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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 June 30, 2008

OR



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

For the transition period from  to

Commission file number: 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.)
|                                                               | 
|1550 Coraopolis Heights Road Moon Township, Pennsylvania       |  | 15108                               
|(Address of principal executive office)                        |  | (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   ̈

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in rule
12b-2 of the Exchange Act.



|                                                                      |  |                             
|--------------------------------------------------------------------- |  | ----------------------------
|Large accelerated filer  x                                            |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈  (Do not check if smaller reporting company) |  | Smaller reporting company   ̈

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

Yes   ̈    No  x

The number of outstanding shares of the registrants common stock on August 1, 2008 was 40,445,327 million shares.









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##### Table of Contents

ATLAS AMERICA, INC. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT

ON FORM
10-Q



|                              |  |                                                                                                   |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                   |  | PAGE
|                              | 
|PART I. FINANCIAL INFORMATION |  | 3                                                                                                
|                              |  |                                                                                                  
|Item 1.                       |  | Financial Statements                                                                              |  | 3   
|                              |  |                                                                                                  
|                              |  | Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007 (Unaudited)                 |  | 3   
|                              |  |                                                                                                  
|                              |  | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2008(Unaudited) |  | 4   
|                              |  |                                                                                                  
|                              |  | Consolidated Statement of Stockholders Equity for the Six Months Ended June 30, 2008
(Unaudited) |  | 5   
|                              |  |                                                                                                  
|                              |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007 (Unaudited) |  | 6   
|                              |  |                                                                                                  
|                              |  | Notes to Financial Statements (Unaudited)                                                         |  | 7   
|                              |  |                                                                                                  
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations             |  | 47  
|                              |  |                                                                                                  
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                        |  | 69  
|                              |  |                                                                                                  
|Item 4.                       |  | Controls and Procedures                                                                           |  | 76  
|                              | 
|PART II. OTHER INFORMATION    |  | 77                                                                                               
|                              |  |                                                                                                  
|Item 1                        |  | Legal Proceedings                                                                                 |  | 77  
|                              |  |                                                                                                  
|Item 1A.                      |  | Risk Factors                                                                                      |  | 77  
|                              |  |                                                                                                  
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                               |  | 78  
|                              |  |                                                                                                  
|Item 6.                       |  | Exhibits                                                                                          |  | 78  
|                              |  |                                                                                                  
|SIGNATURES                    |  |                                                                                                   |  | 80  



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ATLAS AMERICA, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(Unaudited)



|                                                              |  |              |           |   |                  |   |           |  
|------------------------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                                              |  | June 30,2008 |           |   | December 31,2007 |  
|ASSETS                                                        |  |              |           |   |                  |   |           |  
|Current assets:                                               |  |              |           |   |                  |   |           |  
|Cash and cash equivalents                                     |  | $            | 241,549   |   |                  | $ | 145,535   |  
|Accounts receivable                                           |  |              | 263,146   |   |                  |   | 204,687   |  
|Hedge receivable from Partnerships                            |  |              | 50,427    |   |                  |   | 213       |  
|Current portion of derivative asset                           |  |              | 196       |   |                  |   | 38,181    |  
|Prepaid expenses and other                                    |  |              | 26,257    |   |                  |   | 22,939    |  
|Prepaid and deferred income taxes                             |  |              | 53,536    |   |                  |   | 20,642    |  
|                                                              |  |              |           |   |                  |   |           |  
|Total current assets                                          |  |              | 635,111   |   |                  |   | 432,197   |  
|Property, plant and equipment, net                            |  |              | 3,665,265 |   |                  |   | 3,442,036 |  
|Intangible assets, net                                        |  |              | 210,875   |   |                  |   | 224,264   |  
|Goodwill, net                                                 |  |              | 712,026   |   |                  |   | 744,449   |  
|Hedge receivable from Partnerships  long term                |  |              | 74,083    |   |                  |   | 13,452    |  
|Other assets, net                                             |  |              | 59,746    |   |                  |   | 47,969    |  
|                                                              |  |              |           |   |                  |   |           |  
|                                                              |  | $            | 5,357,106 |   |                  | $ | 4,904,367 |  
|                                                              |  |              |           |   |                  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                          |  |              |           |   |                  |   |           |  
|Current liabilities:                                          |  |              |           |   |                  |   |           |  
|Current portion of long-term debt                             |  | $            | 28        |   |                  | $ | 64        |  
|Accounts payable                                              |  |              | 117,003   |   |                  |   | 75,524    |  
|Liabilities associated with drilling contracts                |  |              | 55,856    |   |                  |   | 132,517   |  
|Accrued producer liabilities                                  |  |              | 123,809   |   |                  |   | 80,697    |  
|Derivative liability                                          |  |              | 341,383   |   |                  |   | 111,223   |  
|Accrued liabilities                                           |  |              | 213,096   |   |                  |   | 99,468    |  
|Advances from affiliate                                       |  |              | 123       |   |                  |   | 58        |  
|                                                              |  |              |           |   |                  |   |           |  
|Total current liabilities                                     |  |              | 851,298   |   |                  |   | 499,551   |  
|Long-term debt                                                |  |              | 2,069,539 |   |                  |   | 1,994,392 |  
|Deferred tax liability                                        |  |              | 185,278   |   |                  |   | 197,106   |  
|Long-term derivative liability                                |  |              | 598,816   |   |                  |   | 157,850   |  
|Other long-term liabilities                                   |  |              | 49,249    |   |                  |   | 46,524    |  
|Minority interests                                            |  |              | 1,269,799 |   |                  |   | 1,595,781 |  
|Commitments and contingencies                                 |  |              |           |   |                  |   |           |  
|Stockholders equity:                                         |  |              |           |   |                  |   |           |  
|Preferred stock, $0.01 par value: 1,000,000 authorized shares |  |              |          |   |                  |   |          |  
|Common stock, $0.01 par value: 49,000,000 authorized shares   |  |              | 425       |   |                  |   | 290       |  
|Additional paid-in capital                                    |  |              | 410,296   |   |                  |   | 390,591   |  
|Treasury stock, at cost                                       |  |              | (108,141  | ) |                  |   | (108,886  | )
|ESOP loan receivable                                          |  |              | (379      | ) |                  |   | (417      | )
|Accumulated other comprehensive loss                          |  |              | (102,563  | ) |                  |   | (5,935    | )
|Retained earnings                                             |  |              | 133,489   |   |                  |   | 137,520   |  
|                                                              |  |              |           |   |                  |   |           |  
|Total stockholders equity                                    |  |              | 333,127   |   |                  |   | 413,163   |  
|                                                              |  |              |           |   |                  |   |           |  
|                                                              |  | $            | 5,357,106 |   |                  | $ | 4,904,367 |  
|                                                              |  |              |           |   |                  |   |           |  

See accompanying notes to consolidated financial statements



3



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ATLAS AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)



|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|------------------------------------------- |  | -------------------------- | -------- | - | ------------------------ | - | ------- | ---- |  | - | --------- | - |  | - | ------- | -
|                                            |  | Three Months EndedJune 30, |          |   | Six Months EndedJune 30, |  
|                                            |  | 2008                       |          |   | 2007                     |   |         | 2008 |  |   | 2007      |  
|Revenue:                                    |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Well construction and completion            |  | $                          | 122,341  |   |                          | $ | 65,139  |      |  | $ | 226,479   |   |  | $ | 137,517 |  
|Gas and oil production                      |  |                            | 78,956   |   |                          |   | 25,315  |      |  |   | 155,182   |   |  |   | 46,575  |  
|Transmission, gathering and processing      |  |                            | 454,451  |   |                          |   | 119,109 |      |  |   | 839,777   |   |  |   | 234,399 |  
|Administration and oversight                |  |                            | 5,137    |   |                          |   | 3,439   |      |  |   | 10,154    |   |  |   | 7,983   |  
|Well services                               |  |                            | 5,266    |   |                          |   | 4,155   |      |  |   | 10,064    |   |  |   | 7,876   |  
|Loss on mark-to-market derivatives          |  |                            | (316,068 | ) |                          |   | (2,291  | )    |  |   | (404,849  | ) |  |   | (4,569  | )
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Total revenue                               |  |                            | 350,083  |   |                          |   | 214,866 |      |  |   | 836,807   |   |  |   | 429,781 |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Costs and expenses:                         |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Well construction and completion            |  |                            | 106,384  |   |                          |   | 56,648  |      |  |   | 196,939   |   |  |   | 119,580 |  
|Gas and oil production                      |  |                            | 12,379   |   |                          |   | 2,491   |      |  |   | 23,047    |   |  |   | 4,525   |  
|Transmission, gathering and processing      |  |                            | 369,245  |   |                          |   | 94,849  |      |  |   | 664,777   |   |  |   | 190,324 |  
|Well services                               |  |                            | 2,650    |   |                          |   | 2,147   |      |  |   | 5,062     |   |  |   | 4,190   |  
|General and administrative                  |  |                            | 25,347   |   |                          |   | 21,320  |      |  |   | 46,355    |   |  |   | 35,777  |  
|Net expense reimbursement  affiliate       |  |                            | 184      |   |                          |   | 221     |      |  |   | 434       |   |  |   | 529     |  
|Depreciation, depletion and amortization    |  |                            | 49,143   |   |                          |   | 13,476  |      |  |   | 96,776    |   |  |   | 25,877  |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Total costs and expenses                    |  |                            | 565,332  |   |                          |   | 191,152 |      |  |   | 1,033,390 |   |  |   | 380,802 |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Operating income (loss)                     |  | $                          | (215,249 | ) |                          | $ | 23,714  |      |  | $ | (196,583  | ) |  | $ | 48,979  |  
|Other income (expense):                     |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Interest expense                            |  |                            | (34,310  | ) |                          |   | (8,945  | )    |  |   | (68,408   | ) |  |   | (16,201 | )
|Minority interests                          |  |                            | 231,166  |   |                          |   | 11,776  |      |  |   | 254,831   |   |  |   | 8,590   |  
|Other, net                                  |  |                            | 5,993    |   |                          |   | 1,455   |      |  |   | 8,023     |   |  |   | 2,899   |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Total other income (expense)                |  |                            | 202,849  |   |                          |   | 4,286   |      |  |   | 194,446   |   |  |   | (4,712  | )
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Income (loss) before income taxes (benefit) |  |                            | (12,400  | ) |                          |   | 28,000  |      |  |   | (2,137    | ) |  |   | 44,267  |  
|Provision (benefit) for income taxes        |  |                            | (4,629   | ) |                          |   | 8,134   |      |  |   | (788      | ) |  |   | 14,153  |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Net income (loss)                           |  | $                          | (7,771   | ) |                          | $ | 19,866  |      |  | $ | (1,349    | ) |  | $ | 30,114  |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Net income (loss) per common share:         |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Basic                                       |  | $                          | (0.19    | ) |                          | $ | 0.49    |      |  | $ | (0.03     | ) |  | $ | 0.73    |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Diluted                                     |  | $                          | (0.19    | ) |                          | $ | 0.48    |      |  | $ | (0.03     | ) |  | $ | 0.70    |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Weighted average common shares outstanding: |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Basic                                       |  |                            | 40,335   |   |                          |   | 40,220  |      |  |   | 40,330    |   |  |   | 41,393  |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Diluted                                     |  |                            | 40,335   |   |                          |   | 41,796  |      |  |   | 40,330    |   |  |   | 42,804  |  
|                                            |  |                            |          |   |                          |   |         |      |  |   |           |   |  |   |         |  

See accompanying notes to consolidated financial statements



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ATLAS AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2008

(in thousands, except share data)

(Unaudited)



|                                  |  |              |  |                          |     |  |                |         |   |                    |            |   |                                   |   |          |                  |  |   |                          |   |  |   |          |   |  |   |         |   |  |   |         |  
|--------------------------------- |  | ------------ |  | ------------------------ | --- |  | -------------- | ------- | - | ------------------ | ---------- | - | --------------------------------- | - | -------- | ---------------- |  | - | ------------------------ | - |  | - | -------- | - |  | - | ------- | - |  | - | ------- | -
|                                  |  | Common Stock |  | AdditionalPaid-InCapital |     |  | Treasury Stock |         |   | ESOPLoanReceivable |            |   | AccumulatedOtherComprehensiveLoss |   |          | RetainedEarnings |  |   | TotalStockholdersEquity |  
|                                  |  | Shares       |  | $                        |     |  | Shares         |         |   | $                  |            |   |                                   |   |         
|Balance at January 1, 2008        |  | 29,003,212   |  | $                        | 290 |  | $              | 390,591 |   |                    | (2,126,055 | ) |                                   | $ | (108,886 | )                |  | $ | (417                     | ) |  | $ | (5,935   | ) |  | $ | 137,520 |   |  | $ | 413,163 |  
|Issuance of common units          |  |             |  |                          |    |  |                | 166     |   |                    | 16,972     |   |                                   |   | 745      |                  |  |   |                         |   |  |   |         |   |  |   |        |   |  |   | 911     |  
|Other comprehensive loss          |  |             |  |                          |    |  |                |        |   |                    |           |   |                                   |   |         |                  |  |   |                         |   |  |   | (96,628  | ) |  |   |        |   |  |   | (96,628 | )
|Repayment of ESOP loan            |  |             |  |                          |    |  |                |        |   |                    |           |   |                                   |   |         |                  |  |   | 38                       |   |  |   |         |   |  |   |        |   |  |   | 38      |  
|Stock option compensation expense |  |             |  |                          |    |  |                | 2,005   |   |                    |           |   |                                   |   |         |                  |  |   |                         |   |  |   |         |   |  |   |        |   |  |   | 2,005   |  
|Three-for-two stock split         |  | 13,470,021   |  |                          | 135 |  |                | (135    | ) |                    |           |   |                                   |   |         |                  |  |   |                         |   |  |   |         |   |  |   |        |   |  |   |        |  
|Dividends paid                    |  |             |  |                          |    |  |                |        |   |                    |           |   |                                   |   |         |                  |  |   |                         |   |  |   |         |   |  |   | (2,682  | ) |  |   | (2,682  | )
|Gain on sale of subsidiary units  |  |             |  |                          |    |  |                | 17,669  |   |                    |           |   |                                   |   |         |                  |  |   |                         |   |  |   |         |   |  |   |        |   |  |   | 17,669  |  
|Net loss                          |  |             |  |                          |    |  |                |        |   |                    |           |   |                                   |   |         |                  |  |   |                         |   |  |   |         |   |  |   | (1,349  | ) |  |   | (1,349  | )
|                                  |  |              |  |                          |     |  |                |         |   |                    |            |   |                                   |   |          |                  |  |   |                          |   |  |   |          |   |  |   |         |   |  |   |         |  
|Balance at June 30, 2008          |  | 42,473,233   |  | $                        | 425 |  | $              | 410,296 |   |                    | (2,109,083 | ) |                                   | $ | (108,141 | )                |  | $ | (379                     | ) |  | $ | (102,563 | ) |  | $ | 133,489 |   |  | $ | 333,127 |  
|                                  |  |              |  |                          |     |  |                |         |   |                    |            |   |                                   |   |          |                  |  |   |                          |   |  |   |          |   |  |   |         |   |  |   |         |  

See accompanying notes to consolidated financial statements



5



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ATLAS AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)



|                                                                                             |  |                          |          |   |      |   |            |  
|-------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | ---------- | -
|                                                                                             |  | Six Months EndedJune 30, |         
|                                                                                             |  | 2008                     |          |   | 2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                        |  |                          |          |   |      |   |            |  
|Net income (loss)                                                                            |  | $                        | (1,349   | ) |      | $ | 30,114     |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:     |  |                          |          |   |      |   |            |  
|Depreciation, depletion and amortization                                                     |  |                          | 96,776   |   |      |   | 25,877     |  
|Amortization of deferred finance costs                                                       |  |                          | 4,181    |   |      |   | 1,614      |  
|Non-cash loss on derivative value, net                                                       |  |                          | 209,795  |   |      |   | 4,569      |  
|Non-cash compensation expense                                                                |  |                          | 5,171    |   |      |   | 8,924      |  
|Minority interests                                                                           |  |                          | (254,831 | ) |      |   | (8,590     | )
|Distributions paid to minority interests                                                     |  |                          | (111,490 | ) |      |   | (24,623    | )
|Deferred income taxes                                                                        |  |                          | (304     | ) |      |   | 764        |  
|Change in operating assets and liabilities, net of effects of acquisition:                   |  |                          |          |   |      |   |            |  
|Accounts receivable and prepaid expenses and other                                           |  |                          | (56,082  | ) |      |   | 3,831      |  
|Accounts payable and accrued liabilities                                                     |  |                          | 120,049  |   |      |   | (29,011    | )
|Accounts payable and accounts receivable  affiliates                                        |  |                          | 65       |   |      |   | (12        | )
|Other operating assets/liabilities                                                           |  |                          | 612      |   |      |   | 425        |  
|                                                                                             |  |                          |          |   |      |   |            |  
|Net cash provided by operating activities                                                    |  |                          | 12,593   |   |      |   | 13,882     |  
|                                                                                             |  |                          |          |   |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                        |  |                          |          |   |      |   |            |  
|Net cash paid for acquisition                                                                |  |                          |         |   |      |   | (1,267,977 | )
|Acquisition purchase price adjustment                                                        |  |                          | 31,429   |   |      |   |           |  
|Capital expenditures                                                                         |  |                          | (289,645 | ) |      |   | (96,963    | )
|Investment in Lightfoot Capital Partners, L.P.                                               |  |                          | (440     | ) |      |   | (5,962     | )
|Other                                                                                        |  |                          | 397      |   |      |   | 139        |  
|                                                                                             |  |                          |          |   |      |   |            |  
|Net cash used in investing activities                                                        |  |                          | (258,259 | ) |      |   | (1,370,763 | )
|                                                                                             |  |                          |          |   |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                        |  |                          |          |   |      |   |            |  
|Issuance of Atlas Energy long-term debt                                                      |  |                          | 407,021  |   |      |   |           |  
|Issuance of Atlas Pipeline long-term debt                                                    |  |                          | 244,854  |   |      |   |           |  
|Borrowings under Atlas Pipeline, Atlas Pipeline Holdings, and Atlas Energy credit facilities |  |                          | 309,000  |   |      |   | 934,891    |  
|Repayments under Atlas Pipeline, Atlas Pipeline Holdings, and Atlas Energy credit facilities |  |                          | (768,000 | ) |      |   | (185,023   | )
|Repayments under Atlas Pipeline term loan                                                    |  |                          | (122,837 | ) |      |   |           |  
|Net proceeds from Atlas Energy equity offering                                               |  |                          | 82,533   |   |      |   | 597,500    |  
|Net proceeds from Atlas Pipeline equity offering                                             |  |                          | 207,106  |   |      |   |           |  
|Dividends paid                                                                               |  |                          | (2,682   | ) |      |   | (895       | )
|Purchase of treasury stock                                                                   |  |                          |         |   |      |   | (80,449    | )
|Other                                                                                        |  |                          | (15,315  | ) |      |   | (11,471    | )
|                                                                                             |  |                          |          |   |      |   |            |  
|Net cash provided by financing activities                                                    |  |                          | 341,680  |   |      |   | 1,254,553  |  
|                                                                                             |  |                          |          |   |      |   |            |  
|Net change in cash and cash equivalents                                                      |  |                          | 96,014   |   |      |   | (102,328   | )
|Cash and cash equivalents, beginning of period                                               |  |                          | 145,535  |   |      |   | 185,401    |  
|                                                                                             |  |                          |          |   |      |   |            |  
|Cash and cash equivalents, end of period                                                     |  | $                        | 241,549  |   |      | $ | 83,073     |  
|                                                                                             |  |                          |          |   |      |   |            |  

See accompanying notes to consolidated financial statements



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ATLAS AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2008

(Unaudited)

NOTE 1  BASIS OF PRESENTATION

Atlas America, Inc. (the Company) is a publicly traded (NASDAQ:ATLS)
Delaware corporation whose assets consist primarily of cash and its ownership interests in the following entities as of June 30, 2008:



| |  |  | Atlas Energy Resources, LLC (Atlas Energy or ATN), a publicly traded Delaware limited liability company (NYSE: ATN) focuses on natural gas
development and production in northern Michigans Antrim Shale and the Appalachian Basin, which the Company manages through its subsidiary, Atlas Energy Management, Inc., under the supervision of ATNs board of directors. In May 2008, the
Company purchased an additional 600,000 ATN Class B common units in a private placement transaction at a price of $42.00 per unit (see Note 14). At June 30, 2008, the Company owned approximately 48.3% of the outstanding Class A and common
units and all of the management incentive interests of ATN;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Atlas Pipeline Partners, L.P. (Atlas Pipeline Partners or APL), a midstream energy service provider engaged in the transmission, gathering
and processing of natural gas in the Mid-Continent and Appalachia regions (NYSE:APL). In June 2008, the Company purchased 1,112,000 APL common limited partnership units in a private placement transaction at a net price of $36.02 per common unit (see
Note 14). At June 30, 2008, the Company had a 2.3% direct ownership interest in APL;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Atlas Pipeline Holdings, L.P. (Atlas Pipeline Holdings or AHD), a publicly traded Delaware limited partnership (NYSE: AHD) and owner of the
general partner of APL. Through the Companys ownership of AHDs general partner, it manages AHD. In June 2008, the Company purchased an additional 308,109 common limited partner units in a private placement transaction at a price of
$32.50 per unit (see Note 14). At June 30, 2008, the Company owned approximately 64.4% of the outstanding common units of AHD. AHD owned a 2% general partner interest, all of the incentive distribution rights, and an approximate 12.3% limited
partner interest in APL at June 30, 2008; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lightfoot Capital Partners, L.P. (Lightfoot) and Lightfoot Capital Partners GP, LLC, the general partner of Lightfoot (collectively,
Lightfoot), entities which incubate new master limited partnerships (MLPs) and invest in existing MLPs. The Company has an approximate 12% ownership interest in Lightfoot and a commitment to invest a total of $20.0 million in
Lightfoot. At June 30, 2008, the Company has invested $10.7 million in Lightfoot.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The accompanying consolidated
financial statements, which are unaudited except that the balance sheet at December 31, 2007 is derived from audited financial statements, are presented in accordance with the requirements of Form 10-Q and accounting principles generally
accepted in the United States for interim reporting. They do not include all disclosures normally made in financial statements contained in Form 10-K. In managements opinion, all adjustments necessary for a fair presentation of the
Companys financial position, results of operations and cash flows for the periods disclosed have been made. These interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto
presented in the Companys Annual Report on Form 10-K for the year ended December 31, 2007. The results of operations for the three and six month periods ended June 30, 2008 may not necessarily be indicative of the results of
operations for the full year ending December 31, 2008. Certain amounts in the prior years consolidated financial statements have been reclassified to conform to the current year presentation.



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NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In addition to matters discussed further within this note, a more thorough discussion of the Companys significant accounting policies is included in
its audited consolidated financial statements and notes thereto in its annual report on Form 10-K for the year ended December 31, 2007.

Principles
of Consolidation and Minority Interest

The consolidated financial statements include the accounts of the Company and its subsidiaries,
all of which are wholly-owned except for ATN and AHD, which are controlled by the Company. The financial statements of AHD include its accounts and the accounts of its subsidiaries, all of which are wholly-owned except for APL. The non-controlling
minority ownership interests in the net income (loss) of ATN, AHD and APL are reflected as income (expense) in the Companys consolidated statements of operations, and the minority interests in the assets and liabilities of ATN, AHD and APL are
reflected as a liability on the Companys consolidated balance sheets. All material intercompany transactions have been eliminated.

In accordance with established practice in the oil and gas industry, the Companys financial statements include its pro-rata share of assets, liabilities, revenues, and costs and expenses of the energy partnerships in which ATN has an
interest. Such interests typically range from 30% to 35%.

The Companys consolidated financial statements also include the operations
of APLs Chaney Dell natural gas gathering system and processing plants located in Oklahoma (Chaney Dell system) and APLs Midkiff/Benedum natural gas gathering system and processing plants located in Texas
(Midkiff/Benedum system). In July 2007, APL acquired control of Anadarko Petroleum Corporations (NYSE: APC) (Anadarko) 100% interest in the Chaney Dell system and its 72.8% undivided joint venture interest in the
Midkiff/Benedum system (see Note 3). The transaction was effected by the formation of two joint venture companies which own the respective systems, of which APL has a 95% interest and Anadarko has a 5% interest in each. APL consolidates 100% of
these joint ventures. The Company reflects Anadarkos 5% interest in the net income of these joint ventures as minority interest on its statements of operations. The Company also reflects Anadarkos investment in the net assets of the
joint ventures as minority interest on its consolidated balance sheets. In connection with APLs acquisition of control of the Chaney Dell and Midkiff/Benedum systems, the joint ventures issued cash to Anadarko of $1.9 billion in return for a
note receivable. This note receivable is reflected within minority interest on the Companys consolidated balance sheets.

The
Midkiff/Benedum joint venture has a 72.8% undivided joint venture interest in the Midkiff/Benedum system, of which the remaining 27.2% interest is owned by Pioneer Natural Resources Company (NYSE: PXD) (Pioneer). Due to the
Midkiff/Benedum systems status as an undivided joint venture, the Midkiff/Benedum joint venture proportionally consolidates its 72.8% ownership interest in the assets and liabilities and operating results of the Midkiff/Benedum system.

Use of Estimates

The preparation of
the Companys consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities that exist at the date of the Companys consolidated financial statements, as well as the reported amounts of revenue and costs and expenses during the reporting periods. The Companys
consolidated financial statements are based on a number of significant estimates, including the revenue and expense accruals, deferred tax assets and liabilities, depreciation and amortization, asset impairments, fair value of derivative
instruments, the probability of forecasted transactions, stock compensation, and the allocation of purchase price to the fair value of assets acquired. Actual results could differ from those estimates.



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The natural gas industry principally conducts its business by processing actual transactions at the end
of the month following the month of delivery. Consequently, the most current months financial results were recorded using estimated volumes and contract market prices. Differences between estimated and actual amounts are recorded in the
following months financial results. Management believes that the operating results presented for the three and six months ended June 30, 2008 represent actual results in all material respects (see  Revenue Recognition
accounting policy for further description).

Revenue Recognition

Atlas Energy.Certain energy activities are conducted by ATN through, and a portion of its revenues are attributable to, sponsored energy limited partnerships. ATN contracts with the energy partnerships to
drill partnership wells. The contracts require that the energy partnerships must pay ATN the full contract price upon execution. The income from a drilling contract is recognized as the services are performed using the percentage of completion
method. The contracts are typically completed in less than 60 days. On an uncompleted contract, ATN classifies the difference between the contract payments it has received and the revenue earned as a current liability titled Liabilities
Associated with Drilling Contracts on the Companys consolidated balance sheets. ATN recognizes well services revenues at the time the services are performed. ATN is also entitled to receive management fees according to the respective
partnership agreements, and recognizes such fees as income when earned and includes them in administration and oversight revenues.

ATN
generally sells natural gas and crude oil at prevailing market prices. Revenue is recognized when produced quantities are delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of
ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured and the sales price is fixed or determinable. Revenues from the production of natural gas and crude oil in which ATN has an interest with other
producers are recognized on the basis of ATNs percentage ownership of working interest and/or overriding royalty. Generally, ATNs sales contracts are based on pricing provisions that are tied to a market index, with certain adjustments
based on proximity to gathering and transmission lines and the quality of its natural gas.

Atlas Pipeline.APLs revenue
primarily consists of the fees earned from its transmission, gathering and processing operations. Under certain agreements, APL purchases natural gas from producers and moves it into receipt points on its pipeline systems, and then sells the natural
gas, or produced natural gas liquids (NGLs), if any, off of delivery points on its systems. Under other agreements, APL transports natural gas across its systems, from receipt to delivery point, without taking title to the natural gas.
Revenue associated with APLs regulated transmission pipeline is recognized at the time the transportation service is provided. Revenue associated with the physical sale of natural gas is recognized upon physical delivery of the natural gas. In
connection with its gathering and processing operations, APL enters into the following types of contractual relationships with its producers and shippers:



| |  |  | Fee-Based Contracts. These contracts provide for a set fee for gathering and processing raw natural gas. APLs revenue is a function of the volume of
natural gas that it gathers and processes and is not directly dependent on the value of the natural gas.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | POP Contracts. These contracts provide for APL to retain a negotiated percentage of the sale proceeds from residue natural gas and NGLs it gathers and
processes, with the remainder being remitted to the producer. In this situation, APL and the producer are directly dependent on the volume of the commodity and its value; APL owns a percentage of that commodity and is directly subject to its market
value.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Keep-Whole Contracts. These contracts require APL, as the processor, to purchase raw natural gas from the producer at current market rates. Therefore, APL
bears the economic risk (the processing margin risk) that the aggregate proceeds from the sale of the processed natural gas
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | and NGLs could be less than the amount that it paid for the unprocessed natural gas. However, because the natural gas purchases contracted under keep-whole
agreements are generally low in liquids content and meet downstream pipeline specifications without being processed, the natural gas can be bypassed around the processing plants and delivered directly into downstream pipelines during periods of
margin risk. Therefore, the processing margin risk associated with a portion of APLs keep-whole contracts is minimized.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company accrues unbilled revenue due to timing differences between the delivery of natural gas, NGLs, crude oil, and condensate and the receipt of a delivery statement. These revenues are recorded based upon volumetric data from
ATNs and APLs records and management estimates of the related commodity sales and transportation and compression fees which are, in turn, based upon applicable product prices (see Use of Estimates accounting policy for
further description). The Company had unbilled revenues at June 30, 2008 and December 31, 2007 of $205.4 million and $131.7 million, respectively, which are included in accounts receivable within the Companys consolidated balance
sheets.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock outstanding during the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the
sum of the weighted average number of common stock outstanding and the dilutive effect of potential shares issuable during the period, as calculated by the treasury stock method. 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 market price of shares during the period) with the proceeds received from the exercise
of the stock options (see Note 17). The following table sets forth the reconciliation of the Companys weighted average number of common shares used to compute basic net income (loss) per share with those used to compute diluted net income
(loss) per share (in thousands):



|                                                   |  |                            |  |                          |  |        |  |        
|-------------------------------------------------- |  | -------------------------- |  | ------------------------ |  | ------ |  | -------
|                                                   |  | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|                                                   |  | 2008                       |  | 2007(2)                  |  | 2008   |  | 2007(2)
|Weighted average number of shares  basic          |  | 40,335                     |  | 40,220                   |  | 40,330 |  | 41,393 
|Add: effect of dilutive incentive awards(1)        |  |                           |  | 1,576                    |  |       |  | 1,411  
|                                                   |  |                            |  |                          |  |        |  |        
|Weighted average number of common shares  diluted |  | 40,335                     |  | 41,796                   |  | 40,330 |  | 42,804 
|                                                   |  |                            |  |                          |  |        |  |        



|(1) | For the three and six months ended June 30, 2008, approximately 2,013,000 and 1,878,000 stock options, respectively were excluded from the computation of diluted net income
(loss) per share because the inclusion of such units would be anti-dilutive.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The shares for the three and six months ended June 30, 2007 have been restated to reflect the three for two stock split on May 21, 2008.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

Comprehensive Income (Loss)

Comprehensive income
(loss) includes net income (loss) and all other changes in the equity of a business during a period from transactions and other events and circumstances from non-owner sources that, under accounting principles generally accepted in the United
States, have not been recognized in the calculation of net income. These changes, other than net income (loss), are referred to as other comprehensive income (loss) and for the Company include changes in the fair value of unsettled
derivative contracts accounted for as cash flow hedges and post-retirement plan liabilities (which are presented net of taxes). The following table sets forth the calculation of the Companys comprehensive income (loss) (in thousands):



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|                                                                                                                                                                                                                                                                             |  |                            |         |   |                          |   |        |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                                                                                                                                                             |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                                                                                                                                                                                                                                             |  | 2008                       |         |   | 2007                     |   |        | 2008 |  |   | 2007    |  
|Net income (loss)                                                                                                                                                                                                                                                            |  | $                          | (7,771  | ) |                          | $ | 19,866 |      |  | $ | (1,349  | ) |  | $ | 30,114  |  
|Other comprehensive loss:                                                                                                                                                                                                                                                    |  |                            |         |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Changes in fair value of derivative instruments accounted for as cash flow hedges, net of tax of $45,502 and $170 for the three months ended
June 30, 2008 and 2007, respectively, and $63,316 and $7,325 for the six months ended June 30, 2008 and 2007, respectively      |  |                            | (68,785 | ) |                          |   | (288   | )    |  |   | (98,615 | ) |  |   | (11,608 | )
|Less: reclassification adjustment for realized losses (gains) in net income (loss), net of tax of ($1,742) and $499 for the three months ended
June 30, 2008 and 2007, respectively, and ($1,177) and $99 for the six months ended June 30, 2008 and 2007, respectively      |  |                            | 2,725   |   |                          |   | (849   | )    |  |   | 1,778   |   |  |   | (169    | )
|Plus: amortization of additional post-retirement liability recorded upon adoption of SFAS No. 158, net of tax of $51 and $26 for the
three months ended June 30, 2008 and 2007, respectively, and $102 and $53 for the six months ended June 30, 2008 and 2007, respectively |  |                            | 88      |   |                          |   | 42     |      |  |   | 209     |   |  |   | 84      |  
|                                                                                                                                                                                                                                                                             |  |                            |         |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Total other comprehensive loss                                                                                                                                                                                                                                               |  |                            | (65,972 | ) |                          |   | (1,095 | )    |  |   | (96,628 | ) |  |   | (11,693 | )
|                                                                                                                                                                                                                                                                             |  |                            |         |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Comprehensive income (loss)                                                                                                                                                                                                                                                  |  | $                          | (73,743 | ) |                          | $ | 18,771 |      |  | $ | (97,977 | ) |  | $ | 18,421  |  
|                                                                                                                                                                                                                                                                             |  |                            |         |   |                          |   |        |      |  |   |         |   |  |   |         |  

Capitalized Interest

ATN and APL capitalize interest on borrowed funds related to capital projects only for periods that activities are in progress to bring these projects to their intended use. The weighted average rate used to
capitalize interest on borrowed funds by ATN and APL in the aggregate was 5.4% and 7.3% for the three months ended June 30, 2008 and 2007, respectively, and 6.0% and 7.2% for the six months ended June 30, 2008 and 2007, respectively. The
aggregate amount of interest capitalized by ATN and APL was $2.8 million and $0.9 million for the three months ended June 30, 2008 and 2007, respectively, and $5.5 million and $1.8 million for the six months ended June 30, 2008 and 2007,
respectively.

Intangible Assets

Customer contracts and relationships.APL has recorded intangible assets with finite lives in connection with natural gas gathering contracts and customer relationships assumed in certain consummated acquisitions (see Note 3).
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets (SFAS No. 142) requires that intangible assets with finite useful lives be amortized over their 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 must be amortized over the best estimate of its useful life. At a minimum, APL will assess the useful lives and
residual values of all intangible assets on an annual basis to determine if adjustments are required. The estimated useful life for APLs customer contract intangible assets is based upon the approximate average length of customer contracts in
existence at the date of acquisition. The estimated useful life for APLs customer relationship intangible assets is based upon the estimated average length of non-contracted customer relationships in existence at the date of acquisition.



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Partnership management, operating contracts and non-compete agreement.ATN has recorded intangible
assets with finite lives in connection with partnership management and operating contracts acquired through consummated acquisitions. In addition, ATN entered into a two-year non-compete agreement in connection with the acquisition of AGO (see Note
3). ATN amortizes contracts acquired on a declining balance and straight-line method over their respective estimated useful lives.

The
following table reflects the components of intangible assets being amortized at June 30, 2008 and December 31, 2007 (in thousands):



|                                               |  |               |         |   |                  |   |         |                               |  |      
|---------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | ----------------------------- |  | -----
|                                               |  | June 30, 2008 |         |   | December 31,2007 |   |         | EstimatedUseful LivesIn Years
|Gross Carrying Amount:                         |  |               |         |   |                  |   |         |                               |  |      
|Customer contracts and relationships           |  | $             | 235,382 |   |                  | $ | 235,382 |                               |  | 7 -20
|Partnership management and operating contracts |  |               | 14,343  |   |                  |   | 14,343  |                               |  | 2 -13
|Non-compete agreement                          |  |               | 890     |   |                  |   | 890     |                               |  | 2    
|                                               |  |               |         |   |                  |   |         |                               |  |      
|                                               |  | $             | 250,615 |   |                  | $ | 250,615 |                               |  |      
|                                               |  |               |         |   |                  |   |         |                               |  |      
|Accumulated Amortization:                      |  |               |         |   |                  |   |         |                               |  |      
|Customer contracts and relationships           |  | $             | (28,956 | ) |                  | $ | (16,179 | )                             |  |      
|Partnership management and operating contracts |  |               | (10,339 | ) |                  |   | (9,949  | )                             |  |      
|Non-compete agreement                          |  |               | (445    | ) |                  |   | (223    | )                             |  |      
|                                               |  |               |         |   |                  |   |         |                               |  |      
|                                               |  | $             | (39,740 | ) |                  | $ | (26,351 | )                             |  |      
|                                               |  |               |         |   |                  |   |         |                               |  |      
|Net Carrying Amount:                           |  |               |         |   |                  |   |         |                               |  |      
|Customer contracts and relationships           |  | $             | 206,426 |   |                  | $ | 219,203 |                               |  |      
|Partnership management and operating contracts |  |               | 4,004   |   |                  |   | 4,394   |                               |  |      
|Non-compete agreement                          |  |               | 445     |   |                  |   | 667     |                               |  |      
|                                               |  |               |         |   |                  |   |         |                               |  |      
|                                               |  | $             | 210,875 |   |                  | $ | 224,264 |                               |  |      
|                                               |  |               |         |   |                  |   |         |                               |  |      

Amortization expense on intangible assets was $6.7 million and $0.8 million for the three months
ended June 30, 2008 and 2007, respectively, and $13.4 million and $1.6 million for the six months ended June 30, 2008 and 2007, respectively. Aggregate estimated annual amortization expense for all of the contracts described above for the
next five years ending December 31 is as follows: 2008-$26.8 million; 2009-$26.5 million; 2010-$26.3 million; 2011-$26.2 million; and 2012-$25.7 million.

Goodwill

ATN and APL have recognized goodwill recorded in connection with consummated acquisitions (see Note 3). SFAS
No. 142 requires that goodwill is not amortized, but instead evaluated for impairment at least annually by comparing reporting unit fair values to carrying values. The evaluation of impairment under SFAS No. 142 requires the use of
projections, estimates and assumptions as to the future performance of ATNs and APL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 ATNs and APLs assumptions and, if required, recognition of an impairment loss. ATNs and APLs tests of goodwill at December 31, 2007 resulted in no impairment and no impairment
indicators have been noted as of June 30, 2008. ATN and APL will continue to evaluate its goodwill at least annually and if impairment indicators arise, and will reflect the impairment of goodwill, if any, within the Companys consolidated
statement of operations for the period in which the impairment is indicated. The changes in the carrying amount of goodwill for the six months ended June 30, 2008 and 2007 were as follows (in thousands):



|                                                                                                                                                  |  |                          |         |   |      |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------
|                                                                                                                                                  |  | Six Months EndedJune 30,
|                                                                                                                                                  |  | 2008                     |         |   | 2007
|Balance, beginning of period                                                                                                                      |  | $                        | 744,449 |   |      | $ | 98,607
|Post-closing purchase price adjustment with seller and purchase price allocation adjustment  Chaney Dell and Midkiff/Benedum systems
acquisition |  |                          | (2,217  | ) |      |   |      
|Recovery of state sales tax initially paid on transaction  Chaney Dell and Midkiff/Benedum systems acquisition                                   |  |                          | (30,206 | ) |      |   |      
|                                                                                                                                                  |  |                          |         |   |      |   |       
|Balance, end of period                                                                                                                            |  | $                        | 712,026 |   |      | $ | 98,607
|                                                                                                                                                  |  |                          |         |   |      |   |       



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During the fourth quarter 2007 and first quarter of 2008, APL adjusted its preliminary purchase price
allocation for the acquisition of its Chaney Dell and Midkiff/Benedum systems since its July 2007 acquisition date by increasing the estimated amount allocated to goodwill and intangible assets and reducing amounts initially allocated to property,
plant and equipment (see Note 3 and Note 4). Also, in April 2008, APL received a $30.2 million cash reimbursement for sales tax initially paid on its transaction to acquire the Chaney Dell and Midkiff/Benedum systems in July 2007. The $30.2 million
was initially capitalized as an acquisition cost and allocated to the assets acquired, including goodwill, based upon their estimated fair values at the date of acquisition. Based upon the reimbursement of the sales tax paid in April 2008, APL
reduced goodwill recognized in connection with the acquisition.

New and Recently Adopted Accounting Standards

In June 2008, the Financial Accounting Standards Board (FASB) issued Staff Position No. EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 applies to the calculation of earnings per share (EPS) described in paragraphs 60 and 61 of FASB Statement
No. 128, Earnings per Share for share-based payment awards with rights to dividends or dividend equivalents. It states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. Early adoption is prohibited. All prior-period EPS data presented shall be adjusted retrospectively to conform to the provisions of this FSP. The Company will apply the requirements of FSP EITF
03-6-1 upon its adoption on January 1, 2009 and it does not believe the adoption of FSP EITF 03-6-1 will have a material impact on its financial position or results of operations

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting
Policies (SFAS 162), which reorganizes the sources of accounting principles into a Generally Accepted Accounting Principles (GAAP) hierarchy in order of authority. The purpose of the new standard is to improve financial
reporting by providing a consistent framework for determining what accounting principles should be used when preparing U.S. GAAP financial statements. The standard is effective 60 days after the SECs approval of the PCAOBs amendments to
AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of SFAS 162 will not have an impact on the Companys financial position or results of operations.

In April 2008, the FASB issued Staff Position No. 142-3, Determination of Useful Life of Intangible Assets (FSP FAS
142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other
Intangible Assets (SFAS 142). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the
asset under SFAS No 141(R), Business Combinations (SFAS No. 141(R)). FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early
adoption is



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prohibited. The guidance for determining the useful life of a recognized intangible asset should be applied prospectively to intangible assets acquired after
the effective date. The disclosure requirements should be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. The Company will apply the requirements of FSP FAS 142-3 upon its adoption on
January 1, 2009 and it does not believe the adoption of FSP FAS 142-3 will have a material impact on its financial position or results of operations.

In March 2008, the FASB ratified the Emerging Issues Task Force (EITF) consensus on EITF Issue No. 07-4, Application of the Two-Class Method under FASB Statement No. 128, Earnings per
Share, to Master Limited Partnerships (EITF No. 07-4), an update of EITF No. 03-6, Participating Securities and the Two-Class Method Under FASB Statement No. 128 (EITF No. 03-6). EITF
No. 07-4 requires the calculation of a Master Limited Partnerships net earnings per limited partner unit for each period presented according to distributions declared and participation rights in undistributed earnings as if all of the
earnings for that period had been distributed. In periods with undistributed earnings above specified levels, the calculation per the two-class method results in an increased allocation of such undistributed earnings to the general partner and a
dilution of earnings to the limited partners. EITF No. 07-4 is effective for fiscal years beginning after December 15, 2008, including interim periods within those fiscal years, and requires retrospective application of the guidance to all
periods presented. Early adoption is prohibited. The Companys subsidiaries, APL, AHD and ATN, do not believe the adoption of EITF No. 07-4 will have any impact on its financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement
No. 133 (SFAS No. 161). SFAS No. 161 amends the requirements of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
No. 133) to require enhanced disclosure about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and how
derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008, with early adoption
encouraged. The Company is currently evaluating the impact the adoption of SFAS No. 161 will have on the disclosures regarding its derivative instruments.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends
ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 also requires consolidated net income to be reported, and disclosed on the face of the consolidated statement
of operations, at amounts that include the amounts attributable to both the parent and the noncontrolling interest. Additionally, SFAS No. 160 establishes a single method for accounting for changes in a parents ownership interest in a
subsidiary that does not result in deconsolidation and that the parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. The
Company will apply the requirements of SFAS No. 160 upon its adoption on January 1, 2009 and is currently evaluating whether SFAS No. 160 will have an impact on its financial position or results of operations.

In December 2007, the FASB issued SFAS No 141(R), Business Combinations (SFAS No. 141(R)). SFAS No. 141(R) replaces
SFAS No. 141, Business Combinations (SFAS No. 141), however retains the fundamental requirements that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified
for each business combination. SFAS No. 141(R) requires an acquirer to recognize the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, at their fair values as of that date, with specified
limited exceptions. Changes subsequent to that date are to be recognized in earnings, not goodwill. Additionally, SFAS No. 141 (R)



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requires costs incurred in connection with an acquisition be expensed as incurred. Restructuring costs, if any, are to be recognized separately from the
acquisition. The acquirer in a business combination achieved in stages must also recognize the identifiable assets and liabilities, as well as the noncontrolling interests in the acquiree, at the full amounts of their fair values. SFAS
No. 141(R) is effective for business combinations occurring in fiscal years beginning on or after December 15, 2008. The Company will apply the requirements of SFAS No. 141(R) upon its adoption on January 1, 2009 and is currently
evaluating whether SFAS No. 141(R) will have an impact on its financial position or results of operations.

In February 2007, the FASB
issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment to FASB Statement No. 115 (SFAS No. 159). SFAS No. 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. SFAS No. 159 is effective at the inception of an entitys first fiscal year beginning after November 15, 2007 and offers various options in
electing to apply its provisions. The Company adopted SFAS No. 159 at January 1, 2008, and has elected not to apply the fair value option to any of its financial instruments.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value statements. In February 2008, the FASB issued FASB Staff Position SFAS No. 157-b,
Effective Date of FASB Statement No. 157, which provides for a one-year deferral of the effective date of SFAS No. 157 with regard to an entitys non-financial assets, non-financial liabilities or any non-recurring fair
value measurement. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 157 at January 1, 2008 with respect to its subsidiaries derivative instruments, which are
measured at fair value within its financial statements. The provisions of SFAS No. 157 have not been applied to the Companys non-financial assets and non-financial liabilities. See Note 9 for disclosures pertaining to the provisions of
SFAS No. 157 with regard to the Companys subsidiaries financial instruments.

NOTE 3  ACQUISITIONS

APLs Chaney Dell and Midkiff/Benedum Acquisition

In July 2007, APL acquired control of Anadarkos 100% interest in the Chaney Dell natural gas gathering system and processing plants located in Oklahoma and its 72.8% undivided joint venture interest in the
Midkiff/Benedum natural gas gathering system and processing plants located in Texas (the Anadarko Assets). The Chaney Dell System includes 3,470 miles of gathering pipeline and three processing plants, while the Midkiff/Benedum System
includes 2,500 miles of gathering pipeline and two processing plants. The transaction was effected by the formation of two joint venture companies which own the respective systems, to which APL contributed $1.9 billion and Anadarko contributed the
Anadarko Assets.

In connection with this acquisition, APL reached an agreement with Pioneer, which currently holds a 27.2% undivided joint
venture interest in the Midkiff/Benedum system, whereby Pioneer has an option to buy up to an additional 14.6% interest in the Midkiff/Benedum system, which began on June 15, 2008 and ends on November 1, 2008, and an additional 7.4%
interest beginning on June 15, 2009 and ending on November 1, 2009 (the aggregate 22.0% additional interest can be entirely purchased during the period beginning June 15, 2009 and ending on November 1, 2009). If the option is
fully exercised, Pioneer would increase its interest in the system to approximately 49.2%. Pioneer would pay approximately $230 million, subject to certain adjustments, for the additional 22% interest if fully exercised. APL will manage and control
the Midkiff/Benedum system regardless of whether Pioneer exercises the purchase options. As of August 8, 2008, APL has received no indication that Pioneer will exercise either of its options under the agreement.



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APL funded the purchase price in part from the private placement of $1.125 billion of its common units to
investors at a negotiated purchase price of $44.00 per unit. Of the $1.125 billion, $168.8 million of these units were purchased by AHD. AHD funded this purchased through the private placement of $168.8 million of its common units to investors. APL
also received a capital contribution from AHD of $23.1 million in order for AHD to maintain its 2.0% general partner interest in APL. AHD funded this capital contribution and the underwriting fees and other transaction costs related to its private
placement of common units through borrowings under its revolving credit facility of $25.0 million (see Note 7). AHD, which holds all of the incentive distribution rights of APL as general partner, has also agreed to allocate up to $5.0 million of
its incentive distribution rights per quarter back to APL through the quarter ended June 30, 2009, and up to $3.75 million per quarter thereafter. AHD also agreed that the resulting allocation of incentive distribution rights back to APL would
be after AHD receives the initial $3.7 million per quarter of incentive distribution rights through the quarter ended December 31, 2007, and $7.0 million per quarter thereafter (see Note 15). APL funded the remaining purchase price from $830.0
million of proceeds from a senior secured term loan which matures in July 2014 and borrowings from its senior secured revolving credit facility that matures in July 2013 (see Note 7).

APLs acquisition was accounted for using the purchase method of accounting under SFAS No. 141. The following table presents the purchase price
allocation, including professional fees and other related acquisition costs, to the assets acquired and liabilities assumed in the acquisition, based on their fair values at the date of the acquisition (in thousands):



|                                           |  |   |           |  
|------------------------------------------ |  | - | --------- | -
|Accounts receivable                        |  | $ | 745       |  
|Prepaid expenses and other                 |  |   | 4,587     |  
|Property, plant and equipment              |  |   | 1,030,464 |  
|Intangible assets  customer relationships |  |   | 205,312   |  
|Goodwill                                   |  |   | 613,420   |  
|                                           |  |   |           |  
|Total assets acquired                      |  |   | 1,854,528 |  
|Accounts payable and accrued liabilities   |  |   | (1,499    | )
|                                           |  |   |           |  
|Net cash paid for acquisition              |  | $ | 1,853,029 |  
|                                           |  |   |           |  

APL recorded goodwill in connection with this acquisition as a result of Chaney Dells and
Midkiff/Benedums significant cash flow and strategic industry position. In April 2008, APL received a $30.2 million cash reimbursement for state sales tax initially paid on its transaction to acquire the Chaney Dell and Midkiff/Benedum
systems. The $30.2 million was initially capitalized as an acquisition cost and allocated to the assets acquired, including goodwill, based upon their estimated fair values at the date of acquisition. Based upon the reimbursement of the sales tax
paid in April 2008, APL reduced goodwill recognized in connection with the acquisition. The results of Chaney Dells and Midkiff/Benedums operations are included within the Companys consolidated financial statements from the date of
acquisition.

ATNs DTE Gas and Oil Company Acquisition

On June 29, 2007, ATN acquired all of the outstanding equity interests of DTE Gas & Oil Company (DGO) from DTE Energy Company (NYSE: DTE) and MCN Energy Enterprises for $1.273 billion,
including adjustments for working capital of $15.0 million and current year capital expenditures of $19.0 million. Assets acquired include interests in approximately 2,150 natural gas wells with estimated proved reserves of approximately 610.6
billion cubic feet of natural gas equivalents located in the northern lower peninsula of Michigan, 228,000 developed acres, and 66,000 undeveloped acres. With this acquisition, the Company increased its natural gas and oil production as well as
entered into a new region that offers additional opportunities to expand its operations. Subsequent to the acquisition of DGO, the Company changed DGOs name to Atlas Gas & Oil Company, LLC (AGO).



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To fund the acquisition, ATN borrowed $713.9 million on its new credit facility (see Note 7) and received
net proceeds of $597.5 million from a private placement of its Class B common and new Class D units. Proceeds of $52.5 million were used to pay the outstanding balance of ATNs previous credit facility. The acquisition was accounted for using
the purchase method of accounting under SFAS No. 141. The following table presents the purchase price allocation, including professional fees and other related acquisition costs, to the assets acquired and liabilities assumed based on their
estimated fair market value at the date of acquisition (in thousands):



|                                         |  |   |           |  
|---------------------------------------- |  | - | --------- | -
|Accounts receivable                      |  | $ | 33,764    |  
|Prepaid expenses                         |  |   | 515       |  
|Other assets                             |  |   | 890       |  
|Natural gas and oil properties           |  |   | 1,267,901 |  
|                                         |  |   |           |  
|Total assets acquired                    |  |   | 1,303,070 |  
|Accounts payable and accrued liabilities |  |   | (19,233   | )
|Other liabilities                        |  |   | (210      | )
|Asset retirement obligations             |  |   | (11,109   | )
|                                         |  |   |           |  
|Total liabilities assumed                |  |   | (30,552   | )
|                                         |  |   |           |  
|Net assets acquired                      |  | $ | 1,272,518 |  
|                                         |  |   |           |  

The results of AGOs operations are included within the Companys consolidated financial
statements from the date of acquisition.

The following data presents pro forma revenue, net income (loss) and net income (loss) per share
for the Company for the three and six months ended June 30, 2007 as if the ATN and APL acquisitions discussed above and related financing transactions had occurred on January 1, 2007. Actual financial data for the three and six month
periods ended June 30, 2008 is also presented. The Company has prepared these unaudited pro forma financial results for comparative purposes only. These pro forma financial results may not be indicative of the results that would have occurred
if ATN and APL had completed these acquisitions and financing transactions at the beginning of the periods shown below or the results that will be attained in the future (in thousands, except per share data):



|                             |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        
|---------------------------- |  | -------------------------- | ------- | ------------------------ | ---- | - | ------- |  | - | ------- | - |  | - | -------
|                             |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|                             |  | 2008                       |         |                          | 2007 |   | 2008    |  |   | 2007   
|Revenue                      |  | $                          | 350,083 |                          |      | $ | 423,982 |  | $ | 836,807 |   |  | $ | 762,742
|Net income (loss)            |  | $                          | (7,771  | )                        |      | $ | 24,207  |  | $ | (1,349  | ) |  | $ | 12,014 
|Net income (loss) per share: |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        
|Basic                        |  | $                          | (0.19   | )                        |      | $ | 0.87    |  | $ | (0.03   | ) |  | $ | 0.44   
|                             |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        
|Diluted                      |  | $                          | (0.19   | )                        |      | $ | 0.86    |  | $ | (0.03   | ) |  | $ | 0.44   
|                             |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        

NOTE 4  PROPERTY, PLANT AND EQUIPMENT

Property, plant 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 life. Maintenance and repairs are expensed as incurred. Major renewals and improvements that extend the useful lives of property are capitalized.



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



|                                                            |  |              |           |   |                  |   |           |                               |  |        
|----------------------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | ----------------------------- |  | -------
|                                                            |  | June 30,2008 |           |   | December 31,2007 |   |           | EstimatedUseful Livesin Years
|Natural gas and oil properties:                             |  |              |           |   |                  |   |           |                               |  |        
|Proved properties:                                          |  |              |           |   |                  |   |           |                               |  |        
|Leasehold interests                                         |  | $            | 1,093,963 |   |                  | $ | 1,043,687 |                               |  |        
|Wells and related equipment                                 |  |              | 852,436   |   |                  |   | 752,184   |                               |  |        
|                                                            |  |              |           |   |                  |   |           |                               |  |        
|Total proved properties                                     |  |              | 1,946,399 |   |                  |   | 1,795,871 |                               |  |        
|Unproved properties                                         |  |              | 8,065     |   |                  |   | 16,380    |                               |  |        
|Support equipment                                           |  |              | 11,401    |   |                  |   | 6,936     |                               |  |        
|                                                            |  |              |           |   |                  |   |           |                               |  |        
|Total natural gas and oil properties                        |  |              | 1,965,865 |   |                  |   | 1,819,187 |                               |  |        
|Pipelines, processing and compression facilities            |  |              | 1,782,599 |   |                  |   | 1,638,845 |                               |  | 15  40
|Rights of way                                               |  |              | 170,655   |   |                  |   | 168,359   |                               |  | 20  40
|Land, buildings and improvements                            |  |              | 23,913    |   |                  |   | 21,742    |                               |  | 10  40
|Other                                                       |  |              | 20,118    |   |                  |   | 17,730    |                               |  | 3  10 
|                                                            |  |              |           |   |                  |   |           |                               |  |        
|                                                            |  |              | 3,963,150 |   |                  |   | 3,665,863 |                               |  |        
|Less  accumulated depreciation, depletion and amortization |  |              | (297,885  | ) |                  |   | (223,827  | )                             |  |        
|                                                            |  |              |           |   |                  |   |           |                               |  |        
|                                                            |  | $            | 3,665,265 |   |                  | $ | 3,442,036 |                               |  |        
|                                                            |  |              |           |   |                  |   |           |                               |  |        

In July 2007, APL acquired control of the Chaney Dell and Midkiff/Benedum systems (see Note 3).
During the fourth quarter of 2007 and first quarter of 2008, APL adjusted its preliminary purchase price allocation by adjusting the estimated amounts allocated to goodwill and property, plant, and equipment.

ATN follows the successful efforts method of accounting for oil and gas producing activities. Exploratory drilling costs are capitalized pending
determination of whether a well is successful. Exploratory wells subsequently determined to be dry holes are charged to expense. Costs resulting in exploratory discoveries and all development costs, whether successful or not, are capitalized.
Geological and geophysical costs, delay rentals and unsuccessful exploratory wells are expensed. Oil is converted to gas equivalent basis (Mcfe) at the rate 1 barrel equals 6 Mcf. Depletion is provided on the units-of-production
method.

Upon the sale or retirement of a complete or partial unit of a proved property, the cost is eliminated from the property accounts,
and the resultant gain or loss is reclassified to accumulated depletion. Upon the sale of an entire interest in an unproved property where the property had been assessed for impairment individually, a gain or loss is recognized in the consolidated
statements of income. If a partial interest in an unproved property is sold, any funds received are accounted for as a reduction of the cost in the interest retained.

NOTE 5  OTHER ASSETS

The following is a summary of other assets (in thousands):



|                                                                                                                                    |  |              |        |                  |   |       
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ---------------- | - | ------
|                                                                                                                                    |  | June 30,2008 |        | December 31,2007
|Deferred finance costs, net of accumulated amortization of $18,396 and $14,213 at June 30, 2008 and December 31, 2007, respectively |  | $            | 42,935 |                  | $ | 26,118
|Investments                                                                                                                         |  |              | 11,811 |                  |   | 12,061
|Security deposits                                                                                                                   |  |              | 2,873  |                  |   | 2,630 
|Long-term derivative receivable                                                                                                     |  |              | 2,114  |                  |   | 6,882 
|Other                                                                                                                               |  |              | 13     |                  |   | 278   
|                                                                                                                                    |  |              |        |                  |   |       
|                                                                                                                                    |  | $            | 59,746 |                  | $ | 47,969
|                                                                                                                                    |  |              |        |                  |   |       

Deferred finance costs are recorded at cost and amortized over the term of the respective debt
agreement (see Note 7). In June 2008, APL recorded $1.2 million for accelerated amortization of deferred financing costs associated with the retirement of a portion of its term loan with a portion of the net proceeds from its issuance of senior
notes (see Note 7).



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Long-term derivative receivable from drilling partnerships represents the portion of long-term unrealized
derivative loss on contracts that has been allocated to the drilling partnerships based on their share of total production volume sold. ATN also has a $50.4 million and $0.2 million short-term derivative receivable from drilling partnerships as of
June 30, 2008 and December 31, 2007, respectively, representing the short-term unrealized derivative loss on contracts that have been allocated to them, which is included as part of the Companys accounts receivable on its
consolidated balance sheets.

NOTE 6  ASSET RETIREMENT OBLIGATIONS

The Company follows SFAS No 143, Accounting for Retirement Asset Obligations (SFAS No. 143) and FASB Interpretation
No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47), which requires the Company to recognize an estimated liability for the plugging and abandonment of ATNs oil and gas wells. Under SFAS 143,
the Company must currently recognize a liability for future asset retirement obligations if a reasonable estimate of the fair value of that liability can be made. The associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. SFAS 143 requires the Company to consider estimated salvage value in the calculation of depreciation, depletion and amortization. The Companys asset retirement obligations consist principally of the plugging and
abandonment of ATNs oil and gas wells.

The estimated liability is based on ATNs historical experience in plugging and
abandoning wells, estimated remaining lives of those wells based on reserve estimates, external estimates as to the cost to plug and abandon the wells in the future, and federal and state regulatory requirements. The liability is discounted using an
assumed credit-adjusted risk-free interest rate. Revisions to the liability could occur due to changes in estimates of plugging and abandonment costs or remaining lives of the wells, or if federal or state regulators enact new plugging and
abandonment requirements. ATN has no assets legally restricted for purposes of settling asset retirement obligations. Except for the item previously referenced, ATN has determined that there are no other material retirement obligations associated
with tangible long-lived assets.

A reconciliation of the ATNs liability for well plugging and abandonment costs for the periods
indicated is as follows (in thousands):



|                                                  |  |                            |        |                          |   |        |  |   |        |   |  |   |        |  
|------------------------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | - | ------ | - |  | - | ------ | -
|                                                  |  | Three Months EndedJune 30, |        | Six Months EndedJune 30, |  
|                                                  |  | 2008                       |        | 2007                     |   | 2008   |  |   | 2007   |  
|Asset retirement obligations, beginning of period |  | $                          | 43,801 |                          | $ | 27,590 |  | $ | 42,358 |   |  | $ | 26,726 |  
|Liabilities acquired (See Note 3)                 |  |                            |       |                          |   | 13,415 |  |   |       |   |  |   | 13,415 |  
|Liabilities incurred                              |  |                            | 858    |                          |   | 507    |  |   | 1,640  |   |  |   | 1,027  |  
|Liabilities settled                               |  |                            |       |                          |   |       |  |   | (2     | ) |  |   | (21    | )
|Accretion expense                                 |  |                            | 675    |                          |   | 280    |  |   | 1,338  |   |  |   | 645    |  
|                                                  |  |                            |        |                          |   |        |  |   |        |   |  |   |        |  
|Asset retirement obligations, end of period       |  | $                          | 45,334 |                          | $ | 41,792 |  | $ | 45,334 |   |  | $ | 41,792 |  
|                                                  |  |                            |        |                          |   |        |  |   |        |   |  |   |        |  

The above accretion expense is included in depreciation, depletion and amortization in the
Companys consolidated statements of operations and the asset retirement obligation liabilities are included in other long-term liabilities in the Companys consolidated balance sheets.



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NOTE 7  DEBT

Total debt consists of the following (in thousands):



|                                    |  |              |           |   |                  |   |           |  
|----------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                    |  | June 30,2008 |           |   | December 31,2007 |  
|ATN revolving credit facility       |  | $            | 360,000   |   |                  | $ | 740,000   |  
|ATN 10.75 % senior notes  due 2018 |  |              | 407,021   |   |                  |   |          |  
|AHD revolving credit facility       |  |              | 31,000    |   |                  |   | 25,000    |  
|APL revolving credit facility       |  |              | 20,000    |   |                  |   | 105,000   |  
|APL term loan                       |  |              | 707,180   |   |                  |   | 830,000   |  
|APL 8.125 % senior notes  due 2015 |  |              | 294,338   |   |                  |   | 294,392   |  
|APL 8.75 % senior notes  due 2018  |  |              | 250,000   |   |                  |   |          |  
|Other debt                          |  |              | 28        |   |                  |   | 64        |  
|                                    |  |              |           |   |                  |   |           |  
|                                    |  |              | 2,069,567 |   |                  |   | 1,994,456 |  
|Less current maturities             |  |              | (28       | ) |                  |   | (64       | )
|                                    |  |              |           |   |                  |   |           |  
|Total long-term debt                |  | $            | 2,069,539 |   |                  | $ | 1,994,392 |  
|                                    |  |              |           |   |                  |   |           |  

ATN Revolving Credit Facility

Upon the closing of its acquisition of DTE Gas & Oil (See Note 3), ATN replaced its credit facility with a new 5-year credit facility with an initial borrowing base of $850.0 million with a syndicate of
banks. The borrowing base is redetermined semiannually on April 1 and October 1 subject to changes in ATNs oil and gas reserves and also reduced by 25% of the amount of any issuance of senior unsecured notes by ATN. The borrowing
base at June 30, 2008 was $697.5 million. Up to $50.0 million of the facility may be in the form of standby letters of credit. The facility is secured by substantially all of ATNs assets and is guaranteed by each of ATNs
subsidiaries (other than Anthem Securities, Inc.) and bears interest at either the base rate plus the applicable margin or at adjusted LIBOR plus the applicable margin, elected at ATNs option. At June 30, 2008, the weighted average
interest rate on outstanding borrowings was 3.78%.

The base rate for any day equals the higher of the federal funds rate plus 0.50% or the
J.P. Morgan 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 Eurocurrency liabilities. The applicable margin ranges from 0.0% to 0.75% for
base rate loans and 1.00% to 1.75% for LIBOR loans.

The credit facility requires ATN to maintain specified financial ratios of current
assets to current liabilities and debt to earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) as disclosed in the credit agreement. In addition, the credit agreement limits sales, leases or transfers of
assets and the incurrence of additional indebtedness. The credit agreement limits the distributions payable by ATN if an event of default has occurred and is continuing or would occur as a result of such distribution. ATN is in compliance with these
covenants as of June 30, 2008. The facility terminates in June 2012, when all outstanding borrowings must be repaid. At June 30, 2008 and December 31, 2007, $360.0 million and $740.0 million, respectively, were outstanding under this
facility. In addition, letters of credit of $1.2 million and $1.1 million were outstanding at each date, which are not reflected as borrowings on the Companys consolidated balance sheets.

ATN Senior Notes

In January 2008, ATN completed a
private placement of $250.0 million of its 10.75% senior unsecured notes (Senior Notes) due 2018 to institutional buyers pursuant to rule 144A. under the Securities Act of 1933. In May 2008 ATN issued an additional $150.0 million of
senior notes at 104.75% to par to yield 9.85% to the par call on February 1, 2016. ATN intends to treat these issuances as a single class of debt securities. ATN received proceeds of approximately $398.0 million from these offerings, including
a $7.1 million premium and net of $9.2 million in underwriting fees. In addition, ATN received approximately $4.7 million related to accrued interest. ATN used the net proceeds to reduce the balance outstanding on its revolving credit facility.
Interest on the senior notes is payable semi-annually in arrears on February 1 and August 1 of each year. The senior notes are redeemable at any time at specified redemption prices, together



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with accrued and unpaid interest to the date of redemption. In addition, before February 1, 2011, ATN may redeem up to 35% of the aggregate principal
amount of the senior notes with the proceeds of equity offerings at a stated redemption price. The senior notes are also subject to repurchase by ATN 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 if ATN does not reinvest the net proceeds within 360 days. The senior notes are junior in right of payment to ATNs secured debt, including its obligations under its credit facility. The indenture
governing the senior notes contains covenants, including limitations of ATN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.

AHD Credit Facility

AHD has a $50.0 million revolving credit facility with a syndicate of banks. At
June 30, 2008, AHD had $31.0 million outstanding under its revolving credit facility, which was utilized to fund its capital contribution to APL to maintain its 2.0% general partner interest, underwriter fees and other transaction costs related
to its July 2007 private placement of common units (see Note 3). AHDs credit facility matures in April 2010 and bears interest, at its option, at either (i) adjusted LIBOR (plus the applicable margin, as defined in the credit facility) or
(ii) the higher of the federal funds rate plus 0.5% or the Wachovia Bank, National Association prime rate (each plus the applicable margin). The weighted average interest rate on the outstanding credit facility borrowings at June 30, 2008
was 4.6%. Borrowings under AHDs credit facility are secured by a first-priority lien on a security interest in all of AHDs assets, including a pledge of its interests in APL, and are guaranteed by AHDs subsidiaries (excluding APL
and its subsidiaries). AHDs 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 June 30, 2008.

The events which constitute an event of default under AHDs credit facility
are also customary for loans of this size, including payment defaults, breaches of representations or covenants contained in the credit agreements, adverse judgments against AHD in excess of a specified amount, a change of control of us, AHDs
general partner or any other obligor, and termination of a material agreement and occurrence of a material adverse effect. AHDs credit facility requires it to maintain a combined leverage ratio, defined as the ratio of the sum of
(i) AHDs funded debt (as defined in its credit facility) and (ii) APLs funded debt (as defined in APLs credit facility) to APLs EBITDA (as defined in APLs credit facility) of not more than 5.5 to 1.0. In
addition, AHDs credit facility requires it to maintain a funded debt (as defined in its credit facility) to EBITDA ratio of not more than 3.5 to 1.0; and an interest coverage ratio (as defined in its credit facility) of not less than 3.0 to
1.0. AHDs credit facility defines EBITDA for any period of four fiscal quarters as the sum of (i) four times the amount of cash distributions payable with respect to the last fiscal quarter in such period by APL to AHD in respect of
AHDs general partner interest, limited partner interest and incentive distribution rights in APL and (ii) AHDs consolidated net income (as defined in its credit facility and as adjusted as provided in its credit facility). As of
June 30, 2008, AHDs combined leverage ratio was 4.7 to 1.0, its funded debt to EBITDA was 0.7 to 1.0, and its interest coverage ratio was 28.5 to 1.0.

AHD may borrow under its credit facility (i) for general business purposes, including for working capital, to purchase debt or limited partnership units of APL, to fund general partner contributions from it to
APL and to make permitted acquisitions, (ii) to pay fees and expenses related to its credit facility and (iii) for letters of credit.



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APL Term Loan and Credit Facility

At June 30, 2008, APL had a senior secured credit facility with a syndicate of banks which consists of a term loan maturing in July 2014 and a $380.0 revolving credit facility which matures in July 2013.
Borrowings under the APLs credit facility bear interest, at APLs option, at either (i) adjusted LIBOR plus the applicable margin, as defined, or (ii) the higher of the federal funds rate plus 0.5% or the Wachovia Bank prime
rate (each plus the applicable margin). The weighted average interest rate on the outstanding APL revolving credit facility borrowings at June 30, 2008 was 4.4%, and the weighted average interest rate on the outstanding APL term loan borrowings
at June 30, 2008 was 5.2%. Up to $50.0 million of the APL credit facility may be utilized for letters of credit, of which $22.0 million was outstanding at June 30, 2008. These outstanding letter of credit amounts were not reflected as
borrowings on the Companys consolidated balance sheet.

On June 12, 2008, APL entered into an amendment to its revolving credit
facility and term loan agreement to revise the definition of Consolidated EBITDA to provide for the add-back of charges relating to APLs early termination of certain crude oil derivative contracts (see Note 8) in calculating its
Consolidated EBITDA. On June 27, 2008, APL repaid $122.8 million of its outstanding term loan and repaid $120.0 million of outstanding borrowings under the credit facility with proceeds from its issuance of $250.0 million of 10-year, 8.75%
senior unsecured notes (see Senior Notes). Additionally, on June 27, 2008 APLs lenders increased their commitments for its revolving credit facility by $80.0 million to $380.0 million.

Borrowings under the APL credit facility are secured by a lien on and security interest in all of APLs property and that of its subsidiaries,
except for the assets owned by the Chaney Dell and Midkiff/Benedum joint ventures, and by the guaranty of each of its consolidated subsidiaries other than the joint venture companies. The credit facility contains customary covenants, including
restrictions on APLs ability to incur additional indebtedness; make certain acquisitions, loans or investments; make distribution payments to its unitholders if an event of default exists; or enter into a merger or sale of assets, including
the sale or transfer of interests in its subsidiaries. APL is in compliance with these covenants as of June 30, 2008. Mandatory prepayments of the amounts borrowed under the term loan portion of the credit facility are required from the net
cash proceeds of debt issuances, and of dispositions of assets that exceed $50.0 million in the aggregate in any fiscal year that are not reinvested in replacement assets within 360 days. In connection with the new credit facility, APL agreed to
remit an underwriting fee to the lead underwriting bank of the credit facility of 0.75% of the aggregate principal amount of the term loan outstanding on January 23, 2008. In January 2008, APL and the underwriting bank agreed to extend the
agreement through June 30, 2008. In June 2008, APL and the underwriting bank agreed to extend the agreement through November 30, 2008 and amend the underwriting fee to be 0.50% of the aggregate principal amount of the term loan outstanding
as of that date.

The events which constitute an event of default for APLs credit facility are also customary for loans of this size,
including payment defaults, breaches of representations or covenants contained in the credit agreements, adverse judgments against APL in excess of a specified amount, and a change of control of APLs General Partner. APLs credit facility
requires it to maintain a ratio of funded debt (as defined in the credit facility) to EBITDA (as defined in the credit facility) ratio of not more than 5.25 to 1.0, and an interest coverage ratio (as defined in the credit facility) of not less than
2.5 to 1.0, increasing to 2.75 to 1.0 commencing September 30, 2008. During a Specified Acquisition Period (as defined in the credit facility), for the first 2 full fiscal quarters subsequent to the closing of an acquisition with total
consideration in excess of $75.0 million, the ratio of funded debt to EBITDA will be permitted to step up to 5.75 to 1.0. As of June 30, 2008, APLs ratio of funded debt to EBITDA was 4.6 to 1.0 and its interest coverage ratio was 3.5 to
1.0.



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APL Senior Notes

At June 30, 2008, APL had $250.0 million principal amount outstanding of 8.75% senior unsecured notes due on June 15, 2018 (APL 8.75% Senior Notes) and $293.5 million principal amount outstanding
of 8.125% senior unsecured notes due on December 15, 2015 (APL 8.125% Senior Notes; collectively, the APL Senior Notes). The APL 8.125% Senior Notes are presented combined with $0.8 million of unamortized premium
received as of June 30, 2008. The APL 8.75% Senior Notes were issued on June 27, 2008 in a private placement transaction pursuant to Rule 144A and Regulation S under the Securities Act of 1933 for net proceeds of $244.9 million, after
underwriting commissions and other transaction costs. Interest on the APL Senior Notes in the aggregate is payable semi-annually in arrears on June 15 and December 15. The APL Senior Notes are redeemable at any time at certain redemption
prices, together with accrued and unpaid interest to the date of redemption. Prior to June 15, 2011, APL may redeem up to 35% of the aggregate principal amount of the APL 8.75% Senior Notes with the proceeds of certain equity offerings at a
stated redemption price. A similar redemption option exists prior to December 15, 2008 with respect to the APL 8.125% Senior Notes. The Senior Notes in the aggregate are also subject to repurchase by APL 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 if APL does not reinvest the net proceeds within 360 days. The APL Senior Notes are junior in right of payment to APLs secured debt,
including APLs obligations under its credit facility.

Indentures governing the APL Senior Notes in the aggregate contain covenants,
including limitations of APL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. APL is in compliance with these covenants as of June 30, 2008.

In connection with the issuance of the APL 8.75% Senior Notes, APL entered into a registration rights agreement, whereby it agreed to (a) file an
exchange offer registration statement with the Securities and Exchange Commission for the APL 8.75% Senior Notes, (b) cause the exchange offer registration statement to be declared effective by the Securities and Exchange Commission, and
(c) cause the exchange offer to be consummated by February 23, 2009. If APL does not meet the aforementioned deadline, the APL 8.75% Senior Notes will be subject to additional interest, up to 1% per annum, until such time that APL has
caused the exchange offer to be consummated.

NOTE 8  DERIVATIVE INSTRUMENTS

APL and ATN use a number of different derivative instruments, principally swaps and options, in connection with its commodity price and interest rate risk
management activities. The Company and its subsidiaries enter into financial swap and option instruments to hedge its forecasted natural gas, NGLs, crude oil and condensate sales against the variability in expected future cash flows attributable to
changes in market prices. Its subsidiaries also enter into financial swap instruments to hedge certain portions of its floating interest rate debt against the variability in market interest rates. Swap instruments are contractual agreements between
counterparties to exchange obligations of money as the underlying natural gas, NGLs, crude oil and condensate is sold or interest payments on the underlying debt instrument is due. Under swap agreements, the Company and its subsidiaries receives or
pays a fixed price and receives or remits a floating price based on certain indices for the relevant contract period. Commodity-based option instruments are contractual agreements that grant the right, but not obligation, to purchase or sell natural
gas, NGLs, crude oil and condensate at a fixed price for the relevant contract period. These financial swap and option instruments are generally classified as cash flow hedges in accordance with SFAS No. 133.

The Company and its subsidiaries 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 commodity and interest derivative contracts to the forecasted transactions. The Company and its subsidiaries assess, both at the inception of the
derivative and on an ongoing basis, whether the derivative is effective in offsetting changes in the forecasted cash flow of the hedged item. If it is determined that a derivative is not effective as a hedge or that it has ceased to be an



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effective hedge due to the loss of adequate correlation between the hedging instrument and the underlying item being hedged, the Company and its subsidiaries
will discontinue hedge accounting for the derivative and subsequent changes in the derivative fair value, which is determined by the Company and its subsidiaries through the utilization of market data, will be recognized immediately within gain
(loss) on mark-to-market derivatives in the Companys consolidated statements of operations. For derivatives qualifying as hedges, the Company and its subsidiaries recognize the effective portion of changes in fair value in stockholders
equity as accumulated other comprehensive income (loss), and reclassifies the portion relating to commodity derivatives to gas and oil production revenues for ATN derivatives, gathering, transmission and processing revenues for APL derivatives, and
the portion relating to interest rate derivatives to interest expense within the companys consolidated statements of operations as the underlying transactions are settled. For non-qualifying derivatives and for the ineffective portion of
qualifying derivatives, the Company and its subsidiaries recognize changes in fair value within gain (loss) on mark-to-market derivatives in its consolidated statements of operations as they occur.

Derivatives are recorded on the Companys consolidated balance sheet as assets or liabilities at fair value. At June 30, 2008 and
December 31, 2007, the Company reflected net derivative liabilities on its consolidated balance sheets of $938.2 million and $224.0 million, respectively. Of the $102.6 million of net loss in accumulated other comprehensive loss within
stockholders equity on the Companys consolidated balance sheet at June 30, 2008, if the fair values of the instruments remain at current market values, the Company will reclassify $44.7 million of losses to the Companys
consolidated statements of operations over the next twelve month period as these contracts expire, consisting of $39.7 million of losses primarily to gas and oil production revenues, $5.0 million of losses to gathering, transmission and processing
revenues, and $0.3 million of gains to interest expense. Aggregate losses of $57.9 million will be reclassified to the Companys consolidated statements of operations in later periods as these remaining contracts expire, consisting of $53.8
million of losses to gas and oil production revenues, $4.5 million of losses to gathering, transmission and processing revenues, and $0.4 million of losses to interest expense. Actual amounts that will be reclassified will vary as a result of future
price changes.

Atlas Energy.In May 2007, ATN signed a definitive agreement to acquire AGO (see Note 3). In connection with the
financing of this transaction, ATN agreed as a condition precedent to closing that it would hedge 80% of its projected natural gas volumes for no less than three years from the closing date of the transaction. During May 2007, ATN entered into
derivative instruments to hedge 80% of the projected production of the assets to be acquired as required under the financing agreement. The production volume of the assets to be acquired was not considered to be probable forecasted
production under SFAS No. 133 at the date these derivatives were entered into because the acquisition of the assets had not yet been completed. Accordingly, ATN recognized the instruments as non-qualifying for hedge accounting at
inception with subsequent changes in the derivative value recorded within natural gas and oil production revenues in the Companys consolidated statements of operations. ATN recognized non-cash income of $26.3 million within gain (loss) on
mark-to-market derivatives in the consolidated statements of operations for the second quarter 2007 related to the change in value of these derivatives from May 22, 2007 to June 28, 2007. Upon closing of the acquisition on June 29,
2007, the production volume of the assets acquired was considered probable forecasted production under SFAS No. 133 and ATN evaluated these derivatives under the cash flow hedge criteria in accordance with SFAS No. 133.

ATN recognized gains (losses) on settled contracts covering natural gas production of $(4.8) million and $2.3 million for the three months
ended June 30, 2008 and 2007, respectively, and $1.7 million and $4.7 million for the six months ended June 30, 2008 and 2007, respectively. ATN recognized losses on settled oil production of $32,500 for the three and six months ended
June 30, 2008. There were no gains (losses) on oil settlements for the three months and six months ended June 30, 2007. ATN recognized losses on settled swaps of $114,000 and $23,000 for the three months and six months ended June 30,
2008, respectively. ATN did not enter into any interest rate swaps in the three months or six months ended June 30, 2007. As the underlying prices and terms in ATNs hedge contracts were consistent with the indices used to sell its natural
gas and oil, there were no gains or losses recognized during the three months and six months ended June 30, 2008 and 2007 for hedge ineffectiveness or as a result of the discontinuance of any cash flow hedges.



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As of June 30, 2008, ATN had the following interest rate and commodity derivatives, including
derivatives that do not qualify for hedge accounting:

Interest Fixed-Rate Swap



|                            |  |                |             |      |                          |                                   |      |                                |   |       |  
|--------------------------- |  | -------------- | ----------- | ---- | ------------------------ | --------------------------------- | ---- | ------------------------------ | - | ----- | -
|Term                        |  | NotionalAmount |             | Type |                          | Contract PeriodEnded December 31, |      | Fair ValueAsset/(Liability)(1) |  
|                            |  |                |             |      |                          |                                   |      | (in thousands)                 |  
|January 2008 - January 2011 |  | $              | 150,000,000 |      | Pay 3.11% Receive LIBOR |                                   | 2008 |                                | $ | (382  | )
|                            |  |                |             |      |                          |                                   | 2009 |                                |   | 500   |  
|                            |  |                |             |      |                          |                                   | 2010 |                                |   | 1,700 |  
|                            |  |                |             |      |                          |                                   |      |                                |   |       |  
|                            |  |                |             |      |                          |                                   |      |                                | $ | 1,818 |  
|                            |  |                |             |      |                          |                                   |      |                                |   |       |  

Natural Gas Fixed Price Swaps



|                                      |  |            |  |                    |      |                     |   |          |  
|------------------------------------- |  | ---------- |  | ------------------ | ---- | ------------------- | - | -------- | -
|Production Period Ending December 31, |  | Volumes    |  | AverageFixed Price |      | Fair ValueLiability |  
|                                      |  | (MMbtu)    |  | (per MMbtu)        |      | (in thousands)(1)   |  
|2008                                  |  | 19,780,000 |  | $                  | 8.77 |                     | $ | (92,642  | )
|2009                                  |  | 37,760,000 |  | $                  | 8.54 |                     |   | (142,381 | )
|2010                                  |  | 26,360,000 |  | $                  | 8.11 |                     |   | (76,701  | )
|2011                                  |  | 18,680,000 |  | $                  | 7.90 |                     |   | (48,669  | )
|2012                                  |  | 13,800,000 |  | $                  | 8.20 |                     |   | (31,255  | )
|2013                                  |  | 1,500,000  |  | $                  | 8.73 |                     |   | (2,700   | )
|                                      |  |            |  |                    |      |                     |   |          |  
|                                      |  |            |  |                    |      |                     | $ | (394,348 | )
|                                      |  |            |  |                    |      |                     |   |          |  

Natural Gas Costless Collars



|                                      |  |                |  |           |  |                     |      |                     |   |         |  
|------------------------------------- |  | -------------- |  | --------- |  | ------------------- | ---- | ------------------- | - | ------- | -
|Production Period Ending December 31, |  | Option Type    |  | Volumes   |  | AverageStrike Price |      | Fair ValueLiability |  
|                                      |  |                |  | (MMbtu)   |  | (per MMbtu)         |      | (in thousands) (1)  |  
|2008                                  |  | Puts purchased |  | 780,000   |  | $                   | 7.50 |                     | $ |        |  
|2008                                  |  | Calls sold     |  | 780,000   |  | $                   | 9.40 |                     |   | (3,193  | )
|2010                                  |  | Puts purchased |  | 2,880,000 |  | $                   | 7.75 |                     |   |        |  
|2010                                  |  | Calls sold     |  | 2,880,000 |  | $                   | 8.75 |                     |   | (7,336  | )
|2011                                  |  | Puts purchased |  | 7,200,000 |  | $                   | 7.50 |                     |   |        |  
|2011                                  |  | Calls sold     |  | 7,200,000 |  | $                   | 8.45 |                     |   | (16,536 | )
|2012                                  |  | Puts purchased |  | 720,000   |  | $                   | 7.00 |                     |   |        |  
|2012                                  |  | Calls sold     |  | 720,000   |  | $                   | 8.37 |                     |   | (1,685  | )
|                                      |  |                |  |           |  |                     |      |                     |   |         |  
|                                      |  |                |  |           |  |                     |      |                     | $ | (28,750 | )
|                                      |  |                |  |           |  |                     |      |                     |   |         |  

Crude Oil Fixed Price Swaps



|                                      |  |           |  |                    |        |                     |   |        |  
|------------------------------------- |  | --------- |  | ------------------ | ------ | ------------------- | - | ------ | -
|Production Period Ending December 31, |  | Volumes   |  | AverageFixed Price |        | Fair ValueLiability |  
|                                      |  | (barrels) |  | (per barrel)       |        | (in thousands)(2)   |  
|2008                                  |  | 43,400    |  | $                  | 104.24 |                     | $ | (1,536 | )
|2009                                  |  | 58,900    |  | $                  | 99.92  |                     |   | (2,324 | )
|2010                                  |  | 48,900    |  | $                  | 97.31  |                     |   | (1,863 | )
|2011                                  |  | 40,400    |  | $                  | 96.43  |                     |   | (1,450 | )
|2012                                  |  | 33,500    |  | $                  | 95.99  |                     |   | (1,138 | )
|2013                                  |  | 9,000     |  | $                  | 95.95  |                     |   | (296   | )
|                                      |  |           |  |                    |        |                     |   |        |  
|                                      |  |           |  |                    |        |                     | $ | (8,607 | )
|                                      |  |           |  |                    |        |                     |   |        |  



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Crude Oil Costless Collars



|                                      |  |                                   |  |           |          |                    |        |                     |   |        |  
|------------------------------------- |  | --------------------------------- |  | --------- | -------- | ------------------ | ------ | ------------------- | - | ------ | -
|Production Period Ending December 31, |  | Option Type                       |  | Volumes   |          | AverageStrikePrice |        | Fair ValueLiability |  
|                                      |  |                                   |  | (barrels) |          | (per barrel)       |        | (in thousands) (2)  |  
|2008                                  |  | Puts purchased                    |  | 22,500    |          | $                  | 85.00  |                     | $ |       |  
|2008                                  |  | Calls sold                        |  | 22,500    |          | $                  | 127.00 |                     |   | (358   | )
|2009                                  |  | Puts purchased                    |  | 36,500    |          | $                  | 85.00  |                     |   |       |  
|2009                                  |  | Calls sold                        |  | 36,500    |          | $                  | 118.63 |                     |   | (1,058 | )
|2010                                  |  | Puts purchased                    |  | 31,000    |          | $                  | 85.00  |                     |   |       |  
|2010                                  |  | Calls sold                        |  | 31,000    |          | $                  | 112.92 |                     |   | (973   | )
|2011                                  |  | Puts purchased                    |  | 27,000    |          | $                  | 85.00  |                     |   |       |  
|2011                                  |  | Calls sold                        |  | 27,000    |          | $                  | 110.81 |                     |   | (825   | )
|2012                                  |  | Puts purchased                    |  | 21,500    |          | $                  | 85.00  |                     |   |       |  
|2012                                  |  | Calls sold                        |  | 21,500    |          | $                  | 110.06 |                     |   | (634   | )
|2013                                  |  | Puts purchased                    |  | 6,000     |          | $                  | 85.00  |                     |   |       |  
|2013                                  |  | Calls sold                        |  | 6,000     |          | $                  | 110.09 |                     |   | (173   | )
|                                      |  |                                   |  |           |          |                    |        |                     |   |        |  
|                                      |  |                                   |  |           |          |                    |        |                     | $ | (4,021 | )
|                                      |  |                                   |  |           |          |                    |        |                     |   |        |  
|                                      |  | Total ATN net derivative liablity |  | $         | (433,908 | )                 
|                                      |  |                                   |  |           |          |                    |        |                     |   |        |  
|                                      |  |                                   |  |           |          |                    |        |                     |   |        |  



|(1) | Fair value based on forward NYMEX natural gas prices, as
applicable.
|--- | --------------------------------------------------------------------



|(2) | Fair value based on forward WTI crude oil prices, as applicable.
|--- | ----------------------------------------------------------------

Atlas Pipeline.During June 2008, APL made net payments of $170.4 million related to the early termination of crude oil derivative contracts that
it entered into as proxy hedges for the prices received on the ethane and propane portion of its NGL equity volume. These derivative contracts were put into place simultaneously with APLs acquisition of the Chaney Dell and Midkiff/Benedum
systems in July 2007 and related to production periods ranging from the end of the second quarter of 2008 through the fourth quarter of 2009. During the three and six months ended June 30, 2008, the Company recognized a derivative expense of
$162.1 million related to APLs termination of these derivative instruments, including a non-cash portion of $46.3 million, within loss on mark-to-market derivatives on the Companys consolidated statements of operations. The Company also
recognized a cash derivative expense of $0.3 million related to APLs termination of these derivative instruments within natural gas and liquids revenue on its consolidated statement of operations. During July 2008, APL paid an additional $93.6
million related to the early termination of its crude oil derivative contracts that relate to production periods through the end of 2009 (see Note 19).

In May 2008, AHD entered into an interest rate derivative contract having an aggregate notional principal amount of $25.0 million, which were designated as cash flow hedges. Under the terms of agreement, AHD will pay
an interest rate of 3.01%, plus the applicable margin as defined under the terms of its revolving credit facility (see Note 7), and will receive LIBOR, plus the applicable margin, on the notional principal amounts. This derivative effectively
converts $25.0 million of AHDs floating rate debt under its revolving credit facility to fixed-rate debt. The interest rate swap agreement began on May 30, 2008 and expires on May 28, 2010.

At June 30, 2008, APL has interest rate derivative contracts having aggregate notional principal amounts of $450.0 million, which were designated as
cash flow hedges. Under the terms of these agreements, APL will pay weighted average interest rates of 3.02%, plus the applicable margin as defined under the terms of its revolving credit facility (see Note 7), and will receive LIBOR, plus the
applicable margin, on the



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notional principal amounts. These derivatives effectively convert $450.0 million of APLs floating rate debt under its term loan and revolving credit
facility to fixed-rate debt. The APL interest rate swap agreements are effective as of June 30, 2008 and expire during periods ranging from January 30, 2010 through April 30, 2010.

In June 2007, APL signed definitive agreements to acquire control of the Chaney Dell and Midkiff/Benedum systems (see Note 3). In connection with certain
additional agreements entered into to finance this transaction, APL agreed as a condition precedent to closing that it would hedge 80% of its projected natural gas, NGL and condensate production volume for no less than three years from the closing
date of the transaction. During June 2007, APL entered into derivative instruments to hedge 80% of the projected production of the Anadarko Assets to be acquired as required under the financing agreements. The production volume of the Anadarko
Assets to be acquired was not considered to be probable forecasted production under SFAS 133 at the date these derivatives were entered into because the acquisition of the Anadarko Assets had not yet been completed. Accordingly, APL
recognized the instruments as non-qualifying for hedge accounting at inception with subsequent changes in the derivative value recorded within gain (loss) on mark-to-market derivatives in the Companys consolidated statements of operations. APL
recognized a non-cash loss of $18.8 million related to the change in value of derivatives entered into specifically for the Chaney Dell and Midkiff/Benedum systems from the time the derivative instruments were entered into to the date of closing of
the acquisition during the second quarter 2007. Upon closing of the acquisition in July 2007, the production volume of the Anadarko Assets acquired was considered probable forecasted production under SFAS 133. APL designated many of
these instruments as cash flow hedges and evaluated these derivatives under the cash flow hedge criteria in accordance with SFAS 133.

In
connection with its Chaney Dell and Midkiff/Benedum acquisition, APL reached an agreement with Pioneer granting it an option to buy up to an additional 14.6% interest in the Midkiff/Benedum system, which began on June 15, 2008 and ends on
November 1, 2008, and an additional 7.4% interest beginning on June 15, 2009 and ending on November 1, 2009 (the aggregate 22.0% additional interest can be entirely purchased during the period beginning June 15, 2009 and ending
on November 1, 2009; see Note 3). As of August 8, 2008, APL has received no indication that Pioneer will exercise either of its options under the agreement. If Pioneer does exercise either of these options, APL will discontinue hedge
accounting for the derivative instruments covering the portion of the forecasted production of the Midkiff/Benedum system sold to Pioneer and will evaluate these derivative instruments to determine if they can be documented to match other forecasted
production APL may have.

The following table summarizes APLs derivative activity for the periods indicated (amounts in thousands):



|                                                                                            |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ------------------------ | - | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                                                                            |  | Three Months EndedJune 30, |          |   | Six Months EndedJune 30, |  
|                                                                                            |  | 2008                       |          |   | 2007                     |   |         | 2008 |  |   | 2007     |  
|Loss from cash settlement of qualifying hedge instruments(1)                                |  | $                          | (33,152  | ) |                          | $ | (7,650  | )    |  | $ | (50,795  | ) |  | $ | (10,697 | )
|Gain/(loss) from change in market value of non-qualifying derivatives(2)                    |  |                            | (136,736 | ) |                          |   | (18,835 | )    |  |   | (207,932 | ) |  |   | (20,137 | )
|Gain/(loss) from change in market value of ineffective portion of qualifying derivatives(2) |  |                            | 1,934    |   |                          |   | (9,714  | )    |  |   | (3,726   | ) |  |   | (10,689 | )
|Loss from cash settlement of non-qualifying derivatives(2)                                  |  |                            | (184,564 | ) |                          |   |        |      |  |   | (196,489 | ) |  |   |        |  
|Loss from cash settlement of interest rate derivatives(3)                                   |  |                            | (207     | ) |                          |   |        |      |  |   | (207     | ) |  |   |        |  



|(1) | Included within transmission, gathering and processing revenue on the Companys consolidated statements of operations.
|--- | ----------------------------------------------------------------------------------------------------------------------



|(2) | Included within loss on mark-to-market derivatives on the Companys consolidated statements of operations.
|--- | ----------------------------------------------------------------------------------------------------------



|(3) | Included within interest expense on the Companys consolidated statements of operations.
|--- | ----------------------------------------------------------------------------------------



27



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##### Table of Contents

As of June 30, 2008, AHD had the following interest rate derivatives:

Interest Fixed-Rate Swap



|                    |  |                |            |      |                                |                                 |      |                                |   |     |  
|------------------- |  | -------------- | ---------- | ---- | ------------------------------ | ------------------------------- | ---- | ------------------------------ | - | --- | -
|Term                |  | NotionalAmount |            | Type |                                | ContractPeriodEndedDecember 31, |      | Fair ValueAsset/(Liability)(1) |  
|                    |  |                |            |      |                                |                                 |      | (in thousands)                 |  
|May 2008 - May 2010 |  | $              | 25,000,000 |      | Pay 3.01% Receive LIBOR       |                                 | 2008 |                                | $ | (48 | )
|                    |  |                |            |      |                                |                                 | 2009 |                                |   | 89  |  
|                    |  |                |            |      |                                |                                 | 2010 |                                |   | 133 |  
|                    |  |                |            |      |                                |                                 |      |                                |   |     |  
|                    |  |                |            |      | Total AHD net derivative asset |                                 | $    | 174                            |  
|                    |  |                |            |      |                                |                                 |      |                                |   |     |  



|(1) | Fair value based on independent, third-party statements, supported by observable levels at which transactions are
executed in the marketplace.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

As of June 30, 2008, APL had the following interest rate and commodity derivatives,
including derivatives that do not qualify for hedge accounting:

Interest Fixed-Rate Swap



|                            |  |                |             |      |                          |                                 |      |                                |   |      |  
|--------------------------- |  | -------------- | ----------- | ---- | ------------------------ | ------------------------------- | ---- | ------------------------------ | - | ---- | -
|Term                        |  | NotionalAmount |             | Type |                          | ContractPeriodEndedDecember 31, |      | Fair ValueAsset/(Liability)(1) |  
|                            |  |                |             |      |                          |                                 |      | (in thousands)                 |  
|January 2008 - January 2010 |  | $              | 200,000,000 |      | Pay 2.88% Receive LIBOR |                                 | 2008 |                                | $ | (250 | )
|                            |  |                |             |      |                          |                                 | 2009 |                                |   | 977  |  
|                            |  |                |             |      |                          |                                 | 2010 |                                |   | 170  |  
|                            |  |                |             |      |                          |                                 |      |                                |   |      |  
|                            |  |                |             |      |                          |                                 |      |                                | $ | 897  |  
|                            |  |                |             |      |                          |                                 |      |                                |   |      |  
|April 2008 - April 2010     |  | $              | 250,000,000 |      | Pay 3.14% Receive LIBOR |                                 | 2008 |                                | $ | (635 | )
|                            |  |                |             |      |                          |                                 | 2009 |                                |   | 589  |  
|                            |  |                |             |      |                          |                                 | 2010 |                                |   | 726  |  
|                            |  |                |             |      |                          |                                 |      |                                |   |      |  
|                            |  |                |             |      |                          |                                 |      |                                | $ | 680  |  
|                            |  |                |             |      |                          |                                 |      |                                |   |      |  

Natural Gas Liquids Sales  Fixed Price Swaps



|                                     |  |            |  |                    |       |                        |   |         |  
|------------------------------------ |  | ---------- |  | ------------------ | ----- | ---------------------- | - | ------- | -
|Production Period Ended December 31, |  | Volumes    |  | AverageFixed Price |       | Fair ValueLiability(2) |  
|                                     |  | (gallons)  |  | (pergallon)        |       | (inthousands)          |  
|2008                                 |  | 14,868,000 |  | $                  | 0.697 |                        | $ | (13,921 | )
|2009                                 |  | 8,568,000  |  | $                  | 0.746 |                        |   | (7,069  | )
|                                     |  |            |  |                    |       |                        |   |         |  
|                                     |  |            |  |                    |       |                        | $ | (20,990 | )
|                                     |  |            |  |                    |       |                        |   |         |  



28



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##### Table of Contents

Crude Oil Sales Options (associated with NGL volume)



|                                     |  |             |   |  |                     |   |  |                          |        |                                |   |          |             |  |                       
|------------------------------------ |  | ----------- | - |  | ------------------- | - |  | ------------------------ | ------ | ------------------------------ | - | -------- | ----------- |  | ----------------------
|Production Period Ended December 31, |  | CrudeVolume |   |  | AssociatedNGLVolume |   |  | AverageCrudeStrike Price |        | Fair ValueAsset/(Liability)(3) |   |          | Option Type
|                                     |  | (barrels)   |   |  | (gallons)           |   |  | (per barrel)             |        | (in thousands)                 |   |          |            
|2008                                 |  | 600,000     |   |  | 40,068,000          |   |  | $                        | 60.00  |                                | $ | 4        |             |  | Puts purchased        
|2008                                 |  | (126,000    | ) |  | 11,219,040          |   |  | $                        | 127.55 |                                |   | (962     | )           |  | Puts sold(4)          
|2008                                 |  | (126,000    | ) |  | (11,219,040         | ) |  | $                        | 140.00 |                                |   | 1,821    |             |  | Calls purchased(4)    
|2008                                 |  | 946,800     |   |  | 51,529,968          |   |  | $                        | 80.13  |                                |   | (57,308  | )           |  | Calls sold            
|2009                                 |  | (1,056,000  | ) |  | 94,026,240          |   |  | $                        | 126.05 |                                |   | (11,425  | )           |  | Puts sold(4)(5)       
|2009                                 |  | (1,056,000  | ) |  | (94,026,240         | ) |  | $                        | 143.00 |                                |   | 18,033   |             |  | Calls purchased(4) (5)
|2009                                 |  | 3,636,000   |   |  | 219,602,880         |   |  | $                        | 79.51  |                                |   | (215,989 | )           |  | Calls sold(5)         
|2010                                 |  | 3,127,500   |   |  | 202,370,490         |   |  | $                        | 81.09  |                                |   | (176,190 | )           |  | Calls sold            
|2011                                 |  | 606,000     |   |  | 32,578,560          |   |  | $                        | 95.56  |                                |   | (26,751  | )           |  | Calls sold            
|2012                                 |  | 450,000     |   |  | 24,192,000          |   |  | $                        | 97.10  |                                |   | (18,820  | )           |  | Calls sold            
|                                     |  |             |   |  |                     |   |  |                          |        |                                |   |          |             |  |                       
|                                     |  |             |   |  |                     |   |  |                          |        |                                | $ | (487,587 | )           |  |                       
|                                     |  |             |   |  |                     |   |  |                          |        |                                |   |          |             |  |                       

Natural Gas Sales  Fixed Price Swaps



|                                     |  |            |  |                    |       |                        |   |         |  
|------------------------------------ |  | ---------- |  | ------------------ | ----- | ---------------------- | - | ------- | -
|Production Period Ended December 31, |  | Volumes    |  | AverageFixed Price |       | Fair ValueLiability(3) |  
|                                     |  | (mmbtu)(6) |  | (per mmbtu)(6)     |       | (in thousands)         |  
|2008                                 |  | 2,742,000  |  | $                  | 8.823 |                        | $ | (12,942 | )
|2009                                 |  | 5,724,000  |  | $                  | 8.611 |                        |   | (22,102 | )
|2010                                 |  | 4,560,000  |  | $                  | 8.526 |                        |   | (12,744 | )
|2011                                 |  | 2,160,000  |  | $                  | 8.270 |                        |   | (5,423  | )
|2012                                 |  | 1,560,000  |  | $                  | 8.250 |                        |   | (3,888  | )
|                                     |  |            |  |                    |       |                        |   |         |  
|                                     |  |            |  |                    |       |                        | $ | (57,099 | )
|                                     |  |            |  |                    |       |                        |   |         |  

Natural Gas Basis Sales



|                                     |  |            |  |                    |        |   |                    |   |      
|------------------------------------ |  | ---------- |  | ------------------ | ------ | - | ------------------ | - | -----
|Production Period Ended December 31, |  | Volumes    |  | AverageFixed Price |        |   | Fair ValueAsset(3)
|                                     |  | (mmbtu)(6) |  | (per mmbtu)(6)     |        |   | (in thousands)    
|2008                                 |  | 2,742,000  |  | $                  | (0.744 | ) |                    | $ | 2,605
|2009                                 |  | 5,724,000  |  | $                  | (0.558 | ) |                    |   | 2,706
|2010                                 |  | 4,560,000  |  | $                  | (0.622 | ) |                    |   | 1,048
|2011                                 |  | 2,160,000  |  | $                  | (0.664 | ) |                    |   | 37   
|2012                                 |  | 1,560,000  |  | $                  | (0.601 | ) |                    |   | 27   
|                                     |  |            |  |                    |        |   |                    |   |      
|                                     |  |            |  |                    |        |   |                    | $ | 6,423
|                                     |  |            |  |                    |        |   |                    |   |      

Natural Gas Purchases  Fixed Price Swaps



|                                     |  |            |  |                    |       |     |                    |   |        
|------------------------------------ |  | ---------- |  | ------------------ | ----- | --- | ------------------ | - | -------
|Production Period Ended December 31, |  | Volumes    |  | AverageFixed Price |       |     | Fair ValueAsset(3)
|                                     |  | (mmbtu)(6) |  | (per mmbtu)(6)     |       |     | (in thousands)    
|2008                                 |  | 8,130,000  |  | $                  | 9.001 | (7) |                    | $ | 37,081 
|2009                                 |  | 15,564,000 |  | $                  | 8.680 |     |                    |   | 59,019 
|2010                                 |  | 8,940,000  |  | $                  | 8.580 |     |                    |   | 25,632 
|2011                                 |  | 2,160,000  |  | $                  | 8.270 |     |                    |   | 5,423  
|2012                                 |  | 1,560,000  |  | $                  | 8.250 |     |                    |   | 3,888  
|                                     |  |            |  |                    |       |     |                    |   |        
|                                     |  |            |  |                    |       |     |                    | $ | 131,043
|                                     |  |            |  |                    |       |     |                    |   |        

Natural Gas Basis Purchases



|                                     |  |            |  |                    |        |   |                                |   |         |  
|------------------------------------ |  | ---------- |  | ------------------ | ------ | - | ------------------------------ | - | ------- | -
|Production Period Ended December 31, |  | Volumes    |  | AverageFixed Price |        |   | Fair ValueAsset/(Liability)(3) |  
|                                     |  | (mmbtu)(6) |  | (per mmbtu)(6)     |        |   | (in thousands)                 |  
|2008                                 |  | 8,130,000  |  | $                  | (1.114 | ) |                                | $ | (8,045  | )
|2009                                 |  | 15,564,000 |  | $                  | (0.654 | ) |                                |   | (9,633  | )
|2010                                 |  | 8,940,000  |  | $                  | (0.600 | ) |                                |   | (2,638  | )
|2011                                 |  | 2,160,000  |  | $                  | (0.700 | ) |                                |   | 116     |  
|2012                                 |  | 1,560,000  |  | $                  | (0.610 | ) |                                |   | 58      |  
|                                     |  |            |  |                    |        |   |                                |   |         |  
|                                     |  |            |  |                    |        |   |                                | $ | (20,142 | )
|                                     |  |            |  |                    |        |   |                                |   |         |  



29



---

##### Table of Contents

Crude Oil Sales



|                                     |  |           |  |                    |        |                        |   |        |  
|------------------------------------ |  | --------- |  | ------------------ | ------ | ---------------------- | - | ------ | -
|Production Period Ended December 31, |  | Volumes   |  | AverageFixed Price |        | Fair ValueLiability(3) |  
|                                     |  | (barrels) |  | (per barrel)       |        | (in thousands)         |  
|2008                                 |  | 25,200    |  | $                  | 60.427 |                        | $ | (2,031 | )
|2009                                 |  | 33,000    |  | $                  | 62.700 |                        |   | (2,578 | )
|                                     |  |           |  |                    |        |                        |   |        |  
|                                     |  |           |  |                    |        |                        | $ | (4,609 | )
|                                     |  |           |  |                    |        |                        |   |        |  

Crude Oil Participating Swaps for
NGLs(8)



|                                     |           |             |           |                     |              |                          |                |                    |   |             |  |                    
|------------------------------------ | --------- | ----------- | --------- | ------------------- | ------------ | ------------------------ | -------------- | ------------------ | - | ----------- |  | -------------------
|Production Period Ended December 31, |           | CrudeVolume |           | AssociatedNGLVolume |              | AverageCrudeStrike Price |                | Fair ValueAsset(3) |   | Option Type
|                                     | (barrels) |             | (gallons) |                     | (per barrel) |                          | (in thousands) |                    |  
|2008                                 |           | 126,000     |           | 11,219,040          |              | $                        | 137.00         |                    | $ | 748         |  | Participating swaps

Crude Oil Sales Options



|                                     |  |           |          |                    |        |                        |   |         |             |  |               
|------------------------------------ |  | --------- | -------- | ------------------ | ------ | ---------------------- | - | ------- | ----------- |  | --------------
|Production Period Ended December 31, |  | Volumes   |          | AverageStrikePrice |        | Fair ValueLiability(3) |   |         | Option Type
|                                     |  | (barrels) |          | (per barrel)       |        | (in thousands)         |   |         |            
|2008                                 |  | 10,800    |          | $                  | 60.000 |                        | $ |        |             |  | Puts purchased
|2008                                 |  | 138,000   |          | $                  | 78.055 |                        |   | (8,615  | )           |  | Calls sold    
|2009                                 |  | 306,000   |          | $                  | 80.017 |                        |   | (23,574 | )           |  | Calls sold    
|2010                                 |  | 234,000   |          | $                  | 83.027 |                        |   | (15,633 | )           |  | Calls sold    
|2011                                 |  | 72,000    |          | $                  | 87.296 |                        |   | (3,583  | )           |  | Calls sold    
|2012                                 |  | 48,000    |          | $                  | 83.944 |                        |   | (2,409  | )           |  | Calls sold    
|                                     |  |           |          |                    |        |                        |   |         |             |  |               
|                                     |  |           |          |                    |        |                        | $ | (53,814 | )           |  |               
|                                     |  |           |          |                    |        |                        |   |         |             |  |               
|Total APL net derivative liability   |  | $         | (504,450 | )                  |        |                       
|                                     |  |           |          |                    |        |                        |   |         |             |  |               
|Total net derivative liability       |  | $         | (938,184 | )                  |        |                       
|                                     |  |           |          |                    |        |                        |   |         |             |  |               



|(1) | Fair value based on independent, third-party statements, supported by observable levels at which transactions are
executed in the marketplace.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Fair value based upon management estimates, including forecasted forward NGL prices as a function of forward NYMEX
natural gas, light crude and propane prices.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Fair value based on forward NYMEX natural gas and light crude prices, as applicable.
|--- | ------------------------------------------------------------------------------------



|(4) | Puts sold and calls purchased in 2008 and 2009 represent collars
entered into by APL as offsetting positions for the calls sold related to ethane and propane production. These offsetting positions were entered into to limit the loss which could be incurred if crude oil prices continued to rise.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | A portion of these positions were paid off by APL during July 2008 as a result of APLs early termination of crude
oil derivative contracts (see Note 19).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Mmbtu represents million British Thermal Units.
|--- | -----------------------------------------------



|(7) | Includes APLs premium received from its sale of an option for it to sell 468,000 mmbtu of natural gas for the year
ended December 31, 2008 at $15.50 per mmbtu.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Represents APLs derivative instruments that combine a swap and a put option with the same strike price.
|--- | --------------------------------------------------------------------------------------------------------



30



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##### Table of Contents

NOTE 9  FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted the provisions of SFAS No. 157 at January 1, 2008. SFAS No. 157 establishes a fair value hierarchy which requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157s hierarchy defines three levels of inputs that may be used to measure fair value:

Level 1Unadjusted quoted prices in active markets for identical, unrestricted assets and liabilities that the reporting entity has the ability to access at
the measurement date.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can
be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 Unobservable
inputs that reflect the entitys own assumptions about the assumption market participants would use in the pricing of the asset or liability and are consequently not based on market activity but rather through particular valuation
techniques.

The Company uses the fair value methodology outlined in SFAS No. 157 to value the assets and liabilities recorded
at fair value, including ATNs and APLs commodity hedges and interest rate swaps (see Note 8) and the Companys Supplemental Employment Retirement Plan (SERP) (see Note 17). ATNs and APLs commodity hedges,
with the exception of APLs NGL fixed price swaps and crude oil collars are calculated based on observable market data related to the change in price of the underlying commodity and are therefore defined as Level 2 fair value measurements.
ATNs and APLs interest rate derivative contracts are valued using a LIBOR rate-based forward price curve model, and are therefore defined as Level 2 fair value measurements. The Companys SERP is calculated based on observable
actuarial inputs developed by a third-party actuary, and therefore is defined as a Level 2 fair value measurement. Valuations for APLs NGL fixed price swaps are based on a forward price curve modeled on a regression analysis of natural gas,
crude oil, and propane prices, and therefore are defined as Level 3 fair value measurements. Valuations for APLs crude oil options (including those associated with NGL sales) are based on forward price curves developed by the related financial
institution based upon current quoted prices for crude oil futures, and therefore are defined as Level 3 fair value measurements. In accordance with SFAS No. 157, the following table represents the Companys assets and liabilities recorded
at fair value as of June 30, 2008 (in thousands):



|                                     |  |         |   |         |   |          |         |  |   |          |   |  |   |          |  
|------------------------------------ |  | ------- | - | ------- | - | -------- | ------- |  | - | -------- | - |  | - | -------- | -
|                                     |  | Level 1 |   | Level 2 |   |          | Level 3 |  |   | Total    |  
|SERP liability                       |  | $       |  |         | $ | (2,912   | )       |  | $ |         |   |  | $ | (2,912   | )
|Interest rate swap-based derivatives |  |         |  |         |   | 3,569    |         |  |   |         |   |  |   | 3,569    |  
|APL commodity-based derivatives      |  |         |  |         |   | 55,616   |         |  |   | (561,643 | ) |  |   | (506,027 | )
|ATN commodity-based derivatives      |  |         |  |         |   | (435,726 | )       |  |   |         |   |  |   | (435,726 | )
|                                     |  |         |   |         |   |          |         |  |   |          |   |  |   |          |  
|Total                                |  | $       |  |         | $ | (379,453 | )       |  | $ | (561,643 | ) |  | $ | (941,096 | )
|                                     |  |         |   |         |   |          |         |  |   |          |   |  |   |          |  

APLs Level 3 fair value amount relates to its derivative contracts on NGL fixed price swaps
and crude oil options. The following table provides a summary of changes in fair value of APLs Level 3 derivative instruments as of June 30, 2008 (in thousands):



|                                                           |  |                      |         |   |                                               |   |         |                        |  |   |          |   |  |   |          |  
|---------------------------------------------------------- |  | -------------------- | ------- | - | --------------------------------------------- | - | ------- | ---------------------- |  | - | -------- | - |  | - | -------- | -
|                                                           |  | NGL FixedPrice Swaps |         |   | Crude OilSales Options(assoc. withNGL Volume) |   |         | Crude OilSales Options |  |   | Total    |  
|Balance  December 31, 2007                                |  | $                    | (33,624 | ) |                                               | $ | (24,740 | )                      |  | $ | (145,418 | ) |  | $ | (203,782 | )
|New options contracts                                      |  |                      |        |   |                                               |   |        |                        |  |   | (8,215   | ) |  |   | (8,215   | )
|Cash settlements from unrealized gain(1)                   |  |                      | 1,142   |   |                                               |   | 3,157   |                        |  |   | 215,717  |   |  |   | 220,016  |  
|Cash settlements from other comprehensive income (loss)(1) |  |                      | 20,048  |   |                                               |   | 4,201   |                        |  |   | 11,969   |   |  |   | 36,218   |  
|Net change in unrealized gain (loss)(2)                    |  |                      | (1,005  | ) |                                               |   | 2,513   |                        |  |   | (425,381 | ) |  |   | (423,873 | )
|Deferred option premium recognition                        |  |                      |        |   |                                               |   | (6,776  | )                      |  |   | (35,205  | ) |  |   | (41,981  | )
|Net change in other comprehensive loss                     |  |                      | (7,551  | ) |                                               |   | (32,169 | )                      |  |   | (100,306 | ) |  |   | (140,026 | )
|                                                           |  |                      |         |   |                                               |   |         |                        |  |   |          |   |  |   |          |  
|Balance  June 30, 2008                                    |  | $                    | (20,990 | ) |                                               | $ | (53,814 | )                      |  | $ | (486,839 | ) |  | $ | (561,643 | )
|                                                           |  |                      |         |   |                                               |   |         |                        |  |   |          |   |  |   |          |  



|(1) | Included within transmission, gathering and processing revenue on the Companys consolidated statements of operations.
|--- | ----------------------------------------------------------------------------------------------------------------------



31



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##### Table of Contents

|(2) | Included within loss on mark-to-market derivatives on the Companys consolidated statements of operations.
|--- | ----------------------------------------------------------------------------------------------------------

NOTE 10  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of its business operations, the Company has ongoing relationships with several related entities:

Relationship with ATN Sponsored Investment Partnerships.ATN conducts certain activities through, and a substantial portion of its revenues are attributable to, energy limited partnerships (Investment
Partnerships). ATN serves as general partner of the Investment Partnerships and assumes customary rights and obligations for the Investment Partnerships. As the general partner, ATN is liable for the Investment Partnership liabilities and can
be liable to limited partners if it breaches its responsibilities with respect to the operations of the Investment Partnerships. ATN is entitled to receive management fees, reimbursement for administrative costs incurred, and to share in the
Investment Partnerships revenue, and costs and expenses according to the respective Investment Partnership agreements.

Relationship with Resource America, Inc.On June 30, 2005, Resource America, Inc. (RAI) completed its spin-off of the Company. The Company reimburses RAI for various costs and expenses it incurs on behalf of the
Company, primarily payroll and rent. For the three months ended June 30, 2008 and 2007, these costs totaled $184,000 and $221,000, respectively, and for the six months ended June 30, 2008 and 2007, these costs totaled $434,000 and
$529,000, respectively.

As of June 30, 2008 and December 31, 2007, certain operating expenditures totaling $123,000 and $58,000,
respectively, which remain to be settled between the Company and RAI, are reflected in the Companys consolidated balance sheets as advances from affiliate.

NOTE 11  COMMITMENTS AND CONTINGENCIES

General Commitments. The Company, through ATN, is the managing general
partner of various energy partnerships, and has agreed to indemnify each investor partner from any liability that exceeds such partners share of partnership assets. Subject to certain conditions, investor partners in certain energy
partnerships have the right to present their interests for purchase by ATN, as managing general partner. ATN is not obligated to purchase more than 5% to 10% of the units in any calendar year. Based on past experience, the Company believes that any
liability incurred would not be material.

ATN may be required to subordinate a part of its net partnership revenues from its energy
partnerships to the receipt by investor partners of cash distributions from the energy partnerships equal to at least 10% of their subscriptions determined on a cumulative basis, in accordance with the terms of the partnership agreements.

The Company is party to employment agreements with certain executives that provide compensation and certain other benefits. The agreements
also provide for severance payments under certain circumstances.

As of June 30, 2008, the Company is committed to expend
approximately $158.6 million on pipeline extensions, compressor station upgrades, and processing facility upgrades.



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Legal Proceedings. On June 20, 2008, ATNs wholly-owned subsidiary, Atlas America, LLC, was
named as a co-defendant in the matter captioned CNX Gas Company, LLC (CNX) v. Miller Petroleum, Inc. (Miller), et al. (Chancery Court, Campbell County, Tennessee). In its complaint, CNX alleges that Miller breached a contract
to assign to CNX certain leasehold rights (Leases) representing approximately 30,000 acres in Campbell County, Tennessee and that the Company and another defendant, Wind City Oil & Gas, LLC, interfered with the closing of this
assignment on June 6, 2008. ATN purchased Leases from Miller for approximately $19.1 million. ATN acted in good faith and believes that the outcome of the litigation will be resolved in its favor.

ATN is a party to various routine legal proceeding arising in the ordinary course of its businesses.

Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the Companys financial
condition or results of operations.

NOTE 12  INCOME TAXES

The Company accounts for income taxes under the asset and liability method pursuant to SFAS No. 109, Accounting for Income Taxes (SFAS No. 109). Under SFAS 109, deferred income
taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss and credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of any tax rate change on
deferred taxes is recognized in the period that includes the enactment date of the tax rate change. Realization of deferred tax assets is assessed and, if not more likely than not, a valuation allowance is recorded to write down the deferred tax
assets to their net realizable value.

The Company adopted the provisions of FASB Interpretation 48, Accounting for Uncertainty in
Income Taxes (FIN 48) on January 1, 2007. As required by FIN 48, which clarifies SFAS 109, the Company recognizes the financial statement benefit of a tax position after determining that the relevant tax authority would more
likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater then 50 percent likelihood of being
realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied FIN 48 to all tax positions for which the statute of limitation remained open. During the quarter ended June 30, 2008, there were no
additions, reductions or settlements in unrecognized tax benefits. The Company has no material uncertain tax positions and the implementation of FIN 48 did not have a significant impact on the consolidated financial statements of the Company.

The Company is subject to income taxes in the U.S. federal jurisdiction and various states. Tax regulations within each jurisdiction are
subject to the interpretations of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax
authorities for the years before 2004. The Companys policy is to reflect interest and penalties related to uncertain tax positions as part of the income tax expense, when and if they become applicable.

NOTE 13  COMMON STOCK

Stock splits

On April 22, 2008, the Companys Board of Directors approved a 3-for-2 stock split of the Companys common stock effected in the form of a
50% stock dividend. All shareholders of record as of May 21, 2008 received one additional share of common stock for every two shares of common stock held on that date. The additional shares of common stock were distributed on May 30, 2008.
Information pertaining to shares and earnings per share has been restated for the three and six months ended June 30, 2008 in the accompanying financial statements and notes to the consolidated financial statements to reflect this split and the
2007 split.

On April 27, 2007, the Companys Board of Directors approved a 3-for-2 stock split of the Companys common
stock effected in the form of a 50% stock dividend. All shareholders of record as of May 15, 2007 received one additional share of common stock for every two shares of common stock held on that date. The additional shares of common stock were
distributed on May 25, 2007. Information pertaining to shares and earnings per share has been restated for the three and six months ended June 30, 2007 in the accompanying financial statements and notes to the consolidated financial
statements to reflect this split.



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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.

NOTE 14  ISSUANCE OF SUBSIDIARY UNITS

The Company accounts for offerings by its subsidiaries in accordance with Staff Accounting Bulletin No. 51, Accounting by the Parent in Consolidation for Sales of Stock by a Subsidiary (SAB
51). The Company has adopted a policy to recognize gains on such transactions as a credit to equity rather than as income. These gains represent the Companys portion of the excess net offering price per unit of each of its
subsidiarys units to the book carrying amount per unit.

On June 24, 2008, APL sold 5,750,000 common limited partner units in a
public offering at a price of $37.52 per unit, yielding net proceeds of approximately $206.6 million. Also on June 24, 2008, the Company purchased 308,109 AHD common units and 1,112,000 APL common limited partner units through a private
placement transaction at a price of $32.50 and $36.02 per unit, respectively, for net proceeds of approximately $10.0 million and $40.1 million, respectively. AHD utilized the net proceeds from the sale to purchase 278,000 common units of APL, which
in turn utilized the proceeds to partially fund the early termination of certain crude oil derivative agreements (see Note 8).

On
May 16, 2008, ATN sold 2,070,000 of its Class B common units in a public offering yielding net proceeds of approximately $82.5 million. The net proceeds were used to repay a portion of ATNs outstanding balance under its revolving credit
facility. A gain of $17.7 million, net of an income tax provision of $8.7 million, in accordance with SAB 51 was recorded in consolidated equity as an increase to paid-in capital as well as a corresponding adjustment of $26.4 million to minority
interest, during the six months ended June 30, 2008.

On May 5, 2008, the Company purchased 600,000 of ATNs Class B common
units in a private placement at $42.00 per common unit, increasing the Companys ownership of ATNs common units to 29,952,996 common units. ATNs net proceeds of $25.2 million were used to repay a portion of its outstanding balance
under its revolving credit facility.

In July 2007, APL sold 25,568,175 common units through a private placement to investors at a
negotiated purchase price of $44.00 per unit, yielding net proceeds of approximately $1.125 billion. Of the 25,568,175 common units sold by APL, 3,835,227 common units were purchased by AHD for $168.8 million. APL also received a capital
contribution from AHD of $23.1 million for AHD to maintain its 2.0% general partner interest in APL. AHD funded this capital contribution and other transaction costs through borrowings under its revolving credit facility of $25.0 million. APL
utilized the net proceeds from the sale to partially fund the acquisition of control of the Chaney Dell natural gas gathering system and processing plants located in Oklahoma and a 72.8% interest in the Midkiff/Benedum natural gas gathering system
and processing plants located in Texas (see Note 3).

In July 2007, AHD issued 6,249,995 common units (an approximate 27% interest in it)
for net proceeds of $167.0 million after offering costs in a private placement offering. In addition, in July 2007 APL issued 25,568,175 common units through a private placement to investors, of which 3,835,227 common units were purchased by AHD. A
gain of $53.0 million, net of an income tax provision of $34.3 million, in accordance with SAB 51 was recorded in consolidated equity as an increase to paid-in capital as well as a corresponding adjustment of $87.3 million to minority interest,
during the year ended December 31, 2007.



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In June 2007, ATN issued 24,083,628 Class B common and Class D units (an approximate 31% interest in ATN
at that time) for net proceeds of $597.5 million after offering costs in a private placement offering. A gain of $147.9 million, net of an income tax provision of $87.5 million, in accordance with SAB 51 was recorded in consolidated equity as an
increase to paid-in capital as well as a corresponding adjustment of $235.4 million to minority interest, during the year ended December 31, 2007.

NOTE 15  CASH DISTRIBUTIONS

Atlas Pipeline Partners Cash Distributions. APL is required to distribute, within
45 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 and AHD, as general partner. If APLs common unit distributions in any quarter exceed
specified target levels, AHD will receive between 15% and 50% of such distributions in excess of the specified target levels. Distributions declared by APL for the period from January 1, 2007 through June 30, 2008 were as follows:



|                                       |  |                    |  |                                                   |      |                                                    |   |                                  |  |   |      
|-------------------------------------- |  | ------------------ |  | ------------------------------------------------- | ---- | -------------------------------------------------- | - | -------------------------------- |  | - | -----
|Date Cash Distribution Paid or Payable |  | For Quarter Ended  |  | APL CashDistributionper CommonLimitedPartner Unit |      | Total APL CashDistribution toCommonLimitedPartners |   | Total APL CashDistribution toAHD
|                                       |  |                    |  |                                                   |      | (in thousands)                                     |   | (in thousands)                  
|February 14, 2007                      |  | December 31, 2006  |  | $                                                 | 0.86 |                                                    | $ | 11,249                           |  | $ | 4,193
|May 15, 2007                           |  | March 31, 2007     |  | $                                                 | 0.86 |                                                    | $ | 11,249                           |  | $ | 4,193
|August 14, 2007                        |  | June 30, 2007      |  | $                                                 | 0.87 |                                                    | $ | 11,380                           |  | $ | 4,326
|November 14, 2007                      |  | September 30, 2007 |  | $                                                 | 0.91 |                                                    | $ | 35,205                           |  | $ | 4,498
|February 14, 2008                      |  | December 31, 2007  |  | $                                                 | 0.93 |                                                    | $ | 36,051                           |  | $ | 5,092
|May 15, 2008                           |  | March 31, 2008     |  | $                                                 | 0.94 |                                                    | $ | 36,450                           |  | $ | 7,891
|August 14, 2008(1)                     |  | June 30, 2008      |  | $                                                 | 0.96 |                                                    | $ | 44,095                           |  | $ | 9,307



|(1) | Declared subsequent to June 30, 2008 (see Note 19)
|--- | --------------------------------------------------

In connection with APLs acquisition of control of the Chaney Dell and Midkiff/Benedum systems (see Note 3), AHD, which holds all of the incentive distribution rights in APL, agreed to allocate up to $5.0 million of its incentive
distribution rights per quarter back to APL through the quarter ended June 30, 2009, and up to $3.75 million per quarter thereafter. AHD also agreed that the resulting allocation of incentive distribution rights back to APL would be after AHD
receives the initial $3.7 million per quarter of incentive distribution rights through the quarter ended December 31, 2007, and $7.0 million per quarter thereafter (IDR Adjustment Agreement).



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Atlas Pipeline Holdings Cash Distributions.AHD has 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 for the period from January 1, 2007 through
June 30, 2008 were as follows:



|                                       |  |                    |  |                                                 |      |                                      |   |      
|-------------------------------------- |  | ------------------ |  | ----------------------------------------------- | ---- | ------------------------------------ | - | -----
|Date Cash Distribution Paid or Payable |  | For QuarterEnded   |  | Cash Distribution perCommon LimitedPartner Unit |      | Total CashDistribution to theCompany
|                                       |  |                    |  |                                                 |      | (in thousands)                      
|February 19, 2007                      |  | December 31, 2006  |  | $                                               | 0.25 |                                      | $ | 4,375
|May 18, 2007                           |  | March 31, 2007     |  | $                                               | 0.25 |                                      | $ | 4,375
|August 17, 2007                        |  | June 30, 2007      |  | $                                               | 0.26 |                                      | $ | 4,550
|November 19, 2007                      |  | September 30, 2007 |  | $                                               | 0.32 |                                      | $ | 5,600
|February 19, 2008                      |  | December 31, 2007  |  | $                                               | 0.34 |                                      | $ | 5,950
|May 20, 2008                           |  | March 31, 2008     |  | $                                               | 0.43 |                                      | $ | 7,525
|August 19, 2008(1)                     |  | June 30, 2008      |  | $                                               | 0.51 |                                      | $ | 9,082



|(1) | Declared subsequent to June 30, 2008 (see Note 19)
|--- | --------------------------------------------------

Atlas Energy Resources Cash Distributions.Upon completion of its initial public offering, ATN 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 ATN and paid to the Company from inception are as follows:



|                                       |  |                    |  |                               |      |     |                                     |   |                                        |  |   |      
|-------------------------------------- |  | ------------------ |  | ----------------------------- | ---- | --- | ----------------------------------- | - | -------------------------------------- |  | - | -----
|Date Cash Distribution Paid or Payable |  | For Quarter Ended  |  | CashDistributionPerCommonUnit |      |     | Total CashDistributionto theCompany |   | ManagerIncentiveDistributionEarned (3)
|                                       |  |                    |  |                               |      |     | (in thousands)                      |   | (in thousands)                        
|February 14, 2007                      |  | December 31, 2006  |  | $                             | 0.06 | (1) |                                     | $ | 1,806                                  |  | $ |     
|May 15, 2007                           |  | March 31, 2007     |  | $                             | 0.43 |     |                                     | $ | 12,944                                 |  | $ |     
|August 14, 2007                        |  | June 30, 2007      |  | $                             | 0.43 |     |                                     | $ | 12,944                                 |  | $ |     
|November 14, 2007                      |  | September 30, 2007 |  | $                             | 0.55 |     |                                     | $ | 16,825                                 |  | $ | 784  
|February 14, 2008                      |  | December 31, 2007  |  | $                             | 0.57 |     |                                     | $ | 17,437                                 |  | $ | 965  
|May 15, 2008                           |  | March 31, 2008     |  | $                             | 0.59 |     |                                     | $ | 18,410                                 |  | $ | 1,214
|August 14, 2008(2)                     |  | June 30, 2008      |  | $                             | 0.61 |     |                                     | $ | 19,060                                 |  | $ | 1,687



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



|(2) | Declared subsequent to June 30, 2008 (see Note 19).
|--- | ---------------------------------------------------



|(3) | Payable to the Company in 2010, provided ATN meets certain criteria within its partnership agreements.
|--- | ------------------------------------------------------------------------------------------------------

NOTE 16  INVESTMENT IN LIGHTFOOT

In 2007, the Companys subsidiary, Atlas Lightfoot, LLC,
invested $10.4 million in Lightfoot and owns, directly and indirectly, approximately 12% of the entity of whom Jonathan Cohen, Vice Chairman of the Companys Board of Directors, is the Chairman of the Board. The Company committed to invest a
total of $20.0 million in Lightfoot. The Company has 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 an initial equity
funding commitments of approximately $160.0 million and focuses its investments primarily on incubating new master limited partnerships and providing capital to existing MLPs in need of additional equity or structured debt. Lightfoot concentrates on
assets that are MLP-qualified such as infrastructure, coal, and other asset categories. The Company accounts for its investment in Lightfoot under the equity method of accounting.



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NOTE 17   BENEFIT PLANS

Incentive Bonus Plan

The Companys shareholders approved an Incentive Bonus Plan (Bonus
Plan) in 2007 for the benefit of its senior executive officers. The total amount of cash bonus awards to be made under the Bonus Plan for any plan year will be based on performance goals related to objective business criteria for such year.
For any plan year, the Companys performance must achieve levels targeted by the Companys compensation committee, as established at the beginning of each year, for any bonus awards to be made. Aggregate bonus awards to all participants
under the Bonus Plan may not exceed a limit as set by the compensation committee. The compensation committee has the authority to reduce the total amount of bonus awards, if any, to be made to the eligible employees for any plan year based on its
assessment of personal performance or other factors as the Board may determine to be relevant or appropriate. The compensation committee may permit participants to elect to defer awards.

Stock Incentive Plan

The Company has a Stock Incentive Plan (the Plan) which authorizes
the granting of up to 4,499,999 shares of the Companys common stock to employees, affiliates, consultants and directors of the Company in the form of incentive stock options (ISOs), non-qualified stock options, stock appreciation
rights (SARs), restricted stock and deferred units. The Company and its subsidiaries follow the provisions of SFAS No. 123(R), Share-Based Payment, as revised (SFAS No. 123(R)), for their stock
compensation. 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.

Stock Options. Options under the Plan become exercisable as to 25% of the optioned shares each year after the date of grant, except
options totaling 1,687,500 shares awarded in fiscal 2005 to Messrs. Edward Cohen and Jonathan Cohen which are immediately exercisable, and expire not later than ten years after the date of grant. Compensation cost is recorded on a straight-line
basis. The Company issues new shares when stock options are exercised or units are converted to shares. For the three and six months ended June 30, 2007, respectively, the Company received $9,500 and $105,500 from the exercise of stock options.
There were no stock options exercised during the three and six months ended June 30, 2008.

The following tables set forth the Plan
activity for the three and six months ended June 30, 2008 and 2007:



|                                                        |  |                            |           |                              |   |                       |  |   |                              |   |  |   |      
|------------------------------------------------------- |  | -------------------------- | --------- | ---------------------------- | - | --------------------- |  | - | ---------------------------- | - |  | - | -----
|                                                        |  | Three Months EndedJune 30,
|                                                        |  | 2008                       |           | 2007                        
|                                                        |  | Number ofUnit Options      |           | WeightedAverageExercisePrice |   | Number ofUnit Options |  |   | WeightedAverageExercisePrice
|Outstanding, beginning of period                        |  |                            | 3,540,380 |                              | $ | 16.89                 |  |   | 2,757,994                    |   |  | $ | 11.82
|Granted                                                 |  |                            |          |                              |   |                      |  |   | 30,000                       |   |  | $ | 35.82
|Matured                                                 |  |                            |          |                              |   |                      |  |   | (843                         | ) |  | $ | 11.32
|Forfeited                                               |  |                            |          |                              |   |                      |  |   |                             |   |  |   |     
|                                                        |  |                            |           |                              |   |                       |  |   |                              |   |  |   |      
|Outstanding, end of period(1)(2)                        |  |                            | 3,540,380 |                              | $ | 16.89                 |  |   | 2,787,151                    |   |  | $ | 12.08
|                                                        |  |                            |           |                              |   |                       |  |   |                              |   |  |   |      
|Options exercisable, end of period                      |  |                            | 2,144,650 |                              | $ | 11.64                 |  |   | 1,946,053                    |   |  | $ | 11.50
|                                                        |  |                            |           |                              |   |                       |  |   |                              |   |  |   |      
|Non-cash compensation expense recognized (in thousands) |  | $                          | 983       |                              |   |                       |  | $ | 350                          |   |  |   |      
|                                                        |  |                            |           |                              |   |                       |  |   |                              |   |  |   |      



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|                                                        |  |                          |           |                              |   |                       |  |   |                              |   |  |   |      
|------------------------------------------------------- |  | ------------------------ | --------- | ---------------------------- | - | --------------------- |  | - | ---------------------------- | - |  | - | -----
|                                                        |  | Six Months EndedJune 30,
|                                                        |  | 2008                     |           | 2007                        
|                                                        |  | Number ofUnit Options    |           | WeightedAverageExercisePrice |   | Number ofUnit Options |  |   | WeightedAverageExercisePrice
|Outstanding, beginning of period                        |  |                          | 2,715,380 |                              | $ | 12.10                 |  |   | 2,766,432                    |   |  | $ | 11.82
|Granted                                                 |  |                          | 825,000   |                              | $ | 32.68                 |  |   | 30,000                       |   |  | $ | 35.82
|Matured                                                 |  |                          |          |                              |   |                      |  |   | (9,281                       | ) |  | $ | 11.32
|Forfeited                                               |  |                          |          |                              |   |                      |  |   |                             |   |  |   |     
|                                                        |  |                          |           |                              |   |                       |  |   |                              |   |  |   |      
|Outstanding, end of period(1)(2)                        |  |                          | 3,540,380 |                              | $ | 16.89                 |  |   | 2,787,151                    |   |  | $ | 12.08
|                                                        |  |                          |           |                              |   |                       |  |   |                              |   |  |   |      
|Options exercisable, end of period(3)(4)                |  |                          | 2,144,650 |                              | $ | 11.64                 |  |   | 1,946,053                    |   |  | $ | 11.50
|                                                        |  |                          |           |                              |   |                       |  |   |                              |   |  |   |      
|Non-cash compensation expense recognized (in thousands) |  | $                        | 1,957     |                              |   |                       |  | $ | 699                          |   |  |   |      
|                                                        |  |                          |           |                              |   |                       |  |   |                              |   |  |   |      



|(1) | The weighted average remaining contractual life for outstanding options at June 30, 2008 and 2007 were 7.8 years and 8.1 years, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The aggregate intrinsic value of options outstanding at June 30, 2008 and 2007 were approximately $99.7 million and $127.8 million, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The number of options available for grant at June 30, 2008 was 922,927.
|--- | -----------------------------------------------------------------------



|(4) | The weighted average outstanding contractual life of exercisable options at June 30, 2008 is 7.1 years.
|--- | -------------------------------------------------------------------------------------------------------

The Company used the Black-Scholes option pricing model to estimate the weighted average fair value of options granted during the three and six months
ended June 30, 2008 and 2007. The following weighted average assumptions were used:



|                                    |  |                            |  |      |                          |   |      |   |       |      |  |   |       |  
|----------------------------------- |  | -------------------------- |  | ---- | ------------------------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                    |  | Three Months EndedJune 30, |  |      | Six Months EndedJune 30, |  
|                                    |  | 2008                       |  | 2007 |                          |   | 2008 |   |       | 2007 | 
|Expected dividend yield             |  |                           |  |      | 0.4                      | % |      |   | 0.4   | %    |  |   | 0.4   | %
|Expected stock price volatility     |  |                           |  |      | 35                       | % |      |   | 33    | %    |  |   | 35    | %
|Risk-free interest rate             |  |                           |  |      | 4.7                      | % |      |   | 2.6   | %    |  |   | 4.7   | %
|Expected term (in years)            |  |                           |  |      | 6.25                     |   |      |   | 6.25  |      |  |   | 6.25  |  
|Fair value of stock options granted |  |                           |  | $    | 15.08                    |   |      | $ | 11.75 |      |  | $ | 15.08 |  

Deferred and Restricted Units. Under the Plan, non-employee directors of the Company are
awarded deferred units that vest over a four-year period. Each unit represents the right to receive one share of the Companys common stock upon vesting. Units will vest sooner upon a change in control of the Company or death or disability of a
grantee, provided the grantee has completed at least six months service. The fair value of the grants is based on the closing stock price on the grant date, and is being charged to operations over the requisite service periods using a
straight-line attribution method. Upon termination of service by a grantee, all unvested units are forfeited.

Restricted units are granted
from time to time to employees of the Company. Each unit represents the right to receive one share of the Companys common stock upon vesting. The units are issued to the Restricted Stock Plan when granted, and paid to the Companys
employees upon vesting. The units vest one-fourth at each anniversary date over a four-year service period. The fair value of the grant is based on the closing price on the grant date, and is being expensed over the requisite service period using a
straight-line attribution method.



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##### Table of Contents

The following tables set forth the deferred and restricted units activity for the three and six months
ended June 30, 2008 and 2007:



|                                                   |  |                            |   |      |                                     |       |                |        |   |                                     |   |      
|-------------------------------------------------- |  | -------------------------- | - | ---- | ----------------------------------- | ----- | -------------- | ------ | - | ----------------------------------- | - | -----
|                                                   |  | Three Months EndedJune 30,
|                                                   |  | 2008                       |   | 2007
|                                                   |  | Numberof Units             |   |      | WeightedAverageGrant DateFair Value |       | Numberof Units |        |   | WeightedAverageGrant DateFair Value
|Non-vested shares outstanding, beginning of period |  | 20,270                     |   |      | $                                   | 14.31 |                | 26,124 |   |                                     | $ | 10.28
|Granted                                            |  | 1,523                      |   |      | $                                   | 49.26 |                | 2,783  |   |                                     | $ | 26.93
|Matured                                            |  | (9,429                     | ) |      | $                                   | 7.96  |                | (8,231 | ) |                                     | $ | 9.11 
|Forfeited                                          |  |                           |   |      |                                     |      |                |       |   |                                     |   |     
|                                                   |  |                            |   |      |                                     |       |                |        |   |                                     |   |      
|Non-vested shares outstanding, end of period       |  | 12,364                     |   |      | $                                   | 23.46 |                | 20,676 |   |                                     | $ | 12.99
|                                                   |  |                            |   |      |                                     |       |                |        |   |                                     |   |      



|                                                   |  |                          |   |      |                                     |       |                |        |   |                                     |   |      
|-------------------------------------------------- |  | ------------------------ | - | ---- | ----------------------------------- | ----- | -------------- | ------ | - | ----------------------------------- | - | -----
|                                                   |  | Six Months EndedJune 30,
|                                                   |  | 2008                     |   | 2007
|                                                   |  | Numberof Units           |   |      | WeightedAverageGrant DateFair Value |       | Numberof Units |        |   | WeightedAverageGrant DateFair Value
|Non-vested shares outstanding, beginning of period |  | 21,395                   |   |      | $                                   | 14.65 |                | 26,967 |   |                                     | $ | 10.61
|Granted                                            |  | 1,523                    |   |      | $                                   | 49.26 |                | 2,783  |   |                                     | $ | 26.93
|Matured                                            |  | (10,554                  | ) |      | $                                   | 9.33  |                | (9,074 | ) |                                     | $ | 10.19
|Forfeited                                          |  |                         |   |      |                                     |      |                |       |   |                                     |   |     
|                                                   |  |                          |   |      |                                     |       |                |        |   |                                     |   |      
|Non-vested shares outstanding, end of period       |  | 12,364                   |   |      | $                                   | 23.46 |                | 20,676 |   |                                     | $ | 12.99
|                                                   |  |                          |   |      |                                     |       |                |        |   |                                     |   |      

For the three months ended June 30, 2008 and 2007, the Company recorded non-cash compensation
expense of $1.0 million and $0.4 million, respectively, for the Companys options and units. For the six months ended June 30, 2008 and 2007, the Company recorded non-cash compensation expense of $2.0 million and $0.7 million,
respectively, for the Companys options and units. At June 30, 2008, the Company had unamortized compensation expense related to its unvested portion of the options and units of $10.7 million that the Company expects to recognize over four
years.

Employee Stock Ownership Plan

In connection with the spin-off from RAI, the Company established an Employee Stock Ownership Plan (ESOP) in June 2005. The ESOP, which is a qualified non-contributory retirement plan, was established to acquire shares of the
Companys common stock for the benefit of all employees who are 21 years of age or older and have completed 1,000 hours of service. These shares have been converted to the Companys common stock from RAI stock in an even exchange. The
Company loaned $602,000 (payable in quarterly installments of $18,508 plus interest at 7.5%) to the ESOP, which was used by the ESOP to acquire



39



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the remaining 40,375 unallocated shares of RAI common stock. Contributions to the ESOP are made at the discretion of the Companys Board of Directors.
The cost of shares purchased by the ESOP but not yet allocated to participants is shown as a reduction of stockholders equity. The unearned benefits expense (a reduction in stockholders equity) will be reduced by the amount of any loan
principal payments made by the ESOP to the Company. Any dividends which may be paid on allocated shares will reduce retained earnings; dividends on unearned ESOP shares will be used to service the related debt.

The common stock purchased by the ESOP with the money borrowed is held by the ESOP trustee in a suspense account. On an annual basis, as the ESOP loan is
paid down, a portion of the common stock will be released from the suspense account and allocated to participating employees. As of June 30, 2008, there were 497,735 shares allocated to participants and 47,655 shares which are unallocated. The
fair value of unearned ESOP shares was $2.1 million at June 30, 2008.

Supplemental Employment Retirement Plan

In May 2004, the Company entered into 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 shall be 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. For the three months ended June 30, 2008 and 2007, expense recognized with respect to this commitment was
$0.2 million and $0.2 million, respectively, and the expense recognized for the six months ended June 30, 2008 and 2007 was $0.4 million and $0.3 million, respectively. As of June 30, 2008, the present value of the expected postretirement
obligation due under the SERP was $2.9 million, which is included in other long-term liabilities on the Companys consolidated balance sheet. The following table provides information about amounts recognized in the Companys consolidated
balance sheets at the dates indicated (in thousands):



|                                     |  |              |        |   |                  |   |        |  
|------------------------------------ |  | ------------ | ------ | - | ---------------- | - | ------ | -
|                                     |  | June 30,2008 |        |   | December 31,2007 |  
|Other liabilities                    |  | $            | (2,912 | ) |                  | $ | (2,475 | )
|Accumulated other comprehensive loss |  |              | 291    |   |                  |   | 638    |  
|Deferred income tax asset            |  |              | 170    |   |                  |   | 375    |  
|                                     |  |              |        |   |                  |   |        |  
|Net amount recognized                |  | $            | (2,451 | ) |                  | $ | (1,462 | )
|                                     |  |              |        |   |                  |   |        |  

The estimated amount that will be amortized from accumulated other comprehensive loss into expense
in 2008 is $0.3 million.

AHD Long-Term Incentive Plan

AHD has a Long-Term Incentive Plan (AHD LTIP), which provides performance incentive awards to officers, employees and board members and employees of its affiliates, consultants and joint-venture partners
(collectively, the Participants) who perform services for AHD. The AHD LTIP is administered by a committee (the AHD LTIP Committee), appointed by AHDs board. Under the AHD LTIP, phantom units and/or unit options may be
granted, at the discretion of the AHD LTIP Committee, to all or designated Participants, at the discretion of the AHD LTIP Committee. The AHD LTIP Committee may grant such awards of either phantom units or unit options for an aggregate of 2,100,000
common limited partner units. At June 30, 2008, AHD had 1,440,475 phantom units and unit options outstanding under the AHD LTIP, with 659,150 phantom units and unit options available for grant.



40



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##### Table of Contents

AHD Phantom Units.A phantom unit entitles a Participant to receive a
common unit of AHD, without payment of an exercise price, upon vesting of the phantom unit or, at the discretion of the AHD LTIP Committee, cash equivalent to the then fair market value of a common limited partner unit of AHD. In tandem with phantom
unit grants, the AHD LTIP Committee may grant a Participant a distribution equivalent right (DER), which is the right to receive cash per phantom unit in an amount equal to, and at the same time as, the cash distributions AHD makes on a
common unit during the period such phantom unit is outstanding. The AHD LTIP Committee will determine the vesting period for phantom units. Through June 30, 2008, phantom units granted under the AHD LTIP generally will vest 25% three years from
the date of grant and 100% four years from the date of grant. The vesting of awards may also be contingent upon the attainment of predetermined performance targets, which could increase or decrease the actual award settlement, as determined by the
AHD LTIP Committee, although no awards currently outstanding contain any such provision. Awards will automatically vest upon a change of control of AHD, as defined in the AHD LTIP. Of the phantom units outstanding under the AHD LTIP at June 30,
2008, 675 units will vest within the following twelve months. All phantom units outstanding under the AHD LTIP at June 30, 2008 include DERs granted to the Participants by the AHD LTIP Committee. The amount paid with respect to the AHD LTIP
DERs was $0.1 million for both the three months ended June 30, 2008 and 2007, and $0.2 million and $0.1 million for the six months ended June 30, 2008 and 2007, respectively. This amount was recorded as an adjustment of minority
interests on the Companys consolidated balance sheet.

The following table sets forth the AHD LTIP phantom unit
activity for the periods indicated:



|                                                        |  |                            |         |                          |   |         |  |      |         |  |   |         |  
|------------------------------------------------------- |  | -------------------------- | ------- | ------------------------ | - | ------- |  | ---- | ------- |  | - | ------- | -
|                                                        |  | Three Months EndedJune 30, |         | Six Months EndedJune 30, |  
|                                                        |  | 2008                       |         | 2007                     |   | 2008    |  | 2007 |        
|Outstanding, beginning of period                        |  |                            | 225,475 |                          |   | 220,000 |  |      | 220,825 |  |   | 220,492 |  
|Granted(1)                                              |  |                            |        |                          |   |        |  |      | 4,650   |  |   |        |  
|Unit Adjustment                                         |  |                            |        |                          |   |        |  |      |        |  |   | (492    | )
|Matured                                                 |  |                            |        |                          |   |        |  |      |        |  |   |        |  
|Forfeited                                               |  |                            |        |                          |   |        |  |      |        |  |   |        |  
|                                                        |  |                            |         |                          |   |         |  |      |         |  |   |         |  
|Outstanding, end of period(2)                           |  |                            | 225,475 |                          |   | 220,000 |  |      | 225,475 |  |   | 220,000 |  
|                                                        |  |                            |         |                          |   |         |  |      |         |  |   |         |  
|Non-cash compensation expense recognized (in thousands) |  | $                          | 372     |                          | $ | 495     |  | $    | 738     |  | $ | 839     |  
|                                                        |  |                            |         |                          |   |         |  |      |         |  |   |         |  



|(1) | The weighted average price for phantom unit awards on the date of grant, which is utilized in the calculation of
compensation expense and does not represent an exercise price to be paid by the recipient, was $32.28 for both the three and six months ended June 30, 2008, respectively. There were no grants of phantom units during the three and six months
ended June 30, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The aggregate intrinsic value for phantom unit awards outstanding as of June 30, 2008 was $7.6 million.
|--- | -------------------------------------------------------------------------------------------------------

At June 30, 2008, AHD had approximately $3.1 million of unrecognized compensation expense related to unvested
phantom units outstanding under the AHD LTIP based upon the fair value of the awards.

AHD Unit Options.A unit option entitles a
Participant to receive a common unit of AHD upon payment of the exercise price for the option after completion of vesting of the unit option. The exercise price of the unit option may be equal to or more than the fair market value of AHDs
common unit as determined by AHDs LTIP Committee on the date of grant of the option. AHDs LTIP Committee also shall determine how the exercise price may be paid by the Participant. AHDs LTIP Committee will determine the vesting and
exercise period for unit options. Unit option awards expire 10 years from the date of grant. Through June 30, 2008, unit options granted under AHDs LTIP generally will vest 25% three years from the date of grant and 100% four years from
the date of grant. The vesting of awards may also be contingent upon the attainment of predetermined performance targets, which could increase or decrease the actual award settlement, as determined by AHDs LTIP Committee, although no awards
currently outstanding contain any such provision. Awards will automatically vest upon a change of control of AHD, as defined in AHDs LTIP.



41



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There are no unit options outstanding under AHDs LTIP at June 30, 2008 that will vest within the following twelve months. The following table sets
forth the LTIP unit option activity for the periods indicated:



|                                                        |  |                             |           |                              |   |                      |  |                              |           |  |   |      
|------------------------------------------------------- |  | --------------------------- | --------- | ---------------------------- | - | -------------------- |  | ---------------------------- | --------- |  | - | -----
|                                                        |  | Three Months Ended June 30,
|                                                        |  | 2008                        |           | 2007                        
|                                                        |  | Numberof UnitOptions        |           | WeightedAverageExercisePrice |   | Numberof UnitOptions |  | WeightedAverageExercisePrice
|Outstanding, beginning of period                        |  |                             | 1,215,000 |                              | $ | 22.56                |  |                              | 1,215,000 |  | $ | 22.56
|Granted                                                 |  |                             |          |                              |   |                     |  |                              |          |  |   |     
|Matured                                                 |  |                             |          |                              |   |                     |  |                              |          |  |   |     
|Forfeited                                               |  |                             |          |                              |   |                     |  |                              |          |  |   |     
|                                                        |  |                             |           |                              |   |                      |  |                              |           |  |   |      
|Outstanding, end of period(1)(2)                        |  |                             | 1,215,000 |                              | $ | 22.56                |  |                              | 1,215,000 |  | $ | 22.56
|                                                        |  |                             |           |                              |   |                      |  |                              |           |  |   |      
|Options exercisable, end of period                      |  |                             |          |                              |   |                     |  |                              |          |  |   |     
|                                                        |  |                             |           |                              |   |                      |  |                              |           |  |   |      
|Non-cash compensation expense recognized (in thousands) |  | $                           | 309       |                              |   |                      |  | $                            | 309       |  |   |      
|                                                        |  |                             |           |                              |   |                      |  |                              |           |  |   |      



|                                                        |  |                           |           |                              |   |                      |  |                              |           |  |   |      
|------------------------------------------------------- |  | ------------------------- | --------- | ---------------------------- | - | -------------------- |  | ---------------------------- | --------- |  | - | -----
|                                                        |  | Six Months Ended June 30,
|                                                        |  | 2008                      |           | 2007                        
|                                                        |  | Numberof UnitOptions      |           | WeightedAverageExercisePrice |   | Numberof UnitOptions |  | WeightedAverageExercisePrice
|Outstanding, beginning of period                        |  |                           | 1,215,000 |                              | $ | 22.56                |  |                              | 1,215,000 |  | $ | 22.56
|Granted                                                 |  |                           |          |                              |   |                     |  |                              |          |  |   |     
|Matured                                                 |  |                           |          |                              |   |                     |  |                              |          |  |   |     
|Forfeited                                               |  |                           |          |                              |   |                     |  |                              |          |  |   |     
|                                                        |  |                           |           |                              |   |                      |  |                              |           |  |   |      
|Outstanding, end of period(1)(2)                        |  |                           | 1,215,000 |                              | $ | 22.56                |  |                              | 1,215,000 |  | $ | 22.56
|                                                        |  |                           |           |                              |   |                      |  |                              |           |  |   |      
|Options exercisable, end of period(3)                   |  |                           |          |                              |   |                     |  |                              |          |  |   |     
|                                                        |  |                           |           |                              |   |                      |  |                              |           |  |   |      
|Non-cash compensation expense recognized (in thousands) |  | $                         | 619       |                              |   |                      |  | $                            | 619       |  |   |      
|                                                        |  |                           |           |                              |   |                      |  |                              |           |  |   |      



|(1) | The weighted average remaining contractual life for outstanding options at June 30, 2008 was 8.4 years.
|--- | -------------------------------------------------------------------------------------------------------



|(2) | The aggregate intrinsic value of options outstanding at June 30, 2008 was approximately $13.3 million.
|--- | ------------------------------------------------------------------------------------------------------



|(3) | There were no options exercised during the three and six months ended June 30, 2008 and 2007.
|--- | ---------------------------------------------------------------------------------------------

At June 30, 2008, AHD had approximately $2.5 million of unrecognized compensation expense related to unvested unit options outstanding under
AHDs LTIP based upon the fair value of the awards.

APL Long-Term Incentive Plan

APL has a Long-Term Incentive Plan (APL LTIP), in which officers, employees and non-employee managing board members of the General Partner and
employees of the General Partners affiliates and consultants are eligible to participate. The APL LTIP is administered by a committee (the APL LTIP Committee) appointed by AHDs managing board. The APL LTIP Committee may make
awards of either phantom units or unit options for an aggregate of 435,000 common units. Only phantom units have been granted under the APL LTIP through June 30, 2008.



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A phantom unit entitles a grantee to receive a common unit, without payment of an exercise price, upon
vesting of the phantom unit or, at the discretion of the APL LTIP Committee, cash equivalent to the fair market value of an APL common unit. In addition, the APL LTIP Committee may grant a participant a DER, which is the right to receive cash per
phantom unit in an amount equal to, and at the same time as, the cash distributions APL makes on a common unit during the period the phantom unit is outstanding. A unit option entitles the grantee to purchase APLs common limited partner units
at an exercise price determined by the APL LTIP Committee at its discretion. The APL LTIP Committee also has discretion to determine how the exercise price may be paid by the participant. Except for phantom units awarded to non-employee managing
board members of AHD, the APL LTIP Committee will determine the vesting period for phantom units and the exercise period for options. Through June 30, 2008, phantom units granted under the APL LTIP generally had vesting periods of four years.
The vesting of awards may also be contingent upon the attainment of predetermined performance targets, which could increase or decrease the actual award settlement, as determined by the APL LTIP Committee, although no awards currently outstanding
contain any such provision. Phantom units awarded to non-employee managing board members will vest over a four year period. Awards will automatically vest upon a change of control, as defined in the APL LTIP. Of the units outstanding under the APL
LTIP at June 30, 2008, 55,588 units will vest within the following twelve months. All units outstanding under the APL LTIP at June 30, 2008 include DERs granted to the participants by the APL LTIP Committee. The amounts paid with respect
to APL LTIP DERs were $0.2 million for the three month periods ended June 30, 2008 and 2007, respectively, and $0.3 million for the six month periods ended June 30, 2008 and 2007, respectively. These amounts were recorded as reductions of
minority interest on the Companys consolidated balance sheet.

The following table sets forth the APL LTIP phantom unit activity for
the periods indicated:



|                                                        |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        
|------------------------------------------------------- |  | -------------------------- | ------- | ------------------------ | ---- | - | ------- |  | - | ------- | - |  | - | -------
|                                                        |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|                                                        |  | 2008                       |         |                          | 2007 |   | 2008    |  |   | 2007   
|Outstanding, beginning of period                        |  |                            | 171,087 |                          |      |   | 183,859 |  |   | 129,746 |   |  |   | 159,067
|Granted(1)                                              |  |                            | 345     |                          |      |   | 303     |  |   | 54,296  |   |  |   | 25,095 
|Matured(2)                                              |  |                            | (21,509 | )                        |      |   |        |  |   | (33,369 | ) |  |   |       
|Forfeited                                               |  |                            |        |                          |      |   |        |  |   | (750    | ) |  |   |       
|                                                        |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        
|Outstanding, end of period(3)                           |  |                            | 149,923 |                          |      |   | 184,162 |  |   | 149,923 |   |  |   | 184,162
|                                                        |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        
|Non-cash compensation expense recognized (in thousands) |  | $                          | 697     |                          |      | $ | 973     |  | $ | 1,183   |   |  | $ | 1,874  
|                                                        |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        



|(1) | The weighted average price for phantom unit awards on the date of grant, which is utilized in the calculation of compensation expense and does not represent an exercise price to be
paid by the recipient, was $43.42 and $49.42 for awards granted for the three months ended June 30, 2008 and 2007, respectively, and $44.43 and $50.09 for awards granted for the six months ended June 30, 2008 and 2007, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The intrinsic value for phantom unit awards exercised during the three and six months ended June 30, 2008 was approximately $0.9 million and $1.4 million, respectively. There
were no phantom unit awards exercised during the three and six months ended June 30, 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The aggregate intrinsic value for phantom unit awards outstanding as of June 30, 2008 was $5.9 million.
|--- | -------------------------------------------------------------------------------------------------------

At June 30, 2008, APL had approximately $3.4 million of unrecognized compensation expense related to unvested phantom units outstanding under the
APL LTIP based upon the fair value of the awards.



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APL Incentive Compensation Agreements

APL has incentive compensation agreements which have granted awards to certain key employees retained from previously consummated acquisitions. These
individuals were entitled to receive common units of APL upon the vesting of the awards, which was dependent upon the achievement of certain predetermined performance targets through September 30, 2007. At September 30, 2007, the
predetermined performance targets were achieved and all of the awards under the incentive compensation agreements vested. Of the total common units to be issued under the incentive compensation agreements, 58,822 common units were issued during the
year ended December 31, 2007. The ultimate number of common units estimated to be issued under the incentive compensation agreements will be determined principally by the financial performance of certain APL assets for the year ended
December 31, 2008 and the market value of APLs common units at December 31, 2008. APLs incentive compensation agreements also dictate that no individual covered under the agreements shall receive an amount of common units in
excess of one percent of the outstanding common units of APL at the date of issuance. Common unit amounts due to any individual covered under the agreements in excess of one percent of the outstanding common units of APL shall be paid in cash.

APL recognized compensation expense (income) of $0.5 million and $1.5 million for the three months ended June 30, 2008 and 2007,
respectively, and ($2.8) million and $2.4 million for the six months ended June 30, 2008 and 2007, respectively, related to the vesting of awards under these incentive compensation agreements. The non-cash compensation expense adjustments for
the six months ended June 30, 2008 were principally attributable to changes in APLs common unit market price, which is utilized in the estimation of its non-cash compensation expense for these awards, at June 30, 2008 when compared
with APLs price at earlier periods and adjustments based upon the achievement of actual financial performance targets through June 30, 2008. The vesting period for such awards concluded on September 30, 2007. APLs Management
anticipates that adjustments will be recorded in future periods with respect to the awards under the incentive compensation agreements based upon the actual financial performance of the assets in future periods in comparison to their estimated
performance and the movement in the market value of APLs common units. Based upon APLs managements estimate of the probable outcome of the performance targets at June 30, 2008, 963,974 common unit awards are ultimately
expected to be issued under these agreements during the year ended December 31, 2009, which represents the total amount of common units expected to be issued under the incentive compensation agreements. APL follows SFAS No. 123(R) and
recognized compensation expense related to these awards based upon the fair value method.

ATN Long-Term Incentive Plan

ATN has a Long-Term Incentive Plan (ATN LTIP), which provides performance incentive awards to officers, employees and board members and
employees of its affiliates, consultants and joint-venture partners. The ATN LTIP is administered by its compensation committee, which may grant awards of either restricted stock units, phantom units or unit options for an aggregate of 3,742,000
common units. Awards granted vest 25% after three years and 100% upon the four year anniversary of grant, except for awards granted to board members which vest 25% per year over four years. Upon termination of service by a grantee, all unvested
awards are forfeited. A restricted stock or phantom unit entitles a grantee to receive a common unit of ATN upon vesting of the unit or, at the discretion of ATNs compensation committee, cash equivalent to the then fair market value of a
common unit of ATN. In tandem with phantom unit grants, ATNs compensation committee may grant a distribution equivalent right (DER), which is the right to receive cash per restricted unit in an amount equal to, and at the same time
as, the cash distributions ATN makes on a common unit during the period such phantom unit is outstanding.

Restricted Stock and Phantom
Units. Under the ATN LTIP, 26,375 units of restricted stock and phantom units were awarded in the six months ended June 30, 2008. The fair value of the grants is based on the closing stock price on the grant date, and is being charged to
operations over the requisite service periods using a straight-line attribution method.



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The following table summarizes the activity of restricted stock and phantom units for the six months
ended June 30, 2008:



|                                                   |  |         |   |  |                                     |      
|-------------------------------------------------- |  | ------- | - |  | ----------------------------------- | -----
|                                                   |  | Units   |   |  | WeightedAverageGrant DateFair Value
|Non-vested shares outstanding at December 31, 2007 |  | 624,665 |   |  | $                                   | 24.42
|Granted                                            |  | 26,375  |   |  |                                     | 34.52
|Vested                                             |  | (12,279 | ) |  |                                     | 21.06
|Forfeited                                          |  | (100    | ) |  |                                     | 35.00
|                                                   |  |         |   |  |                                     |      
|Non-vested shares outstanding at June 30, 2008     |  | 638,661 |   |  | $                                   | 24.90
|                                                   |  |         |   |  |                                     |      

Stock Options. In the six months ended June 30, 2008, 14,000 unit options were awarded
under the ATN LTIP. Option awards expire 10 years from the date of grant and are generally granted with an exercise price equal to the market price of ATNs common units at the date of grant. ATN uses the Black-Scholes option pricing model to
estimate the weighted average fair value per option granted with the following assumptions:



|                                                     |  |                     |       |   |                        |   |       |  
|---------------------------------------------------- |  | ------------------- | ----- | - | ---------------------- | - | ----- | -
|                                                     |  | Assumptions         |      
|                                                     |  | Grant DateJune 2008 |       |   | Grant DateJanuary 2008 |  
|Options granted                                      |  |                     | 7,500 |   |                        |   | 6,500 |  
|Expected life (years)                                |  |                     | 6.25  |   |                        |   | 6.25  |  
|Expected volatility                                  |  |                     | 34    | % |                        |   | 27    | %
|Risk-free interest rate                              |  |                     | 4.0   | % |                        |   | 2.8   | %
|Expected dividend yield                              |  |                     | 6.2   | % |                        |   | 7.0   | %
|Weighted average fair value of stock options granted |  | $                   | 7.66  |   |                        | $ | 3.41  |  

The following table sets forth option activity for the six months ended June 30, 2008:



|                                     |  |           |   |  |                              |       |                                         |     |                         |   |       
|------------------------------------ |  | --------- | - |  | ---------------------------- | ----- | --------------------------------------- | --- | ----------------------- | - | ------
|                                     |  | Shares    |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualTerm |     | AggregateIntrinsicValue
|                                     |  |           |   |  |                              |       | (in years)                              |     | (in thousands)         
|Outstanding at December 31, 2007     |  | 1,895,052 |   |  | $                            | 24.09 |                                         | 8.9 |                         |   |       
|Granted                              |  | 14,000    |   |  | $                            | 35.36 |                                         |     |                         |   |       
|Exercised                            |  |          |   |  |                              |      |                                         |     |                         |   |       
|Forfeited or expired                 |  | (3,650    | ) |  | $                            | 27.97 |                                         |     |                         |   |       
|                                     |  |           |   |  |                              |       |                                         |     |                         |   |       
|Outstanding at June 30, 2008         |  | 1,905,402 |   |  | $                            | 24.17 |                                         | 8.4 |                         | $ | 26,637
|                                     |  |           |   |  |                              |       |                                         |     |                         |   |       
|Options exercisable at June 30, 2008 |  | 93,438    |   |  | $                            | 21.00 |                                         | 7.8 |                         |   |       
|                                     |  |           |   |  |                              |       |                                         |     |                         |   |       
|Available for grant at June 30, 2008 |  | 1,173,754 |   |  |                              |       |                                         |     |                         |   |       
|                                     |  |           |   |  |                              |       |                                         |     |                         |   |       

ATN recognized $1.3 million and $1.0 million in compensation expense related to restricted stock
units, phantom units and stock options for the three months ended June 30, 2008 and 2007, respectively. ATN recognized $2.7 million and $2.1 million in related compensation expense for the six months ended June 30, 2008 and 2007, respectively. ATN
paid $0.3 million and $0.2 million with respect to its LTIP DERs for the three months ended June 30, 2008 and 2007, respectively. ATN paid $0.7 million and $0.3 million with respect to its LTIP DERs for the six months ended June 30, 2008
and 2007, respectively. These amounts were recorded as a reduction of minority interest on the Companys consolidated balance sheets. At June 30, 2008, ATN had approximately $14.1 million of unrecognized compensation expense related to the
unvested portion of the restricted stock units, phantom units and options.



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##### Table of Contents

NOTE 18  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 June 30, |          |   | Six Months EndedJune 30, |  
|                                                                                                   |  | 2008                        |          |   | 2007                     |   |         | 2008 |  |   | 2007     |  
|Gas and oil production                                                                             |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Revenues (a)                                                                                       |  | $                           | 78,956   |   |                          | $ | 51,573  |      |  | $ | 155,182  |   |  | $ | 72,832   |  
|Costs and expenses                                                                                 |  |                             | (12,379  | ) |                          |   | (2,491  | )    |  |   | (23,047  | ) |  |   | (4,525   | )
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Segment profit                                                                                     |  | $                           | 66,577   |   |                          | $ | 49,082  |      |  | $ | 132,135  |   |  | $ | 68,307   |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Well construction and completion                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Revenues                                                                                           |  | $                           | 122,341  |   |                          | $ | 65,139  |      |  | $ | 226,479  |   |  | $ | 137,517  |  
|Costs and expenses                                                                                 |  |                             | (106,384 | ) |                          |   | (56,648 | )    |  |   | (196,939 | ) |  |   | (119,580 | )
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Segment profit                                                                                     |  | $                           | 15,957   |   |                          | $ | 8,491   |      |  | $ | 29,540   |   |  | $ | 17,937   |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Atlas Pipeline                                                                                     |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Revenues (b)                                                                                       |  | $                           | 132,528  |   |                          | $ | 86,810  |      |  | $ | 424,663  |   |  | $ | 196,535  |  
|Revenues  affiliates                                                                              |  |                             | 11,523   |   |                          |   | 8,479   |      |  |   | 20,747   |   |  |   | 16,211   |  
|Costs and expenses                                                                                 |  |                             | (369,112 | ) |                          |   | (94,827 | )    |  |   | (664,523 | ) |  |   | (190,279 | )
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Segment profit (loss)                                                                              |  | $                           | (225,061 | ) |                          | $ | 462     |      |  | $ | (219,113 | ) |  | $ | 22,467   |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Other                                                                                              |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Revenues                                                                                           |  | $                           | 4,735    |   |                          | $ | 2,865   |      |  | $ | 9,736    |   |  | $ | 6,686    |  
|Costs and expenses                                                                                 |  |                             | (2,783   | ) |                          |   | (2,169  | )    |  |   | (5,316   | ) |  |   | (4,235   | )
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Segment profit                                                                                     |  | $                           | 1,952    |   |                          | $ | 696     |      |  | $ | 4,420    |   |  | $ | 2,451    |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Reconciliation of segment profit (loss) to net income (loss) before income tax provision (benefit) |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Segment profit (loss)                                                                              |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Gas and oil production                                                                             |  | $                           | 66,577   |   |                          | $ | 49,082  |      |  | $ | 132,135  |   |  | $ | 68,307   |  
|Well construction and completion                                                                   |  |                             | 15,957   |   |                          |   | 8,491   |      |  |   | 29,540   |   |  |   | 17,937   |  
|Atlas Pipeline                                                                                     |  |                             | (225,061 | ) |                          |   | 462     |      |  |   | (219,113 | ) |  |   | 22,467   |  
|Other (c)                                                                                          |  |                             | 1,952    |   |                          |   | 696     |      |  |   | 4,420    |   |  |   | 2,451    |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Total segment profit (loss)                                                                        |  |                             | (140,575 | ) |                          |   | 58,731  |      |  |   | (53,018  | ) |  |   | 111,162  |  
|General and administrative expenses                                                                |  |                             | (25,347  | ) |                          |   | (21,320 | )    |  |   | (46,355  | ) |  |   | (35,777  | )
|Net expense reimbursement - affiliate                                                              |  |                             | (184     | ) |                          |   | (221    | )    |  |   | (434     | ) |  |   | (529     | )
|Depreciation, depletion and amortization                                                           |  |                             | (49,143  | ) |                          |   | (13,476 | )    |  |   | (96,776  | ) |  |   | (25,877  | )
|Interest expense                                                                                   |  |                             | (34,310  | ) |                          |   | (8,945  | )    |  |   | (68,408  | ) |  |   | (16,201  | )
|Minority interest                                                                                  |  |                             | 231,166  |   |                          |   | 11,776  |      |  |   | 254,831  |   |  |   | 8,590    |  
|Other income  net                                                                                 |  |                             | 5,993    |   |                          |   | 1,455   |      |  |   | 8,023    |   |  |   | 2,899    |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Net income (loss) before income tax provision (benefit)                                            |  | $                           | (12,400  | ) |                          | $ | 28,000  |      |  | $ | (2,137   | ) |  | $ | 44,267   |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Capital expenditures                                                                               |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Gas and oil production                                                                             |  | $                           | 76,045   |   |                          | $ | 31,787  |      |  | $ | 130,519  |   |  | $ | 53,281   |  
|Well construction and completion                                                                   |  |                             |         |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Atlas Pipeline                                                                                     |  |                             | 73,201   |   |                          |   | 25,018  |      |  |   | 157,270  |   |  |   | 41,881   |  
|Corporate and other                                                                                |  |                             | 713      |   |                          |   | 1,218   |      |  |   | 1,856    |   |  |   | 1,801    |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Total capital expenditures                                                                         |  | $                           | 149,959  |   |                          | $ | 58,023  |      |  | $ | 289,645  |   |  | $ | 96,963   |  
|                                                                                                   |  |                             |          |   |                          |   |         |      |  |   |          |   |  |   |          |  



|                                 |  |              |           |                  |   |          
|-------------------------------- |  | ------------ | --------- | ---------------- | - | ---------
|                                 |  | June 30,2008 |           | December 31,2007
|Balance sheet                    |  |              |           |                  |   |          
|Goodwill                         |  |              |           |                  |   |          
|Gas and oil production           |  | $            | 21,527    |                  | $ | 21,527   
|Well construction and completion |  |              | 6,389     |                  |   | 6,389    
|Atlas Pipeline                   |  |              | 676,860   |                  |   | 709,283  
|Corporate and other              |  |              | 7,250     |                  |   | 7,250    
|                                 |  |              |           |                  |   |          
|                                 |  | $            | 712,026   |                  | $ | 744,449  
|                                 |  |              |           |                  |   |          
|Total assets                     |  |              |           |                  |   |          
|Gas and oil production           |  | $            | 2,001,172 |                  | $ | 1,821,631
|Well construction and completion |  |              | 13,854    |                  |   | 11,138   
|Atlas Pipeline                   |  |              | 3,157,456 |                  |   | 2,877,614
|Corporate and other              |  |              | 184,624   |                  |   | 193,984  
|                                 |  |              |           |                  |   |          
|                                 |  | $            | 5,357,106 |                  | $ | 4,904,367
|                                 |  |              |           |                  |   |          



|(a) | Includes gain on mark-to-market derivatives of $26.3 million for the three and six months ended June 30, 2007, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(b) | Includes loss on mark-to-market derivatives of $316.1 million and $28.5 million for the three months ended June 30, 2008 and 2007, respectively, and $404.8 million and $30.8
million for the six months ended June 30, 2008 and 2007, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(c) | Includes revenues and expenses from well services, transportation and administration and oversight that do not meet the quantitative threshold for reporting segment information for
the three and six months ended June 30, 2008 and 2007, 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, minority interests and general corporate expenses.

NOTE 19  SUBSEQUENT EVENTS

During July 2008,
APL made payments of $93.6 million related to the early termination of crude oil derivative contracts that it entered into as proxy hedges for the prices received on the ethane and propane portion of its NGL equity volume. These derivative contracts
were put into place simultaneously with the APLs acquisition of the Chaney Dell and Midkiff/Benedum systems in July 2007 and related to 2009 production periods. These payments were made in connection with the APLs early termination of
other crude oil derivative contracts in June 2008 (see Note 8).

On July 22, 2008, the Companys Board of Directors declared a
cash dividend of $0.05 per share, payable on August 19, 2008 to shareholders of record on August 6, 2008.

On July 22, 2008,
APL declared a quarterly cash distribution of $0.96 per unit on its outstanding common limited partner units, representing the cash distribution for the quarter ended June 30, 2008. The $53.4 million distribution, including $9.3 million to AHD
for its general partner interest after the allocation of $5.0 million of its incentive distribution rights back to APL, will be paid on August 14, 2008 to unitholders of record at the close of business on August 6, 2008.

On July 22, 2008, AHD declared a quarterly cash distribution of $0.51 per unit on its outstanding common limited partner units, representing the
cash distribution for the quarter ended June 30, 2008. This distribution is payable on August 19, 2008 to unitholders of record on August 6, 2008.

On July 22, 2008, ATN declared a quarterly cash distribution of $0.61 per unit per unit on its outstanding common limited partner units, representing the cash distribution for the quarter ended June 30,
2008. This distribution is payable on August 14, 2008 to unitholders of record on August 6, 2008.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Forward-Looking Statements

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, Risk
Factors, in our annual report on Form 10-K for 2007. These risks and uncertainties could cause actual results to differ materially from the results stated or implied in this document. 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.



47



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The following discussion provides information to assist in understanding our financial condition and
results of operations. This discussion should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report.

General

We are a publicly traded Delaware corporation whose common units are listed on the NASDAQ
Stock Market under the symbol ATLS. Our assets currently consist principally of cash on hand and our ownership interests in the following entities:



| |  |  | Atlas Energy Resources, LLC (Atlas Energy or ATN), a publicly traded Delaware limited liability company (NYSE: ATN) focused on natural gas
development and production in northern Michigans Antrim Shale and the Appalachian Basin, which we manage through our subsidiary, Atlas Energy Management, Inc., under the supervision of ATNs board of directors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Atlas Pipeline Partners, L.P. (Atlas Pipeline Partners or APL), a midstream energy service provider engaged in the transmission, gathering
and processing of natural gas in the Mid-Continent and Appalachia regions (NYSE:APL);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Atlas Pipeline Holdings, L.P. (Atlas Pipeline Holdings or AHD), a publicly traded Delaware limited partnership (NYSE: AHD) and owner of the
general partner of APL. Through our ownership of its general partner, we manage AHD; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lightfoot Capital Partners LP and Lightfoot Capital Partners GP, LLC, the general partner of Lightfoot (collectively, Lightfoot), entities which
incubate new master limited partnerships (MLPs) and invest in existing MLPs. We have an approximate 12% ownership interest in Lightfoot and a commitment to invest a total of $20.0 million in Lightfoot.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ownership interest in ATN consists of the following:



| |  |  | all of the outstanding Class A units, representing 1,293,486 units at June 30, 2008, which entitles us to receive 2% of the cash distributed by ATN
without any obligation to make future capital contributions to ATN;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all of the management incentive interests in ATN, which entitle us to receive increasing percentages, up to a maximum of 25.0%, of any cash distributed by ATN as it
reaches certain target distribution levels in excess of $0.48 per ATN common unit in any quarter after ATN has met the tests set forth within its limited liability company agreement; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 29,952,996 common units, including 600,000 purchased in May 2008 in a private placement, representing approximately 47.3% of the outstanding common units at
June 30, 2008, or a 46.3% ownership interest in ATN.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ownership of ATNs management incentive interests
entitles us to receive an increasing percentage of cash distributed by ATN as it reaches certain target distribution levels after ATN has met the tests set forth within its limited liability company agreement. The rights entitle us to receive 15.0%
of all cash distributed in a quarter after each ATN common unit has received $0.48 for that quarter, and 25.0% of all cash distributed after each ATN common unit has received $0.59 for that quarter. As set forth in ATNs limited liability
company agreement, for us to receive distributions from ATN under the management incentive interests, ATN must:



| |  |  | for 12 full, consecutive, non-overlapping calendar quarters, (a) pay a quarterly cash distribution to the outstanding Class A and common units in an
amount that, on average exceeds $0.48 per unit, (b) generate adjusted operating surplus, as defined, that on average is equal to the amount of all cash distributions paid to the Class A and common units plus the amount of management
incentive distributions earned, and (c) not reduce the quarterly cash distribution per unit for any of such 12 quarters; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | for the last four full, consecutive, non-overlapping quarters during the 12 quarter period described previously (or any four full, consecutive and non-overlapping
quarters after the completion of the 12 quarter test is complete), (a) pay a quarterly cash distribution to the outstanding Class A and common units in an amount that exceeds $0.48 per unit, (b) generate adjusted operating surplus, as
defined, that on average is equal to the amount of all cash distributions paid to the Class A and common units plus the amount of management incentive distributions earned and (c) not reduce the quarterly cash distribution per unit for any
of such four quarters.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ownership interest in APL consists of 1,112,000 common units, purchased in June 2008 in a
private placement transaction, representing approximately 2.4% of the outstanding common units of APL at June 30, 2008, or a 2.3% ownership interest (see Recent Developments).

Our ownership interest in AHD consists of 17,808,109 common units, including 308,109 purchased in a June 2008 private placement, representing
approximately 64.4% of the outstanding common units of AHD at June 30, 2008. AHDs general partner, which is a wholly-owned subsidiary of ours, does not have an economic interest in AHD, and AHDs capital structure does not include
incentive distribution rights. AHDs ownership interest in APL consists of the following:



| |  |  | a 2.0% general partner interest, which entitles it to receive 2% of the cash distributed by APL;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | all of the incentive distribution rights, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by APL as it reaches
certain target distribution levels in excess of $0.42 per APL common unit in any quarter. In connection with APLs acquisition of control of the Chaney Dell and Midkiff/Benedum systems, AHD, the holder of all of the incentive distribution
rights in APL, had agreed to allocate up to $5.0 million of its incentive distribution rights per quarter back to APL through the quarter ended June 30, 2009, and up to $3.75 million per quarter thereafter. AHD also agreed that the resulting
allocation of incentive distribution rights back to APL would be after AHD receives the initial $3.7 million per quarter of incentive distribution rights through the quarter ended December 31, 2007, and $7.0 million per quarter thereafter
(IDR Adjustment Agreement); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 5,754,253 common units, representing approximately 12.5% of the outstanding common units at June 30, 2008, or a 12.0% ownership interest in APL.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

AHDs ownership of APLs incentive distribution rights entitles it to receive an increasing percentage of cash
distributed by APL as it reaches certain target distribution levels. The rights entitle AHD, subject to the IDR Adjustment Agreement, to receive the following:



| |  |  | 13.0% of all cash distributed in a quarter after each APL common unit has received $0.42 for that quarter;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | 23.0% of all cash distributed after each APL common unit has received $0.52 for that quarter; and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | 48.0% of all cash distributed after each APL common unit has received $0.60 for that quarter.
| | - |  | ---------------------------------------------------------------------------------------------



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##### Table of Contents

Financial Presentation

Our principal operating activities are conducted principally through ATN, AHD, and APL, and our cash flows consist primarily of distributions from received from ATN and AHD on our partnership interests. Our
consolidated financial statements contain the consolidated financial statements of ATN and AHD, and AHDs consolidated financial statements include the consolidated financial statements of APL. The non-controlling minority interests in ATN, AHD
and APL are reflected as income (expense) in our consolidated statements of income (expense) and as a liability on our consolidated balance sheet. Throughout this section, when we refer to our consolidated financial statements, we are
referring to the consolidated results for us and our wholly-owned subsidiaries and the consolidated results of ATN and AHD, including APLs financial results, adjusted for non-controlling minority interests in ATNs, AHDs and
APLs net income (loss).

Atlas Energy

ATN was formed in December 2006 through our contribution of substantially all of our natural gas and oil assets and our investment partnership management business to it in connection with ATNs initial public offering. ATN is an
independent developer and producer of natural gas and oil, with operations in northern Michigans Antrim Shale and the Appalachian Basin region of the United States, principally in western New York, eastern Ohio, western Pennsylvania and
Tennessee. ATN is also a leading sponsor and manager of tax-advantaged direct investment natural gas and oil partnerships in the United States. ATN funds the drilling of natural gas and oil wells on its acreage by sponsoring and managing tax
advantaged investment partnerships. It generally structures its investment partnerships so that, upon formation of a partnership, ATN co-invests in and contributes leasehold acreage to it, enters into drilling and well operating agreements with it
and becomes its managing general partner. ATN is managed by Atlas Energy Management, Inc., our wholly-owned subsidiary, through which we provide ATN with the personnel necessary to manage its assets and raise capital.

ATN had the following key assets at June 30, 2008:

Gas and oil operations



| |  |  | proved reserves of almost 900 billion cubic feet equivalents (Bcfe) at June 30, 2008 in Appalachia and Michigan, including the reserves net to
ATNs equity interest in its investment partnerships and ATNs direct interests in producing wells;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | direct and indirect working interests in over 10,000 gross producing gas and oil wells;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | net average daily production of 93.2 million cubic feet equivalents (MMcfe) per day for the six months ended June 30, 2008; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | over 1.2 million gross (over 1.1 million net) acres, of which over 0.6 million gross and net acres are undeveloped.
| | - |  | -------------------------------------------------------------------------------------------------------------------

Partnership management business



| |  |  | ATN investment partnership business, which includes equity interests in 93 investment partnerships and a registered broker-dealer which acts as the dealer-manager
of ATNs investment partnership offerings; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | managed total proved reserves of over 500 Bcfe.
| | - |  | -----------------------------------------------



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##### Table of Contents

Atlas Pipeline Holdings and Atlas Pipeline

AHD was formed in July 2006 through our contribution of ownership interests in Atlas Pipeline Partners GP, LLC (Atlas Pipeline GP), the
general partner of APL, to it in connection with AHDs initial public offering. AHDs cash generating assets currently consist solely of its interests in APL.

APL is a leading provider of natural gas gathering services in the Anadarko, Arkoma and Permian Basins and the Golden Trend in the southwestern and mid-continent United States and the Appalachian Basin in the eastern
United States. In addition, APL is a leading provider of natural gas processing and treatment services in Oklahoma and Texas. APL also provides interstate gas transmission services in southeastern Oklahoma, Arkansas, southern Kansas and southeastern
Missouri. APLs business is conducted in the midstream segment of the natural gas industry through two reportable segments: its Mid-Continent operations and its Appalachian operations.

Through its Mid-Continent operations, APL owns and operates:



| |  |  | a FERC-regulated, 565-mile interstate pipeline system (Ozark Gas Transmission) that extends from southeastern Oklahoma through Arkansas and into
southeastern Missouri and which has throughput capacity of approximately 400 million cubic feet per day (MMcfd);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | eight active natural gas processing plants with aggregate capacity of approximately 750 MMcfd and one treating facility with a capacity of approximately 200 MMcfd,
located in Oklahoma and Texas; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 7,870 miles of active natural gas gathering systems located in Oklahoma, Arkansas, Kansas and Texas, which transport gas from wells and central delivery points in
the Mid-Continent region to APLs natural gas processing and treating plants or Ozark Gas Transmission.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Through its
Appalachian operations, APL owns and operates 1,600 miles of natural gas gathering systems located in eastern Ohio, western New York, western Pennsylvania and northeastern Tennessee. Through an omnibus agreement and other agreements between us, APL
and ATN, APL gathers substantially all of the natural gas for its Appalachian Basin operations from wells operated by ATN. Among other things, the omnibus agreement requires ATN to connect to APLs gathering systems wells it operates that are
located within 2,500 feet of APLs gathering systems. APL is also party to natural gas gathering agreements with us and ATN under which it receives gathering fees generally equal to a percentage, typically 16%, of the selling price of the
natural gas it transports.

Subsequent Events

During July 2008, APL made payments of $93.6 million related to the early termination of crude oil derivative contracts that it entered into as proxy hedges for the prices received on the ethane and propane portion of its NGL equity volume.
These derivative contracts were put into place simultaneously with the APLs acquisition of the Chaney Dell and Midkiff/Benedum systems in July 2007 and related to 2009 production periods. These payments were made in connection with the
APLs early termination of other crude oil derivative contracts in June 2008 (see Note 8).

On July 22, 2008, our Board of
Directors declared a cash dividend of $0.05 per share, payable on August 19, 2008 to shareholders of record on August 6, 2008.

On July 22, 2008, APL declared a quarterly cash distribution of $0.96 per unit on its outstanding common limited partner units, representing the cash distribution for the quarter ended June 30, 2008. The $53.4 million
distribution, including $9.3 million to AHD for its general partner interest after the allocation of $5.0 million of its incentive distribution rights back to APL, will be paid on August 14, 2008 to unitholders of record at the close of
business on August 6, 2008.



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On July 22, 2008, AHD declared a quarterly cash distribution of $0.51 per unit, payable on
August 19, 2008 to unitholders of record on August 6, 2008.

On July 22, 2008, ATN declared a quarterly cash distribution of
$0.61 per unit, payable on August 14, 2008 to unitholders of record on August 6, 2008.

Recent Developments

In June 2008, we purchased 1,112,000 APL common limited partner units and 308,109 AHD common limited partner units in a private placement transaction at
per unit amounts of $36.02 and $32.50, respectively. APL used the proceeds of $40.1 million to fund the early termination of certain crude oil derivative agreements. AHD used the proceeds of $10.0 million to fund the purchase of an additional
278,000 APL common units.

In May 2008, we purchased 600,000 of ATNs Class B common units in a private placement transaction at a
price of $42.00 per common unit, increasing our ownership to 29,952,996 common units. ATNs proceeds of $25.2 million were used to repay a portion of its outstanding balance under its revolving credit facility.

Atlas Energy.In June 2008, ATN entered into a $19.1 million agreement with Miller Petroleum, Inc. (Miller) whereby Miller assigned
(i) 100% of the working interest in its oil and gas leases comprising 27,620 acres in the Koppers North and Koppers South section of Campbell County, Tennessee, (ii) 100% of the working interest in 8 existing wells, and (iii) 100% of
the working interest in its oil and gas leases comprising 1,952 acres adjacent to the Koppers acreage. The agreement also provides Miller with an option to participate up to 25% in up to 10 wells to be drilled on the assigned acreage. In addition,
ATN entered into two agreements with Miller whereby (i) Miller will provide drilling services to it for a two-year term in which ATN prepaid $500,000 and (ii) whereby ATN will transport and process natural gas for Miller from its existing
wells.

In May 2008, ATN sold 2,070,000 of its Class B common units in a public offering yielding net proceeds of approximately $82.5
million. The net proceeds were used to repay a portion of its outstanding balance under its revolving credit facility.

In January 2008,
ATN completed a private placement of $250.0 million of 10.75% senior unsecured notes due 2018 in a private placement transaction. In May 2008, ATN issued an additional $150.0 million of 10.75% senior unsecured notes due 2018 at 104.75% of par to
yield 9.85% to the par call on February 1, 2016 pursuant to Rule 144A and Regulation S under the Securities Act of 1933. ATN used the aggregate net proceeds of $402.7 million (including accrued interest paid of $4.7 million, net of underwriting
fees of $9.2 million) to reduce the outstanding balance on its revolving credit facility.

Interest on the senior notes is payable
semi-annually in arrears on February 1 and August 1 of each year. The senior notes are redeemable at any time at certain redemption prices, together with accrued and unpaid interest to the date of redemption. In addition, before
February 1, 2011, ATN 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 ATN 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 if ATN does not reinvest the net proceeds within 360 days.

The senior notes are junior in right of payment to its secured debt, including its obligations under the credit facility. The indenture governing the
senior notes contains covenants, including limitations of its ability to: incur certain liens; engage in sale/leaseback transactions; incur additional indebtedness; declare or pay



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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. In connection with a senior notes registration rights agreement entered into by ATN, it filed an exchange offer registration statement with the Securities and Exchange Commission on
March 28, 2008.

Atlas Pipeline and Atlas Pipeline Holdings.In June 2008, APL sold 5,750,000 common limited partner units in a
public offering at a price of $37.52 per unit, yielding net proceeds of approximately $206.6 million. Concurrently, APL sold 278,000 common limited partner units to AHD in a private placement transaction at a price of $36.02 per unit, resulting in
net proceeds of approximately $50.1 million. APL also received a capital contribution from AHD of $5.4 million for it to maintain its 2.0% general partner interest in APL. APL utilized the net proceeds from the sale and the capital contribution to
fund the early termination of certain crude oil derivative agreements. In order to fund its purchase of APLs common limited partner units, AHD sold 308,109 of its common limited partner units to us in a private placement transaction at a price
of $32.50 per unit for net proceeds of $10.0 million.

The net proceeds from the public and private placement offerings of APLs
common units were utilized to fund the early termination of a majority of its crude oil derivative contracts that it entered into as proxy hedges for the prices it receives for the ethane and propane portion of its NGL equity volume. These hedges,
which related to production periods ranging from the end of second quarter of 2008 through the fourth quarter of 2009, were put in place simultaneously with APLs acquisition of the Chaney Dell and Midkiff/Benedum systems in July 2007 and have
become less effective as a result of significant increases in the price of crude oil and less significant increases in the price of ethane and propane. APL estimates that it incurred a charge during the second quarter 2008 of approximately $10.6
million due to the decline in the price correlation of crude oil and ethane and propane. APL terminated these derivative contracts during June and July 2008 at an aggregate net cost of approximately $264.0 million. Our net loss for the second
quarter 2008 includes a $116.1 million cash derivative expense resulting from APLs June 2008 net payments of $170.4 million to unwind a portion of these derivative contracts. APL also made payments of $93.6 million during July 2008 to unwind
the remaining portion of these derivative contracts and will reflect a charge against our net income for a portion of this amount during the third quarter of 2008.

In June 2008, APL issued $250.0 million of 10-year, 8.75% senior unsecured notes (the APL 8.75% Notes) in a private placement transaction pursuant to Rule 144A and Regulation S under the Securities Act of
1933. The sale of the APL 8.75% Senior Notes generated net proceeds of approximately $244.9 million, which APL utilized to repay indebtedness under its senior secured term loan and revolving credit facility.

In June 2008, APL obtained $80.0 million of increased commitments to its senior secured revolving credit facility, increasing its aggregate lender
commitments to $380.0 million. In connection with this and the previously mentioned transactions, APL also amended its senior secured credit facility to, among other things, exclude from the calculation of Consolidated EBITDA the costs associated
with its termination of hedging agreements to the extent such costs are financed with or paid out of the net proceeds of an equity offering. In addition, consistent with several other recent energy master limited partnership agreements, APLs
general partners managing board and conflicts committee approved an amendment to its limited partnership agreement which will allow the cash expenditure to terminate derivative contracts to not reduce APLs distributable cash flow.

Acquisitions

Atlas Energy.In
June 2007, ATN acquired DTE Gas & Oil Company from DTE Energy Company (DTE  NYSE: DTE) for $1.3 billion in cash. The assets acquired, which consisted principally of interests in natural gas wells in the Antrim Shale, are
the basis for the formation of ATNs Michigan gas and oil operations. ATN funded the purchase price in part from its private placement of $181.2 million of its Class B common units and $416.3 million of its Class D units to investors at a
weighted average negotiated price of $25.00. ATN funded the remaining purchase price from borrowings under its credit facility.



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Atlas Pipeline.In July 2007, APL acquired control of Anadarko Petroleum Corporations
(Anadarko  NYSE: APC) 100% interest in the Chaney Dell natural gas gathering system and processing plants located in Oklahoma and its 72.8% undivided joint venture interest in the Midkiff/Benedum natural gas gathering system and
processing plants located in Texas (the Anadarko Assets). The transaction was effected by the formation of two joint venture companies which own the respective systems, to which APL contributed $1.9 billion and Anadarko contributed the
Anadarko Assets. APL funded the purchase price, in part, from its private placement of $1.125 billion of its common units to investors at a negotiated purchase price of $44.00 per unit. Of the $1.125 billion, AHD purchased $168.8 million of these
APL units, which was funded through its issuance of 6,249,995 of its common units in a private placement transaction at a negotiated purchase price of $27.00 per unit. AHD, as general partner and holder all of APLs incentive distribution
rights, also agreed to allocate up to $5.0 million of its incentive distribution rights per quarter back to APL through the quarter ended June 30, 2009, and up to $3.75 million per quarter thereafter. AHD also agreed that the resulting
allocation of incentive distribution rights back to APL would be after AHD receives the initial $3.7 million per quarter of incentive distribution rights through the quarter ended December 31, 2007, and $7.0 million per quarter thereafter. APL
funded the remaining purchase price from $830.0 million of proceeds from a senior secured term loan which matures in July 2014 and borrowings under its senior secured revolving credit facility that matures in July 2013.

In connection with this acquisition, APL reached an agreement with Pioneer Natural Resources Company (Pioneer  NYSE: PXD), which
currently holds an approximate 27.2% undivided joint venture interest in the Midkiff/Benedum system, whereby Pioneer will have an option to buy up to an additional 14.6% interest in the Midkiff/Benedum system, which began on June 15, 2008 and
ends on November 1, 2008, and up to an additional 7.4% interest beginning on June 15, 2009 and ending on November 1, 2009 (the aggregate 22.0% additional interest can be entirely purchased during the period beginning June 15,
2009 and ending on November 1, 2009). If the option is fully exercised, Pioneer would increase its interest in the system to approximately 49.2%. Pioneer would pay approximately $230 million, subject to certain adjustments, for the additional
22% interest if fully exercised. APL will manage and control the Midkiff/Benedum system regardless of whether Pioneer exercised the purchase options.

Contractual Revenue Arrangements

Atlas Energy

Appalachia Natural Gas. ATN has a natural gas supply agreement with Hess Corporation (Hess) which is valid through March 31, 2009. Subject to certain exceptions, Hess has a last right of
refusal to buy all of the natural gas produced and delivered by ATN and its affiliates, including its investment partnerships, at certain delivery points. Based on recent production data available to ATN, we anticipate that ATN and its affiliates,
including its investment partnerships, will sell approximately 18% of their Appalachian natural gas production during the year ending December 31, 2008 under the Hess agreement. The agreement requires the parties to negotiate a new pricing
arrangement at each annual delivery point. If, at the end of any applicable period, the parties cannot agree to a new price for any delivery point, then ATN may solicit offers from third parties to buy the natural gas for that delivery point. If
Hess does not match this price, then ATN may sell the natural gas to the third party. ATN markets the remainder of its natural gas, which is principally located in the Fayette County, PA area, primarily to Colonial Energy, Inc., UGI Energy Services,
and others.

We expect that natural gas produced from ATNs wells drilled in areas of the Appalachian Basin other than those described
above will be primarily tied to the spot market price and supplied to:



| |  |  | gas marketers;
| | - |  | --------------



| |  |  | local distribution companies;
| | - |  | -----------------------------



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| |  |  | industrial or other end-users; and/or
| | - |  | -------------------------------------



| |  |  | companies generating electricity.
| | - |  | ---------------------------------

Michigan Natural Gas. In Michigan, ATN has natural gas sales agreements with DTE, which are valid through December 31, 2012. DTE has the obligation to purchase all of the natural gas produced and delivered by ATN and its
affiliates from specific projects at certain delivery points. Based on recent production data available to ATN, we anticipate that ATN and its affiliates will sell approximately 50% of their Michigan natural gas production during the year ending
December 31, 2008 under the DTE agreements in most cases at NYMEX pricing.

Crude Oil. Crude oil produced from ATNs wells
flows directly into storage tanks where it is picked up by an oil company, a common carrier, or pipeline companies acting for an oil company, which is purchasing the crude oil. ATN sells any oil produced by its Appalachian wells to regional oil
refining companies at the prevailing spot market price for Appalachian crude oil. In Michigan, the property operator typically markets the oil produced.

Atlas Pipeline

APLs revenue primarily consists of the fees earned from its transmission, gathering and
processing operations. Under certain agreements, APL purchases natural gas from producers and moves it into receipt points on its pipeline systems, and then sells the natural gas, or produced natural gas liquids (NGLs), if any, off of
delivery points on its systems. Under other agreements, APL transports natural gas across its systems, from receipt to delivery point, without taking title to the natural gas. Revenue associated with APLs regulated transmission pipeline is
recognized at the time the transportation service is provided. Revenue associated with the physical sale of natural gas is recognized upon physical delivery of the natural gas. In connection with its gathering and processing operations, APL enters
into the following types of contractual relationships with its producers and shippers:

Fee-Based Contracts. These contracts provide
for a set fee for gathering and processing raw natural gas. APLs revenue is a function of the volume of natural gas that it gathers and processes and is not directly dependent on the value of the natural gas.

POP Contracts. These contracts provide for APL to retain a negotiated percentage of the sale proceeds from residue natural gas and NGLs it gathers
and processes, with the remainder being remitted to the producer. In this situation, APL and the producer are directly dependent on the volume of the commodity and its value; APL owns a percentage of that commodity and is directly subject to its
market value.

Keep-Whole Contracts. These contracts require APL, as the processor, to purchase raw natural gas from the producer at
current market rates. Therefore, APL bears the economic risk (the processing margin risk) that the aggregate proceeds from the sale of the processed natural gas and NGLs could be less than the amount that it paid for the unprocessed
natural gas. However, because the natural gas purchases contracted under keep-whole agreements are generally low in liquids content and meet downstream pipeline specifications without being processed, the natural gas can be bypassed around the
processing plants and delivered directly into downstream pipelines during periods of margin risk. Therefore, the processing margin risk associated with a portion of APLs keep-whole contracts is minimized.

Recent Trends and Uncertainties

Atlas Energy.
Realized pricing of ATNs oil and natural gas production is primarily driven by the prevailing worldwide prices for crude oil and spot market prices applicable to United States natural gas production. Pricing for natural gas and oil production
has been volatile and unpredictable for many years. Significant factors that may impact future commodity prices include developments in the issues



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currently impacting Iraq and Iran and the Middle East in general; the extent to which members of the Organization of Petroleum Exporting Countries and other
oil exporting nations are able to continue to manage oil supply through export quotas; and overall North American gas supply and demand fundamentals, including the impact of increasing liquefied natural gas deliveries to the United States. Although
we cannot predict the occurrence of events that will affect future commodity prices or the degree to which these prices will be affected, the prices for commodities that we produce will generally approximate market prices in the geographic region of
the production. In order to address, in part, volatility in commodity prices, ATN has implemented a hedging program that is intended to reduce the volatility in its revenues. This program mitigates, but does not eliminate, ATNs sensitivity to
short-term changes in commodity prices. See Item 3, Quantitative and Qualitative Disclosures About Market Risk.

We
believe that current natural gas prices will continue to cause relatively high levels of natural gas-related drilling in the United States as producers seek to increase their level of natural gas production. Although the number of natural gas wells
drilled in the United States has increased overall in recent years, a corresponding increase in production has not been realized, primarily as a result of smaller discoveries and the decline in production from existing wells. We believe that an
increase in United States drilling activity, additional sources of supply such as liquefied natural gas, and imports of natural gas will be required for the natural gas industry to meet the expected increased demand for, and to compensate for the
slowing production of, natural gas in the United States. The areas in which ATN operates are experiencing significant drilling activity as a result of recent high natural gas prices, new increased drilling for deeper natural gas formations and the
implementation of new exploration and production techniques.

While we anticipate continued high levels of exploration and production
activities in the areas in which ATN operates, fluctuations in energy prices can greatly affect production rates and investments by third parties in the development of new natural gas reserves. Drilling activity generally decreases as natural gas
prices decrease. We have no control over the level of drilling activity in the areas of ATNs operations.

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.

APL 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, flexibility, and maintenance of high-quality customer relationships. Many of APLs competitors operate as master limited partnerships and enjoy a cost of capital comparable to
and, in some cases lower than, APL. Other competitors, such as major oil and gas and pipeline companies, have capital resources and control supplies of natural gas substantially greater than APL. Smaller local distributors may enjoy a marketing
advantage in their immediate service areas. We believe the primary difference between APL and some of its competitors is that APL provides an integrated and responsive package of midstream services, while some of its competitors provide only certain
services. We believe that offering an integrated package of services, while remaining flexible in the types of contractual arrangements that APL offers producers, allows APL to compete more effectively for new natural gas supplies in its regions of
operations.

As a result of APLs POP and keep-whole contracts, its results of operations and financial condition substantially depend
upon the price of natural gas and NGLs. We believe 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, we
generally expect NGL prices to follow changes in crude oil prices over the long term, which we believe 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



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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.

Results of Operations

The following table illustrates selected operational information for the periods indicated:



|                                                         |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|-------------------------------------------------------- |  | --------------------------- | --------- | - | ------------------------- | - | ------- | ---- |  | - | --------- | - |  | - | ------- | -
|                                                         |  | Three Months Ended June 30, |           |   | Six Months Ended June 30, |  
|                                                         |  | 2008                        |           |   | 2007                      |   |         | 2008 |  |   | 2007      |  
|Atlas Energy:                                            |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Production revenues (in thousands):                      |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Gas(1)                                                   |  | $                           | 74,217    |   |                           | $ | 22,709  |      |  | $ | 147,091   |   |  | $ | 42,137  |  
|Oil                                                      |  | $                           | 4,706     |   |                           | $ | 2,592   |      |  | $ | 8,058     |   |  | $ | 4,419   |  
|Production volume(1)(2)(3)(4):                           |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Gas(mcfd)                                                |  |                             | 92,026    |   |                           |   | 85,901  |      |  |   | 90,683    |   |  |   | 84,951  |  
|Oil (bpd)                                                |  |                             | 434       |   |                           |   | 462     |      |  |   | 420       |   |  |   | 411     |  
|                                                         |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Total (mcfed)                                            |  |                             | 94,630    |   |                           |   | 88,673  |      |  |   | 93,203    |   |  |   | 87,417  |  
|Average sales prices(3)(5):                              |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Gas (per mcf)(6)                                         |  | $                           | 9.21      |   |                           | $ | 9.27    |      |  | $ | 9.39      |   |  | $ | 9.20    |  
|Oil (per bbl)                                            |  | $                           | 119.16    |   |                           | $ | 61.62   |      |  | $ | 105.58    |   |  | $ | 59.40   |  
|Production costs(3)(7):                                  |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Lease operating expenses                                 |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|As a percent of production revenues                      |  |                             | 9         | % |                           |   | 9       | %    |  |   | 9         | % |  |   | 9       | %
|Per mcf                                                  |  | $                           | 0.83      |   |                           | $ | 0.88    |      |  | $ | 0.81      |   |  | $ | 0.85    |  
|Production taxes per mcf                                 |  | $                           | 0.43      |   |                           | $ | 0.03    |      |  | $ | 0.38      |   |  | $ | 0.04    |  
|                                                         |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Total production costs per mcf                           |  | $                           | 1.26      |   |                           | $ | 0.91    |      |  | $ | 1.19      |   |  | $ | 0.89    |  
|                                                         |  |                             |           |  
|Depletion per Mcfe(3)                                    |  | $                           | 2.56      |   |                           | $ | 2.32    |      |  | $ | 2.54      |   |  | $ | 2.31    |  
|Atlas Pipeline:                                          |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Appalachia system throughput volume (mcfd)(3)            |  |                             | 84,475    |   |                           |   | 66,152  |      |  |   | 80,054    |   |  |   | 64,352  |  
|Velma system gathered gas volume (mcfd)(3)               |  |                             | 65,519    |   |                           |   | 62,788  |      |  |   | 63,960    |   |  |   | 61,907  |  
|Elk City/Sweetwater system gathered gas volume (mcfd)(3) |  |                             | 292,544   |   |                           |   | 308,703 |      |  |   | 298,961   |   |  |   | 298,355 |  
|Chaney Dell system gathered gas volume (mcfd)(3)(8)      |  |                             | 284,528   |   |                           |   |        |      |  |   | 268,008   |   |  |   |        |  
|Midkiff/Benedum system gathered gas volume (mcfd)(3)(8)  |  |                             | 150,157   |   |                           |   |        |      |  |   | 146,350   |   |  |   |        |  
|NOARK Ozark Gas Transmission throughput volume (mcfd)(3) |  |                             | 401,539   |   |                           |   | 321,717 |      |  |   | 395,916   |   |  |   | 304,400 |  
|                                                         |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  
|Combined throughput volume (mcfd)(3)                     |  |                             | 1,278,762 |   |                           |   | 759,360 |      |  |   | 1,253,249 |   |  |   | 729,014 |  
|                                                         |  |                             |           |   |                           |   |         |      |  |   |           |   |  |   |         |  



|(1) | Excludes sales of residual gas and sales to landowners.
|--- | -------------------------------------------------------



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|(2) | Production quantities consist of the sum of (i) Atlas Energys proportionate share of production from wells in which it has a direct interest, based on its proportionate
net revenue interest in such wells, and (ii) Atlas Energys proportionate share of production from wells owned by the investment partnerships in which Atlas Energy has an interest, based on Atlas Energys equity interest in each such
partnership and based on each partnerships proportionate net revenue interest in these wells.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Mcf and mcfd represents thousand cubic feet and thousand cubic feet per day; mcfe and mcfed represents thousand cubic feet equivalent
and thousand cubic feet equivalent per day, and bbl and bpd represents barrels and barrels per day. Barrels are converted to mcfe using the ratio of six mcfs to one barrel.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Atlas Energy acquired AGO on June 29, 2007, and production volume from these assets have only been included from that date.
|--- | ---------------------------------------------------------------------------------------------------------------------------



|(5) | Atlas Energys average sales price before the effects of financial hedging was $11.32 and $8.36 for the three months ended June 30, 2008 and 2007, respectively, and $9.79
and $8.12 per Mcf for the six months ended June 30, 2008 and 2007, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Includes $2.9 million and $7.0 million of derivative proceeds which were not included as revenue in the three and six months ended June 30, 2008. No such derivative proceeds
were received through the three and six months ended June 30, 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | The Chaney Dell and Midkiff/Benedum systems were acquired on July 27, 2007.
|--- | ---------------------------------------------------------------------------

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Natural Gas and Oil
Production. Our natural gas and oil production revenues consist of ATNs production and sale of natural gas and crude oil to unaffiliated third-party customers. Natural gas and oil production expenses include labor to operate wells and
related equipment, repairs and maintenance, materials and supplies, property taxes, severance taxes and other related costs. Our natural gas and oil production revenues were $79.0 million for the three months ended June 30, 2008, an increase of
$53.6 million from $25.3 million for the prior year comparable period. Total production volume increased to 94.6 mmcfe per day for the three months ended June 30, 2008 compared with 88.7 mmcfe per day for the prior year comparable period.
ATNs Michigan assets, acquired on June 29, 2007, accounted for $45.0 million of natural gas and oil production revenue for the three months ended June 30, 2008, an increase of $44.1 million over the second quarter 2007. ATNs
Appalachian assets had natural gas and oil production revenue of $34.0 million for the second quarter 2008, an increase of $9.5 million compared with revenue of $24.5 million for the second quarter 2007. The increase in revenue related to ATNs
Appalachia assets is primarily related to an increase in volumes of 6.4 mmcfe per day or 22.6%. Average realized oil prices for the second quarter 2008 were $119.16 per barrel for the second quarter 2008, representing an increase of approximately
93.4%, respectively, from the prior year comparable period, while average realized natural gas prices decreased by $0.06 per mcf to $9.21 per mcf for the second quarter 2008 when compared with the prior year second quarter.

Natural gas and oil production expenses were $12.4 million for the three months ended June 30, 2008, an increase of $9.9 million from $2.5 million
for the prior year comparable period. The increase was attributable to $9.3 million of production expenses for ATNs Michigan assets and a $0.6 million increase in Appalachia production expenses due to an increase in the number of wells ATN
owns.

Well Construction and Completion. Our well construction and completion revenues and expenses represent fees generated and
costs incurred associated with the completion of wells for drilling investments partnerships ATN sponsors. ATNs drilling contracts are on a cost plus basis (typically cost plus 15%) and, as such, an increase in well drilling costs
also results in an increase in well drilling revenues. Our well construction and completion revenues were $122.3 million for the three months ended June 30, 2008, an increase of $57.2 million from $65.1 million for the prior year comparable
period. The increase is primarily due to the increase in the number of Marcellus Shale wells drilled for the three months ended June 30, 2008, which are drilled at a higher cost than other ATN Appalachian wells. ATN drilled 212 net wells for
the second quarter 2008 compared with 220 for the prior year second quarter. At June 30, 2008, the balance in Liabilities associated with drilling contracts on our consolidated balance sheet includes $36.5 million of funds raised in
ATNs drilling investment programs that have not been applied to the completion of wells as of June 30, 2008 due to the timing of drilling operations, and thus have not been recognized as well construction and completion revenue.



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Administration and Oversight and Well Services. Administration and oversight revenues consist of
fees ATN receives from the investment drilling partnerships upon drilling of well ($15,000 to $45,000) and on a monthly basis afterwards ($75 per month) for administration services provided for the remaining life of the well. Well services revenues
consist of monthly operating fees ATN receives from the investment drilling partnerships for the remaining life of the well. Administration and oversight fee revenues were $5.1 million for the second quarter 2008 compared with $3.4 million for the
second quarter 2007, an increase of approximately $1.7 million or 50.0%. Well services revenues were $5.3 million for the second quarter 2008 compared with $4.2 million for the second quarter 2007, an increase of $1.1 million or 26.2%. Both
increases were due to an increase in wells drilled by ATN since June 30, 2007.

Transmission, Gathering and Processing.
Transmission, gathering and processing revenues principally include revenues earned by APL through its transportation and sale of natural gas, NGLs and condensate in its Appalachian and Mid-Continent business segments, and expenses within this
category primarily include cost of sales of the commodities sold and related operating expenses. APLs Appalachia business segment earns revenues under its master gas gathering agreement with us and ATN through gathering services provided,
which are eliminated against the corresponding transmission, gathering and processing expenses recognized by us and ATN. These amounts are eliminated upon consolidation in our financial statements. Transmission, gathering and processing revenues
also include gathering service fees received from its investment partnerships.

Our transmission, gathering and processing revenues were
$454.5 million for the three months ended June 30, 2008, an increase of $335.3 million from $119.1 million for the prior year comparable period. Transmission, gathering and processing expenses were $369.2 million for the three months ended
June 30, 2008, an increase of $274.4 million from $94.8 million for the prior year comparable period. These increases were due principally to the revenues and expenses associated with APLs Chaney Dell and Midkiff/Benedum systems, which
were acquired in July 2007, and the effect of higher realized commodity prices and higher volumes on its other systems. APLs average gross natural gas gathered volume for the three months ended June 30, 2008 was 1.3 billion cubic feet per
day (bcfd) compared with 0.7 bcfd for the prior year comparable period, an increase of 0.5 bcfd due principally to the acquisition of the Chaney Dell and Midkiff/Benedum systems.

Loss on Mark-to-Market Derivatives. Loss on mark-to-market derivatives was $316.1 million for the three months ended June 30, 2008 compared
with a $2.3 million loss for the prior year comparable period. This change, which consists of the mark-to-market on non-qualifying derivatives and the ineffective portion of qualifying derivatives as determined in accordance with Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133), was the result of a $115.8 million net cash derivative termination expense related to APLs
early termination of a portion of its crude oil derivative contracts (see Recent Developments) and commodity price movements and their unfavorable impact on derivative contracts APL has for production volumes in future periods. For
example, at June 30, 2008, forward crude oil prices for the duration of APLs derivative contracts, which are the basis for adjusting the fair value of its crude oil derivative contracts, were at an average price of $140.26 per barrel
compared with $96.94 per barrel at March 31, 2008, an increase of $43.32. APL enters into derivative instruments solely to hedge its forecasted natural gas, NGLs and condensate sales against the variability in expected future cash flows
attributable to changes in market prices. See further discussion of derivatives under Item 3,  Quantitative and Qualitative Disclosures About Market Risk.

Other Income, Costs and Expenses.General and administrative expenses, including amounts reimbursed to affiliates, increased $4.0 million to $25.5
million for the three months ended June 30, 2008 compared with $21.5 million for the prior year comparable period. This increase was mainly due to higher costs associated with managing our and our subsidiaries businesses, including
management time related to acquisition and capital raising opportunities, and an increase in ATNs investment partnership syndication activities.



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Depreciation, depletion and amortization increased to $49.1 million for the three months ended
June 30, 2008 compared with $13.5 million for the three months ended June 30, 2007 due primarily to the depreciation and depletion associated with ATNs acquired DGO assets and APLs acquired Chaney Dell and Midkiff/Benedum
system assets and ATNs and APLs expansion capital expenditures incurred between the periods.

Interest expense increased to
$34.3 million for the three months ended June 30, 2008 as compared with $8.9 million for the comparable prior year period. This $25.4 million increase was primarily due to interest associated with additional borrowings by ATN and APL to
partially finance ATNs acquisition of DGO in June 2007 and APLs acquisition of the Chaney Dell and Midkiff/Benedum systems during July 2007. These amounts were partially offset by lower variable interest rates between periods.

Minority interest income for the three months ended June 30, 2008, which represents non-controlling, non-affiliated ownership
interests in ATN, AHD and APL, was $231.2 million compared with an expense of $11.8 million for the prior year comparable period. The change between periods is principally due to a $257.9 million decrease in APLs net income and a decrease in
our ownership interest in AHD to 64% for the three months ended June 30, 2008 compared with 83% for the prior year comparable period. These amounts were partially offset by a $3.3 million increase in ATNs net income between periods. The
decrease in APLs net income was the result of an unfavorable movement of $285.9 million in the impact of certain net losses recognized on derivatives from the prior year comparable period. The decrease in our ownership interest in AHD was due
to its public issuances of common units to in July 2007. ATNs increase in net income between periods was principally due to the inclusion of DGOs operating results from its date of acquisition.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Natural Gas and Oil Production. Our natural gas and oil production revenues were $155.2 million for the six months ended June 30, 2008, an increase of $108.6 million from $46.6 million for the prior year
comparable period. Total production volume increased to 93.2 mmcfe per day for the six months ended June 30, 2008 compared with 87.4 mmcfe per day for the prior year comparable period. ATNs Michigan assets, acquired on June 29, 2007,
accounted for $92.3 million of natural gas and oil production revenue for the six months ended June 30, 2008, an increase of $91.5 million when compared with the prior year six month period. ATNs Appalachian assets had natural gas and oil
production revenue of $62.9 million for the six months ended June 30, 2008, an increase of $17.2 million, or 37.5% compared with $45.7 million for the comparable prior year period. The increase in revenue related to ATNs Appalachia assets
is primarily related to an increase in volumes of 6.6 mmcfe per day, or 24.4% when compared with the prior year period. Average realized oil prices for the six months ended June 30, 2008 were $105.58 per barrel, representing an increase of
approximately 77.7% from the prior year comparable period, while average realized natural gas prices increased by $0.19 per mcf to $9.39 per mcf for the six months ended June 30, 2008 when compared with the prior year period.

Natural gas and oil production expenses were $23.0 million for the six months ended June 30, 2008, an increase of $18.5 million from $4.5 million
for the prior year comparable period. The increase was attributable to $17.4 million of production expenses for ATNs Michigan assets and a $1.1 million increase in Appalachia production expenses due to an increase in the number of wells ATN
owns.

Well Construction and Completion. Our well construction and completion revenues were $226.5 million for the six months ended
June 30, 2008, an increase of $89.0 million from $137.5 million for the prior year comparable period. The increase is primarily due to the increase in the number of Marcellus Shale wells drilled for the six months ended June 30, 2008,
which are drilled at a higher cost than other ATN Appalachian wells. ATN drilled 430 net wells for the six months ended June 30, 2008 compared with 462 for the prior year comparable period.



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Administration and Oversight and Well Services. Administration and oversight fee revenues were
$10.2 million for the six months ended June 30, 2008 compared with $8.0 million for the six months ended June 30, 2007, an increase of $2.2 million or 27.5%. Well services revenues were $10.1 million for the six months ended June 30,
2008 compared with $7.9 million for the six months ended June 30, 2007, an increase of $2.2 million or 27.8%. Both increases were due to an increase in wells drilled by ATN since June 30, 2007.

Transmission, Gathering and Processing. Our transmission, gathering and processing revenues were $839.8 million for the six months ended
June 30, 2008, an increase of $605.4 million from $234.4 million for the prior year comparable period. Transmission, gathering and processing expenses were $664.8 million for the six months ended June 30, 2008, an increase of $474.5
million from $190.3 million for the prior year comparable period. These increases were due principally to the revenues and expenses associated with APLs Chaney Dell and Midkiff/Benedum systems and the effect of higher realized commodity prices
and higher volumes on its other systems. APLs average gross natural gas gathered volume for the six months ended June 30, 2008 was 1.3 billion cubic feet per day (bcfd) compared with 0.7 bcfd for the prior year comparable
period, an increase of 0.5 bcfd due principally to the acquisition of the Chaney Dell and Midkiff/Benedum systems.

Loss on
Mark-to-Market Derivatives. Loss on mark-to-market derivatives was $404.8 million for the six months ended June 30, 2008 compared with $4.6 million for the prior year comparable period. This change, which consists of the mark-to-market on
non-qualifying derivatives and the ineffective portion of qualifying derivatives, was the result of a $115.8 million net cash derivative termination expense related to APLs early termination of a portion of its crude oil derivative contracts
(see Recent Developments) and commodity price movements and their unfavorable impact on derivative contracts APL has for production volumes in future periods. For example, at June 30, 2008, forward crude oil prices for the duration
of APLs derivative contracts, which are the basis for adjusting the fair value of its crude oil derivative contracts, were at an average price of $140.26 per barrel compared with $89.89 per barrel at December 31, 2007, an increase of
$50.37. APL enters into derivative instruments solely to hedge its forecasted natural gas, NGLs and condensate sales against the variability in expected future cash flows attributable to changes in market prices. See further discussion of
derivatives under Item 3,  Quantitative and Qualitative Disclosures About Market Risk.

Other Income, Costs
and Expenses.General and administrative expenses, including amounts reimbursed to affiliates, increased $10.5 million to $46.8 million for the six months ended June 30, 2008 compared with $36.3 million for the prior year comparable period.
This increase was mainly due to higher costs associated with managing our and our subsidiaries businesses, including management time related to acquisition and capital raising opportunities, and an increase in ATNs investment partnership
syndication activities.

Depreciation, depletion and amortization increased to $96.8 million for the six months ended June 30, 2008
compared with $25.9 million for the six months ended June 30, 2007 due primarily to the depreciation and depletion associated with ATNs acquired DGO assets and APLs acquired Chaney Dell and Midkiff/Benedum system assets and
ATNs and APLs expansion capital expenditures incurred between the periods.

Interest expense increased to $68.4 million for the
six months ended June 30, 2008 as compared with $16.2 million for the comparable prior year period. This $52.2 million increase was primarily due to interest associated with additional borrowings by ATN and APL to partially finance ATNs
acquisition of DGO in June 2007 and APLs acquisition of the Chaney Dell and Midkiff/Benedum systems during July 2007. These amounts were partially offset by lower variable interest rates between periods.



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Minority interest income for the six months ended June 30, 2008, which represents non-controlling,
non-affiliated ownership interests in ATN, AHD and APL, was $254.8 million compared with an expense of $8.6 million for the prior year comparable period. The change between periods is principally due to a $302.4 million decrease in APLs net
income and a decrease in our ownership interest in AHD to 64% for the six months ended June 30, 2008 compared with 83% for the prior year comparable period. These amounts were partially offset by a $14.3 million increase in ATNs net
income between periods. The decrease in APLs net income was the result of an unfavorable movement of $370.4 million in the impact of certain net losses recognized on derivatives from the prior year comparable period. The decrease in our
ownership interest in AHD was due to its private placement of common units to partially finance APLs acquisition of the Chaney Dell and Midkiff/Benedum systems in July 2007. ATNs increase in net income between periods was principally due
to the inclusion of DGOs operating results from its date of acquisition.

Liquidity and Capital Resources

Our primary sources of liquidity are distributions received with respect to our ownership interests in ATN, APL and AHD. Our primary cash requirements are
for our general and administrative expenses and other expenditures, which we expect to fund through distributions received. Our operations principally occur through our subsidiaries, whose sources of liquidity are discussed in more detail below.

Atlas Energy. ATNs primary sources of liquidity are cash generated from operations, capital raised through investment
partnerships and borrowings under its credit facility. ATNs primary cash requirements, in addition to normal operating expenses, are for debt service, capital expenditures and quarterly distributions to its unitholders. In general, we expect
ATN to fund:



| |  |  | cash distributions and maintenance capital expenditures through existing cash, cash flows from operating activities, and the temporary use of funds raised in its
investment partnerships in the period before it invests these funds;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expansion capital expenditures and working capital deficits through the retention of cash, additional borrowings and capital raised through investment partnerships;
and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | debt principal payments through additional borrowings as they become due or by the issuance of additional common units.
| | - |  | -----------------------------------------------------------------------------------------------------------------------

During the year ended December 31, 2007, ATN raised $145.0 million through its investment partnerships and anticipates raising $400.0 million during
the current year. At June 30, 2008, ATN had $360.0 million of outstanding borrowings under its credit facility, with a borrowing base of $697.5 million. In addition to the availability under its credit facility, ATN has a universal shelf
registration statement on file with the Securities and Exchange Commission, which allows it to issue an unlimited amount of equity or debt securities.

Atlas Pipeline Holdings. AHDs primary sources of liquidity are distributions received with respect to its ownership interests in APL and borrowings under its credit facility. Its primary cash requirements
are for its general and administrative expenses, capital contributions to APL to maintain or increase its ownership interest and quarterly distributions to its common unitholders. AHD expects to fund its general and administrative expenses through
distributions received from APL and its capital contributions to APL through the retention of cash and borrowings under its credit facility. At June 30, 2008, AHD had $31.0 million outstanding and $19.0 million of remaining committed capacity
under its credit facility, subject to covenant limitations (see Note 7 under Item 1, Financial Statements).

Atlas
Pipeline.APLs primary sources of liquidity are cash generated from operations and borrowings under its credit facility. APLs primary cash requirements, in addition to normal operating expenses, are for debt service, capital
expenditures and quarterly distributions to its common unitholders and general partner. In general, we expect APL to fund:



| |  |  | cash distributions and maintenance capital expenditures through existing cash and cash flows from operating activities;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



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| |  |  | expansion capital expenditures and working capital deficits through the retention of cash and additional borrowings; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | debt principal payments through additional borrowings as they become due or by the issuance of additional limited partner units.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

At June 30, 2008, APL had $20.0 million of outstanding borrowings under its $380.0 million credit facility and $22.0 million of outstanding letters
of credit, which are not reflected as borrowings on our consolidated balance sheet, with $338.0 million of remaining committed capacity under its credit facility, subject to covenant limitations. In addition to the availability under its credit
facility, APL has a universal shelf registration statement on file with the Securities and Exchange Commission, which allows it to issue equity or debt securities of which $136.4 million remains available for issuance at June 30, 2008.

We believe that we and our subsidiaries have sufficient liquid assets, cash from operations and borrowing capacity to meet our and their
financial commitments, debt service obligations, distribution requirements, contingencies and anticipated capital expenditures. However, we and our subsidiaries are subject to business and operational risks that could adversely affect our cash flow.
We and our subsidiaries may supplement our cash generation with proceeds from financing activities, including borrowings under our subsidiaries credit facilities and other borrowings and the issuance of additional common shares and units.

Cash Flows  Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Net cash provided by operating activities of $12.6 million for the six months ended June 30, 2008 represented a decrease of $1.3 million from $13.9
million provided by operating activities for the comparable prior year period. The decrease was derived principally from an $86.9 million increase in cash distributions to minority interests and a $2.1 million decrease in net income excluding
non-cash items, partially offset by a $87.2 million favorable movement in cash flow from working capital changes. The increase in cash distributions to minority interests is due mainly to increases in ATNs, AHDs and APLs common
units outstanding and their cash distribution amount per common unit. The increase in net income excluding non-cash items was principally due to the contributions from ATNs acquisition of DTE and APLs Chaney Dell and Midkiff/Benedum
systems, which were acquired in June 2007 and July 2007, respectively, and increased profitability in other aspects of its business. The non-cash charges which impacted net income include favorable increases of $205.2 million for net non-cash loss
on derivative value and $66.9 million for depreciation, depletion and amortization, partially offset by an unfavorable increase for minority interests in net income of $246.8 million. The movement in net non-cash loss on derivative value between
periods resulted from commodity price movements during the six months ended June 30, 2008 and the unfavorable non-cash impact it had on our net income, which was due to the mark-to-market of derivative contracts APL has for future periods. The
increase in depreciation, depletion and amortization resulted from ATNs acquisition of DTE in June 2007 and APLs acquisition of the Chaney Dell and Midkiff/Benedum systems in July 2007. The movement in minority interests in net income
was due to a decrease in APLs net income and a decrease in our ownership interests in AHD and ATN between periods, partially offset by an increase in ATNs net income between periods. The favorable movement in working capital changes was
primarily due to the favorable timing of cash payments for the current portion of APLs and ATNs hedge liabilities and accounts payable to APLs derivative counterparties.

Net cash used in investing activities of $258.3 million for the six months ended June 30, 2008 represented a decreased $1,112.5 from $1,370.8
million used in investing activities for the comparable prior year period. This decrease was principally due to a $1,268.0 reduction in cash paid for acquisitions related ATNs acquisition of AGO on June 29, 2007, the current year
post-closing purchase price adjustment of APLs prior year acquisition of the Chaney Dell and Midkiff/Benedum systems of $31.4 million, and a $5.5 million decrease in our investments in Lightfoot. This decrease was offset by a $192.7 million
increase in capital expenditures. See further discussion of capital expenditures under Capital Requirements.



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Net cash provided by financing activities of $341.7 million for the six months ended June 30, 2008
represented a decrease of $912.9 million from $1,254.6 million of net cash provided by financing activities for the prior year comparable period. This decrease was principally due to a $1,208.9 million net reduction in APL, ATN, and AHD credit
facility borrowings, a $307.9 million decrease in net proceeds from APL and ATN equity offerings, and a $122.8 million increase in repayment of the APL term loan. These amounts are partially offset by a $651.9 million increase for the net proceeds
from the issuance of APL and ATN long-term debt and a decrease of $80.4 million in our purchases of treasury stock.

Capital Requirements

Our principal assets are our ownership interests in ATN, APL and AHD, through which our operating activities occur. As such, we do not
have any separate capital requirements apart from those entities. AHD, whose principal assets are its ownership interests in APL, does not have any separate capital requirements apart from APL. A more detailed discussion of ATNs and APLs
capital requirements is provided below.

Atlas Energy. ATNs capital requirements consist primarily of:



| |  |  | maintenance capital expenditures  capital expenditures ATN makes on an ongoing basis to maintain its capital asset base and its current production volumes at
a steady level; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expansion capital expenditures  capital expenditures ATN makes to expand its capital asset base for longer than the short-term and include new leasehold
interests and the development and exploitation of existing leasehold interests through acquisitions and investments in its drilling partnerships.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Atlas Pipeline.APLs operations require continual investment to upgrade or enhance existing operations and to ensure compliance with safety, operational, and environmental regulations. APLs capital
requirements consist primarily of:



| |  |  | maintenance capital expenditures to maintain equipment reliability and safety and to address environmental regulations; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | expansion capital expenditures to acquire complementary assets and to expand the capacity of its existing operations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------

The following table summarizes our consolidated maintenance and expansion capital expenditures, excluding amounts paid for acquisitions, for the periods
presented (in thousands):



|                                 |  |                            |         |                          |   |        |  |      |         |  |   |       
|-------------------------------- |  | -------------------------- | ------- | ------------------------ | - | ------ |  | ---- | ------- |  | - | ------
|                                 |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|                                 |  | 2008                       |         | 2007                     |   | 2008   |  | 2007
|Atlas Energy                     |  |                            |         |                          |   |        |  |      |         |  |   |       
|Maintenance capital expenditures |  | $                          | 12,975  |                          | $ | 8,750  |  | $    | 25,950  |  | $ | 17,500
|Expansion capital expenditures   |  |                            | 63,783  |                          |   | 24,255 |  |      | 106,425 |  |   | 37,582
|                                 |  |                            |         |                          |   |        |  |      |         |  |   |       
|Total                            |  | $                          | 76,758  |                          | $ | 33,005 |  | $    | 132,375 |  | $ | 55,082
|                                 |  |                            |         |                          |   |        |  |      |         |  |   |       
|Atlas Pipeline                   |  |                            |         |                          |   |        |  |      |         |  |   |       
|Maintenance capital expenditures |  | $                          | 2,045   |                          | $ | 700    |  | $    | 3,664   |  | $ | 1,472 
|Expansion capital expenditures   |  |                            | 71,156  |                          |   | 24,552 |  |      | 153,606 |  |   | 40,409
|                                 |  |                            |         |                          |   |        |  |      |         |  |   |       
|Total                            |  | $                          | 73,201  |                          | $ | 25,252 |  | $    | 157,270 |  | $ | 41,881
|                                 |  |                            |         |                          |   |        |  |      |         |  |   |       
|Consolidated                     |  |                            |         |                          |   |        |  |      |         |  |   |       
|Maintenance capital expenditures |  | $                          | 15,020  |                          | $ | 9,450  |  | $    | 29,614  |  | $ | 18,972
|Expansion capital expenditures   |  |                            | 134,939 |                          |   | 48,807 |  |      | 260,031 |  |   | 77,991
|                                 |  |                            |         |                          |   |        |  |      |         |  |   |       
|Total                            |  | $                          | 149,959 |                          | $ | 58,257 |  | $    | 289,645 |  | $ | 96,963
|                                 |  |                            |         |                          |   |        |  |      |         |  |   |       



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ATNs expansion capital expenditures increased to $63.8 million and $106.4 million for the three and
six months ended June 30, 2008, respectively, due principally to higher capital contributions to its investment drilling partnerships and increased acquisitions of leasehold acreage. ATN maintenance capital expenditures for the three and six
months ended June 30, 2008 increased to $13.0 and $26.0 million, respectively, due primarily to the maintenance capital expenditures associated with the DGO acquisition, which occurred in June 2007.

APLs expansion capital expenditures increased to $71.2 million and $153.6 million for the three and six months ended June 30, 2008,
respectively, due principally to the construction of a 60 MMcfd expansion of APLs Sweetwater processing plant and the acquisition of a gathering system located in Tennessee with an approximate capacity of 20.0 MMcfd for $9.1 million. The
increase in expansion capital expenditures also includes expansions of APLs existing gathering systems and upgrades to processing facilities and compressors to accommodate new wells drilled in APLs service areas. Maintenance capital
expenditures for the three and six months ended June 30, 2008 increased to $2.0 million and $3.7 million, respectively, compared with prior year periods due to the maintenance capital requirements of the Chaney Dell and Midkiff/Benedum systems,
which were acquired in July 2007, and fluctuations in the timing of APLs scheduled maintenance activity.

As of June 30, 2008,
we are committed to expend approximately $158.6 million on pipeline extensions, compressor station upgrades and processing facility upgrades.

Income
Taxes

Our effective income tax rate was 36.9% and 32.0% for the six months ended June 30, 2008 and 2007, respectively, and 37.3%
and 29.1% for the three months ended June 30, 2008 and 2007, respectively. The respective increases in our effective income tax rate between periods is a result of a reduction in tax benefits related to depletion and tax-exempt interest income
relative to income (loss) before taxes. Currently, it is our expectation that our effective income tax rate will approximate 37.0% for the year ended December 31, 2008.

Off Balance Sheet Arrangements

As of June 30, 2008, our off balance sheet arrangements are
limited to ATNs guarantee of Crown Drilling of Pennsylvania, LLCs $3.6 million credit agreement, ATNs letter of credit outstanding of $1.2 million, APLs letters of credit outstanding of $22.0 million and our commitments to
expend approximately $158.6 million on capital projects. In addition, we are committed to invest a total of $20.0 million in Lightfoot, of which $10.7 million has been invested as of June 30, 2008.

Critical Accounting Policies and Estimates

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires making estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of actual revenue and expenses during the reporting period. Although we base our estimates on historical experience and various other assumptions that we believe
to be reasonable under the circumstances, actual results may differ from the estimates on which our financial statements are prepared at any given point of time. Changes in these estimates could materially affect our financial position, results of



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operations or cash flows. Significant items that are subject to such estimates and assumptions include revenue and expense accruals, deferred tax assets and
liabilities, depreciation and amortization, asset impairment, fair value of derivative instruments, stock compensation, and the allocation of purchase price to the fair value of assets acquired. A discussion of our significant accounting policies we
have adopted and followed in the preparation of our consolidated financial statements is included within our Annual Report on Form 10-K for the year ended December 31, 2007 and in Note 2 under Item 1, Financial Statements
included in this report, and there have been no material changes to these policies through June 30, 2008.

Fair Value of Financial Instruments

We adopted the provisions of SFAS No. 157 at January 1, 2008. SFAS No. 157 establishes a fair value hierarchy which requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 (1) creates a single definition of fair value, (2) establishes a hierarchy for measuring fair
value, and (3) expands disclosure requirements about items measured at fair value. SFAS No. 157 does not change existing accounting rules governing what can or what must be recognized and reported at fair value in our financial statements,
or disclosed at fair value in our notes to the financial statements. As a result, we will not be required to recognize any new assets or liabilities at fair value.

SFAS No. 157s hierarchy defines three levels of inputs that may be used to measure fair value:

Level 1Unadjusted quoted
prices in active markets for identical, unrestricted assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or
liability.

Level 3 Unobservable inputs that reflect the entitys own assumptions about the assumption market participants would use in
the pricing of the asset or liability and are consequently not based on market activity but rather through particular valuation techniques.

We use the fair value methodology outlined in SFAS No. 157 to value the assets and liabilities recorded at fair value, including ATNs and APLs commodity hedges and interest rate swaps (see Note 9 under Item 1,
Financial Statements) and our SERP (see Note 17 under Item 1, Financial Statements). ATNs and APLs commodity hedges, with the exception of APLs NGL fixed price swaps and crude oil collars are calculated
based on observable market data related to the change in price of the underlying commodity and are therefore defined as Level 2 fair value measurements. ATNs and APLs interest rate derivative contracts are valued using a LIBOR rate-based
forward price curve model, and are therefore defined as Level 2 fair value measurements. Our SERP is calculated based on observable actuarial inputs developed by a third-party actuary, and therefore is defined as a Level 2 fair value measurement.
Valuations for APLs NGL fixed price swaps are based on a forward price curve modeled on a regression analysis of natural gas, crude oil, and propane prices, and therefore are defined as Level 3 fair value measurements. Valuations for
APLs crude oil options (including those associated with NGL sales) are based on forward price curves developed by the related financial institution based upon current quoted prices for crude oil futures, and therefore are defined as Level 3
fair value measurements.

New and Recently Adopted Accounting Standards

In June 2008, the Financial Accounting Standards Board (FASB) issued Staff Position No. EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 applies to the calculation of earnings per share (EPS) described in paragraphs 60 and 61 of FASB Statement No.
128, Earnings per Share for share-based



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payment awards with rights to dividends or dividend equivalents. It states that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. All prior-period EPS data presented shall be adjusted retrospectively to conform to the provisions of this FSP. We will apply the
requirements of FSP EITF 03-6-1 upon its adoption on January 1, 2009 and we do not believe the adoption of FSP EITF 03-6-1 will have a material impact on our financial position or results of operations

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting
Policies (SFAS 162), which reorganizes the sources of accounting principles into a GAAP hierarchy in order of authority. The purpose of the new standard is to improve financial reporting by providing a consistent framework for
determining what accounting principles should be used when preparing U.S. GAAP financial statements. The standard is effective 60 days after the SECs approval of the PCAOBs amendments to AU Section 411, The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of SFAS 162 will not have an impact on our financial position or results of operations.

In April 2008, the FASB issued Staff Position No. 142-3, Determination of Useful Life of Intangible Assets (FSP FAS 142-3).
FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible
Assets (SFAS 142). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under
SFAS No 141(R), Business Combinations (SFAS No. 141(R)). FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.
Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset should be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements should be applied
prospectively to all intangible assets recognized as of, and subsequent to, the effective date. We will apply the requirements of FSP FAS 142-3 upon its adoption on January 1, 2009 and we do not believe the adoption of FSP FAS 142-3 will have a
material impact on our financial position or results of operations.

In March 2008, the FASB ratified the Emerging Issues Task Force
(EITF) consensus on EITF Issue No. 07-4, Application of the Two-Class Method under FASB Statement No. 128, Earnings per Share, to Master Limited Partnerships (EITF No. 07-4), an update of EITF
No. 03-6, Participating Securities and the Two-Class Method Under FASB Statement No. 128 (EITF No. 03-6). EITF No. 07-4 requires the calculation of a Master Limited Partnerships net earnings per
limited partner unit for each period presented according to distributions declared and participation rights in undistributed earnings as if all of the earnings for that period had been distributed. In periods with undistributed earnings above
specified levels, the calculation per the two-class method results in an increased allocation of such undistributed earnings to the general partner and a dilution of earnings to the limited partners. EITF No. 07-4 is effective for fiscal years
beginning after December 15, 2008, including interim periods within those fiscal years, and requires retrospective application of the guidance to all periods presented. Early adoption is prohibited. Our subsidiaries, APL, AHD and ATN, do not
believe the adoption of EITF No. 07-4 will have any impact on its financial position or results of operations.

In March 2008, the
FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 amends
the requirements of SFAS No. 133 to require enhanced disclosure about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related
interpretations, and how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008, with
early adoption encouraged. We are currently evaluating the impact the adoption of SFAS No. 161 will have on the disclosures regarding our derivative instruments.



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In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements-an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary
and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS
No. 160 also requires consolidated net income to be reported, and disclosed on the face of the consolidated statement of operations, at amounts that include the amounts attributable to both the parent and the noncontrolling interest.
Additionally, SFAS No. 160 establishes a single method for accounting for changes in a parents ownership interest in a subsidiary that does not result in deconsolidation and that the parent recognize a gain or loss in net income when a
subsidiary is deconsolidated. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. We will apply the requirements of SFAS No. 160 upon its adoption on January 1, 2009 and are currently evaluating
whether SFAS No. 160 will have an impact on our financial position or results of operations.

In December 2007, the FASB issued SFAS
No 141(R), Business Combinations (SFAS No. 141(R)). SFAS No. 141(R) replaces SFAS No. 141, Business Combinations, however retains the fundamental requirements that the acquisition method of
accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141(R) requires an acquirer to recognize the assets acquired, liabilities assumed, and any noncontrolling interest in
the acquiree at the acquisition date, at their fair values as of that date, with specified limited exceptions. Changes subsequent to that date are to be recognized in earnings, not goodwill. Additionally, SFAS No. 141 (R) requires costs
incurred in connection with an acquisition be expensed as incurred. Restructuring costs, if any, are to be recognized separately from the acquisition. The acquirer in a business combination achieved in stages must also recognize the identifiable
assets and liabilities, as well as the noncontrolling interests in the acquiree, at the full amounts of their fair values. SFAS No. 141(R) is effective for business combinations occurring in fiscal years beginning on or after December 15,
2008. We will apply the requirements of SFAS No. 141(R) upon its adoption on January 1, 2009 and are currently evaluating whether SFAS No. 141(R) will have an impact on our financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment
to FASB Statement No. 115 (SFAS No. 159). SFAS No. 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. SFAS No. 159 is effective at the
inception of an entitys first fiscal year beginning after November 15, 2007 and offers various options in electing to apply its provisions. We adopted SFAS No. 159 at January 1, 2008, and have elected not to apply the fair value
option to any of our financial instruments.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value statements. In February
2008, the FASB issued FASB Staff Position SFAS No. 157-b, Effective Date of FASB Statement No. 157, which provides for a one-year deferral of the effective date of SFAS No. 157 with regard to an entitys non-financial
assets and non-financial liabilities or any non-recurring fair value measurement. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We adopted SFAS No. 157 at January 1, 2008 with respect to our
subsidiaries derivative instruments, which are measured at fair value within our financial statements. The provisions of SFAS No. 157 have not been applied to our non-financial assets and non-financial liabilities. See Fair
Value of Financial Instruments for disclosures pertaining to the provisions of SFAS No. 157 with regard to our subsidiaries financial instruments.



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|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. As our assets currently consist principally of our ownership interests
in our subsidiaries, the following information principally encompasses their exposure to market risks unless otherwise noted. The term market risk refers to the risk of loss arising from adverse changes in interest rates and oil and
natural gas prices. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonable possible losses. This forward-looking information provides indicators of how we view and manage our ongoing
market risk exposures. All of the market risk sensitive instruments were entered into for purposes other than trading.

General

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

We and our subsidiaries 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 and our subsidiaries manage these risks through regular operating and financing activities and periodical use of derivative financial
instruments. The following analysis presents the effect on our results of operations, cash flows and financial position as if the hypothetical changes in market risk factors occurred on June 30, 2008. Only the potential impact of hypothetical
assumptions is analyzed. The analysis does not consider other possible effects that could impact our and our subsidiaries business.

Interest Rate Risk.At June 30, 2008, ATN had an $850.0 million senior secured revolving credit facility with a borrowing base of $697.5 million ($360.0 million outstanding). The weighted average interest rate for these
borrowings was 3.78% at June 30, 2008. ATN also has interest rate derivative contracts at June 30, 2008 having an aggregate notional principal amount of $150.0 million. Under the terms of this agreement, ATN will pay 3.11%, plus the
applicable margin as defined under the terms of its credit facility, and will receive LIBOR plus the applicable margin, on the notional principal amount. This derivative contract effectively converts $150.0 million of ATNs floating rate debt
under the credit facility to fixed-rate debt. The interest rate swap agreement expires on January 31, 2011.

In May 2008, AHD entered
into an interest rate derivative contract having an aggregate notional principal amount of $25.0 million. Under the terms of agreement, AHD will pay an interest rate of 3.01%, plus the applicable margin as defined under the terms of its revolving
credit facility (see Note 11), and will receive LIBOR, plus the applicable margin, on the notional principal amounts. This derivative effectively converts $25.0 million of its floating rate debt under the revolving credit facility to fixed-rate
debt. The interest rate swap agreement began on May 30, 2008 and expires on May 28, 2010.

At June 30, 2008, APL had
interest rate derivative contracts having aggregate notional principal amounts of $450.0 million. Under the terms of these agreements, APL will pay weighted average interest rates of 3.02%, plus the applicable margin as defined under the terms of
its revolving credit facility (see APL Term Loan and Credit Facility), and will receive LIBOR, plus the applicable margin, on the notional principal amounts. These derivatives effectively convert $450.0 million of APLs
floating rate debt under its term loan and revolving credit facility to fixed-rate debt. The APL interest rate swap agreements are effective as of June 30, 2008 and expire during periods ranging from January 30, 2010 through April 30,
2010.

At June 30, 2008, APL had a $380.0 million senior secured revolving credit facility ($20.0 million outstanding). APL also had
$707.2 million outstanding under its senior secured term loan at June 30, 2008. The weighted average interest rate for APLs revolving credit facility borrowings was 4.4% at June 30, 2008, and the weighted average interest rate for
the term loan borrowings was 5.2% at June 30, 2008.



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Holding all other variables constant, including the effect of interest rate derivatives, a hypothetical
100 basis-point, or 1%, change in interest rates would change our consolidated interest expense by $4.9 million.

Commodity Price
Risk. Our market risk exposure to commodities is due to the fluctuations in the price of natural gas, NGLs, condensate and oil and the impact those price movements have on the financial results of our subsidiaries. To limit its exposure to
changing natural gas prices, ATN uses financial derivative instruments for a portion of its future natural gas production. APL is exposed to commodity prices as a result of being paid for certain services in the form of natural gas, NGLs and
condensate rather than cash. APL enters into financial swap and option instruments to hedge forecasted sales against the variability in expected future cash flows attributable to changes in market prices. These financial swap and option instruments
are generally classified as cash flow hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). A 10% change in the average price of natural gas, NGLs,
condensate and oil would result in a change to our consolidated operating income (loss), excluding minority interest and income tax effects, for the twelve-month period ending June 30, 2009 of approximately $34.1 million.

Atlas Energy. Realized pricing of ATNs oil and natural gas production is primarily driven by the prevailing worldwide prices for crude oil
and spot market prices applicable to United States natural gas production. Pricing for natural gas and oil production has been volatile and unpredictable for many years. To limit its exposure to changing natural gas prices, ATN enters into
natural gas and oil swap and costless collar option contracts. At any point in time, such contracts may include regulated 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 and oil.

ATN formally
documents all relationships between derivative instruments and the items being hedged, including the risk management objective and strategy for undertaking the derivative transactions. This includes matching the natural gas and oil futures and
options contracts to the forecasted transactions. ATN assesses, both at the inception of the derivative contract 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 and realized gains and losses are recognized within the consolidated statements of operations 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,
ATN will discontinue hedge accounting for the derivative and subsequent changes in fair value for the derivative will be recognized immediately into earnings.

As of June 30, 2008, ATN had the following interest rate and commodity derivatives, including derivatives that do not qualify for hedge accounting:

Interest Fixed-Rate Swap



|                            |  |                |             |      |                          |                                 |      |                                |   |       |  
|--------------------------- |  | -------------- | ----------- | ---- | ------------------------ | ------------------------------- | ---- | ------------------------------ | - | ----- | -
|Term                        |  | NotionalAmount |             | Type |                          | ContractPeriodEndedDecember 31, |      | Fair ValueAsset/(Liability)(1) |  
|                            |  |                |             |      |                          |                                 |      | (in thousands)                 |  
|January 2008 - January 2011 |  | $              | 150,000,000 |      | Pay 3.11% Receive LIBOR |                                 | 2008 |                                | $ | (382  | )
|                            |  |                |             |      |                          |                                 | 2009 |                                |   | 500   |  
|                            |  |                |             |      |                          |                                 | 2010 |                                |   | 1,700 |  
|                            |  |                |             |      |                          |                                 |      |                                |   |       |  
|                            |  |                |             |      |                          |                                 |      |                                | $ | 1,818 |  
|                            |  |                |             |      |                          |                                 |      |                                |   |       |  



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Natural Gas Fixed Price Swaps



|                                      |  |            |  |                    |      |                     |   |          |  
|------------------------------------- |  | ---------- |  | ------------------ | ---- | ------------------- | - | -------- | -
|Production Period Ending December 31, |  | Volumes    |  | AverageFixed Price |      | Fair ValueLiability |  
|                                      |  | (MMbtu)    |  | (per MMbtu)        |      | (in thousands)(1)   |  
|2008                                  |  | 19,780,000 |  | $                  | 8.77 |                     | $ | (92,642  | )
|2009                                  |  | 37,760,000 |  | $                  | 8.54 |                     |   | (142,381 | )
|2010                                  |  | 26,360,000 |  | $                  | 8.11 |                     |   | (76,701  | )
|2011                                  |  | 18,680,000 |  | $                  | 7.90 |                     |   | (48,669  | )
|2012                                  |  | 13,800,000 |  | $                  | 8.20 |                     |   | (31,255  | )
|2013                                  |  | 1,500,000  |  | $                  | 8.73 |                     |   | (2,700   | )
|                                      |  |            |  |                    |      |                     |   |          |  
|                                      |  |            |  |                    |      |                     | $ | (394,348 | )
|                                      |  |            |  |                    |      |                     |   |          |  

Natural Gas Costless Collars



|                                      |  |                |  |           |  |                     |      |                     |   |         |  
|------------------------------------- |  | -------------- |  | --------- |  | ------------------- | ---- | ------------------- | - | ------- | -
|Production Period Ending December 31, |  | Option Type    |  | Volumes   |  | AverageStrike Price |      | Fair ValueLiability |  
|                                      |  |                |  | (MMbtu)   |  | (per MMbtu)         |      | (in thousands) (1)  |  
|2008                                  |  | Puts purchased |  | 780,000   |  | $                   | 7.50 |                     | $ |        |  
|2008                                  |  | Calls sold     |  | 780,000   |  | $                   | 9.40 |                     |   | (3,193  | )
|2010                                  |  | Puts purchased |  | 2,880,000 |  | $                   | 7.75 |                     |   |        |  
|2010                                  |  | Calls sold     |  | 2,880,000 |  | $                   | 8.75 |                     |   | (7,336  | )
|2011                                  |  | Puts purchased |  | 7,200,000 |  | $                   | 7.50 |                     |   |        |  
|2011                                  |  | Calls sold     |  | 7,200,000 |  | $                   | 8.45 |                     |   | (16,536 | )
|2012                                  |  | Puts purchased |  | 720,000   |  | $                   | 7.00 |                     |   |        |  
|2012                                  |  | Calls sold     |  | 720,000   |  | $                   | 8.37 |                     |   | (1,685  | )
|                                      |  |                |  |           |  |                     |      |                     |   |         |  
|                                      |  |                |  |           |  |                     |      |                     | $ | (28,750 | )
|                                      |  |                |  |           |  |                     |      |                     |   |         |  

Crude Oil Fixed Price Swaps



|                                      |  |           |  |                    |        |                     |   |        |  
|------------------------------------- |  | --------- |  | ------------------ | ------ | ------------------- | - | ------ | -
|Production Period Ending December 31, |  | Volumes   |  | AverageFixed Price |        | Fair ValueLiability |  
|                                      |  | (barrels) |  | (per barrel)       |        | (in thousands)(2)   |  
|2008                                  |  | 43,400    |  | $                  | 104.24 |                     | $ | (1,536 | )
|2009                                  |  | 58,900    |  | $                  | 99.92  |                     |   | (2,324 | )
|2010                                  |  | 48,900    |  | $                  | 97.31  |                     |   | (1,863 | )
|2011                                  |  | 40,400    |  | $                  | 96.43  |                     |   | (1,450 | )
|2012                                  |  | 33,500    |  | $                  | 95.99  |                     |   | (1,138 | )
|2013                                  |  | 9,000     |  | $                  | 95.95  |                     |   | (296   | )
|                                      |  |           |  |                    |        |                     |   |        |  
|                                      |  |           |  |                    |        |                     | $ | (8,607 | )
|                                      |  |           |  |                    |        |                     |   |        |  



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Crude Oil Costless Collars



|                                      |  |                                    |  |           |          |                    |        |                     |   |        |  
|------------------------------------- |  | ---------------------------------- |  | --------- | -------- | ------------------ | ------ | ------------------- | - | ------ | -
|Production Period Ending December 31, |  | Option Type                        |  | Volumes   |          | AverageStrikePrice |        | Fair ValueLiability |  
|                                      |  |                                    |  | (barrels) |          | (per barrel)       |        | (in thousands) (2)  |  
|2008                                  |  | Puts purchased                     |  | 22,500    |          | $                  | 85.00  |                     | $ |       |  
|2008                                  |  | Calls sold                         |  | 22,500    |          | $                  | 127.00 |                     |   | (358   | )
|2009                                  |  | Puts purchased                     |  | 36,500    |          | $                  | 85.00  |                     |   |       |  
|2009                                  |  | Calls sold                         |  | 36,500    |          | $                  | 118.63 |                     |   | (1,058 | )
|2010                                  |  | Puts purchased                     |  | 31,000    |          | $                  | 85.00  |                     |   |       |  
|2010                                  |  | Calls sold                         |  | 31,000    |          | $                  | 112.92 |                     |   | (973   | )
|2011                                  |  | Puts purchased                     |  | 27,000    |          | $                  | 85.00  |                     |   |       |  
|2011                                  |  | Calls sold                         |  | 27,000    |          | $                  | 110.81 |                     |   | (825   | )
|2012                                  |  | Puts purchased                     |  | 21,500    |          | $                  | 85.00  |                     |   |       |  
|2012                                  |  | Calls sold                         |  | 21,500    |          | $                  | 110.06 |                     |   | (634   | )
|2013                                  |  | Puts purchased                     |  | 6,000     |          | $                  | 85.00  |                     |   |       |  
|2013                                  |  | Calls sold                         |  | 6,000     |          | $                  | 110.09 |                     |   | (173   | )
|                                      |  |                                    |  |           |          |                    |        |                     |   |        |  
|                                      |  |                                    |  |           |          |                    |        |                     | $ | (4,021 | )
|                                      |  |                                    |  |           |          |                    |        |                     |   |        |  
|                                      |  | Total ATN net derivative liability |  | $         | (433,908 | )                 
|                                      |  |                                    |  |           |          |                    |        |                     |   |        |  



|(3) | Fair value based on forward NYMEX natural gas prices, as applicable.
|--- | --------------------------------------------------------------------



|(4) | Fair value based on forward WTI crude oil prices, as applicable.
|--- | ----------------------------------------------------------------

Atlas Pipeline.APL is exposed to commodity prices as a result of being paid for certain services in the form of natural gas, NGLs, and condensate
rather than cash. For gathering services, APL receives fees or commodities from the producers to bring the raw natural gas from the wellhead to the processing plant. For processing services, APL either receives fees or commodities as payment for
these services, based on the type of contractual agreement. A 10% change in the average price of NGLs, natural gas and condensate APL processes and sells, based on estimated unhedged market prices of $1.72, $12.96 and $137.82 for NGLs, natural gas
and condensate, respectively, would result in a change to our gross margin for the twelve-month period ending June 30, 2009, excluding the effect of minority interests in APL net income (loss), of approximately $28.9 million.

APL uses a number of different derivative instruments, principally swaps and options, in connection with its commodity price and interest rate risk
management activities. APL enters into financial swap and option instruments to hedge its forecasted natural gas, NGLs and condensate sales against the variability in expected future cash flows attributable to changes in market prices. APL also
enters into financial swap instruments to hedge certain portions of its floating interest rate debt against the variability in market interest rates. Swap instruments are contractual agreements between counterparties to exchange obligations of money
as the underlying natural gas, NGLs and condensate is sold or interest payments on the underlying debt instrument is due. Under swap agreements, APL receives or pays a fixed price and receives or remits a floating price based on certain indices for
the relevant contract period. Commodity-based option instruments are contractual agreements that grant the right, but not obligation, to purchase or sell natural gas, NGLs and condensate at a fixed price for the relevant contract period. These
financial swap and option instruments are generally classified as cash flow hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133).

APL formally documents all relationships between hedging instruments and the items being hedged, including our risk management objective and strategy for
undertaking the hedging transactions. This includes matching the derivative contracts to the forecasted transactions. APL assesses, both at the inception of the derivative and on an ongoing basis, whether the derivative is effective in offsetting
changes in the forecasted cash flow of the hedged item. 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 adequate correlation between the hedging instrument and the
underlying item being hedged, APL will discontinue hedge accounting for the derivative and subsequent changes in the derivative fair value, which is determined by APL through the utilization of market data, will be recognized immediately within
other income (loss) in our consolidated statements of operations. For APLs derivatives qualifying as hedges, we recognize the effective portion of changes in fair value in partners capital as accumulated other comprehensive income
(loss), and reclassify the portion relating to commodity derivatives to natural gas and liquids revenue and the portion relating to interest rate derivatives to interest expense within our consolidated statements of operations as the underlying
transactions are settled. For APLs non-qualifying derivatives and for the ineffective portion of qualifying derivatives, we recognize changes in fair value within other income (loss) in our consolidated statements of operations as they occur.



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During June 2008, APL made net payments of $170.4 million related to the early termination of crude oil
derivative contracts that it entered into as proxy hedges for the prices received on the ethane and propane portion of its NGL equity volume. These derivative contracts were put into place simultaneously with the APLs acquisition of the Chaney
Dell and Midkiff/Benedum systems in July 2007 and related to production periods ranging from the end of the second quarter of 2008 through the fourth quarter of 2009. During the three and six months ended June 30, 2008, the Partnership
recognized a derivative expense of $162.5 million related to APLs termination of these derivative instruments, including a non-cash portion of $46.3 million, within loss on mark-to-market derivatives on our consolidated statements of
operations. We also recognized a cash derivative expense of $0.3 million related to APLs termination of these derivative instruments within natural gas and liquids revenue on our consolidated statement of operations. During July 2008, APL paid
an additional $93.6 million related to the early termination of its crude oil derivative contracts that relate to production periods through the end of 2009 (see Recent Events).

In connection with its Chaney Dell and Midkiff/Benedum acquisition, APL reached an agreement with Pioneer which grants Pioneer an option to buy up to an
additional 14.6% interest in the Midkiff/Benedum system, which began on June 15, 2008 and ends on November 1, 2008, and an additional 7.4% interest beginning on June 15, 2009 and ending on November 1, 2009 (the aggregate 22.0%
additional interest can be entirely purchased during the period beginning June 15, 2009 and ending on November 1, 2009; see Note 9 under Item 1, Financial Statements). As of August 8, 2008, APL has received no
indication that Pioneer will exercise either of its options under the agreement. If Pioneer does exercise either of these options, APL will discontinue hedge accounting for the derivative instruments covering the portion of the forecasted production
of the Midkiff/Benedum system sold to Pioneer and will evaluate these derivative instruments to determine if they can be documented to match other forecasted production APL may have.

As of June 30, 2008, AHD had the following interest rate derivatives:

Interest Fixed-Rate Swap



|                    |  |                |            |      |                                |                                   |      |                                |   |     |  
|------------------- |  | -------------- | ---------- | ---- | ------------------------------ | --------------------------------- | ---- | ------------------------------ | - | --- | -
|Term                |  | NotionalAmount |            | Type |                                | Contract PeriodEnded December 31, |      | Fair ValueAsset/(Liability)(1) |  
|                    |  |                |            |      |                                |                                   |      | (in thousands)                 |  
|May 2008 - May 2010 |  | $              | 25,000,000 |      | Pay 3.01%  Receive LIBOR      |                                   | 2008 |                                | $ | (48 | )
|                    |  |                |            |      |                                |                                   | 2009 |                                |   | 89  |  
|                    |  |                |            |      |                                |                                   | 2010 |                                |   | 133 |  
|                    |  |                |            |      |                                |                                   |      |                                |   |     |  
|                    |  |                |            |      | Total AHD net derivative asset |                                   | $    | 174                            |  
|                    |  |                |            |      |                                |                                   |      |                                |   |     |  



|(1) | Fair value based on independent, third-party statements, supported by observable levels at which transactions are
executed in the marketplace.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

As of June 30, 2008, APL had the following interest rate and commodity derivatives,
including derivatives that do not qualify for hedge accounting:

Interest Fixed-Rate Swap



|                            |  |                |             |      |                          |                                   |      |                                |   |      |  
|--------------------------- |  | -------------- | ----------- | ---- | ------------------------ | --------------------------------- | ---- | ------------------------------ | - | ---- | -
|Term                        |  | NotionalAmount |             | Type |                          | Contract PeriodEnded December 31, |      | Fair ValueAsset/(Liability)(1) |  
|                            |  |                |             |      |                          |                                   |      | (in thousands)                 |  
|January 2008 - January 2010 |  | $              | 200,000,000 |      | Pay 2.88% Receive LIBOR |                                   | 2008 |                                | $ | (250 | )
|                            |  |                |             |      |                          |                                   | 2009 |                                |   | 977  |  
|                            |  |                |             |      |                          |                                   | 2010 |                                |   | 170  |  
|                            |  |                |             |      |                          |                                   |      |                                |   |      |  
|                            |  |                |             |      |                          |                                   |      |                                | $ | 897  |  
|                            |  |                |             |      |                          |                                   |      |                                |   |      |  
|April 2008 - April 2010     |  | $              | 250,000,000 |      | Pay 3.14% Receive LIBOR |                                   | 2008 |                                | $ | (635 | )
|                            |  |                |             |      |                          |                                   | 2009 |                                |   | 589  |  
|                            |  |                |             |      |                          |                                   | 2010 |                                |   | 726  |  
|                            |  |                |             |      |                          |                                   |      |                                |   |      |  
|                            |  |                |             |      |                          |                                   |      |                                | $ | 680  |  
|                            |  |                |             |      |                          |                                   |      |                                |   |      |  



73



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Natural Gas Liquids Sales  Fixed Price Swaps



|                                     |  |            |  |                    |       |                        |   |         |  
|------------------------------------ |  | ---------- |  | ------------------ | ----- | ---------------------- | - | ------- | -
|Production Period Ended December 31, |  | Volumes    |  | AverageFixed Price |       | Fair ValueLiability(2) |  
|                                     |  | (gallons)  |  | (per gallon)       |       | (in thousands)         |  
|2008                                 |  | 14,868,000 |  | $                  | 0.697 |                        | $ | (13,921 | )
|2009                                 |  | 8,568,000  |  | $                  | 0.746 |                        |   | (7,069  | )
|                                     |  |            |  |                    |       |                        |   |         |  
|                                     |  |            |  |                    |       |                        | $ | (20,990 | )
|                                     |  |            |  |                    |       |                        |   |         |  

Crude Oil Sales Options (associated with NGL volume)



|                                     |  |             |   |  |                      |   |  |                         |        |                                |   |          |             |  |                       
|------------------------------------ |  | ----------- | - |  | -------------------- | - |  | ----------------------- | ------ | ------------------------------ | - | -------- | ----------- |  | ----------------------
|Production Period Ended December 31, |  | CrudeVolume |   |  | AssociatedNGL Volume |   |  | AverageCrudeStrikePrice |        | Fair ValueAsset/(Liability)(3) |   |          | Option Type
|                                     |  | (barrels)   |   |  | (gallons)            |   |  | (per barrel)            |        | (in thousands)                 |   |          |            
|2008                                 |  | 600,000     |   |  | 40,068,000           |   |  | $                       | 60.00  |                                | $ | 4        |             |  | Puts purchased        
|2008                                 |  | (126,000    | ) |  | 11,219,040           |   |  | $                       | 127.55 |                                |   | (962     | )           |  | Puts sold(4)          
|2008                                 |  | (126,000    | ) |  | (11,219,040          | ) |  | $                       | 140.00 |                                |   | 1,821    |             |  | Calls purchased(4)    
|2008                                 |  | 946,800     |   |  | 51,529,968           |   |  | $                       | 80.13  |                                |   | (57,308  | )           |  | Calls sold            
|2009                                 |  | (1,056,000  | ) |  | 94,026,240           |   |  | $                       | 126.05 |                                |   | (11,425  | )           |  | Puts sold(4) (5)      
|2009                                 |  | (1,056,000  | ) |  | (94,026,240          | ) |  | $                       | 143.00 |                                |   | 18,033   |             |  | Calls purchased(4) (5)
|2009                                 |  | 3,636,000   |   |  | 219,602,880          |   |  | $                       | 79.51  |                                |   | (215,989 | )           |  | Calls sold(5)         
|2010                                 |  | 3,127,500   |   |  | 202,370,490          |   |  | $                       | 81.09  |                                |   | (176,190 | )           |  | Calls sold            
|2011                                 |  | 606,000     |   |  | 32,578,560           |   |  | $                       | 95.56  |                                |   | (26,751  | )           |  | Calls sold            
|2012                                 |  | 450,000     |   |  | 24,192,000           |   |  | $                       | 97.10  |                                |   | (18,820  | )           |  | Calls sold            
|                                     |  |             |   |  |                      |   |  |                         |        |                                |   |          |             |  |                       
|                                     |  |             |   |  |                      |   |  |                         |        |                                | $ | (487,587 | )           |  |                       
|                                     |  |             |   |  |                      |   |  |                         |        |                                |   |          |             |  |                       

Natural Gas Sales  Fixed Price Swaps



|                                     |  |            |  |                    |       |                        |   |         |  
|------------------------------------ |  | ---------- |  | ------------------ | ----- | ---------------------- | - | ------- | -
|Production Period Ended December 31, |  | Volumes    |  | AverageFixed Price |       | Fair ValueLiability(3) |  
|                                     |  | (mmbtu)(6) |  | (per mmbtu)(6)     |       | (in thousands)         |  
|2008                                 |  | 2,742,000  |  | $                  | 8.823 |                        | $ | (12,942 | )
|2009                                 |  | 5,724,000  |  | $                  | 8.611 |                        |   | (22,102 | )
|2010                                 |  | 4,560,000  |  | $                  | 8.526 |                        |   | (12,744 | )
|2011                                 |  | 2,160,000  |  | $                  | 8.270 |                        |   | (5,423  | )
|2012                                 |  | 1,560,000  |  | $                  | 8.250 |                        |   | (3,888  | )
|                                     |  |            |  |                    |       |                        |   |         |  
|                                     |  |            |  |                    |       |                        | $ | (57,099 | )
|                                     |  |            |  |                    |       |                        |   |         |  

Natural Gas Basis Sales



|                                     |  |            |  |                    |        |   |                    |   |      
|------------------------------------ |  | ---------- |  | ------------------ | ------ | - | ------------------ | - | -----
|Production Period Ended December 31, |  | Volumes    |  | AverageFixed Price |        |   | FairValue Asset(3)
|                                     |  | (mmbtu)(6) |  | (per mmbtu)(6)     |        |   | (in thousands)    
|2008                                 |  | 2,742,000  |  | $                  | (0.744 | ) |                    | $ | 2,605
|2009                                 |  | 5,724,000  |  | $                  | (0.558 | ) |                    |   | 2,706
|2010                                 |  | 4,560,000  |  | $                  | (0.622 | ) |                    |   | 1,048
|2011                                 |  | 2,160,000  |  | $                  | (0.664 | ) |                    |   | 37   
|2012                                 |  | 1,560,000  |  | $                  | (0.601 | ) |                    |   | 27   
|                                     |  |            |  |                    |        |   |                    |   |      
|                                     |  |            |  |                    |        |   |                    | $ | 6,423
|                                     |  |            |  |                    |        |   |                    |   |      



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Natural Gas Purchases  Fixed Price Swaps



|                                     |  |            |  |                    |       |     |                    |   |        
|------------------------------------ |  | ---------- |  | ------------------ | ----- | --- | ------------------ | - | -------
|Production Period Ended December 31, |  | Volumes    |  | Average FixedPrice |       |     | FairValue Asset(3)
|                                     |  | (mmbtu)(6) |  | (per mmbtu)(6)     |       |     | (in thousands)    
|2008                                 |  | 8,130,000  |  | $                  | 9.001 | (7) |                    | $ | 37,081 
|2009                                 |  | 15,564,000 |  | $                  | 8.680 |     |                    |   | 59,019 
|2010                                 |  | 8,940,000  |  | $                  | 8.580 |     |                    |   | 25,632 
|2011                                 |  | 2,160,000  |  | $                  | 8.270 |     |                    |   | 5,423  
|2012                                 |  | 1,560,000  |  | $                  | 8.250 |     |                    |   | 3,888  
|                                     |  |            |  |                    |       |     |                    |   |        
|                                     |  |            |  |                    |       |     |                    | $ | 131,043
|                                     |  |            |  |                    |       |     |                    |   |        

Natural Gas Basis Purchases



|                                     |  |            |  |                    |        |   |                                |   |         |  
|------------------------------------ |  | ---------- |  | ------------------ | ------ | - | ------------------------------ | - | ------- | -
|Production Period Ended December 31, |  | Volumes    |  | Average FixedPrice |        |   | Fair ValueAsset/(Liability)(3) |  
|                                     |  | (mmbtu)(6) |  | (per mmbtu)(6)     |        |   | (in thousands)                 |  
|2008                                 |  | 8,130,000  |  | $                  | (1.114 | ) |                                | $ | (8,045  | )
|2009                                 |  | 15,564,000 |  | $                  | (0.654 | ) |                                |   | (9,633  | )
|2010                                 |  | 8,940,000  |  | $                  | (0.600 | ) |                                |   | (2,638  | )
|2011                                 |  | 2,160,000  |  | $                  | (0.700 | ) |                                |   | 116     |  
|2012                                 |  | 1,560,000  |  | $                  | (0.610 | ) |                                |   | 58      |  
|                                     |  |            |  |                    |        |   |                                |   |         |  
|                                     |  |            |  |                    |        |   |                                | $ | (20,142 | )
|                                     |  |            |  |                    |        |   |                                |   |         |  

Crude Oil Sales



|                                     |  |           |  |                    |        |                       |   |        |  
|------------------------------------ |  | --------- |  | ------------------ | ------ | --------------------- | - | ------ | -
|Production Period Ended December 31, |  | Volumes   |  | AverageFixed Price |        | FairValueLiability(3) |  
|                                     |  | (barrels) |  | (per barrel)       |        | (in thousands)        |  
|2008                                 |  | 25,200    |  | $                  | 60.427 |                       | $ | (2,031 | )
|2009                                 |  | 33,000    |  | $                  | 62.700 |                       |   | (2,578 | )
|                                     |  |           |  |                    |        |                       |   |        |  
|                                     |  |           |  |                    |        |                       | $ | (4,609 | )
|                                     |  |           |  |                    |        |                       |   |        |  

Crude Oil Participating Swaps for NGLs(8)



|                                     |  |             |  |                     |  |                          |        |                     |   |             |  |                    
|------------------------------------ |  | ----------- |  | ------------------- |  | ------------------------ | ------ | ------------------- | - | ----------- |  | -------------------
|Production Period Ended December 31, |  | CrudeVolume |  | AssociatedNGLVolume |  | AverageCrudeStrike Price |        | Fair ValueAsset (3) |   | Option Type
|                                     |  | (barrels)   |  | (gallons)           |  | (per barrel)             |        | (in thousands)      |   |            
|2008                                 |  | 126,000     |  | 11,219,040          |  | $                        | 137.00 |                     | $ | 748         |  | Participating swaps

Crude Oil Sales Options



|                                     |  |           |          |                    |        |                        |   |         |             |  |               
|------------------------------------ |  | --------- | -------- | ------------------ | ------ | ---------------------- | - | ------- | ----------- |  | --------------
|Production Period Ended December 31, |  | Volumes   |          | AverageStrikePrice |        | Fair ValueLiability(3) |   |         | Option Type
|                                     |  | (barrels) |          | (per barrel)       |        | (in thousands)         |   |         |            
|2008                                 |  | 10,800    |          | $                  | 60.000 |                        | $ |        |             |  | Puts purchased
|2008                                 |  | 138,000   |          | $                  | 78.055 |                        |   | (8,615  | )           |  | Calls sold    
|2009                                 |  | 306,000   |          | $                  | 80.017 |                        |   | (23,574 | )           |  | Calls sold    
|2010                                 |  | 234,000   |          | $                  | 83.027 |                        |   | (15,633 | )           |  | Calls sold    
|2011                                 |  | 72,000    |          | $                  | 87.296 |                        |   | (3,583  | )           |  | Calls sold    
|2012                                 |  | 48,000    |          | $                  | 83.944 |                        |   | (2,409  | )           |  | Calls sold    
|                                     |  |           |          |                    |        |                        |   |         |             |  |               
|                                     |  |           |          |                    |        |                        | $ | (53,814 | )           |  |               
|                                     |  |           |          |                    |        |                        |   |         |             |  |               
|Total APL net derivative liability   |  | $         | (504,450 | )                  |        |                       
|                                     |  |           |          |                    |        |                        |   |         |             |  |               
|Total net derivative liability       |  | $         | (938,184 | )                  |        |                       
|                                     |  |           |          |                    |        |                        |   |         |             |  |               



|(1) | Fair value based on independent, third-party statements, supported by observable levels at which transactions are
executed in the marketplace.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | Fair value based upon management estimates, including forecasted forward NGL prices as a function of forward NYMEX
natural gas, light crude and propane prices.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Fair value based on forward NYMEX natural gas and light crude prices, as applicable.
|--- | ------------------------------------------------------------------------------------



|(4) | Puts sold and calls purchased in 2008 and 2009 represent collars
entered into by APL as offsetting positions for the calls sold related to ethane and propane production. These offsetting positions were entered into to limit the loss which could be incurred if crude oil prices continued to rise.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | A portion of these positions were paid off by APL during July 2008 as a result of APLs early termination of crude
oil derivative contracts (see Note 19).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Mmbtu represents million British Thermal Units.
|--- | -----------------------------------------------



|(7) | Includes APLs premium received from its sale of an option for it to sell 468,000 mmbtu of natural gas for the year
ended December 31, 2008 at $15.50 per mmbtu.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Represents APLs derivative instruments that combine a swap and a put option with the same strike price.
|--- | --------------------------------------------------------------------------------------------------------

Atlas America.At June 30, 2008 and December 31, 2007, we reflected a net hedging liability on our
balance sheet of $938.2 million and $224.0 million, respectively, as a result of ATNs, AHDs and APLs derivative contracts. Of the $102.6 million net loss in accumulated other comprehensive loss at June 30, 2008, we will
reclassify $44.7 million of losses to our consolidated statements of operations over the next twelve month period as these contracts expire, and $57.9 million 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.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

We maintain disclosure
controls and procedures that are designed to ensure that information required to be disclosed in our Securities 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 General Partners 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 and with the participation of our disclosure committee appointed by such officers, 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 at June 30, 2008.

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



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PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

We are currently involved in
various disputes incidental to our normal business operations. In addition, ATN have been named as a party to a certain legal action brought by CNX Gas Company, LLC which is discussed in Note 10 of the notes to the consolidated financial statements
included in Part I, Item 1 of this Form 10-Q, which is incorporated herein by reference. ATN is of the opinion that the final resolution of any currently pending or threatened litigation is not likely to have a material adverse effect on our
consolidated financial position, results of operations or cash flows.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

The risk factors set forth below
should be read in conjunction with those appearing in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Due to the accounting of our derivative contracts, increases in prices for natural gas, crude oil and NGLs could result in non-cash balance sheet reductions.

With the objective of enhancing the predictability of future revenues, from time to time we enter into natural gas, natural gas liquids and crude oil
derivative contracts. We account for these derivative contracts by applying the provisions of SFAS No. 133. Due to the mark-to-market accounting treatment for these derivative contracts, we could recognize incremental derivative liabilities
between reporting periods resulting from increases or decreases in reference prices for natural gas, crude oil and NGLs, which could result in our recognizing a non-cash loss in our consolidated statements of operations or through accumulated other
comprehensive income (loss) and a consequent non-cash decrease in our stockholders equity between reporting periods. Any such decrease could be substantial. In addition, we may be required to make a cash payment upon the termination of any of
these derivative contracts.

Our hedging activities do not eliminate our exposure to fluctuations in commodity prices and interest rates and may reduce
our cash flow and subject our earnings to increased volatility.

Our operations expose us to fluctuations in commodity prices. We
utilize derivative contracts related to the future price of crude oil, natural gas and NGLs with the intent of reducing the volatility of our cash flows due to fluctuations in commodity prices. We also have exposure to interest rate fluctuations as
a result of variable rate debt under our term loan and revolving credit facility. We have entered into interest rate swap agreements to convert a portion of this variable rate debt to a fixed rate obligation, thereby reducing our exposure to market
rate fluctuations.

We have entered into derivative transactions related to only a portion of our crude oil, natural gas and NGL volume and
our variable rate debt. As a result, we will continue to have direct commodity price risk and interest rate risk with respect to the unhedged portion of these items. To the extent we hedge our commodity price and interest rate risk using certain
derivative contracts, we will forego the benefits we would otherwise experience if commodity prices or interest rates were to change in our favor.

Even though our hedging activities are monitored by management, these activities could reduce our cash flow in some circumstances, including if the counterparty to the hedging contract defaults on its contract obligations, if there is a
change in the expected differential between the underlying price in the hedging agreement and the actual prices received or, with regard to commodity derivatives, if production is less than expected. With respect to commodity derivative contracts,
if the actual amount of production is lower than the amount that is subject to our derivative instruments, we might be forced to satisfy all or a portion of derivative transactions without the benefit of the cash flow from our sale of the underlying
physical commodity, resulting in a reduction of our cash flow. In addition, we have entered into proxy hedges with respect to our NGLs, typically using crude oil derivative contracts, based upon the historical price correlation between crude oil and
NGLs. Certain of these proxy hedges could become less effective as a result of significant increases in the price of crude oil and less significant increases in the price of ethane and propane. If these proxy hedges remain less effective, our
settlement of the contracts could result in significant costs to us.

The accounting standards regarding hedge accounting are complex, and
even when we engage in hedging transactions that are effective economically, these transactions may not be considered effective for accounting purposes. Accordingly, our financial statements may reflect volatility due to these derivatives, even when
there is no underlying economic impact at that point. In addition, it is not always possible for us to engage in a derivative transaction that completely mitigates our exposure to commodity prices and interest rates. Our financial statements may
reflect a gain or loss arising from an exposure to commodity prices and interest rates for which we are unable to enter into a completely effective hedge transaction.



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|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------



| | (1) | At the 2008 Annual Meeting of Stockholders, which was held on June 13, 2008, the stockholders elected Edward E. Cohen, Dennis A. Holtz and Harmon S. Spolan to serve until the
2011 Annual Meeting. The ballot tabulation for the election of directors was as follows:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                 |  |               |  |                          |  |            |  
|---------------- |  | ------------- |  | ------------------------ |  | ---------- | -
|Nominees         |  | Votes InFavor |  | Votes Againstor Withheld |  | Percentage |  
|Edward E. Cohen  |  | 23,499,551    |  | 710,726                  |  | 97.06      | %
|Dennis A. Holtz  |  | 22,966,575    |  | 1,243,702                |  | 94.86      | %
|Harmon S. Spolan |  | 23,916,504    |  | 293,773                  |  | 98.79      | %



| | (2) | The stockholders also voted upon a proposal to adopt an Amended and Restated Annual Incentive Plan for Senior Executives. The annual incentive plan (the 2007 Plan),
which was approved by the board and the stockholders at the 2007 annual meeting, was amended to increase the maximum award payable to an individual to $15 million from $5 million and to allow awards to be paid in either cash or shares of common
stock under the Companys Stock Incentive Plan. Additionally, the 2007 Plan was clarified to allow the compensation committee to make such adjustments to performance goals in the event of a change of control as it deems appropriate. The ballot
tabulation for the approval of the Amended and Restated Annual Incentive Plan for Senior Executives was as follows:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|               |  |               |  |                     |  |           
|-------------- |  | ------------- |  | ------------------- |  | ----------
|Votes in Favor |  | Votes Against |  | Votes in Abstention |  | Percentage
|17,340,767     |  | 608,039       |  | 58,097              |  | 64.38%    



|ITEM 6. | EXHIBITS
|------- | --------



|            |  |                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                         
|            | 
|3.1         |  | Amended and Restated Certificate of Incorporation(1)                                                                                                                                                                                                                                                                                                
|            | 
|3.2         |  | Amended and Restated Bylaws(1)                                                                                                                                                                                                                                                                                                                      
|            | 
|4.1         |  | Form of Stock Certificate(2)                                                                                                                                                                                                                                                                                                                        
|            | 
|10.1(a)     |  | Master Natural Gas Gathering Agreement, dated February 2, 2000, among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, L.P., Atlas America, Inc., Resource Energy, Inc. and
Viking Resources Corporation(2)                                                                                                                     
|            | 
|10.1(b)     |  | Natural Gas Gathering Agreement, dated January 1, 2002, among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, L.P., Atlas Resources, Inc., Atlas Energy Group, Inc., Atlas
Noble Corp., Resource Energy, Inc. and Viking Resources Corporation(2)                                                                              
|            | 
|10.1(c)     |  | Amendment to Master Natural Gas Gathering Agreement, dated February October 25, 2005, among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, L.P., Atlas America, Inc.,
Resource Energy, Inc., Viking Resources Corporation, Atlas Noble Corp., and Atlas Resources, Inc.(3)                                                    
|            | 
|10.1(d)     |  | Amendment and Joinder to Gas Gathering Agreements, dated as of December 18, 2006, among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, L.P., Atlas America, Inc., Resource
Energy, LLC, Viking Resources, LLC, Atlas Noble LLC, Atlas Resources, LLC, Atlas Energy Resources, LLC, and Atlas Energy Operating Company, LLC.(4)



78



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|        |  |                                                                                                                                                                                                                                    
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 
|10.2(a) |  | Omnibus Agreement, dated February 2, 2000, among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, L.P., Atlas America, Inc., Resource Energy, Inc. and Viking Resources
Corporation(2)                         
|        | 
|10.2(b) |  | Amendment and Joinder to Omnibus Agreement, dated as of December 18, 2006 among Atlas Pipeline, Atlas America, Resource Energy, LLC, Viking Resources, LLC, Atlas Energy Resources, LLC, and Atlas
Energy Operating Company, LLC(4)
|        | 
|10.3    |  | Tax Matters Agreement between Atlas America, Inc. and Resource America, Inc. date May 14, 2004(5)                                                                                                                                  
|        | 
|10.4    |  | Transition Services Agreement between Atlas America, Inc. and Resource America, Inc. date May 14, 2004(5)                                                                                                                          
|        | 
|10.5    |  | Employment Agreement for Edward E. Cohen dated May 14, 2004(5)                                                                                                                                                                     
|        | 
|10.6    |  | Agreement for Services among Atlas America, Inc. and Richard Weber, dated April 5, 2006(6)                                                                                                                                         
|        | 
|10.7    |  | Contribution, Conveyance and Assumption Agreement, dated as of December 18, 2006, among Atlas America, Inc., Atlas Energy Resources, LLC and Atlas Energy Operating Company, LLC(4)                                                
|        | 
|10.8    |  | Omnibus Agreement, dated as of December 18, 2006, between Atlas America, Inc. and Atlas Energy Resources, LLC(4)                                                                                                                   
|        | 
|10.9    |  | Management Agreement, dated as of December 18, 2006, among Atlas Energy Resources, LLC, Atlas Energy Operating Company, LLC and Atlas Energy Management, Inc.(4)                                                                   
|        | 
|31.1    |  | Rule 13a-14(a)/15d-14(a) Certification                                                                                                                                                                                             
|        | 
|31.2    |  | Rule 13a-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 filed June 14, 2005
|--- | ------------------------------------------------------------------



|(2) | Previously filed as an exhibit to our registration statement on Form S-1 (registration no. 333-112652)
|--- | ------------------------------------------------------------------------------------------------------



|(3) | Previously filed as an exhibit to our Form 8-K dated October 31, 2005
|--- | ---------------------------------------------------------------------



|(4) | Previously filed as an exhibit to our Form 10-K for the year ended December 31, 2006
|--- | ------------------------------------------------------------------------------------



|(5) | Previously filed as an exhibit to our Form 10-Q for the quarter ended June 30, 2004
|--- | -----------------------------------------------------------------------------------



|(6) | Previously filed as an exhibit to our Form 10-Q for the quarter ended June 30, 2006
|--- | -----------------------------------------------------------------------------------



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SIGNATURES

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



|                     |  |  |  |                     |  |                      |  |                                                   
|-------------------- |  |  |  | ------------------- |  | -------------------- |  | --------------------------------------------------
|                     |  |  |  | ATLAS AMERICA, INC.
|                     |  |  | 
|Date: August 8, 2008 |  |  |  | By:                 |  | /s/ EDWARD E. COHEN 
|                     |  |  |  |                     |  |                      |  | Edward E. Cohen                                   
|                     |  |  |  |                     |  |                      |  | Chairman of the Board and Chief Executive Officer 
|                     |  |  | 
|Date: August 8, 2008 |  |  |  | By:                 |  | /s/ MATTHEW A. JONES
|                     |  |  |  |                     |  |                      |  | Matthew A. Jones                                  
|                     |  |  |  |                     |  |                      |  | Chief Financial Officer                           
|                     |  |  | 
|Date: August 8, 2008 |  |  |  | By:                 |  | /s/ NANCY J. MCGURK 
|                     |  |  |  |                     |  |                      |  | Nancy J. McGurk                                   
|                     |  |  |  |                     |  |                      |  | Senior Vice President and Chief Accounting Officer



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