
            
            6,389Atlas
                Pipeline
            
            
            63,441
            
            
            63,441Corporate
                and other
            
            
            7,250
            
            
            7,250$
            98,607
            
            $
            98,607Total
                assetsGas
                and oil production
            
            $
            358,959
            
            $
            377,807Well
                construction and completion
            
            
            8,558
            
            
            8,335Atlas
                Pipeline
            
            
            784,740
            
            
            787,128Corporate
                and other
            
            
            104,889
            
            
            203,656$
            1,257,146
            
            $
            1,376,926





(a)
            Includes
                revenue and expense from well services, transportation and administration
                and oversight of $1,753 and ($1,393) that do not meet the quantitative
                threshold for reporting segment information for the three months
                ended
                March 31, 2007 and 2006,
                respectively.





Operating
      profit (loss) per segment represents total revenues less costs and expenses
      attributable thereto, excluding interest, provision for possible losses and
      depreciation, depletion and amortization, and general corporate
      expenses.





19


**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)





**NOTE
      10 — COMMITMENTS AND CONTINGENCIES**





The
      Company is a party to various routine legal proceedings arising out of the
      ordinary course of its business. Management believes that none of these actions,
      individually or in the aggregate, will have a material adverse effect on its
      financial condition or results of results of operations.





One
      of
      the Company’s subsidiaries, Resource Energy, LLC, together with Resource
      America, Inc. (the Company’s former parent) was a defendant in a class action
      originally filed in February 2000 in the New York Supreme Court, Chautauqua
      County, by individuals, putatively on their own behalf and on behalf of
      similarly situated individuals, who leased property to the Company. The
      complaint alleged that the Company was not paying landowners the proper amount
      of royalty revenues with respect to natural gas produced from the leased
      properties. The complaint was seeking damages in an unspecified amount for
      the
      alleged difference between the amount of royalties actually paid and the amount
      of royalties that allegedly should have been paid. In April 2007, a settlement
      of this lawsuit was approved by the court. Pursuant to the settlement terms,
      the
      Company has agreed to pay $300,000, upgrade certain gathering systems and cap
      certain transportation expenses chargeable to the land owners.





As
      of
      March 31, 2007, Atlas Pipeline is committed to expend approximately $50.5
      million on pipeline extensions, compressor station upgrades and processing
      facility upgrades.





**NOTE
      11 — BENEFIT PLANS**




The
      Company follows the provisions of SFAS No. 123(R), *Share-Based
      Payment* ,
      as
      revised (“SFAS No. 123(R)”), to account for stock incentive compensation plans.
      Generally, the approach to accounting in SFAS No. 123(R) requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the financial statements based on their fair values. Under
      various plans described below, employees and non-employee directors have
      received stock/unit options and stock/unit grants, and as a result, the Company
      charged to General and administrative expenses compensation cost of $4.0 million
      and $2.7 for the three months ended March 31, 2007 and 2006, respectively.
      At
      March 31, 2007, the Company had unamortized compensation expense of $34.2
      million that the Company expects to recognize over approximately four years.
      The
      Company issues new shares when options are exercised or units are converted
      to
      shares. Summarized
      information related to each of the Company’s stock incentive compensation plans
      is described in the following paragraphs.





20






**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)




**NOTE
      11 — BENEFIT PLANS - (Conti** **nued)**




*Atlas
      America Long Term Incentive Plan.* The
      Company adopted a Stock Incentive Plan (the “Plan”) in 2004 which authorized the
      granting of up to 2.0 million shares of the Company’s common
      stock.




No
        options or grants were awarded in the three months ended March 31, 2007.
        During
        this period, the Company received $95,500 from the exercise of 3,750 options.
        There were 1,225,775 options and 11,612 restricted and deferred units
        outstanding as of March 31, 2007.


*Atlas
      Energy Resources Long-Term Incentive Plan.* In
      December 2006, Atlas Energy Resources LLC adopted a Long-Term Incentive Plan
      (“ATN LTIP”), which authorized the granting of 3,742,000 Atlas Energy Class B
      common units.




In
      January, 2007 Atlas Energy granted unit option awards that expire 10 years
      from
      the date of grant, and will vest over a four year service period. The
      Black-Scholes option pricing model was used to estimate the fair value of $2.41
      per option with the following assumptions (a) expected dividend yield of 8.0%,
      (b) risk-free interest rate of 4.7%, (c) expected volatility of 25%, and (d)
      an
      expected life of 6.25 years. The following table sets forth the ATN LTIP option
      activity for the three months ended March 31, 2007:




**Weighted
                  Average**
              
              **Aggregate****Weighted
                  Average**
              
              **Remaining**
              
              **Intrinsic****Shares**
              
              **Exercise
                  Price**
              
              **Contractual
                  Term**
              
              **Value****(in
                  Years)**
              
              **(in
                  Thousands)**Outstanding
                  at December 31, 2006
              
              
              373,752
              
              $
              21.00
              
              
              9.3Granted
              
              
              1,297,600
              
              $
              23.06
              
              
              9.8Outstanding
                  at March 31, 2007
              
              
              1,671,352
              
              $
              22.60
              
              
              9.6
              
              $
              6,769Options
                  exercisable at March 31, 2007
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -Available
                  for grant
              
              
              1,512,029






In
      addition, Atlas Energy has granted restricted and phantom units that vest over
      a
      four year period. Each unit entitles the grantee to one common unit upon
      vesting, as well as distribution equivalent rights during the period the unit
      is
      outstanding. The following table sets forth the ATN LTIP restricted and phantom
      unit activity for the three months ended March 31, 2007:




**Weighted
                  Average****Units**
              
              **Grant
                  Date Fair Value**Outstanding
                  at December 31, 2006
              
              
              47,619
              
              $
              21.00Granted
              
              
              511,000
              
              $
              23.06Outstanding
                  at March 31, 2007
              
              
              558,619
              
              $
              22.88




*Atlas
      Pipeline Holdings, L.P. Long-Term Incentive Plan.* In
      November 2006, AHD adopted a Long-Term Incentive Plan (“AHD LTIP”), which authorized
      the grant of 2,100,000 common units. No options or grants were awarded or were
      exercised in the three months ended March 31, 2007. There were 1,215,000 options
      and 220,000 phantom units outstanding as of March 31, 2007.




*Atlas
        Pipeline Long-Term Incentive Plan.* Atlas
        Pipeline has a Long-Term Incentive Plan (“APL LTIP”), which authorized the grant
        of 435,000 common units. Only phantom units that vest over a four year service
        period have been granted under the APL LTIP through March 31, 2007. Each
        unit entitles the grantee to one common unit upon vesting, as well as
        distribution equivalent rights during the period the unit is outstanding.
        The
        following table represents the APL LTIP phantom unit activity for the three
        months ended March 31, 2007:





21




**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**MARCH
      31, 2007**


(Unaudited)




**NOTE
      11 — BENEFIT PLANS - (Continued)**





**Weighted
                  Average****Units**
              
              **Grant
                  Date Fair Value**Outstanding
                  at December 31, 2006
              
              
              159,067
              
              $
              45.51Granted
              
              
              24,792
              
              $
              50.10Outstanding
                  at March 31, 2007
              
              
              183,859
              
              $
              46.11









Atlas
      Pipeline also has incentive compensation agreements which have granted awards
      to
      certain key employees retained from previously consummated acquisitions. These
      individuals are entitled to receive common units of Atlas Pipeline upon
      achievement of pre-determined performance .
      Based
      on Atlas Pipeline management’s estimate of the probable outcome of the
      performance targets, 223,039 common units are ultimately expected to be issued
      under these agreements, during the period September 2007 through December 2008.




*Supplemental
      Employment Retirement Plan (“SERP”).* The
      Company has an employment agreement with its Chairman of the Board, Chief
      Executive Officer and President, Edward E. Cohen, pursuant to which the Company
      has agreed to provide him with a SERP and with certain financial benefits upon
      termination of his employment. Under the SERP, Mr. Cohen will be paid an
      annual benefit equal to the product of (a) 6.5% multiplied by, (b) his
      base salary at the time of his retirement, death or other termination of
      employment with the Company, multiplied by, (c) the amount of years
      he is employed by the Company commencing upon the effective date of the
      SERP agreement, limited to an annual maximum benefit of 65% of his final base
      salary and a minimum of 26% of his final base salary. During the three months
      ended March 31, 2007 and 2006 operations were charged $162,000 and $40,000,
      respectively, with respect to this commitment.







**NOTE
      12 — DUTCH AUCTION TENDER OFFER**







On
      January 30, 2007, the Company announced that the Board of Directors had
      authorized a “Dutch Auction” tender offer for up to 1,950,000 shares of the
      Company’s common stock at an anticipated offer range of between $52.00 and
      $54.00 per share. The tender offer commenced on February 8, 2007 and
      expired on March 9, 2007. In connection with this offering, the Company
      purchased 1,486,605 shares at a cost of $80.4 million, including
      expenses.







22


**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


**March
      31, 2007**


(Unaudited)







**NOTE
      13 — CASH DISTRIBUTIONS**




The
        Company receives quarterly cash distributions from Atlas Pipeline Holdings
        and
        Atlas Energy Resources according to the policies described
        below.




*Atlas
      Pipeline Holdings Cash Distributions.* Upon
      completion of its initial public offering, AHD adopted a cash distribution
      policy under which it distributes, within 50 days after the end of each quarter,
      all of its available cash (as defined in its partnership agreement) for that
      quarter to its common unitholders. Distributions declared by AHD and paid to
      the
      Company from inception are as follows:







**Date
                Cash**
              **Distribution
                Paid**
            
            **For
                Quarter**
              **Ended**
            
            **Cash
                Distribution per**
              **Common
                Limited Partner Unit**
            
            **Total
                Cash Distribution to the Company (in thousands)**November
                19, 2006
            
            
            September
                30, 2006
            
            $
            0.17
            (1)
            $
            2,975February
                19, 2007
            
            
            December
                31, 2006
            
            $
            0.25
            
            $
            4,375




__________________________




(1)
            Represents
                a pro-rated cash distribution of $0.24 per common unit for the period
                from
                July 26, 2006, the date of the AHD’s initial public offering, through
                September 30, 2006.









On
      April
      26, 2007, AHD declared a cash distribution of $0.25 per unit on its outstanding
      common limited partner units. The $4.4 million distribution to the Company
      will
      be paid on May 18, 2007.









*Atlas
      Energy Resources Cash Distributions.* Upon
      completion of its initial public offering, Atlas Energy adopted a cash
      distribution policy under which it distributes, within 45 days after the end
      of
      each quarter, all of its available cash (as defined in its limited liability
      agreement) for that quarter. Distributions declared by Atlas Energy and paid
      to
      the Company from inception are as follows:







**Date
                Cash**
              **Distribution
                Paid**
            
            **For
                Quarter**
              **Ended**
            
            **Cash
                Distribution per**
              **Common
                Unit**
            
            **Total
                Cash Distribution to the Company (in thousands)**February
                14, 2007
            
            
            December
                31, 2006
            
            $
            0.06
            (1)
            $
            1,806




__________________________




(1)
            Represents
                a pro-rated cash distribution of $0.42 per unit for the period from
                December 18, 2006, the date of Atlas Energy’s initial public offering,
                through December 31, 2006.









On
      April
      26, 2007, Atlas Energy declared a cash distribution of $0.43 per unit on its
      outstanding common units, representing the cash distribution for the quarter
      ended March 31, 2007. The $12.9 million distribution to the Company will be
      paid
      on May 15, 2007.


23


**ATLAS
      AMERICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**


March
      31, 2007


(Unaudited)






**NOTE
      14 — SUBSEQUENT EVENTS**




On
      April
      27, 2007, the Company announced that its Board of Directors had approved a
      3-for-2 stock split to be effected in the form of a stock dividend. Shareholders
      of record as of May 15, 2007 will receive one additional share of common stock
      for each two shares of common stock they own on that date. The shares will
      be
      distributed on or about May 25, 2007. Information pertaining to shares and
      earnings per share has not been restated in the accompanying financial
      statements and notes to the consolidated financial statements to reflect this
      split. This information will be presented effective after the stock dividend
      is
      distributed (in the Company’s June 30, 2007 interim financial
      statements).





On
      April
      27, 2007, the Company also announced that its Board of Directors has declared
      its first quarterly cash dividend of $0.05 per share of common stock, payable
      on
      May 15, 2007, to shareholders of record on May 8, 2007.





On
      April 18, 2007, Atlas Pipeline amended the terms of its $40.0 million of
      preferred limited partner unit financing arrangement with Sunlight Capital
      Partners (“Sunlight”). Under the amended provisions of the financing
      arrangement, the stated 6.5% per annum dividend on the preferred units will
      accrue, but not be payable until March 13, 2008. The conversion of the
      preferred units, at Sunlight’s option, will be postponed until the date
      immediately following the first common unit distribution record date after
      March
      13, 2008. In addition, the conversion price for the preferred units was
      increased to the lesser of $43.00 or 95% of the market price of Atlas Pipeline’s
      common units as of the date of notice of conversion. In connection with this
      amended arrangement, Atlas Pipeline provided Sunlight a premium on its preferred
      units through the issuance of approximately $8.5 million of its 8.125% senior
      unsecured notes at 103% of their par value.





24


**Item
      2.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      (Unaudited)**




*When
      used in this Form 10-Q, the words “believes” “anticipates,” “expects” and
      similar expressions are intended to identify forward-looking statements. 
Such statements are subject to certain risks and uncertainties more particularly
      described in Item 1A, under the caption “Risk Factors”, in our annual report on
      Form 10-K/A for fiscal 2006.  These risks and uncertainties could cause
      actual results to differ materially.  Readers are cautioned not to place
      undue reliance on these forward-looking statements, which speak only as of
      the
      date hereof.  We undertake no obligation to publicly release the results of
      any revisions to forward-looking statements which we may make to reflect events
      or circumstances after the date of this Form 10-Q or to reflect the occurrence
      of unanticipated events, except as may be requested by applicable
      law.*




**General**





We
      are an
      energy company engaged, through subsidiaries, in the development, production
      and
      transportation of natural gas and, to a lesser extent, oil.




We
      conduct our development and production operations through Atlas Energy
      Resources, LLC (NYSE: ATN), which we refer to as Atlas Energy, or ATN, in which
      we own approximately 80% of the common units. Atlas Energy focuses its
      operations in the Appalachian Basin.




We
      conduct our natural gas transportation and processing operations through Atlas
      Pipeline Partners, L.P. (NYSE: APL), which we refer to as Atlas Pipeline, or
      APL. The general partner of Atlas Pipeline is Atlas Pipeline Partners GP, LLC,
      which we refer to as Atlas Pipeline GP, a wholly-owned subsidiary of Atlas
      Pipeline Holdings, L.P. (NYSE: AHD), which we refer to as Atlas Pipeline
      Holdings, or AHD, in which we own an 82.9% interest. Atlas Pipeline GP has
      a 2%
      general partner interest, a 12.5% limited partner interest and all the incentive
      distribution rights in Atlas Pipeline.




On
      June 15, 2006, our Board of Directors changed our year end from
      September 30 to December 31. Accordingly, these consolidated financial
      statements reflect the Company’s new year-end of December 31 and year-to-date
      amounts are for the three month periods ended March 31, 2007 and
      2006.





**Recent
      Developments**






*Stock
      and Cash Dividend.* On April
      27, 2007, our Board of Directors approved a 3-for-2 stock split to be effected
      in the form of a stock dividend. Shareholders of record as of May 15, 2007
      will
      receive one additional share of common stock for each two shares of common
      stock
      they own on that date. The shares will be distributed on or about May 25, 2007.
      Also, on April 27, 2007, our Board of Directors declared a cash dividend of
      $.05
      per share, payable on May 15, 2007, to shareholders of record on May 8, 2007.




*Investment by
      Atlas Lightfoot, LLC.* On
      February 21, 2007, our subsidiary, Atlas Lightfoot, LLC, invested $931,000
      in Lightfoot Capital Partners LP, or Lightfoot, and will own, directly and
      indirectly, approximately 18% of Lightfoot Capital Partners GP, LLC, the general
      partner of Lightfoot. We have committed to invest a total of $20.0 million
      in
      Lightfoot. We will also receive certain co-investment rights until such point
      as
      Lightfoot raises additional capital through a private offering to institutional
      investors or a public offering. Lightfoot has initial equity funding commitments
      of approximately $160.0 million and intends to focus its investments primarily
      on incubating new master limited partnerships, or MLPs, and providing capital
      to
      existing MLPs in need of additional equity or structured debt. Lightfoot will
      concentrate on assets that are MLP-qualified such as infrastructure, coal,
      and
      other asset categories and intends to form new MLPs in partnership with
      management teams in sectors that have under-utilized by the MLP structure.




*Dutch
      Tender Offer.* On
      January 30, 2007, we announced that the Board of Directors had authorized a
“Dutch Auction” tender offer for up to 1,950,000 shares of the Company’s common
      stock at an anticipated offer range of between $52.00 and $54.00 per share.
      The
      tender offer commenced on February 8, 2007 and expired on March 9,
      2007. In connection with this offering, we purchased 1,486,605 shares at a
      cost
      of $80.4 million, including expenses.




**General
      Trends and Outlook**







*Atlas
      Pipeline.* The
      midstream natural gas industry links the exploration and production of natural
      gas and the delivery of its components to end-use markets and provides natural
      gas gathering, compression, dehydration, treating, conditioning, processing,
      fractionation and transportation services. This industry group is generally
      characterized by regional competition based on the proximity of gathering
      systems and processing plants to natural gas producing wells.




25





Atlas
      Pipeline faces competition for natural gas transportation and in obtaining
      natural gas supplies for its processing and related services operations.
      Competition for natural gas supplies is based primarily on the location of
      gas-gathering facilities and gas-processing plants, operating efficiency and
      reliability, and the ability to obtain a satisfactory price for products
      recovered. Competition for customers is based primarily on price, delivery
      capabilities, and maintenance of high-quality customer relationships. Many
      of
      Atlas Pipeline’s competitors operate as master limited partnerships and enjoy a
      cost of capital comparable to and, in some cases lower than, theirs. Other
      competitors, such as major oil and gas and pipeline companies, have capital
      resources and control supplies of natural gas substantially greater than theirs.
      Smaller local distributors may enjoy a marketing advantage in their immediate
      service areas. Atlas Pipeline believes the primary difference between it and
      some of its competitors is that they provide an integrated and responsive
      package of midstream services, while some of their competitors provide only
      certain services. Atlas Pipeline believes that offering an integrated package
      of
      services, while remaining flexible in the types of contractual arrangements
      that
      it offers producers, allows it to compete more effectively for new natural
      gas
      supplies in their regions of operations.





As
      a
      result of Atlas Pipeline’s POP and keep-whole contracts, its results of
      operations and financial condition substantially depend upon the price of
      natural gas and NGLs. Atlas Pipeline believes that future natural gas prices
      will be influenced by supply deliverability, the severity of winter and summer
      weather and the level of United States economic growth. Based on historical
      trends, Atlas Pipeline generally expects NGL prices to follow changes in crude
      oil prices over the long term, which it believes will in large part be
      determined by the level of production from major crude oil exporting countries
      and the demand generated by growth in the world economy. The number of active
      oil and gas rigs has increased in recent years, mainly due to recent significant
      increases in natural gas prices, which could result in sustained increases
      in
      drilling activity during the current and future periods. However, energy market
      uncertainty could negatively impact North American drilling activity in the
      short term. Lower drilling levels over a sustained period would have a negative
      effect on natural gas volumes gathered and processed.





*Atlas
      Energy.* As
      a
      driller for and producer of natural gas, Atlas Energy’s results of operations
      and financial condition, like those of Atlas Pipeline, substantially depend
      on
      the price of natural gas and are affected by the same factors. Because of the
      current high levels ofnatural gas prices Atlas Energy expects that not
      withstanding short-term market uncertainty that may cause short-term declines
      in
      drilling activity, there will continue to be relatively high levels of natural
      gas-related drilling in the United States as producers seek to increase their
      level of natural gas production. However fluctuations in energy
      prices can greatly affect production rates and investments by third parties
      in
      the development of new natural gas reserves including investments in our
      drilling investment partnerships. Drilling activity generally decreases as
      natural gas prices decrease. Atlas Energy has no control over the level of
      drilling activity in the areas of its operations.





**Results
      of Operations for the Three Months Ended March 31, 2007 Compared to the Three
      Months Ended March 31, 2006**





***Well
      Construction and Completion***





Our
      well
      construction and completion revenues and costs and expenses incurred represent
      the billings and costs associated with the completion of wells for drilling
      investment partnerships we sponsor.  The following table sets forth
      information relating to these revenues and the related costs, gross profit
      margins and number of net wells drilled during the periods indicated (dollars
      in
      thousands):





**Three
                Months Ended****March
                31,****2007**
            
            **2006**Average
                construction and completion revenue per well
            
            $
            299
            
            $
            291Average
                construction and completion cost per well
            
            
            260
            
            
            253Average
                construction and completion gross profit per well
            
            $
            39
            
            $
            38Gross
                profit margin
            
            $
            9,446
            
            $
            6,637Net
                wells drilled
            
            
            242
            
            
            175





26





Our
      well
      construction and completion segment margin was $9.4 million in the three months
      ended March 31, 2007, an increase of $2.8 million (42%) from $6.6 million in
      the
      three months ended March 31, 2006.  During the three months ended March 31,
      2007, the increase of $2.8 million in segment margin was attributable to an
      increase in the number of wells drilled ($2.5 million) and an increase in the
      gross profit per well ($268,000). The increase in the number of wells drilled
      is
      the result of an increase in our fundraising in fiscal 2006. It should be noted
      that “Liabilities associated with drilling contracts” on our balance sheet
      includes $6.9 million of funds raised in our drilling investment programs in
      calendar 2006 that have not been applied to the completion of wells as of March
      31, 2007 due to the timing of drilling operations, and thus had not been
      recognized as well drilling revenue.  We expect to recognize this amount as
      revenue in the second quarter of fiscal 2007. During fiscal 2006 we raised
      $218.5 million and plan to raise approximately $270.0 million fiscal 2007.
      We
      anticipate favorable oil and gas prices will continue to favorably impact our
      fundraising and therefore our drilling revenues in the remainder of fiscal
      2007.





***Gas
      and Oil Production***





The
      following table sets forth information relating to our production revenues,
      production volumes, sales prices, production costs and depletion for the periods
      indicated:





**Three
                Months Ended****March
                31,****2007**
            
            **2006**Production
                revenues (in thousands):Gas(1)
            
            $
            19,427
            
            $
            20,492Oil
            
            $
            1,826
            
            $
            2,365Production
                volumes(2):Gas (mcf/day)(1)
            
            
            23,681
            
            
            20,866Oil (bbls/day)
            
            
            359
            
            
            423Total (mcfe/day)(3)
            
            
            25,835
            
            
            23,404Average
                sales prices:Gas (per mcf)(3)
            
            $
            9.12
            
            $
            10.91Oil (per bbl)(3)
            
            $
            56.52
            
            $
            62.13Production
                costs(4):As a percent of production revenues
            
            
            10
            %
            
            8
            %Per
                mcfe
            
            $
            .87
            
            $
            .90Depletion
                per mcfe
            
            $
            2.31
            
            $
            1.98




(1)
              
              Excludes sales of residual gas and
                sales to
                landowners.(2)
              
              Production quantities consist of the
                sum of
                (i) our proportionate share of production from wells in which we have
                a direct interest, based on our proportionate net revenue interest
                in such
                wells, and (ii) our proportionate share of production from wells
                owned by the investment partnerships in which we have an interest,
                based
                on our equity interest in each such partnership and based on each
                partnership’s proportionate net revenue interest in these wells.(3)
              
              Our average sales price before the
                effects of
                financial hedging was $7.85 and $9.37 per mcf for the three months
                ended
                March 31 2007 and 2006, respectively.(4)
              
              Production costs include labor to
                operate the
                wells and related equipment, repairs and maintenance, materials and
                supplies, property taxes, severance taxes, insurance and production
                overhead.


Our
      natural gas revenues were $19.4 million in the three months ended March 31,
      2007, a decrease of $1.1 million (5%) from $20.5 million in the three months
      ended March 31, 2006. The decrease was attributable to a 16% decrease in the
      average sales price of natural gas partially offset by a 13% increase in
      production volumes. The $1.1 million decrease in natural gas revenues consisted
      of a $3.4 million decrease attributable to decreases in natural gas sales
      prices and a $2.3 million increase attributable to increased production volumes.





The
      increase in our gas production volumes of 2,815 Mcf/d resulted from production
      associated with new wells drilled for our investment partnerships. We believe
      that gas volumes will continue to be favorably impacted in the remainder of
      2007
      as ongoing projects to extend and enhance the gathering systems of Atlas
      Pipeline are completed and wells drilled are connected in these areas of
      expansion.





27


Our
      oil
      revenues were $1.8 million in the three months ended March 31, 2007, a decrease
      of $539,000 (23%) from $2.4 million during the three months ended March 31,
      2006. The decrease resulted from a 9% decrease in the average sales price of
      oil, and a 15% decrease in production volumes. The $539,000 decrease consisted
      of $214,000 attributable to decreases in sales prices, and $325,000 attributable
      to volume decreases, as we drill primarily for natural gas rather than
      oil.





Our
      production costs were $2.0 million in the three months March 31, 2007, an
      increase of $129,000 (7%) from $1.9 million in the three months ended March
      31,
      2006.  This increase includes an increase in pumping labor and maintenance
      costs associated with an increase in the number of wells we own and operate
      from
      the prior year period. The increase in production costs as a percent of
      production revenues in the three months ended March 31, 2007 as compared to
      March 31, 2006 was due to a decrease in our average sales price per mcfe.





***Transmission,
      Gathering and Processing***





The
      following table presents selected volumetric information related to Atlas
      Pipeline for the periods indicated:





**Three
                Months Ended****March
                31, 2007**
            
            **March
                31, 2006****Operating
                data:**Appalachia
                system throughput volume (mcf/day)
            
            
            62,532
            
            
            57,326Velma
                system gathered gas volume (mcf/day)
            
            
            61,017
            
            
            60,715NOARK
                Ozark Gas Transmission throughput volume (mcf/day)
            
            
            286,891
            
            
            239,151Elk
                City/Sweetwater system gathered gas volume (mcf/day)
            
            
            287,892
            
            
            252,190Combined
                throughput volume (mcf/day)
            
            
            698,332
            
            
            609,382







Average
      throughput volume on Atlas Pipeline’s Appalachia system increased by 5.2 mmcf/d
      (9%) for the three months ended March 31, 2007 to 62.5 mmcf/d, principally
      due
      to new wells connected to its gathering system. Gross natural gas gathered
      volumes averaged 61.0 mmcf/d on the Velma system for the three months ended
      March 31, 2007, an increase of 0.5% from the comparable prior year period.
      Gathered natural gas volume on the Elk City system averaged 287.9 mmcf/d for
      the
      three months ended March 31, 2007, an increase of 14% from the comparable prior
      year period. For the NOARK system, average Ozark Gas Transmission throughput
      volume was 286.9 mmcf/d for the three months ended March 31, 2007, an increase
      of 20% from the prior year comparable period.





Our
      transmission, gathering and processing revenues were $117.5 million for the
      three months ended March 31, 2007, a decrease of $700,000 from $118.2
      million for the three months ended March 31, 2006. The decrease was
      attributable to a decrease of $11 million in revenue contributions from Atlas
      Pipeline’s NOARK system primarily due to lower natural gas sales volumes on its
      gathering systems, and a decrease of $2.9 million from the Velma system due
      to
      lower commodity prices compared to the prior year period. In addition, Atlas
      Pipeline recognized a $2.9 million increase in derivative losses from the prior
      year, due to unfavorable movements in commodity prices. This decrease was
      partially offset by an increase of $16.4 million from Atlas Pipeline’s Elk City
      system primarily due to an increase in volumes, which includes contributions
      from the newly constructed Sweetwater gas plant.





Transmission,
      gathering, and processing revenues above include revenues earned by Atlas
      Pipeline’s Appalachian segment under its master gas gathering agreement with us
      or Atlas Energy which is eliminated upon consolidation in our financial
      statements. Revenues earned under this agreement were approximately $7.7 million
      and $7.9 million the three months ended March 31, 2007 and 2006, respectively.
      This is offset by transportation revenues received by us from our investment
      partnerships for gathering services of $3.3 million and $2.3 million for the
      same periods.




Our
      transmission, gathering and processing costs and expenses were $95.5 million
      for
      the three months ended March 31, 2007, an increase of $4.1 million
      (4.5%) from $91.4 million for the three months ended March 31, 2006.
      The increase was primarily related to increased gathered and processed volumes
      on Atlas Pipeline’s Elk City system, which includes contributions from the
      Sweetwater processing facility, and higher NOARK and Appalachia system operating
      and maintenance costs as a result of additional capacity and additional well
      connections. These amounts were partially offset by a decrease from Atlas
      Pipeline’s NOARK gathering system natural gas purchases and a decrease in
      commodity prices on Atlas Pipeline’s Velma system.







28





***Administration
      and Oversight***





Our
      administrative and oversight fee represents supervision and administrative
      fees
      earned for drilling wells and ongoing monthly management fees from our
      investment partnerships. These fees were $4.5 million in the three months ended
      March 31, 2007, an increase of $1.2 million (37%) from $3.3 million in the
      three
      months ended March 31, 2006. This increase is attributable to an increase in
      the
      number of wells drilled and managed for our investment partnerships in the
      three
      months ended March 31, 2007 as compared to 2006.





***Well
      Services***





Our
      well
      services revenues were $3.7 million in the three months ended March 31, 2007,
      an
      increase of $955,000 (35%) from $2.8 million in the three months ended March
      31,
      2006. This increase resulted from an increase in the number of wells operated
      for our investment partnerships due to additional wells drilled in the twelve
      months ended March 31, 2007.





Our
      well
      services expenses were $2.0 in the three months ended March 31, 2007, an
      increase of $277,000 (16%) from $1.8 million in the three months ended March
      31,
      2006.  This increase was attributable to an increase in wages, benefits,
      and field office expenses associated with an increase in employees due to the
      increase in the number of wells we operate for our investment
      partnerships.





***General
      and Administrative***





Our
      general and administrative expenses, including net expense reimbursements to
      affiliate were $14.8 million in the three months ended March 31, 2007, an
      increase of $1.5 million from $13.3 million in the three months ended March
      31,
      2006. These expenses include, among other things, salaries and benefits not
      allocated to a specific segment, costs of running our corporate office,
      partnership syndication activities and outside services. The increase of $1.5
      million in the three months ended March 31, 2007 is principally attributable
      to
      general and administrative expenses related to Atlas Pipeline’s operations,
      which increased primarily as a result of an increase of $1.1 million related
      to
      stock compensation awards, and an increase of $445,000 in audit
      fees.





***Depletion***





Our
      depletion of oil and gas properties as a percentage of oil and gas revenues
      was
      25% in the three months ended March 31, 2007, compared to 18% in the three
      months ended March 31, 2006. Depletion expense per mcfe was $2.31 in the three
      months ended March 31, 2007, an increase of $0.33 (17%) per mcfe from $1.98
      in
      the three months ended March 31, 2006. Increases in our depletable basis and
      production volumes caused depletion expense to increase $1.2 million (28%)
      to
      $5.4 million in the three months ended March 31, 2007 compared to $4.2 million
      in the three months ended March 31, 2006. The variances from period to period
      are directly attributable to changes in our oil and gas reserve quantities,
      production levels, product prices and changes in the depletable cost basis
      of
      our oil and gas properties.





***Depreciation
      and Amortization***




Depreciation
      and amortization increased $1.1 million (19%) to $7.0 million in the three
      months ended March 31, 2007 compared to $5.9 million in the three months ended
      March 31, 2006. This was primarily due to the increased asset base associated
      with Atlas Pipeline’s acquisition of the NOARK assets in 2006 and expansion
      capital expenditures, particularly the construction of the Sweetwater processing
      facility.





***Interest
      Expense***





Our
      interest expense was $7.3 million in the three months ended March 31, 2007,
      an
      increase of $535,000 from $6.7 million in the three months ended March 31,
      2006.
      This resulted primarily from an increase in interest expense of $408,000 as
      a
      result of outstanding borrowings by Atlas Energy of $56.5 million under its
      credit facility.





***Minority
      Interests***




At
      March
      31, 2007, we owned 11% of the partnership interest in Atlas Pipeline through
      our
      ownership in AHD. Because we control the operations of APL, we include it in
      our
      consolidated financial statements and show the ownership by the public as
      minority interests. The minority interest income in AHD earnings was $695,000
      for in the three months ended March 31, 2007 and an expense of $6.3 million
      for the three months ended March 31, 2006, a decrease of $6.9 million in the
      three months ended March 31, 2007. This decrease is a result of a decrease
      in
      the non-cash allocation of Atlas Pipeline’s net income to
      the
      limited partners resulting from the allocation of incentive
      distributions to AHD, the general partner.




29




After
      the
      initial public offering of Atlas Energy on December 18, 2006, approximately
      19.4% is owned by the general public. We include Atlas Energy in our
      consolidated financial statements and show the ownership by the pubic as a
      minority interest. The minority interest expense in Atlas Energy was $3.9
      million for the three months ended March 31, 2007.





**Liquidity
      and Capital Resources**







*General.* We
      fund operations from a combination of sources. Atlas Energy funds its
      exploration and production operations from cash generated by operations, capital
      raised through drilling investment partnerships and, if required, use of its
      credit facility. Atlas Pipeline funds its operations through a combination
      of
      cash generated by operations, its credit facility and sales of its common units.


The
      following table sets forth our sources and uses of cash (in
      thousands):





**Three
                Months Ended****March
                31,****2007**
            
            **2006**Used
                in operations
            
            $
            (46,927
            )
            $
            (48,181
            )Used
                in investing activities
            
            
            (41,423
            )
            
            (30,119
            )Provided
                by (used in) financing activities
            
            
            (8,670
            )
            
            65,943Decrease
                in cash and cash equivalents
            
            $
            (97,020
            )
            $
            (12,357
            )







We
      had
      $88.4 million in cash and cash equivalents on hand at March 31, 2007, as
      compared to $185.4 million at December 31, 2006. Our ratio of earnings from
      continuing operations before income taxes, minority interest and interest
      expense to fixed charges was 5.0 to 1.0 for the three months ended
      March 31, 2007 and March 31, 2006. We had working capital of $26.9
      million, a decrease of $50.6 million from $77.5 at December 31, 2006. The
      decrease in our working capital reflects a decrease in our current assets of
      $139.4 million, partially offset by a decrease in our current liabilities of
      $88.8 million. The decrease in our current assets is primarily due to a decrease
      in cash of $97.0 million, a decrease in accounts receivable of $11.0 and a
      decrease of $22.0 million in the current portion of our hedge receivable. The
      decrease in cash was primarily a result of $80.4 million used to repurchase
      stock. The decrease in our current liabilities is primarily due to a decrease
      of
      $67.1 million in our liabilities associated with drilling contracts, related
      to
      the timing of funds raised and the subsequent use of those funds.




At March 31,
      2007, the borrowing base under Atlas Energy’s credit facility is $175.0 million,
      and it has $118.0 million available. At March 31, 2007, Atlas Pipeline has
      a borrowing base of $225.0 million under its credit facility, of which $164.9
      million is available. At March 31, 2007, AHD has a borrowing base of $50.0
      million, with no outstanding borrowings. See Note 7 to our Consolidated
      Financial Statements for information on Atlas Energy’s, Atlas Pipeline’s and
      AHD’s credit facilities at March 31, 2007.





*Cash
      flows from operating activities* . **** Cash
      provided by operations is an important source of short-term liquidity for
      us.  It is directly affected by changes in commodity prices, interest rates
      and our ability to raise funds from our drilling investment partnerships. 
Net ** cash
      used
      in operating activities decreased $1.3 million in the three months ended March
      31, 2007 to $46.9 million from $48.2 million in the three months ended March
      31,
      2007, substantially as a result of the following:





•
            
            an
                increase in net income before depreciation and amortization of $1.0
                million in the three months ended March 31, 2007 as compared to the
                prior
                year period, principally as a result of income included in our financial
                statements from our acquisitions, higher
                gross margins related to administrative and oversight and well services,and drilling profits;•
            
            an
                increase in non-cash items of $3.1 million related to losses on our
                hedge
                values and compensation expense resulting from grants under long-term
                incentive plans;•
            
            changes
                in minority interests and distributions paid to minority interests
                decreased by $5.2 million due to a decrease in the allocation of
                Atlas
                Pipeline’s earnings to the limited partners, offset by higher
                distributions paid to minority interests,•
            
            changes
                in our deferred tax liability decreased by $2.2 million as compared
                to the
                three months ended March 31, 2006 which reflects the impact of timing
                differences between accounting and tax records, and•
            
            changes
                in operating assets and liabilities increased operating cash flow
                by $4.6
                million in the three months ended March 31, 2007, compared to the
                three
                months ended March 31, 2006.






30





This change
      in operating assets and liabilities is primarily a result of the
      following:





•
            
            a
                decrease of $16.3 million in accounts payable and accrued liabilities,
                including liabilities associated with our drilling contracts, our
                level of
                liabilities associated with drilling contracts is dependent upon
                the
                remaining amount of our drilling obligations at any balance sheet
                date,
                which is dependent upon the timing of funds raised through our investment
                partnerships; and•
            
            an
                increase of $21.4 million in accounts receivable and prepaid expenses,
                primarily due to a decrease in Atlas Pipeline’s accounts receivable
                resulting from a decrease in commodity
                prices.





*Cash
      flows from investing activities.* **** Cash
      used
      in our investing activities increased $11.3 million in the three months ended
      March 31, 2007 to $41.4 million from $30.1 million in the three months ended
      March 31, 2006 primarily as a result of a $6.8 million increase in capital
      expenditures related to an increase in the number of wells we drilled, and
      a
      $3.4 million increase in capital expenditures related to pipeline expansions.





*Cash
      flows from financing activities.* Cash
      used
      in our financing activities increased $74.6 million in the three months ended
      March 31, 2007 to $8.7 million from cash provided of $65.9 million in the three
      months ended March 31, 2006, as a result of the following:





•
            
            we
                repurchased $80.4 million of common stock in a Dutch tender offer
                in the
                three months ended March 31, 2007; repurchases were $475,000 in the
                three
                months ended March 31, 2006;•
            
            net
                borrowings on debt increased by $34.9 million in the three months
                ended
                March 31, 2007 as compared to the prior year similar period principally
                as
                a result of the borrowings under Atlas Energy’s credit facility;
                and•
            
            we
                received proceeds of $30.0 million from Atlas Pipeline’s issuance of
                cumulative convertible preferred units in March 2006; there were
                no such
                offerings in the three months ended March 31, 2007.





*Capital
      Requirements:* During
      the three months ended March 31, 2007, our capital expenditures related
      primarily to investments in our drilling partnerships and pipeline expansions,
      in which we invested $22.1 million and $18.4 million, respectively.  For
      the three months ended March 31, 2007 and the remaining quarters of fiscal
      2007,
      we funded and expect to continue to fund these capital expenditures through
      cash
      on hand, borrowings under our credit facilities, and from operations.  We
      have established three credit facilities to fund our capital expenditures.





The
      level
      of capital expenditures we must devote to our exploration and production
      operations depends upon the level of funds raised through our drilling
      investment partnerships.  We believe cash flows from operations and amounts
      available under our credit facilities will be adequate to fund our contributions
      to these partnerships.  However, the amount of funds we raise and the level
      of our capital expenditures will vary in the future depending on market
      conditions for natural gas and other factors.





We
      continuously evaluate acquisitions of gas and oil and pipeline assets.  In
      order to make any acquisition, we believe we will be required to access outside
      capital either through debt or equity placements or through joint venture
      operations with other energy companies.  There can be no assurance that we
      will be successful in our efforts to obtain outside capital.





*Atlas
      Energy New Credit Facility.* In
      December 2006, Atlas Energy entered into a new $250.0 million credit
      facility, with a syndicate of lenders by Wachovia Bank, N.A., or Wachovia.
      The revolving credit facility borrowing base was increased to $175.0 million
      in
      March 2007, which may be redetermined subject to changes in Atlas Energy’s oil
      and gas reserves. Up to $50.0 million of the facility may be in the form of
      standby letters of credit. The facility is secured by Atlas Energy’s assets and
      bears interest at either the base rate plus the applicable margin or at an
      adjusted London Interbank Offered Rate, or LIBOR plus the applicable
      margin, elected at Atlas Energy’s option.




The
      Wachovia credit facility requires Atlas Energy to maintain specified ratios
      of
      current assets to current liabilities, interest coverage (as defined), and
      debt
      to earnings before interest, taxes, depreciation, depletion and amortization,
      or
      EBITDA. In addition, the facility limits sales, leases or transfers of assets
      and the incurrence of additional indebtedness. The facility limits the dividends
      payable by Atlas Energy if an event of default has occurred and is continuing
      or
      would occur as a result of such distribution. Atlas Energy is in compliance
      with
      these covenants as of March 31, 2007. The facility terminates in December
      2011, when all outstanding borrowings must be repaid. At March 31, 2007 and
      December 31, 2006, $57.0 million and $495,000, respectively, were
      outstanding under this facility including letters of credit of $495,000 at
      each
      date which are not reflected as borrowings on our Consolidated Balance Sheets.
      At March 31, 2007, the weighted average interest rate on outstanding borrowings
      was 8.5%.





31


**Contractual
      Obligations and Commercial Commitments**





The
      following table summarizes our contractual obligations at March 31, 2007.




Payments
                  Due By Period(in
                  thousands)Less
                  than
              
              2
                  -
                  3
              
              4
                  -
                  5
              
              After
                  5Contractual
                  cash obligations:
              
              Total
              
              1
                  Year
              
              Years
              
              Years
              
              YearsLong-term
                  debt(1)
              
              $
              395,579
              
              $
              81
              
              $
              48
              
              $
              109,500
              
              $
              285,950Secured
                  revolving credit facilities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Operating
                  lease obligations
              
              
              6,769
              
              
              3,728
              
              
              2,731
              
              
              309
              
              
              1Capital
                  lease obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Unconditional
                  purchase obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Other
                  long-term obligation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Total
                  contractual cash obligations
              
              $
              402,348
              
              $
              3,809
              
              $
              2,779
              
              $
              109,809
              
              $
              285,951





(1)
            
            Not
                included in the table above are estimated interest payments calculated
                at
                the rates in effect at March 31, 2007 of: 2008 - $31.9 million; 2009
                -
                $31.9 million; 2010 - $31.9 million; 2011 - $31.9 million and 2012
                and
                after - $113.7 million.





Payments
                  due by Period(in
                  thousands)Less
                  than
              
              
              1-
                  3
              
              
              4
                  - 5
              
              After
                  5Other
                  commercial commitments:
              
              
              Total
              
              
              1
                  Year
              
              
              Years
              
              
              Years
              
              YearsStandby
                  letters of credit
              
              $
              7,545
              
              $
              7,545
              
              $
              -
              
              $
              -
              
              $
              -Guarantees
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Standby
                  replacement commitments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Other
                  commercial commitments
              
              
              50,532
              
              
              50,532
              
              
              -
              
              
              -
              
              
              -Total
                  commercial commitments
              
              $
              58,077
              
              $
              58,077
              
              $
              -
              
              $
              
              
              $
              -





**Critical
      Accounting Policies**





The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America.  The preparation of these financial statements requires us to make
      estimates and judgments that affect the reported amounts of our assets,
      liabilities, revenues, costs and expenses, and related disclosure of contingent
      assets and liabilities.  On an on-going basis, we evaluate our estimates,
      including those related to the provision for possible losses, deferred tax
      assets and liabilities, goodwill and identifiable intangible assets, and certain
      accrued liabilities.  We base our estimates on historical experience and on
      various other assumptions that we believe reasonable under the circumstances,
      the results of which form the basis for making judgments about the carrying
      values of assets and liabilities that are not readily apparent from other
      sources.  Actual results may differ from these estimates under different
      assumptions or conditions.





For
      a
      detailed discussion on the application of policies critical to our business
      operations and other accounting policies, see our Annual Report on Form 10-K/A
      for the year ended December 31, 2006 Note 2 of the "Notes to Consolidated
      Financial Statements" and Note 2 to the “Notes to Consolidated Financial
      Statements” included in this report.





**Recently
      Issued Financial Accounting Standards**






In
      February 2007, the Financial Accounting Standards Board, or FASB issued
      Statement of Financial Accounting Standards No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities,* or
      SFAS
      159. SFAS 159 permits entities to choose to measure eligible financial
      instruments and certain other items at fair value. The objective is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions. The statement will be effective as of the beginning of an entity’s
      first fiscal year beginning after November 15, 2007. The Statement offers
      various options in electing to apply its provisions and at this time we have
      not
      made any decisions as to its application and are evaluating the impact of the
      adoption of SFAS 159 on our financial position and results of operations.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, *Fair
      Value Measurement* ,
      or SFAS
      157. SFAS 157 addresses the need for increased consistency in fair value
      measurements, defining fair value as the price that would be received to sell
      an
      asset or paid to transfer a liability in an orderly transaction between market
      participants at the measurement date. It also establishes a framework for
      measuring fair value and expands disclosure requirements. SFAS 157 is effective
      for us beginning January 1, 2008. We are currently evaluating the impact of
      its
      adoption of SFAS 157 on our financial position and results of operations.





32


We
      adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes,* or FIN
      48, on January 1, 2007. Previously, we had accounted for tax contingencies
      in accordance with Statement of Financial Accounting Standards No.5,
*Accounting for Contingencies*. FIN
      48
      clarifies the accounting for income taxes, by prescribing a minimum recognition
      threshold a tax position is required to meet before being recognized in the
      financial statements. FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. As
      a
      result of the implementation of FIN 48, we determined that we had no liability
      for unrecognized income tax benefits upon adoption and through March 31,
      2007.





We
      file
      numerous Federal and State consolidated and separate income tax returns. We
      are
      no longer subject to United States Federal income tax examinations for periods
      ending before September 30, 2003 and we are no longer subject to state and
      local
      income tax examinations by tax authorities for periods ending before September
      30, 2002.





Our
      policy is to recognize potential accrued interest and penalties related to
      unrecognized tax benefits in income tax expense.





We
      do not
      anticipate that total unrecognized tax benefits will significantly change within
      the next twelve months.





**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 following discussion is not meant to be a precise indicator of
      expected future gains or losses, but rather an indicator of reasonable
      possible losses.  This forward-looking information provides indicators of
      how we view and manage our ongoing market risk exposures.  All of our
      market risk sensitive instruments were entered into for purposes other than
      trading.





**General**





We
      are
      exposed to various market risks, principally fluctuating interest rates and
      changes in commodity prices.  These risks can impact our results of
      operations, cash flows and financial position.  We manage these risks
      through regular operating and financing activities and periodically use
      derivative financial instruments.





The
      following analysis presents the effect on our earnings, cash flows and financial
      position as if the hypothetical changes in market risk factors occurred on
      March
      31, 2007.  Only the potential impacts of hypothetical assumptions are
      analyzed.  The analysis does not consider other possible effects that could
      impact our business.





*Interest
      Rate Risk.* At
      March
      31, 2007, Atlas Energy had a $175.0 million revolving credit facility ($56.5
      million outstanding at March 31, 2007).  The weighted average interest rate
      for this facility was 8.5% at March 31, 2007.





At
      March
      31, 2007, Atlas Pipeline had a $225.0 million revolving credit facility ($53.0
      million outstanding at March 31, 2007). The weighted average interest rate
      for
      this facility was 7.4% at March 31, 2007.





Holding
      all other variables constant, if interest rates hypothetically increased or
      decreased by 10%, our net annual income would change by approximately
      $494,000.





33


*Commodity
      Price Risk* . 
      Our major market risk exposure in commodities is fluctuations in the pricing
      of
      our gas and oil production.  Realized pricing is primarily driven by the
      prevailing worldwide prices for crude oil and spot market prices applicable
      to
      United States natural gas production.  Pricing for gas and oil production
      has been volatile and unpredictable for many years.  To limit our exposure
      to changing natural gas prices, we use hedges.  Through our hedges, we seek
      to provide a measure of stability in the volatile environment of natural gas
      prices.  These transactions are similar to NYMEX-based futures contracts,
      swaps and options, but also require firm delivery of the hedged quantity. 
Thus, we limit these arrangements to much smaller quantities than those
      projected to be available at any delivery point.  For the twelve month
      period ending March 31, 2007, we estimate approximately 62% of our produced
      natural gas volumes will be sold in this manner, leaving our remaining
      production to be sold at contract prices in the month produced or at spot market
      prices. Atlas Energy also negotiates with certain purchasers for delivery
      of a portion of natural gas it will produce for the upcoming twelve
      months.  The prices under most of its gas sales contracts are negotiated on
      an annual basis and are index-based. Atlas Energy's risk management
      objective is to lock in a range of pricing for expected production volumes.
      Considering
      those volumes for which we have entered into physical or financial hedge
      agreements for the year ended December 31, 2007, and current indices, a
      theoretical 10% upward or downward change in the price of natural gas would
      change net income by approximately $5.2 million.





Atlas
      Energy also enters into natural gas futures and option contracts. At any point
      in time, such contracts may include regulated New York Mercantile Exchange,
      or
      NYMEX futures and options contracts and non-regulated over-the-counter futures
      contracts with qualified counterparties. NYMEX contracts are generally settled
      with offsetting positions, but may be settled by the delivery of natural
      gas.





Atlas
      Energy  formally document all relationships between hedging instruments and
      the items being hedged, including its risk management objective and
      strategy for undertaking the hedging transactions. This includes matching the
      natural gas futures and options contracts to the forecasted transactions. We
      assess, both at the inception of the hedge and on an ongoing basis, whether
      the
      derivatives are highly effective in offsetting changes in the fair value of
      hedged items. Historically these contracts have qualified and been designated
      as
      cash flow hedges and recorded at their fair values. Gains or losses on future
      contracts are determined as the difference between the contract price and a
      reference price, generally prices on NYMEX. Changes in fair value are
      recognized in stockholders' equity as Accumulated Other Comprehensive
      Income (Loss) and recognized within the consolidated statements of
      income in the month the hedged commodity is sold. If it is determined
      that a derivative is not highly effective as a hedge or it has ceased to be
      a
      highly effective hedge, due to the loss of correlation between changes
      in reference prices underlying a hedging instrument and
      actual commodity prices, we will discontinue hedge accounting for the
      derivative and subsequent changes in fair value for the derivative will be
      recognized immediately into earnings.




At
      March
      31, 2007 and December 31, 2006 Atlas Energy had net hedging assets of $687,000
      and $47.4 million, respectively. At March 31, 2007, Atlas Energy had 293 open
      natural gas futures contracts related to natural gas sales covering 60.8 million
      MMBtus of natural gas, maturing through March 31, 2012 at a combined average
      settlement price of $8.31 per MMBtu. Atlas Energy recognized a gain of $2.4
      million and $1.4 million on settled contracts covering natural gas production
      for the three months ended March 31, 2007 and 2006, respectively. There were
      no
      gains or losses recognized during the three months ended March 31, 2007 or
      2006
      for hedge ineffectiveness or as a result of the discontinuance of these cash
      flow hedges. Of the $687,000 net unrealized hedge gain at March 31, 2007, Atlas
      Energy portion is $292,000 and $395,000 has been reallocated to the investment
      partnerships.




*Atlas
      Pipeline.* Atlas
      Pipeline also enters into certain financial swaps and option instruments which
      qualify as cash flow hedges in accordance with SFAS No. 133 to hedge its
      forecasted natural gas, NGLs and condensate sales against the variability in
      expected future cash flows attributable to changes in market prices. The swap
      instruments are contractual agreements between counterparties to exchange
      obligations of money as the underlying natural gas, NGLs and condensate is
      sold.
      Under these swap agreements, Atlas Pipeline receives a fixed price and remits
      a
      floating price based on certain indices for the relevant contract period.




Atlas
      Pipeline formally documents all relationships between hedging instruments and
      the items being hedged, including its risk management objective and strategy
      for
      undertaking the hedging transactions. This includes matching the natural gas
      futures and options contracts to the forecasted transactions. Atlas Pipeline
      assesses, both at the inception of the hedge and on an ongoing basis, whether
      the derivatives are effective in offsetting changes in the forecasted cash
      flow
      of hedged items. If it is determined that a derivative is not effective as
      a
      hedge or that it has ceased to be an effective hedge due to the loss of
      correlation between the reference prices underlying a hedging instrument and
      the
      underlying commodity, Atlas Pipeline will discontinue hedge accounting for
      the
      derivative and subsequent changes in the derivative fair value, which is
      determined through the utilization of market data, will be recognized
      immediately into earnings.


34




A
      portion
      of Atlas Pipeline’s future natural gas sales is periodically hedged through the
      use of swaps and collar contracts. Realized gains and losses on the derivative
      instruments that are classified as effective hedges are reflected in the
      contract month being hedged as an adjustment to revenue.




At
      March
      31, 2007 and December 31, 2006, Atlas Pipeline had a net hedging liability
      of
      $28.0 million and 20.1 million, respectively. Ineffective hedge gains or losses
      are recorded in Atlas Pipeline’s consolidated statements of income while the
      hedge contracts are open and may increase or decrease until settlement of the
      contract. Atlas Pipeline recognized losses of $3.0 million and $2.4 million,
      for
      the three months ended March 31, 2007 and 2006, respectively, related to
      the settlement of qualifying hedge instruments. Atlas Pipeline also recognized
      a
      loss of $1.3 million and a gain of $1.0 for the three months ended
      March 31, 2007 and 2006, respectively, related to the change in market
      value of non-qualifying or ineffective hedges. Such gains and losses are
      included within transmission, gathering and processing in the Company’s
      consolidated statements of income.




Derivatives
      are recorded on our Balance Sheets as assets or liabilities at fair value.
      At
      March 31, 2007 and
      December 31, 2006, we reflected a net hedging asset and liability on
      our balance sheets of $27.3 million, respectively, when combining the
      above hedges of Atlas Energy and Atlas Pipeline. Of the $1.8 million net loss
      in
      accumulated other comprehensive income at March 31, 2007, we will
      reclassify $1.2 million of losses to our consolidated statements of income
      over the next twelve month period as these contracts expire, and $600,000 of
      losses will be reclassified in later periods if the fair values of the
      instruments remain at current market values. Actual amounts that will be
      reclassified will vary as a result of future price changes.





As
      of
      March 31, 2007, we had the following financial hedges in place:





**ATLAS
      ENERGY RESOURCES HEDGES**


**Natural
      Gas Fixed Price Swaps**





**Twelve
                Month****Period
                Ending**
            
            
            
            **Average**
            
            **Fair
                Value****March
                31**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Asset/(Liability)****(3)****(MMB****tu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2008
            
            
            16,380,000
            
            $
            8.676
            
            $
            1,3422009
            
            
            16,080,000
            
            
            8.599
            
            
            6112010
            
            
            14,040,000
            
            
            8.195
            
            
            1,1332011
            
            
            7,950,000
            
            
            7.572
            
            
            (1,440
            )2012
            
            
            3,600,000
            
            
            7.365
            
            
            (46
            )$
            1,600





**Natural
      Gas Costless Collars**





**Twelve
                Month****Period
                Ending**
            
            
            
            
            
            **Average**
            
            **Fair
                Value****March
                31**
            
            **Option
                Type**
            
            **Volumes**
            
            **Floor
                and Cap**
            
            **Asset/(Liability)****(3)****(MMBtu****)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2008
            
            
            Puts
                purchased
            
            
            1,200,000
            
            $
            7.500
            
            $
            —2008
            
            
            Calls
                sold
            
            
            1,200,000
            
            
            8.600
            
            
            (364
            )2008
            
            
            Puts
                purchased
            
            
            390,000
            
            
            7.500
            
            
            —2008
            
            
            Calls
                sold
            
            
            390,000
            
            
            9.400
            
            
            (465
            )2009
            
            
            Puts
                purchased
            
            
            1,170,000
            
            
            7.500
            
            
            —2009
            
            
            Calls
                sold
            
            
            1,170,000
            
            
            9.400
            
            
            (84
            )Total
                Atlas Energy Resources net asset
            $
            (913
            )$
            687





35


**ATLAS
      PIPELINE HEDGES**


**Natural
      Gas - Price Swaps (Liquids Sales)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Asset/(Liability)****(2)****(gallons)**
            
            **(per
                gallon)**
            
            **(in
                thousands)**2007
            
            
            71,631,000
            
            $
            0.901
            
            $
            (9,221
            )2008
            
            
            33,012,000
            
            
            0.697
            
            
            (9,076
            )2009
            
            
            8,568,000
            
            
            0.746
            
            
            (2,113
            )$
            (20,410
            )





**Natural
      Gas - Price Swaps (Sales)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Asset/(Liability)****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            810,000
            
            $
            7.255
            
            $
            (798
            )2008
            
            
            240,000
            
            
            7.270
            
            
            (395
            )2009
            
            
            480,000
            
            
            8.000
            
            
            (162
            )$
            (1,355
            )





**Natural
      Gas Basis (Sales)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Asset****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            810,000
            
            $
            (0.535
            )
            $
            3622008
            
            
            240,000
            
            
            (0.555
            )
            
            1502009
            
            
            480,000
            
            
            (0.540
            )
            
            50$
            562





**Natural
      Gas Fixed Price (Purchase)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Liability****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            5,220,000
            
            $
            8.854
            **(4)**
            $
            (4,926
            )2008
            
            
            4,056,000
            
            
            8.719
            **(5)**
            
            (733
            )2009
            
            
            2,088,000
            
            
            8.343
            
            
            (19
            )$
            (5,678
            )





**Natural
      Gas Basis (Purchase)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Liability****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            5,220,000
            
            $
            (0.907
            )
            $
            (322
            )2008
            
            
            4,056,000
            
            
            (1.028
            )
            
            (211
            )2009
            
            
            2,880,000
            
            
            (0.592
            )
            
            (150
            )$
            (683
            )





36


**Crude
      Oil Fixed - Price Swaps (Sales)**





**Production****Period
                Ended**
            
            
            
            **Average**
            
            **Fair
                Value****December
                31,**
            
            **Volumes**
            
            **Fixed
                Price**
            
            **Liability****(3)****(barrels)**
            
            **(per
                barrel)**
            
            **(in
                thousands)**2007
            
            
            57,800
            
            $
            56.192
            
            $
            (717
            )2008
            
            
            65,400
            
            
            59.424
            
            
            (689
            )2009
            
            
            33,000
            
            
            62.700
            
            
            (207
            )$
            (1,613
            )





**Crude
      Oil Options (Sales)**





**Production**
            
            
            
            
            
            
            
            **Fair
                Value****Period
                Ended**
            
            
            
            
            
            **Average**
            
            **Asset/****December
                31,**
            
            **Option
                Type**
            
            **Volumes**
            
            **Strike
                Price**
            
            **(Liability)****(3)****(MMBtu)****(1)**
            
            **(per
                MMBtu)**
            
            **(in
                thousands)**2007
            
            
            Puts
                purchased
            
            
            9,900
            
            $
            60.000
            
            $
            132007
            
            
            Calls
                sold
            
            
            9,900
            
            
            73.380
            
            
            (27
            )2008
            
            
            Puts
                purchased
            
            
            43,800
            
            
            60.000
            
            
            (25
            )2008
            
            
            Calls
                sold
            
            
            43,800
            
            
            79.544
            
            
            (166
            )2009
            
            
            Puts
                purchased
            
            
            30,000
            
            
            60.000
            
            
            1222009
            
            
            Calls
                sold
            
            
            30,000
            
            
            71.250
            
            
            (196
            )$
            (279
            )





**Crude
      Oil Sales Options (associated with NGL volumes)**





**Production**
            
            
            
            
            
            
            
            
            
            **Fair
                Value****Period
                Ended**
            
            
            
            **Crude**
            
            **Associated**
            
            **Average
                crude**
            
            **Asset/****December
                31,**
            
            **Option
                Type**
            
            **Volumes**
            
            **NGL
                Volumes**
            
            **Strike
                Price**
            
            **(Liability)****(3)****(barrels)**
            
            **(gallons)**
            
            **(per
                barrel)**
            
            **(in
                thousands)**2008
            
            
            Puts
                purchased
            
            
            693,600
            
            
            38,744,000
            
            $
            60.000
            
            
            2,5262008
            
            
            Calls
                sold
            
            
            693,600
            
            
            38,744,000
            
            
            84.000
            
            
            (2,570
            )2009
            
            
            Puts
                purchased
            
            
            720,000
            
            
            40,219,000
            
            
            60.000
            
            
            3,3142009
            
            
            Calls
                sold
            
            
            720,000
            
            
            40,219,000
            
            
            81.000
            
            
            (1,838
            )$
            1,432Total
                Atlas Pipeline net liability
            
            $
            (28,024
            )Total
                Atlas America net liability
            
            
            $
            (27,337
            )






(1)
            
            MMBtu represents
                million British Thermal Units.(2)
            
            Fair
                value based upon management estimates, including forecasted forward
                NGL
                prices as a function of forward NYMEX natural gas and light crude
                prices.(3)
            
            Fair
                value based on forward NYMEX natural gas and light crude prices,
                as
                applicable.(4)
            
            Includes
                Atlas Pipeline’s premium received from its sale of an option for it to
                sell 3,600,000 MMBtu of natural gas at an average price of $14.33 per
                MMBtu for the year ended December 31, 2007.(5)
            
            Includes
                Atlas Pipeline’s premium received from its sale of an option for it to
                sell 936,000 MMBtu of natural gas for the year ended December 31,
                2008 at $15.50 per MMBtu.









37


**Item
      4.**   **Controls
      and Procedures**




We
        maintain disclosure controls and procedures that are designed to ensure that
        information required to be disclosed in Securities and Exchange Act of 1934
        reports is recorded, processed, summarized and reported within the time periods
        specified in the SEC’s rules and forms, and that such information is accumulated
        and communicated to our management, including our chief executive officer
        and
        our chief financial officer, as appropriate, to allow timely decisions regarding
        required disclosure. In designing and evaluating the disclosure controls
        and
        procedures, our management recognized that any controls and procedures, no
        matter how well designed and operated, can provide only reasonable assurance
        of
        achieving the desired control objectives, and our management necessarily
        was
        required to apply its judgment in evaluating the cost-benefit relationship
        of
        possible controls and procedures.
 
 Under
        the
        supervision of our chief executive officer and chief financial officer, we
        have
        carried out an evaluation of the effectiveness of our disclosure controls
        and
        procedures as of the end of the period covered by this report. Based upon
        that
        evaluation, our chief executive officer and chief financial officer concluded
        that our disclosure controls and procedures are effective at the reasonable
        assurance level.
 
 There
        have been no significant changes in our internal control over financial
        reporting that have materially affected, or are reasonably likely to materially
        effect, our internal control over financial reporting during our most recent
        quarter.


There
      were no changes during the Company’s last fiscal quarter that materially
      affected, or are reasonably likely to materially affect, the Company’s internal
      control over financial reporting.





**PART
      II.  OTHER INFORMATION**





**Item
      2.**   **Unregistered
      Sales of Equity Securities and Use of Proceeds**





**Issuer
      Purchase of Equity Securities**





**Total
                Number of**
              **Shares
                Purchased**
            
            **Average
                Price**
              **paid
                Per Share**
            
            **Shares
                Purchased As Part of Publicly Announced Plans or
                Programs**
            
            **Maximum
                Number of Shares that May Yet Be Purchased Under the Plans or
                Programs****January
                1-31, 2007**
            
            0
            
            0
            
            0**February
                1-28, 2007**
            
            0
            
            0
            
            0**March
                1-31, 2007**
            
            
            1,486,605
            
            $
            54.05
            
            
            1,486,605**Total**
            
            
            1,486,605
            
            $
            54.05
            
            
            1,486,605
            
            
            See
                Note 1







Note
                1:
            On
                January 30, 2007, the Company announced that its Board of Directors
                had
                authorized a “Dutch Auction” tender offer for up to 1,950,000 shares of
                the Company’s common stock at an anticipated offer range of between $52.00
                and $54.00 per share. The tender offer commenced on February 8, 2007
                and
                expired on March 9, 2007. In connection with this offering, the Company
                purchased 1,486,605 shares at a cost of $80.4 million, including
                expenses.





**Item
      6.**   **Exhibits**




Exhibit
      No.  Description


3.1
            Amended
                and Restated Certificate of Incorporation(1)3.2
            Amended
                and Restated Bylaws(1)31.1
            Rule
                13(a)-14(a)/15d-14(a) Certification.31.2
            Rule
                13(a)-14(a)/15d-14(a) Certification.32.1
            Section
                1350 Certification.32.2
            Section
                1350 Certification.







(1)
            
            Previously
                filed as an exhibit to our Form 8-K for the quarter ended June
                14, 2005.








38










**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
                AMERICA, INC.****(Registrant)**Date:
                May 10, 2007
            By:*/s/
                Matthew A. Jones*Matthew A. JonesChief Financial OfficerDate:
                May 10, 2007
            By:/s/*Nancy
                J. McGurk*Nancy J. McGurk
              Senior
                Vice President and Chief Accounting Officer










39