##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ________ to ________
 Commission file number: 001-32169
 ATLAS AMERICA, INC.
  DELAWARE
(State or other jurisdiction of 
incorporation or organization)
    
    51-0404430
(I.R.S. Employer Identification No.)1550 Coraopolis Heights Road 
Moon Township, Pennsylvania
(Address of principal executive office)
    
    15108
(Zip code)
 (412) 262-2830
 þ o
  Large accelerated filer þ
    
    Accelerated filer oNon-accelerated filer o (Do not check if smaller reporting company)
    
    Smaller reporting company o
  o þ




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##### 



ATLAS AMERICA, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
 PAGEPART I. FINANCIAL INFORMATION
    
    
    3Item 1.
    
    Financial Statements
    
    
    3Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007 (Unaudited)
    
    
    3Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2008 and 2007 (Unaudited)
    
    
    4Consolidated Statement of Stockholders Equity for the Nine Months Ended September 30, 2008 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    51Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    
    72Item 4.
    
    Controls and Procedures
    
    
    80PART II. OTHER INFORMATION
    
    
    81Item 1.
    
    Legal Proceedings
    
    
    81Item 1A.
    
    Risk Factors
    
    
    81Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    82Item 6.
    
    Exhibits
    
    
    83SIGNATURES
    
    
    84EX-31.1EX-31.2EX-32.1EX-32.2
  2




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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)
 September 30,
    
    
    December 31,ASSETS
    
    2008
    
    
    2007Current assets:Cash and cash equivalents
    
    $
    125,306
    
    
    $
    145,535Accounts receivable
    
    
    203,376
    
    
    
    204,900Derivative receivable from Partnerships
    
    
    851
    
    
    
    213Current portion of derivative asset
    
    
    32,303
    
    
    
    37,968Prepaid expenses and other
    
    
    35,180
    
    
    
    22,939Prepaid and deferred income taxes
    
    
    39,840
    
    
    
    20,642Total current assets
    
    
    436,856
    
    
    
    432,197Property, plant and equipment, net
    
    
    3,817,012
    
    
    
    3,442,036Intangible assets, net
    
    
    204,180
    
    
    
    224,264Goodwill, net
    
    
    712,026
    
    
    
    744,449Derivative receivable  long term from Partnerships
    
    
    14,038
    
    
    
    13,542Derivative receivable  long term
    
    
    11,401
    
    
    
    6,882Other assets, net
    
    
    55,917
    
    
    
    40,997$
    5,251,430
    
    
    $
    4,904,367LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    13
    
    
    $
    64Accounts payable
    
    
    143,146
    
    
    
    75,524Liabilities associated with drilling contracts
    
    
    32,626
    
    
    
    132,517Accrued producer liabilities
    
    
    75,941
    
    
    
    80,697Derivative liability
    
    
    93,256
    
    
    
    111,223Accrued liabilities
    
    
    122,111
    
    
    
    99,468Advances from affiliate
    
    
    105
    
    
    
    58Total current liabilities
    
    
    467,198
    
    
    
    499,551Long-term debt
    
    
    2,326,328
    
    
    
    1,994,392Deferred tax liability
    
    
    245,070
    
    
    
    197,106Long-term derivative liability
    
    
    177,288
    
    
    
    157,850Other long-term liabilities
    
    
    54,342
    
    
    
    46,524Minority interests
    
    
    1,565,894
    
    
    
    1,595,781Commitments and contingenciesStockholders equity:Preferred stock, $0.01 par value: 1,000,000 authorized shares
    
    
    
    
    
    
    Common stock, $0.01 par value: 49,000,000 authorized shares
    
    
    425
    
    
    
    290Additional paid-in capital
    
    
    411,511
    
    
    
    390,591Treasury stock, at cost
    
    
    (142,455
    )
    
    
    (108,886
    )ESOP loan receivable
    
    
    (361
    )
    
    
    (417
    )Accumulated other comprehensive loss
    
    
    (9,383
    )
    
    
    (5,935
    )Retained earnings
    
    
    155,573
    
    
    
    137,520Total stockholders equity
    
    
    415,310
    
    
    
    413,163$
    5,251,430
    
    
    $
    4,904,367
  3




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##### Table of Contents



ATLAS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:Well construction and completion
    
    $
    116,987
    
    
    $
    103,324
    
    
    $
    343,466
    
    
    $
    240,841Gas and oil production
    
    
    81,235
    
    
    
    63,265
    
    
    
    236,417
    
    
    
    109,840Transmission, gathering and processing
    
    
    424,413
    
    
    
    246,195
    
    
    
    1,264,190
    
    
    
    480,594Administration and oversight
    
    
    5,216
    
    
    
    5,364
    
    
    
    15,370
    
    
    
    13,347Well services
    
    
    5,299
    
    
    
    4,845
    
    
    
    15,363
    
    
    
    12,721Gain (loss) on mark-to-market derivatives
    
    
    147,505
    
    
    
    (11,467
    )
    
    
    (257,344
    )
    
    
    (16,036
    )Total revenue
    
    
    780,655
    
    
    
    411,526
    
    
    
    1,617,462
    
    
    
    841,307Costs and expenses:Well construction and completion
    
    
    101,727
    
    
    
    89,847
    
    
    
    298,666
    
    
    
    209,427Gas and oil production
    
    
    12,688
    
    
    
    9,887
    
    
    
    35,735
    
    
    
    14,412Transmission, gathering and processing
    
    
    338,475
    
    
    
    187,416
    
    
    
    1,003,252
    
    
    
    377,740Well services
    
    
    2,753
    
    
    
    2,515
    
    
    
    7,815
    
    
    
    6,705General and administrative
    
    
    13,278
    
    
    
    48,677
    
    
    
    59,633
    
    
    
    84,454Net expense reimbursement  affiliate
    
    
    255
    
    
    
    246
    
    
    
    689
    
    
    
    775Depreciation, depletion and amortization.
    
    
    46,134
    
    
    
    35,187
    
    
    
    142,910
    
    
    
    61,064Total costs and expenses
    
    
    515,310
    
    
    
    373,775
    
    
    
    1,548,700
    
    
    
    754,577Operating income
    
    
    265,345
    
    
    
    37,751
    
    
    
    68,762
    
    
    
    86,730Other income (expense):Interest expense
    
    
    (37,079
    )
    
    
    (37,480
    )
    
    
    (105,487
    )
    
    
    (53,681
    )Minority interests
    
    
    (194,054
    )
    
    
    6,402
    
    
    
    60,777
    
    
    
    14,992Other, net
    
    
    3,815
    
    
    
    3,526
    
    
    
    11,838
    
    
    
    6,425Total other income (expense)
    
    
    (227,318
    )
    
    
    (27,552
    )
    
    
    (32,872
    )
    
    
    (32,264
    )Income before income taxes
    
    
    38,027
    
    
    
    10,199
    
    
    
    35,890
    
    
    
    54,466Provision for income taxes
    
    
    (13,924
    )
    
    
    (3,096
    )
    
    
    (13,136
    )
    
    
    (17,249
    )Net income
    
    $
    24,103
    
    
    $
    7,103
    
    
    $
    22,754
    
    
    $
    37,217Net income per common share:Basic
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.57
    
    
    $
    0.91Diluted
    
    $
    0.58
    
    
    $
    0.17
    
    
    $
    0.54
    
    
    $
    0.88Weighted average common shares outstanding:Basic
    
    
    40,093
    
    
    
    40,280
    
    
    
    40,251
    
    
    
    41,018Diluted
    
    
    41,731
    
    
    
    41,969
    
    
    
    42,048
    
    
    
    42,522
  4




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ATLAS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
(in thousands, except share data)
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    ESOP
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Treasury Stock
    
    
    Loan
    
    
    Comprehensive
    
    
    Retained
    
    
    Stockholders'Shares
    
    
    $
    
    
    Capital
    
    
    Shares
    
    
    $
    
    
    Receivable
    
    
    Loss
    
    
    Earnings
    
    
    EquityBalance at January 1, 2008
    
    
    29,003,212
    
    
    $
    290
    
    
    $
    390,591
    
    
    
    (2,126,055
    )
    
    $
    (108,886
    )
    
    $
    (417
    )
    
    $
    (5,935
    )
    
    $
    137,520
    
    
    $
    413,163Issuance of common units
    
    
    28,403
    
    
    
    -
    
    
    
    367
    
    
    
    28,777
    
    
    
    1,292
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,659Other comprehensive loss
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (3,448
    )
    
    
    -
    
    
    
    (3,448
    )Repayment of ESOP loan
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    56
    
    
    
    -
    
    
    
    -
    
    
    
    56Treasury stock purchase
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,002,877
    )
    
    
    (34,861
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (34,861
    )Stock option compensation
expense
    
    
    -
    
    
    
    -
    
    
    
    3,019
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    3,019Three-for-two stock split
    
    
    13,470,021
    
    
    
    135
    
    
    
    (135
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Dividends paid
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,701
    )
    
    
    (4,701
    )Gain on sale of subsidiary units
    
    
    -
    
    
    
    -
    
    
    
    17,669
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    17,669Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    22,754
    
    
    
    22,754Balance at September 30, 2008
    
    
    42,501,636
    
    
    $
    425
    
    
    $
    411,511
    
    
    
    (3,100,155
    )
    
    $
    (142,455
    )
    
    $
    (361
    )
    
    $
    (9,383
    )
    
    $
    155,573
    
    
    $
    415,310
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ATLAS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Nine Months EndedSeptember 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    22,754
    
    
    $
    37,217Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Depreciation, depletion and amortization
    
    
    142,910
    
    
    
    61,064Amortization of deferred finance costs
    
    
    5,925
    
    
    
    7,626Non-cash (gain) loss on derivative value, net
    
    
    (45,872
    )
    
    
    19,501Non-cash compensation (income) expense
    
    
    (4,132
    )
    
    
    43,506Minority interests
    
    
    (60,777
    )
    
    
    (14,992
    )Distributions paid to minority interests
    
    
    (177,934
    )
    
    
    (32,853
    )Deferred income taxes (benefit)
    
    
    15,621
    
    
    
    (4,145
    )Change in operating assets and liabilities, net of effects of acquisitions:Accounts receivable and prepaid expenses and other
    
    
    (6,886
    )
    
    
    (70,505
    )Accounts payable and accrued liabilities
    
    
    (36,021
    )
    
    
    30,974Accounts payable and accounts receivable  affiliates
    
    
    47
    
    
    
    -Other operating assets/liabilities
    
    
    685
    
    
    
    760Net cash provided by (used in) operating activities
    
    
    (143,680
    )
    
    
    78,153CASH FLOWS FROM INVESTING ACTIVITIES:Net cash paid for acquisitions
    
    
    -
    
    
    
    (3,141,680
    )Acquisition purchase price adjustment
    
    
    31,429
    
    
    
    -Capital expenditures
    
    
    (469,385
    )
    
    
    (201,856
    )Investment in Lightfoot Capital Partners, L.P.
    
    
    (437
    )
    
    
    (10,379
    )Proceeds from sale of assets
    
    
    63
    
    
    
    1,071Other
    
    
    851
    
    
    
    (813
    )Net cash used in investing activities
    
    
    (437,479
    )
    
    
    (3,353,657
    )CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of Atlas Energy long-term debt
    
    
    407,125
    
    
    
    -Issuance of Atlas Pipeline long-term debt
    
    
    244,854
    
    
    
    -Borrowings under Atlas Pipeline Partners, L.P., Atlas Pipeline Holdings,
and Atlas Energy credit facilities
    
    
    908,000
    
    
    
    1,931,509Repayments under Atlas Pipeline Partners, L.P., Atlas Pipeline Holdings,
and Atlas Energy credit facilities
    
    
    (1,110,025
    )
    
    
    (345,922
    )Repayments under Atlas Pipeline Partners, L.P. term loan
    
    
    (122,847
    )
    
    
    -Net proceeds from Atlas Pipeline Partners L.P. equity offerings
    
    
    206,901
    
    
    
    946,555Net proceeds from Atlas Energy equity offering
    
    
    82,514
    
    
    
    597,500Net proceeds from Atlas Pipeline Holdings equity offering
    
    
    -
    
    
    
    167,033Dividends paid
    
    
    (4,701
    )
    
    
    (2,238
    )Purchase of treasury stock
    
    
    (34,861
    )
    
    
    (80,449
    )Deferred
financing costs and other
    
    
    (16,030
    )
    
    
    (10,073
    )Net cash provided by financing activities
    
    
    560,930
    
    
    
    3,203,915Net change in cash and cash equivalents
    
    
    (20,229
    )
    
    
    (71,589
    )Cash and cash equivalents, beginning of period
    
    
    145,535
    
    
    
    185,401Cash and cash equivalents, end of period
    
    $
    125,306
    
    
    $
    113,812
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ATLAS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
(Unaudited)
 NOTE 1  BASIS OF PRESENTATION
  
    
    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, Indianas New Albany 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 September 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 September 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 September 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 September 30, 2008; and
 
    
    Lightfoot Capital Partners, LP (Lightfoot LP) and
Lightfoot Capital Partners GP LLC, (Lightfoot GP) 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 direct and indirect 18% ownership interest in Lightfoot GP and a commitment to invest a total of
$20.0 million in Lightfoot LP. The Company also has direct and
indirect ownership interest in Lightfoot LP. As of September 30, 2008, the Company has invested $10.7
million in Lightfoot LP.
  7




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NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Principles of Consolidation and Minority Interest
     Use of Estimates
  8




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##### Table of Contents



Revenue Recognition
 Atlas Energy.
  Atlas Pipeline.
 
    
    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.
 9




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
    
    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.
  Net Income Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007(1)
    
    
    2008
    
    
    2007(1)Weighted average number of shares  basic
    
    
    40,093
    
    
    
    40,280
    
    
    
    40,251
    
    
    
    41,018Add: effect of dilutive incentive awards
    
    
    1,638
    
    
    
    1,689
    
    
    
    1,797
    
    
    
    1,504Weighted average number of common shares 
diluted
    
    
    41,731
    
    
    
    41,969
    
    
    
    42,048
    
    
    
    42,522
 
 (1)
    
    The shares for the three and nine months ended September 30, 2007 have been
restated to reflect the three for two stock split on May 21, 2008. Comprehensive Income (Loss)
  10




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    24,103
    
    
    $
    7,103
    
    
    $
    22,754
    
    
    $
    37,217Other comprehensive income (loss):Changes in fair value of derivative
instruments accounted for as cash flow
hedges, net of tax provision (benefit)
of $53,888 and $4,948 for the three
months ended September 30, 2008 and
2007, respectively, and ($9,428) and
($2,377) for the nine months ended
September 30, 2008 and 2007,
respectively
    
    
    84,283
    
    
    
    8,424
    
    
    
    (14,332
    )
    
    
    (3,184
    )Less: reclassification adjustment for
realized losses (gains) in net income,
net of tax of $5,633 and ($687) for
the three months ended September 30,
2008 and 2007, respectively, and
$6,810 and ($786) for the nine months
ended September 30, 2008 and 2007,
respectively
    
    
    8,810
    
    
    
    (1,170
    )
    
    
    10,588
    
    
    
    (1,339
    )Plus: amortization of additional
post-retirement liability recorded
upon adoption of SFAS No. 158, net of
tax of $51 and $27 for the three
months ended September 30, 2008 and
2007, respectively, and $153 and
$80 for the nine months ended
September 30, 2008 and 2007,
respectively
    
    
    87
    
    
    
    41
    
    
    
    296
    
    
    
    125Total other comprehensive income (loss)
    
    
    93,180
    
    
    
    7,295
    
    
    
    (3,448
    )
    
    
    (4,398
    )Comprehensive income
    
    $
    117,283
    
    
    $
    14,398
    
    
    $
    19,306
    
    
    $
    32,819
 Capitalized Interest
  Intangible Assets
 Customer contracts and relationships.
 11




---



##### Table of Contents



Partnership management, operating contracts and non-compete agreement.
  EstimatedSeptember 30,
    
    
    December 31,
    
    
    Useful Lives2008
    
    
    2007
    
    
    In YearsGross Carrying Amount:Customer contracts and relationships
    
    $
    235,382
    
    
    $
    235,382
    
    
    7 - 20Partnership
management and operating contracts
    
    
    14,343
    
    
    
    14,343
    
    
    2 - 13Non-compete agreement
    
    
    890
    
    
    
    890
    
    
    2$
    250,615
    
    
    $
    250,615Accumulated Amortization:Customer contracts and relationships
    
    $
    (35,346
    )
    
    $
    (16,179
    )Partnership
management and operating contracts
    
    
    (10,533
    )
    
    
    (9,949
    )Non-compete agreement
    
    
    (556
    )
    
    
    (223
    )$
    (46,435
    )
    
    $
    (26,351
    )Net Carrying Amount:Customer contracts and relationships
    
    $
    200,036
    
    
    $
    219,203Partnership
management and operating contracts
    
    
    3,810
    
    
    
    4,394Non-compete agreement
    
    
    334
    
    
    
    667$
    204,180
    
    
    $
    224,264
  Goodwill
  12




---



##### Table of Contents



Nine Months EndedSeptember 30,2008
    
    
    2007Balance, beginning of period
    
    $
    744,449
    
    
    $
    98,607Post-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
  Impairment of Long-Lived Assets
    13




---



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New and Recently Adopted Accounting Standards
    14




---



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15




---



##### Table of Contents



NOTE 3  ACQUISITIONS
 APLs Chaney Dell and Midkiff/Benedum Acquisition
   16




---



##### Table of Contents



Accounts receivable
    
    $
    745Prepaid expenses and other
    
    
    4,587Property, plant and equipment
    
    
    1,030,464Intangible assets  customer relationships
    
    
    205,312Goodwill
    
    
    613,420Total assets acquired
    
    
    1,854,528Accounts payable and accrued liabilities
    
    
    (1,499
    )Net cash paid for acquisition
    
    $
    1,853,029
  ATNs DTE Gas and Oil Company Acquisition
  17




---



##### Table of Contents



Accounts receivable
    
    $
    33,764Prepaid expenses
    
    
    515Other assets
    
    
    890Natural gas and oil properties
    
    
    1,267,901Total assets acquired
    
    
    1,303,070Accounts 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
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    780,655
    
    
    $
    411,526
    
    
    $
    1,617,462
    
    
    $
    1,178,427Net income
    
    $
    24,103
    
    
    $
    7,103
    
    
    $
    22,754
    
    
    $
    16,429Net income per share:Basic
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.57
    
    
    $
    0.40Diluted
    
    $
    0.58
    
    
    $
    0.17
    
    
    $
    0.54
    
    
    $
    0.39
 18




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##### Table of Contents



NOTE 4  PROPERTY, PLANT AND EQUIPMENT
   EstimatedSeptember 30,
    
    
    December 31,
    
    
    Useful Lives2008
    
    
    2007
    
    
    in YearsNatural gas and oil properties:Proved properties:Leasehold interests
    
    $
    1,208,014
    
    
    $
    1,043,687Wells and related equipment
    
    
    816,130
    
    
    
    752,184Total proved properties
    
    
    2,024,144
    
    
    
    1,795,871Unproved properties
    
    
    17,625
    
    
    
    16,380Support equipment
    
    
    9,265
    
    
    
    6,936Total natural gas and oil properties
    
    
    2,051,034
    
    
    
    1,819,187Pipelines, processing and compression facilities
    
    
    1,884,819
    
    
    
    1,638,845
    
    
    15 -- 40Rights of way
    
    
    172,016
    
    
    
    168,359
    
    
    20 -- 40Land, buildings and improvements
    
    
    24,581
    
    
    
    21,742
    
    
    10 -- 40Other
    
    
    21,225
    
    
    
    17,730
    
    
    3 -- 104,153,675
    
    
    
    3,665,863Less  accumulated depreciation, depletion and
amortization
    
    
    (336,663
    )
    
    
    (223,827
    )$
    3,817,012
    
    
    $
    3,442,036
    19




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##### Table of Contents



NOTE 5  OTHER ASSETS
  September 30,
    
    
    December 31,2008
    
    
    2007Deferred finance costs, net of
accumulated amortization of $20,138
and $14,213 at September 30, 2008 and
December 31, 2007, respectively
    
    $
    41,681
    
    
    $
    26,118Investments
    
    
    11,635
    
    
    
    12,061Security deposits
    
    
    2,118
    
    
    
    2,630Other
    
    
    483
    
    
    
    188$
    55,917
    
    
    $
    40,997
   NOTE 6  ASSET RETIREMENT OBLIGATIONS
    20




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Asset retirement obligations, beginning of period
    
    $
    45,334
    
    
    $
    41,792
    
    
    $
    42,358
    
    
    $
    26,726Liabilities acquired (See Note 3)
    
    
    
    
    
    
    505
    
    
    
    
    
    
    
    13,920Liabilities incurred
    
    
    975
    
    
    
    997
    
    
    
    2,615
    
    
    
    2,024Liabilities settled
    
    
    (36
    )
    
    
    (9
    )
    
    
    (38
    )
    
    
    (30
    )Accretion expense
    
    
    687
    
    
    
    673
    
    
    
    2,025
    
    
    
    1,318Asset retirement obligations, end of period
    
    $
    46,960
    
    
    $
    43,958
    
    
    $
    46,960
    
    
    $
    43,958
  NOTE 7  DEBT
  September 30,
    
    
    December 31,2008
    
    
    2007ATN revolving credit facility
    
    $
    462,000
    
    
    $
    740,000ATN 10.75% senior notes  due 2018.
    
    
    406,838
    
    
    
    AHD revolving credit facility
    
    
    31,000
    
    
    
    25,000APL revolving credit facility
    
    
    175,000
    
    
    
    105,000APL term loan
    
    
    707,180
    
    
    
    830,000APL 8.125% senior notes  due 2015.
    
    
    294,310
    
    
    
    294,392APL 8.75% senior notes  due 2018
    
    
    250,000
    
    
    
    Other debt
    
    
    13
    
    
    
    642,326,341
    
    
    
    1,994,456Less current maturities
    
    
    (13
    )
    
    
    (64
    )Total long-term debt
    
    $
    2,326,328
    
    
    $
    1,994,392
 ATN Revolving Credit Facility
   21




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##### Table of Contents



ATN Senior Notes
  AHD Credit Facility
  22




---



##### Table of Contents



APL Term Loan and Credit Facility
    23




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##### Table of Contents



APL Senior Notes
    24




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##### Table of Contents



NOTE 8  DERIVATIVE INSTRUMENTS
    Atlas Energy
  25




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##### Table of Contents



Natural Gas Fixed Price Swaps
 ProductionPeriod Ending
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset/(Liability)(MMbtu)
    
    
    (per MMbtu)
    
    
    (in thousands)(1)2008
    
    
    9,890,000
    
    
    $
    8.87
    
    
    $
    13,6832009
    
    
    45,060,000
    
    
    $
    8.56
    
    
    
    16,0772010
    
    
    33,660,000
    
    
    $
    8.14
    
    
    
    (11,620
    )2011
    
    
    25,980,000
    
    
    $
    7.91
    
    
    
    (11,840
    )
 26




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##### Table of Contents



ProductionPeriod Ending
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Volumes
    
    Fixed Price
    
    
    Asset/(Liability)(MMbtu)
    
    (per MMbtu)
    
    
    (in thousands)(1)2012
    
    
    17,440,000
    
    
    $
    8.13
    
    
    
    (4,196
    )2013
    
    
    1,500,000
    
    
    $
    8.73
    
    
    
    443$
    2,547
 Natural Gas Costless Collars
 ProductionPeriod Ending
    
    
    
    
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Option Type
    
    Volumes
    
    Floor and Cap
    
    
    Asset/ (Liability)(MMbtu)
    
    (per MMbtu)
    
    
    (in thousands)(1)2008
    
    Puts purchased
    
    
    390,000
    
    
    $
    7.50
    
    
    $
    802008
    
    Calls sold
    
    
    390,000
    
    
    $
    9.40
    
    
    
    2009
    
    Puts purchased
    
    
    240,000
    
    
    $
    11.00
    
    
    
    7142009
    
    Calls sold
    
    
    240,000
    
    
    $
    15.35
    
    
    
    2010
    
    Puts purchased
    
    
    3,120,000
    
    
    $
    7.92
    
    
    
    2010
    
    Calls sold
    
    
    3,120,000
    
    
    $
    9.10
    
    
    
    (604
    )2011
    
    Puts purchased
    
    
    7,200,000
    
    
    $
    7.50
    
    
    
    2011
    
    Calls sold
    
    
    7,200,000
    
    
    $
    8.45
    
    
    
    (3,804
    )2012
    
    Puts purchased
    
    
    720,000
    
    
    $
    7.00
    
    
    
    2012
    
    Calls sold
    
    
    720,000
    
    
    $
    8.37
    
    
    
    (468
    )$
    (4,082
    )
 Crude Oil Fixed Price Swaps
 ProductionPeriod Ending
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Volumes
    
    Fixed Price
    
    
    Asset/ (Liability)(Bbl)

    
    (per Bbl)
    
    
    (in thousands)(2)2008
    
    
    22,400
    
    
    $
    103.67
    
    
    $
    472009
    
    
    58,900
    
    
    $
    99.92
    
    
    
    (148
    )2010
    
    
    48,900
    
    
    $
    97.31
    
    
    
    (344
    )2011
    
    
    40,400
    
    
    $
    96.43
    
    
    
    (327
    )2012
    
    
    33,500
    
    
    $
    96.00
    
    
    
    (280
    )2013
    
    
    9,000
    
    
    $
    95.95
    
    
    
    (75
    )$
    (1,127
    )
 Crude Oil Costless Collars
 ProductionPeriod Ending
    
    
    
    
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Option Type
    
    
    Volumes
    
    Floor and Cap
    
    
    Asset/ (Liability)(Bbl)
    
    (per Bbl)
    
    
    (in thousands)(2)2008
    
    Puts purchased
    
    
    10,500
    
    
    $
    85.00
    
    
    $
    22008
    
    Calls sold
    
    
    10,500
    
    
    $
    126.44
    
    
    
    2009
    
    Puts purchased
    
    
    36,500
    
    
    $
    85.00
    
    
    
    2009
    
    Calls sold
    
    
    36,500
    
    
    $
    118.63
    
    
    
    (86
    )2010
    
    Puts purchased
    
    
    31,000
    
    
    $
    85.00
    
    
    
    2010
    
    Calls sold
    
    
    31,000
    
    
    $
    112.92
    
    
    
    (190
    )
 27




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##### Table of Contents



ProductionPeriod Ending
    
    
    
    
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Option Type
    
    Volumes
    
    
    Floor and Cap
    
    
    Asset/ (Liability)(Bbl)
    
    (per Bbl)
    
    
    (in thousands)(2)2011
    
    Puts purchased
    
    
    27,000
    
    
    $
    85.00
    
    
    
    2011
    
    Calls sold
    
    
    27,000
    
    
    $
    110.81
    
    
    
    (196
    )2012
    
    Puts purchased
    
    
    21,500
    
    
    $
    85.00
    
    
    
    2012
    
    Calls sold
    
    
    21,500
    
    
    $
    110.06
    
    
    
    (165
    )2013
    
    Puts purchased
    
    
    6,000
    
    
    $
    85.00
    
    
    
    2013
    
    Calls sold
    
    
    6,000
    
    
    $
    110.09
    
    
    
    (47
    )$
    (682
    )Total ATN net derivative liability
    
    $
    (3,344
    )
 
 (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 Holdings and Atlas Pipeline Partners.
  Early Termination of Derivative ContractsThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net cash derivative
expense included
within gain (loss)
on mark-to-market
derivatives on the
Companys
consolidated
statements of
operations
    
    $
    (70,258
    )
    
    $
    
    
    
    $
    (186,068
    )
    
    $
    
 28




---



##### Table of Contents



Early Termination of Derivative ContractsThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net cash derivative
expense included
within
transmission,
gathering and
processing revenue
on the Companys
consolidated
statements of
operations
    
    
    (1,258
    )
    
    
    
    
    
    
    (1,573
    )
    
    
    Net non-cash
derivative income
(expense) included
within gain (loss)
on mark-to-market,
net on the
Companys
consolidated
statements of
operations
    
    
    6,488
    
    
    
    
    
    
    
    (39,857
    )
    
    
    Net non-cash
derivative expense
included within
transmission,
gathering and
processing revenue
on the Companys
consolidated
statements of
operations
    
    
    (19,514
    )
    
    
    
    
    
    
    (19,514
    )
    
    
    
    29




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Loss from cash settlement of
qualifying hedge
instruments(1)
    
    $
    (27,419
    )
    
    $
    (12,850
    )
    
    $
    (78,214
    )
    
    $
    (23,548
    )Gain/(loss) from change in
market value of non-qualifying
derivatives(2)
    
    
    (190,013
    )
    
    
    (15,595
    )
    
    
    17,919
    
    
    
    (35,731
    )Gain/(loss) from change in
market value of ineffective
portion of qualifying
derivatives(2)
    
    
    (44,997
    )
    
    
    7,164
    
    
    
    (41,271
    )
    
    
    (3,526
    )Loss from cash settlement of
non-qualifying
derivatives(2)
    
    
    (84,207
    )
    
    
    (3,037
    )
    
    
    (280,696
    )
    
    
    (3,037
    )Loss from cash settlement of
interest rate
derivatives(3)
    
    
    (708
    )
    
    
    
    
    
    
    (915
    )
    
    
    
 
 (1)
    
    Included within transmission, gathering and processing revenue on the Companys
consolidated statements of operations.(2)
    
    Included within gain (loss) on mark-to-market derivatives, net on the Companys consolidated
statements of operations.(3)
    
    Included within interest expense on the Companys consolidated statements of operations.  Interest Fixed-Rate Swap
 Notional
    
    
    
    
    Contract Period
    
    Fair ValueTerm
    
    Amount
    
    
    Type
    
    Ended December 31,
    
    Asset/(Liability)(1)(in thousands)May 2008-May 2010
    
    $
    25,000,000
    
    
    Pay 3.01% Receive LIBOR
    
    2008
    
    $
    462009
    
    
    (4
    )2010
    
    
    40Total AHD net derivative asset
    
    $
    82
 
 (1)
    
    Fair value based on independent, third-party statements, supported by
observable levels at which transactions are executed in the marketplace.  Interest Fixed-Rate Swap
 Notional
    
    
    
    
    Contract Period
    
    Fair ValueTerm
    
    Amount
    
    
    Type
    
    Ended December 31,
    
    Asset/(Liability)(1)(in thousands)January 2008-January 2010
    
    $
    200,000,000
    
    
    Pay 2.88% Receive LIBOR
    
    2008
    
    $
    4132009
    
    
    2382010
    
    
    65$
    716April 2008-April 2010
    
    $
    250,000,000
    
    
    Pay 3.14% Receive LIBOR
    
    2008
    
    $
    3652009
    
    
    (339
    )2010
    
    
    197$
    223
 30




---



##### Table of Contents



Natural Gas Liquids Sales  Fixed Price Swaps
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Liability(2)(gallons)
    
    
    (per gallon)
    
    
    (in thousands)2008
    
    
    7,434,000
    
    
    $
    0.697
    
    
    $
    (3,642
    )2009
    
    
    8,568,000
    
    
    $
    0.746
    
    
    
    (3,607
    )$
    (7,249
    )
 Crude Oil Sales Options (associated with NGL volume)
 Production Period
    
    
    
    
    
    Associated
    
    
    AverageEnded
    
    Crude
    
    
    NGL
    
    
    Crude
    
    
    Fair ValueDecember 31,
    
    Volume
    
    
    Volume
    
    
    Strike Price
    
    
    Asset/(Liability)(3)
    
    
    Option Type(barrels)
    
    
    (gallons)
    
    
    (per barrel)
    
    
    (in thousands)2008
    
    
    536,400
    
    
    
    29,972,124
    
    
    $
    70.16
    
    
    $
    110
    
    
    Puts purchased2008
    
    
    126,000
    
    
    
    11,219,040
    
    
    $
    127.55
    
    
    
    (3,531
    )
    
    Puts sold(4)2008
    
    
    126,000
    
    
    
    11,219,040
    
    
    $
    140.00
    
    
    
    65
    
    
    Calls purchased(4)2008
    
    
    473,400
    
    
    
    25,764,984
    
    
    $
    80.13
    
    
    
    (10,104
    )
    
    Calls sold2009
    
    
    1,584,000
    
    
    
    85,038,534
    
    
    $
    80.00
    
    
    
    2,372
    
    
    Puts purchased2009
    
    
    304,200
    
    
    
    27,085,968
    
    
    $
    126.05
    
    
    
    (9,082
    )
    
    Puts sold(4)2009
    
    
    304,200
    
    
    
    27,085,968
    
    
    $
    143.00
    
    
    
    1,026
    
    
    Calls purchased(4)2009
    
    
    2,121,600
    
    
    
    114,072,336
    
    
    $
    81.01
    
    
    
    (51,161
    )
    
    Calls sold2010
    
    
    3,127,500
    
    
    
    202,370,490
    
    
    $
    81.09
    
    
    
    (90,981
    )
    
    Calls sold2010
    
    
    714,000
    
    
    
    45,415,440
    
    
    $
    120.00
    
    
    
    8,966
    
    
    Calls purchased(4)2011
    
    
    606,000
    
    
    
    32,578,560
    
    
    $
    95.56
    
    
    
    (13,597
    )
    
    Calls sold2011
    
    
    252,000
    
    
    
    13,547,520
    
    
    $
    120.00
    
    
    
    3,462
    
    
    Calls purchased(4)2012
    
    
    450,000
    
    
    
    24,192,000
    
    
    $
    97.10
    
    
    
    (9,981
    )
    
    Calls sold2012
    
    
    180,000
    
    
    
    9,676,800
    
    
    $
    120.00
    
    
    
    2,629
    
    
    Calls purchased(4)$
    (169,807
    )
 Natural Gas Sales  Fixed Price Swaps
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset/(Liability)(3)(mmbtu)(5)
    
    
    (per mmbtu)(5)
    
    
    (in thousands)2008
    
    
    1,371,000
    
    
    $
    8.823
    
    
    $
    1,7222009
    
    
    5,724,000
    
    
    $
    8.611
    
    
    
    2,6672010
    
    
    4,560,000
    
    
    $
    8.526
    
    
    
    (269
    )2011
    
    
    2,160,000
    
    
    $
    8.270
    
    
    
    (583
    )2012
    
    
    1,560,000
    
    
    $
    8.250
    
    
    
    (251
    )$
    3,286
 Natural Gas Basis Sales
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset(3)(mmbtu)(5)
    
    
    (per mmbtu)(5)
    
    
    (in thousands)2008
    
    
    1,371,000
    
    
    $
    (0.744
    )
    
    $
    2,0422009
    
    
    5,724,000
    
    
    $
    (0.558
    )
    
    
    1,5992010
    
    
    4,560,000
    
    
    $
    (0.622
    )
    
    
    7322011
    
    
    2,160,000
    
    
    $
    (0.664
    )
    
    
    2172012
    
    
    1,560,000
    
    
    $
    (0.601
    )
    
    
    97$
    4,687
 31




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##### Table of Contents



Natural Gas Purchases  Fixed Price Swaps
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset/(Liability)(3)(mmbtu)(5)
    
    
    (per mmbtu)(5)
    
    
    (in thousands)2008
    
    
    4,065,000
    
    
    $
    8.274
    (6)
    
    $
    (5,622
    )2009
    
    
    15,564,000
    
    
    $
    8.680
    
    
    
    (8,329
    )2010
    
    
    8,940,000
    
    
    $
    8.580
    
    
    
    1962011
    
    
    2,160,000
    
    
    $
    8.270
    
    
    
    5832012
    
    
    1,560,000
    
    
    $
    8.250
    
    
    
    251$
    (12,921
    )
 Natural Gas Basis Purchases
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Liability(3)(mmbtu)(5)
    
    
    (per mmbtu)(5)
    
    
    (in thousands)2008
    
    
    4,065,000
    
    
    $
    (1.114
    )
    
    $
    (6,761
    )2009
    
    
    15,564,000
    
    
    $
    (0.654
    )
    
    
    (5,362
    )2010
    
    
    8,940,000
    
    
    $
    (0.600
    )
    
    
    (2,118
    )2011
    
    
    2,160,000
    
    
    $
    (0.700
    )
    
    
    (50
    )2012
    
    
    1,560,000
    
    
    $
    (0.610
    )
    
    
    (49
    )$
    (14,340
    )
 Ethane Put Options
 Production Period
    
    Associated
    
    
    AverageEnded
    
    NGL
    
    
    Crude
    
    
    Fair ValueDecember 31,
    
    Volume
    
    
    Strike Price
    
    
    Asset(2)
    
    
    Option Type(gallons)
    
    
    (per gallon)
    
    
    (in thousands)2008
    
    
    7,560,000
    
    
    $
    0.7885
    
    
    $
    399
    
    
    Puts purchased2009
    
    
    16,254,000
    
    
    $
    0.6928
    
    
    
    196
    
    
    Puts purchased$
    595
 Propane Put Options
 Production Period
    
    Associated
    
    
    AverageEnded
    
    NGL
    
    
    Crude
    
    
    Fair ValueDecember 31,
    
    Volume
    
    
    Strike Price
    
    
    Asset(2)
    
    
    Option Type(gallons)
    
    
    (per gallon)
    
    
    (in thousands)2008
    
    
    8,946,000
    
    
    $
    1.4752
    
    
    $
    174
    
    
    Puts purchased2009
    
    
    23,310,000
    
    
    $
    1.3935
    
    
    
    368
    
    
    Puts purchased$
    542
 Crude Oil Sales
 Production Period
    
    
    
    
    
    Average
    
    Fair ValueEnded December 31,
    
    Volumes
    
    Fixed Price
    
    Liability(3)(barrels)
    
    (per barrel)
    
    (in thousands)2008
    
    
    14,100
    
    
    $
    60.569
    
    
    $
    (563
    )2009
    
    
    33,000
    
    
    $
    62.700
    
    
    
    (1,305
    )$
    (1,868
    )
 32




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##### Table of Contents



Crude Oil Sales Options
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Strike Price
    
    
    Asset/(Liability)(3)
    
    
    Option Type(barrels)
    
    
    (per barrel)
    
    
    (in thousands)2008
    
    
    69,000
    
    
    $
    68.000
    
    
    $
    10
    
    
    Puts purchased2008
    
    
    69,000
    
    
    $
    78.055
    
    
    
    (1,589
    )
    
    Calls sold2009
    
    
    168,000
    
    
    $
    90.000
    
    
    
    253
    
    
    Puts purchased2009
    
    
    306,000
    
    
    $
    80.017
    
    
    
    (13,525
    )
    
    Calls sold2010
    
    
    234,000
    
    
    $
    83.027
    
    
    
    (9,382
    )
    
    Calls sold2011
    
    
    72,000
    
    
    $
    87.296
    
    
    
    (1,938
    )
    
    Calls sold2012
    
    
    48,000
    
    
    $
    83.944
    
    
    
    (1,380
    )
    
    Calls sold$
    (27,551
    )Total APL net derivative liability
    
    $
    (223,687
    )Total Company net derivative liability
    
    $
    (226,949
    )
 
 (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 costless collars
entered into by APL as offsetting positions for the calls sold related to ethane and
propane production. In addition, calls were purchased by APL for 2010 through 2012 to
offset positions for calls sold. These offsetting positions were entered into to limit
the loss which could be incurred if crude oil prices continued to rise.(5)
    
    Mmbtu represents million British Thermal Units.(6)
    
    Includes APLs premium received from its sale of an option for it to sell
234,000 mmbtu of natural gas for the year ended December 31, 2008 at $18.00 per mmbtu. NOTE 9  FAIR VALUE OF FINANCIAL INSTRUMENTS
  Level 1
 Level 2 
 Level 3 
  33




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##### Table of Contents



Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalSERP liability
    
    $
    
    
    
    $
    (3,132
    )
    
    $
    
    
    
    $
    (3,132
    )Interest rate swap-based derivatives
    
    
    
    
    
    
    1,982
    
    
    
    
    
    
    
    1,982APL commodity-based derivatives
    
    
    
    
    
    
    (21,154
    )
    
    
    (203,472
    )
    
    
    (224,626
    )ATN commodity-based derivatives
    
    
    
    
    
    
    (3,344
    )
    
    
    
    
    
    
    (3,344
    )Total
    
    $
    
    
    
    $
    (25,648
    )
    
    $
    (203,472
    )
    
    $
    (229,120
    )
  Crude OilSales OptionsNGL Fixed
    
    
    (assoc. with
    
    
    Crude OilPrice Swaps
    
    

NGL Volume)
    
    

Sales Options
    
    
    TotalBalance  December 31, 2007
    
    $
    (33,624
    )
    
    $
    (24,740
    )
    
    $
    (145,418
    )
    
    $
    (203,782
    )New options contracts
    
    
    
    
    
    
    262
    
    
    
    7,134
    
    
    
    7,396Cash settlements from unrealized gain (loss)
    
    
    (168
    )
    
    
    1,871
    
    
    
    254,511
    
    
    
    256,214Cash settlements from other comprehensive income
(1)
    
    
    27,057
    
    
    
    10,664
    
    
    
    83,645
    
    
    
    121,366Net change in unrealized gain (loss)(2)
    
    
    8,173
    
    
    
    19,831
    
    
    
    (219,637
    )
    
    
    (191,633
    )Deferred option premium recognition
    
    
    
    
    
    
    228
    
    
    
    403
    
    
    
    631Net change in other comprehensive loss
    
    
    (8,687
    )
    
    
    (35,667
    )
    
    
    (149,310
    )
    
    
    (193,664
    )Balance  September 30, 2008
    
    $
    (7,249
    )
    
    $
    (27,551
    )
    
    $
    (168,672
    )
    
    $
    (203,472
    )
 
 (1)
    
    Included within transmission, gathering and processing revenue revenue on the Companys
consolidated statements of operations.(2)
    
    Included within gain (loss) on mark-to-market derivatives on the Companys consolidated
statements of operations. NOTE 10  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
  Relationship with ATN Sponsored Investment Partnerships.
 34




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##### Table of Contents



Relationship with Resource America, Inc.
  NOTE 11  COMMITMENTS AND CONTINGENCIES
 General Commitments
     Legal Proceedings
 CNX Gas Company, LLC (CNX) v. Miller Petroleum, Inc. (Miller)
  NOTE 12  INCOME TAXES
  35




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##### Table of Contents



NOTE 13  COMMON STOCK
 Stock Repurchase Plan
  Stock Splits
   36




---



##### Table of Contents



Dutch Auction Tender Offer
  NOTE 14  ISSUANCE OF SUBSIDIARY UNITS
       37




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##### Table of Contents



NOTE 15  CASH DISTRIBUTIONS
 Atlas Pipeline Partners Cash Distributions.
 APL Cash
    
    Total APL CashDistribution
    
    DistributionDate Cash
    
    
    
    per Common
    
    to Common
    
    Total APL CashDistribution
    
    For Quarter
    
    Limited
    
    Limited
    
    DistributionPaid or Payable
    
    Ended
    
    Partner Unit
    
    Partners
    
    to AHD(in thousands)
    
    (in thousands)February 14, 2007
    
    December 31, 2006
    
    $
    0.86
    
    
    $
    11,249
    
    
    $
    4,193May 15, 2007
    
    March 31, 2007
    
    $
    0.86
    
    
    $
    11,249
    
    
    $
    4,193August 14, 2007
    
    June 30, 2007
    
    $
    0.87
    
    
    $
    11,380
    
    
    $
    4,326November 14, 2007
    
    September 30, 2007
    
    $
    0.91
    
    
    $
    35,205
    
    
    $
    4,498February 14, 2008
    
    December 31, 2007
    
    $
    0.93
    
    
    $
    36,051
    
    
    $
    5,092May 15, 2008
    
    March 31, 2008
    
    $
    0.94
    
    
    $
    36,450
    
    
    $
    7,891August 14, 2008
    
    June 30, 2008
    
    $
    0.96
    
    
    $
    44,096
    
    
    $
    9,308November 14, 2008(1)
    
    September 30, 2008
    
    $
    0.96
    
    
    $
    44,105
    
    
    $
    9,312
 
 (1)
    
    Declared subsequent to September 30, 2008 (see Note 19)  Atlas Pipeline Holdings Cash Distributions.
 38




---



##### Table of Contents



Date Cash
    
    
    
    Cash Distribution per
    
    Total CashDistribution Paid
    
    For Quarter
    
    Common Limited
    
    Distribution to theor Payable
    
    Ended
    
    Partner Unit
    
    Company (in thousands)February 19, 2007
    
    December 31, 2006
    
    $
    0.25
    
    
    $
    4,375May 18, 2007
    
    March 31, 2007
    
    $
    0.25
    
    
    $
    4,375August 17, 2007
    
    June 30, 2007
    
    $
    0.26
    
    
    $
    4,550November 19, 2007
    
    September 30, 2007
    
    $
    0.32
    
    
    $
    5,600February 19, 2008
    
    December 31, 2007
    
    $
    0.34
    
    
    $
    5,950May 20, 2008
    
    March 31, 2008
    
    $
    0.43
    
    
    $
    7,525August 19, 2008
    
    June 30, 2008
    
    $
    0.51
    
    
    $
    9,082November 19, 2008(1)
    
    September 30, 2008
    
    $
    0.51
    
    
    $
    9,082
 
 (1)
    
    Declared subsequent to September 30, 2008 (see Note 19) Atlas Energy Resources Cash Distributions.
 CashDistribution
    
    Total Cash
    
    ManagerDate Cash
    
    
    
    Per
    
    Distribution
    
    IncentiveDistribution
    
    For Quarter
    
    Common
    
    to the
    
    DistributionPaid or Payable
    
    Ended
    
    Unit
    
    Company
    
    Earned(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
    
    
    $
    784February 14 , 2008
    
    December 31, 2007
    
    $
    0.57
    
    
    $
    17,437
    
    
    $
    965May 15 , 2008
    
    March 31, 2008
    
    $
    0.59
    
    
    $
    18,410
    
    
    $
    1,214August 14 , 2008
    
    June 30, 2008
    
    $
    0.61
    
    
    $
    19,060
    
    
    $
    1,687November 14 , 2008(2)
    
    September 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 September 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
  39




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##### Table of Contents



NOTE 17  BENEFIT PLANS
 Incentive Bonus Plan
  Stock Incentive Plan
  Stock Options
  Three Months EndedSeptember 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Averageof Unit
    
    
    Exercise
    
    
    of Unit
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding, beginning of period
    
    
    3,540,380
    
    
    $
    16.89
    
    
    
    2,787,151
    
    
    $
    12.08Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Matured
    
    
    (28,155
    )
    
    $
    11.32
    
    
    
    (71,770
    )
    
    $
    11.32Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 40




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##### Table of Contents



Three Months EndedSeptember 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Averageof Unit
    
    
    Exercise
    
    
    of Unit
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding, end of period(1)(2)
    
    
    3,512,225
    
    
    $
    16.94
    
    
    
    2,715,381
    
    
    $
    12.10Options exercisable, end of period
    
    
    2,350,298
    
    
    $
    11.61
    
    
    
    2,108,088
    
    
    $
    11.49Non-cash compensation expense
recognized (in thousands)
    
    $
    983
    
    
    
    
    
    
    $
    378
 Nine Months EndedSeptember 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Averageof Unit
    
    
    Exercise
    
    
    of Unit
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding, beginning of period
    
    
    2,715,380
    
    
    $
    12.10
    
    
    
    2,766,432
    
    
    $
    11.82Granted
    
    
    825,000
    
    
    $
    32.68
    
    
    
    30,000
    
    
    $
    35.82Matured
    
    
    (28,155
    )
    
    $
    11.32
    
    
    
    (81,051
    )
    
    $
    11.32Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of period(1)(2)
    
    
    3,512,225
    
    
    $
    16.94
    
    
    
    2,715,381
    
    
    $
    12.10Options exercisable, end of
period(3)(4)
    
    
    2,350,298
    
    
    $
    11.61
    
    
    
    2,108,088
    
    
    $
    11.49Non-cash compensation expense
recognized (in thousands)
    
    $
    2,941
    
    
    
    
    
    
    $
    1,077
 
 (1)
    
    The weighted average remaining contractual lives for outstanding options at September 30, 2008 and 2007 were 7.6 years and 7.8
years, respectively.(2)
    
    The aggregate intrinsic values of options outstanding at September 30, 2008 and 2007 were approximately $60.3 million and $60.6
million, respectively.(3)
    
    The number of options available for grant at September 30, 2008 was 841,704.(4)
    
    The weighted average outstanding contractual life of exercisable options at September 30, 2008 is 6.8 years.  Nine Months EndedSeptember 30,2008
    
    
    2007Expected dividend yield
    
    
    0.4
    %
    
    
    0.4
    %Expected stock price volatility
    
    
    33
    %
    
    
    35
    %Risk-free interest rate
    
    
    2.6
    %
    
    
    4.7
    %Expected term (in years)
    
    
    6.25
    
    
    
    6.25Fair value of stock options granted
    
    $
    11.75
    
    
    $
    15.08
 41




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##### Table of Contents



Deferred Units and Restricted Shares.
   Three Months EndedSeptember 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageNumber
    
    
    Grant Date
    
    
    Number
    
    
    Grant Dateof Units
    
    
    Fair Value
    
    
    of Units
    
    
    Fair ValueNon-vested shares
outstanding,
beginning of period
    
    
    12,083
    
    
    $
    23.60
    
    
    
    20,676
    
    
    $
    14.20Granted
    
    
    397
    
    
    $
    37.69
    
    
    
    438
    
    
    $
    34.25Matured
    
    
    (248
    )
    
    $
    20.14
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-vested shares
outstanding, end of
period
    
    
    12,232
    
    
    $
    24.13
    
    
    
    21,114
    
    
    $
    14.61
 Nine Months EndedSeptember 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageNumber
    
    
    Grant Date
    
    
    Number
    
    
    Grant Dateof Units
    
    
    Fair Value
    
    
    of Units
    
    
    Fair ValueNon-vested shares
outstanding,
beginning of period
    
    
    21,114
    
    
    $
    14.61
    
    
    
    26,967
    
    
    $
    10.61Granted
    
    
    1,920
    
    
    $
    46.87
    
    
    
    3,221
    
    
    $
    27.93Matured
    
    
    (10,802
    )
    
    $
    9.57
    
    
    
    (9,074
    )
    
    $
    7.43Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-vested shares
outstanding, end of
period
    
    
    12,232
    
    
    $
    24.13
    
    
    
    21,114
    
    
    $
    14.61
  42




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##### Table of Contents



Employee Stock Ownership Plan
   Supplemental Employment Retirement Plan
  September 30,
    
    
    December 31,2008
    
    
    2007Other liabilities
    
    $
    (3,132
    )
    
    $
    (2,475
    )Accumulated other comprehensive loss
    
    
    204
    
    
    
    638Deferred income tax asset
    
    
    120
    
    
    
    375Net amount recognized
    
    $
    (2,808
    )
    
    $
    (1,462
    )
  43




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##### Table of Contents



AHD Long-Term Incentive Plan
  AHD Phantom Units.
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Outstanding, beginning of period
    
    
    225,475
    
    
    
    220,000
    
    
    
    220,825
    
    
    
    220,492Granted(1)
    
    
    
    
    
    
    
    
    
    
    4,650
    
    
    
    Unit Adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (492
    )Matured
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of period(2)
    
    
    225,475
    
    
    
    220,000
    
    
    
    225,475
    
    
    
    220,000Non-cash compensation expense
recognized (in thousands)
    
    $
    354
    
    
    $
    385
    
    
    $
    1,092
    
    
    $
    1,224
 
 (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 the nine months ended September 30, 2008. There
were no grants of phantom units during the three months ended September 30, 2008 and 2007, and the nine months ended September 30,
2007. 44




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##### Table of Contents



(2)
    
    The aggregate intrinsic value for phantom unit awards outstanding as of September 30, 2008 was $5.4 million.  AHD Unit Options.
 Three Months Ended September 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Averageof Unit
    
    
    Exercise
    
    
    of Unit
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding, beginning of period
    
    
    1,215,000
    
    
    $
    22.56
    
    
    
    1,215,000
    
    
    $
    22.56Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Matured
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of period(1)(2)
    
    
    1,215,000
    
    
    $
    22.56
    
    
    
    1,215,000
    
    
    $
    22.56Options exercisable, end of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash compensation expense
recognized (in thousands)
    
    $
    309
    
    
    
    
    
    
    $
    309
 Nine Months Ended September 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Averageof Unit
    
    
    Exercise
    
    
    of Unit
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding, beginning of period
    
    
    1,215,000
    
    
    $
    22.56
    
    
    
    1,215,000
    
    
    $
    22.56Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Matured
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of period(1)(2)
    
    
    1,215,000
    
    
    $
    22.56
    
    
    
    1,215,000
    
    
    $
    22.56
 45




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##### Table of Contents



Nine Months Ended September 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Averageof Unit
    
    
    Exercise
    
    
    of Unit
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceOptions exercisable, end of period(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash compensation expense
recognized (in thousands)
    
    $
    928
    
    
    
    
    
    
    $
    928
 
 (1)
    
    The weighted average remaining contractual life for outstanding options at September 30, 2008 was 8.1 years.(2)
    
    The aggregate intrinsic value of options outstanding at September 30, 2008 was approximately $1.9 million.(3)
    
    There were no options exercised during the three and nine months ended September 30, 2008 and 2007.  APL Long-Term Incentive Plan
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Outstanding, beginning of period
    
    
    149,923
    
    
    
    184,162
    
    
    
    129,746
    
    
    
    159,067Granted(1)
    
    
    
    
    
    
    
    
    
    
    54,296
    
    
    
    25,095Matured(2)
    
    
    (10,860
    )
    
    
    (38,401
    )
    
    
    (44,229
    )
    
    
    (38,401
    )
 46




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Forfeited
    
    
    (1,000
    )
    
    
    (1,000
    )
    
    
    (1,750
    )
    
    
    (1,000
    )Outstanding, end of period(3)
    
    
    138,063
    
    
    
    144,761
    
    
    
    138,063
    
    
    
    144,761Non-cash compensation expense recognized
(in thousands)
    
    $
    600
    
    
    $
    592
    
    
    $
    1,783
    
    
    $
    2,466
 
 (1)
    
    The weighted average prices 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, were $44.43 and $50.09 for awards granted for the nine months ended September 30, 2008 and 2007,
respectively. There were no awards granted for the three months ended September 30, 2008 and 2007, respectively.(2)
    
    The intrinsic values for phantom unit awards exercised during the three months ended September 30, 2008 and 2007, were approximately $0.4 million and
$2.0 million, respectively, and $1.8 million and $2.0 million during the nine months ended September 30, 2008 and 2007, respectively.(3)
    
    The aggregate intrinsic value for phantom unit awards outstanding as of September 30, 2008 was $3.5 million.  APL Incentive Compensation Agreements
   47




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##### Table of Contents



ATN Long-Term Incentive Plan
  Restricted Stock and Phantom Units.
  WeightedAverageGrant DateUnits
    
    
    Fair ValueNon-vested shares outstanding at December 31, 2007
    
    
    624,665
    
    
    $
    24.42Granted
    
    
    35,793
    
    
    
    31.62Vested
    
    
    (12,279
    )
    
    
    21.06Forfeited
    
    
    (100
    )
    
    
    35.00Non-vested shares outstanding at September 30, 2008
    
    
    648,079
    
    
    $
    24.88
 Stock Options
 AssumptionsGrant Date
    
    
    Grant DateJune 2008
    
    
    January 2008Options granted
    
    
    7,500
    
    
    
    6,500Expected life (years)
    
    
    6.25
    
    
    
    6.25Expected 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
 48




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##### Table of Contents



WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicExercise
    
    
    Term
    
    
    ValueShares
    
    
    Price
    
    
    (in years)
    
    
    (in thousands)Outstanding at December 31, 2007
    
    
    1,895,052
    
    
    $
    24.09
    
    
    
    8.9Granted
    
    
    14,000
    
    
    $
    35.36Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (4,850
    )
    
    $
    26.75Outstanding at September 30, 2008
    
    
    1,904,202
    
    
    $
    24.17
    
    
    
    8.2
    
    
    $
    3,102Options exercisable at September 30, 2008
    
    
    93,438
    
    
    $
    21.00
    
    
    
    7.5Available for grant at September 30, 2008
    
    
    1,165,536
  NOTE 18  OPERATING SEGMENT INFORMATION
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Gas and oil productionRevenues(a)
    
    $
    81,235
    
    
    $
    63,265
    
    
    $
    236,417
    
    
    $
    136,097Costs and expenses
    
    
    (12,688
    )
    
    
    (9,887
    )
    
    
    (35,735
    )
    
    
    (14,412
    )Segment income
    
    $
    68,547
    
    
    $
    53,378
    
    
    $
    200,682
    
    
    $
    121,685Well construction and completionRevenues
    
    $
    116,987
    
    
    $
    103,324
    
    
    $
    343,466
    
    
    $
    240,841Costs and expenses
    
    
    (101,727
    )
    
    
    (89,847
    )
    
    
    (298,666
    )
    
    
    (209,427
    )Segment income
    
    $
    15,260
    
    
    $
    13,477
    
    
    $
    44,800
    
    
    $
    31,414Atlas PipelineRevenues (b)
    
    $
    567,032
    
    
    $
    231,257
    
    
    $
    991,695
    
    
    $
    427,792Revenues  affiliates
    
    
    12,021
    
    
    
    8,610
    
    
    
    32,768
    
    
    
    24,821Costs and expenses
    
    
    (338,338
    )
    
    
    (187,390
    )
    
    
    (1,002,861
    )
    
    
    (377,669
    )Segment income
    
    $
    240,715
    
    
    $
    52,477
    
    
    $
    21,602
    
    
    $
    74,944Other(c)Revenues
    
    $
    3,380
    
    
    $
    5,070
    
    
    $
    13,116
    
    
    $
    11,756Costs and expenses
    
    
    (2,890
    )
    
    
    (2,541
    )
    
    
    (8,206
    )
    
    
    (6,776
    )Segment income
    
    $
    490
    
    
    $
    2,529
    
    
    $
    4,910
    
    
    $
    4,980Reconciliation of segment income to net
income before income tax provisionSegment incomeGas and oil production
    
    $
    68,547
    
    
    $
    53,378
    
    
    $
    200,682
    
    
    $
    121,685Well construction and completion
    
    
    15,260
    
    
    
    13,477
    
    
    
    44,800
    
    
    
    31,414
 49




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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Atlas Pipeline
    
    
    240,715
    
    
    
    52,477
    
    
    
    21,602
    
    
    
    74,944Other
    
    
    490
    
    
    
    2,529
    
    
    
    4,910
    
    
    
    4,980Total segment income
    
    
    325,012
    
    
    
    121,861
    
    
    
    271,994
    
    
    
    233,023General and administrative expenses
    
    
    (13,278
    )
    
    
    (48,677
    )
    
    
    (59,633
    )
    
    
    (84,454
    )Net expense reimbursement  affiliate
    
    
    (255
    )
    
    
    (246
    )
    
    
    (689
    )
    
    
    (775
    )Depreciation, depletion and
amortization
    
    
    (46,134
    )
    
    
    (35,187
    )
    
    
    (142,910
    )
    
    
    (61,064
    )Interest expense
    
    
    (37,079
    )
    
    
    (37,480
    )
    
    
    (105,487
    )
    
    
    (53,681
    )Minority interest income (expense)
    
    
    (194,054
    )
    
    
    6,402
    
    
    
    60,777
    
    
    
    14,992Other income  net
    
    
    3,815
    
    
    
    3,526
    
    
    
    11,838
    
    
    
    6,425Net income before income tax
provision
    
    $
    38,027
    
    
    $
    10,199
    
    
    $
    35,890
    
    
    $
    54,466Capital expendituresGas and oil production
    
    $
    89,434
    
    
    $
    68,768
    
    
    $
    219,953
    
    
    $
    122,049Well construction and completion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Atlas Pipeline
    
    
    89,124
    
    
    
    34,544
    
    
    
    246,394
    
    
    
    76,428Corporate and other
    
    
    1,182
    
    
    
    1,578
    
    
    
    3,038
    
    
    
    3,379Total capital expenditures
    
    $
    179,740
    
    
    $
    104,890
    
    
    $
    469,385
    
    
    $
    201,856
 September 30,
    
    
    December 31,2008
    
    
    2007Balance sheetGoodwillGas and oil production
    
    $
    21,527
    
    
    $
    21,527Well construction and completion
    
    
    6,389
    
    
    
    6,389Atlas Pipeline
    
    
    676,860
    
    
    
    709,283Corporate and other
    
    
    7,250
    
    
    
    7,250$
    712,026
    
    
    $
    744,449Total assetsGas and oil production
    
    $
    2,002,268
    
    
    $
    1,821,631Well construction and completion
    
    
    13,854
    
    
    
    11,138Atlas Pipeline
    
    
    3,056,762
    
    
    
    2,877,614Corporate and other
    
    
    178,546
    
    
    
    193,984$
    5,251,430
    
    
    $
    4,904,367
 
 (a)
    
    Revenues for the nine months ended September 30, 2007 include non-cash gains of $26.3
million related to non-qualifying hedges associated with the acquisition of AGO (see Note 3).(b)
    
    Includes gain (loss) on mark-to-market derivatives of $147.5 million and $14.8 million
for the three months ended September 30, 2008 and 2007, respectively, and ($257.3) million
and ($16.0) million for the nine months ended September 30, 2008 and 2007, respectively.(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 nine months ended September 30, 2008 and 2007, respectively.  NOTE 19  SUBSEQUENT EVENTS
     50




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##### Table of Contents



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.
  General
  
    
    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 (Lightfoot LP) and
Lightfoot Capital Partners GP, LLC, (Lightfoot GP) the general
partner of Lightfoot (collectively, Lightfoot), entities which incubate new master
limited partnerships (MLPs) and invest in existing MLPs. We have an approximate direct and indirect 18%
ownership interest in Lightfoot GP and a commitment to invest a total of $20.0 million in
Lightfoot LP. We also have a direct and indirect ownership interests
in Lightfoot L.P.
  
    
    all of the outstanding Class A units, representing 1,293,486 units at September 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
 51




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##### Table of Contents



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 September
30, 2008, or a 46.3% ownership interest in ATN.
  
    
    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
    
    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.
   
    
    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
 52




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##### Table of Contents




    
    5,754,253 common units, representing approximately 12.5% of the outstanding common
units at September 30, 2008, or a 12.3% ownership interest in APL.
  
    
    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.
 Financial Presentation
  Atlas Energy
   Gas and oil operations
 
    
    direct and indirect working interests in over 11,400 gross producing gas and oil wells;
    
    net average daily production of 94.2 million cubic feet equivalents (MMcfe) per day
for the nine months ended September 30, 2008; and
    
    over 1.2 million net acres, of which over 0.8 million net acres are undeveloped.
 53




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##### Table of Contents



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
 Atlas Pipeline Holdings and Atlas Pipeline Partners
    
    
    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, as well as third party pipelines.
  Subsequent Events
   54




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##### Table of Contents



Recent Developments
    Atlas Energy.
  Atlas Pipeline and Atlas Pipeline Holdings.
 55




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##### Table of Contents



Acquisitions
 Atlas Energy.
 Atlas Pipeline Partners.
 56




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##### Table of Contents



Contractual Revenue Arrangements
 Atlas Energy
 Appalachia Natural Gas
  
    
    gas marketers;
    
    local distribution companies;
    
    industrial or other end-users; and/or
    
    companies generating electricity.
 Michigan Natural Gas
 Crude Oil.
 57




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##### Table of Contents



Atlas Pipeline Partners
  Fee-Based Contracts.
 POP Contracts.
 Keep-Whole Contracts
 Recent Trends and Uncertainties
  Atlas Energy
 58




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Atlas Pipeline Partners.
   59




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Results of Operations
  Three Months Ended
September 30,
    
    
    Nine Months Ended
September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Atlas Energy:Production revenues (in thousands)Gas(1)
    
    $
    77,253
    
    
    $
    60,302
    
    
    $
    224,345
    
    
    $
    102,439Oil
    
    $
    3,956
    
    
    $
    2,938
    
    
    $
    12,014
    
    
    $
    7,357Production volume(1) (2) (3) (4)Gas (mcfd)
    
    
    93,664
    
    
    
    88,628
    
    
    
    91,684
    
    
    
    85,545Oil (bpd)
    
    
    424
    
    
    
    446
    
    
    
    421
    
    
    
    425Total (mcfed) Oil(bpd)
    
    
    96,209
    
    
    
    91,304
    
    
    
    94,210
    
    
    
    88,095Average sales prices(3)(5):Gas (per mcf)(6)
    
    $
    9.26
    
    
    $
    8.19
    
    
    $
    9.35
    
    
    $
    8.55Oil (per bbl)(9) Gas(mcfd)
    
    $
    101.34
    
    
    $
    71.63
    
    
    $
    104.15
    
    
    $
    63.75Production costs (3) (7):Lease operating expenses
    
    $
    0.85
    
    
    $
    0.74
    
    
    $
    0.82
    
    
    $
    0.78As a percent of production revenues per mcf
    
    
    9
    %
    
    
    10
    %
    
    
    9
    %
    
    
    10
    %Production taxes per mcfe
    
    
    0.41
    
    
    
    0.25
    
    
    
    0.39
    
    
    
    0.17Total production costs per mcfe
    
    $
    1.26
    
    
    $
    0.99
    
    
    $
    1.21
    
    
    $
    0.95Depletion per Mcfe(3)
    
    $
    2.57
    
    
    $
    2.19
    
    
    $
    2.55
    
    
    $
    2.24Atlas Pipeline Partners:Appalachia system throughput volume
(mcfd)(3)
    
    
    91,829
    
    
    
    71,876
    
    
    
    84,007
    
    
    
    66,888Velma system gathered gas volume (mcfd)(3).
    
    
    64,386
    
    
    
    63,757
    
    
    
    64,103
    
    
    
    62,531Elk City/Sweetwater system gathered gas volume
(mcfd)(3)
    
    
    279,145
    
    
    
    299,450
    
    
    
    292,307
    
    
    
    298,724Chaney Dell system gathered gas volume (mcfd)(3)
(8)
    
    
    300,467
    
    
    
    255,649
    
    
    
    278,906
    
    
    
    255,649Midkiff/Benedum system gathered gas volume
(mcfd)(3) (8)
    
    
    143,224
    
    
    
    150,061
    
    
    
    145,300
    
    
    
    150,061NOARK Ozark Gas Transmission throughput volume
(mcfd)(3)
    
    
    445,708
    
    
    
    325,652
    
    
    
    412,634
    
    
    
    311,562Combined throughput volume (mcfd)(3)
    
    
    1,324,759
    
    
    
    1,166,445
    
    
    
    1,277,257
    
    
    
    1,145,415
 60




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##### Table of Contents



(1)
    
    Excludes sales of residual gas and sales to landowners.(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 $10.49 and $6.55 for the three months ended September 30, 2008 and
2007, respectively, and $10.03 and $7.12 per Mcf for the nine months ended September 30, 2008 and 2007, respectively.(6)
    
    Includes $2.6 million and $6.5 million of derivative proceeds which were not included as revenue in the three months ended September 20, 2008 and
2007, respectively, and $10.5 million and $6.5 million in the nine months ended September 30, 2008 and 2007, respectively.(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)
    
    Atlas Pipeline acquired the Chaney Dell and Midkiff/Benedum systems on July 27, 2007, and production volume from these systems has only been
included from that date.(9)
    
    Atlas Energys average sales price for oil before the effects of financial hedging were $106.94 and $108.09 per barrel for the three months and nine
months ended September 30, 2008. There were no oil financial hedges for the three months and nine months ended September 30, 2007. Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Natural Gas and Oil Production
  Well Construction and Completion
 61




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##### Table of Contents



Administration and Oversight and Well Services
 Transmission, Gathering and Processing
  Gain (Loss) on Mark-to-Market Derivatives
 Other Income, Costs and Expenses.
 62




---



##### Table of Contents



Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 Natural Gas and Oil Production
  Well Construction and Completion
 63




---



##### Table of Contents



Administration and Oversight and Well Services
 Transmission, Gathering and Processing
 Gain (Loss) on Mark-to-Market Derivatives
 Other Income, Costs and Expenses.
  64




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##### Table of Contents



Liquidity and Capital Resources
  Atlas Energy
 
    
    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.
  65




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##### Table of Contents



Atlas Pipeline Holdings
 Atlas Pipeline Partners.
 
    
    cash distributions and maintenance capital expenditures through existing cash and
cash flows from operating activities;
    
    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.
   Cash Flows  Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
  66




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##### Table of Contents



Capital Requirements
  Atlas Energy.
 
    
    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 Partners.
 
    
    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.
 67




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Atlas EnergyMaintenance capital expenditures
    
    $
    12,975
    
    
    $
    12,975
    
    
    $
    38,925
    
    
    $
    30,475Expansion capital expenditures
    
    
    77,641
    
    
    
    57,371
    
    
    
    184,066
    
    
    
    94,953Total
    
    $
    90,616
    
    
    $
    70,346
    
    
    $
    222,991
    
    
    $
    125,428Atlas Pipeline PartnersMaintenance capital expenditures
    
    $
    1,711
    
    
    $
    2,328
    
    
    $
    5,375
    
    
    $
    3,800Expansion capital expenditures
    
    
    87,413
    
    
    
    32,216
    
    
    
    241,019
    
    
    
    72,628Total
    
    $
    89,124
    
    
    $
    34,544
    
    
    $
    246,394
    
    
    $
    76,428ConsolidatedMaintenance capital expenditures
    
    $
    14,686
    
    
    $
    15,303
    
    
    $
    44,300
    
    
    $
    34,275Expansion capital expenditures
    
    
    165,054
    
    
    
    89,587
    
    
    
    425,085
    
    
    
    167,581Total
    
    $
    179,740
    
    
    $
    104,890
    
    
    $
    469,385
    
    
    $
    201,856
    Income Taxes
  68




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##### Table of Contents



Off Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
  Fair Value of Financial Instruments
   Level 1
 Level 2 
 Level 3 
  69




---



##### Table of Contents



New and Recently Adopted Accounting Standards
     70




---



##### Table of Contents



71




---



##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  General
    72




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##### Table of Contents



Interest Rate Risk.
     Commodity Price Risk
 Atlas Energy.
 73




---



##### Table of Contents



Natural Gas Fixed Price Swaps
 ProductionPeriod Ending
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset/(Liability)(MMbtu)
    
    
    (per MMbtu)
    
    
    (in thousands)(1)2008
    
    
    9,890,000
    
    
    $
    8.87
    
    
    $
    13,6832009
    
    
    45,060,000
    
    
    $
    8.56
    
    
    
    16,0772010
    
    
    33,660,000
    
    
    $
    8.14
    
    
    
    (11,620
    )2011
    
    
    25,980,000
    
    
    $
    7.91
    
    
    
    (11,840
    )2012
    
    
    17,440,000
    
    
    $
    8.13
    
    
    
    (4,196
    )2013
    
    
    1,500,000
    
    
    $
    8.73
    
    
    
    443$
    2,547
 Natural Gas Costless Collars
 ProductionPeriod Ending
    
    
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Option Type
    
    Volumes
    
    
    Floor and Cap
    
    
    Asset/(Liability)(MMbtu)
    
    
    (per MMbtu)
    
    
    (in thousands)(1)2008
    
    Puts purchased
    
    
    390,000
    
    
    $
    7.50
    
    
    $
    802008
    
    Calls sold
    
    
    390,000
    
    
    $
    9.40
    
    
    
    2009
    
    Puts purchased
    
    
    240,000
    
    
    $
    11.00
    
    
    
    7142009
    
    Calls sold
    
    
    240,000
    
    
    $
    15.35
    
    
    
    2010
    
    Puts purchased
    
    
    3,120,000
    
    
    $
    7.92
    
    
    
    2010
    
    Calls sold
    
    
    3,120,000
    
    
    $
    9.10
    
    
    
    (604
    )
 74




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##### Table of Contents



ProductionPeriod Ending
    
    
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Option Type
    
    Volumes
    
    
    Floor and Cap
    
    
    Asset/(Liability)(MMbtu)
    
    
    (per MMbtu)
    
    
    (in thousands)(1)2011
    
    Puts purchased
    
    
    7,200,000
    
    
    $
    7.50
    
    
    
    2011
    
    Calls sold
    
    
    7,200,000
    
    
    $
    8.45
    
    
    
    (3,804
    )2012
    
    Puts purchased
    
    
    720,000
    
    
    $
    7.00
    
    
    
    2012
    
    Calls sold
    
    
    720,000
    
    
    $
    8.37
    
    
    
    (468
    )$
    (4,082
    )
 Crude Oil Fixed Price Swaps
 ProductionPeriod Ending
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset/(Liability)(Bbl)
    
    
    (per Bbl)
    
    
    (in thousands)(2)2008
    
    
    22,400
    
    
    $
    103.67
    
    
    $
    472009
    
    
    58,900
    
    
    $
    99.92
    
    
    
    (148
    )2010
    
    
    48,900
    
    
    $
    97.31
    
    
    
    (344
    )2011
    
    
    40,400
    
    
    $
    96.43
    
    
    
    (327
    )2012
    
    
    33,500
    
    
    $
    96.00
    
    
    
    (280
    )2013
    
    
    9,000
    
    
    $
    95.95
    
    
    
    (75
    )$
    (1,127
    )
 Crude Oil Costless Collars
 ProductionPeriod Ending
    
    
    
    
    
    
    
    Average
    
    
    Fair ValueDecember 31,
    
    Option Type
    
    Volumes
    
    
    Floor and Cap
    
    
    Asset/ (Liability)(Bbl)
    
    
    (per Bbl)
    
    
    (in thousands)(2)2008
    
    Puts purchased
    
    
    10,500
    
    
    $
    85.00
    
    
    $
    22008
    
    Calls sold
    
    
    10,500
    
    
    $
    126.44
    
    
    
    2009
    
    Puts purchased
    
    
    36,500
    
    
    $
    85.00
    
    
    
    2009
    
    Calls sold
    
    
    36,500
    
    
    $
    118.63
    
    
    
    (86
    )2010
    
    Puts purchased
    
    
    31,000
    
    
    $
    85.00
    
    
    
    2010
    
    Calls sold
    
    
    31,000
    
    
    $
    112.92
    
    
    
    (190
    )2011
    
    Puts purchased
    
    
    27,000
    
    
    $
    85.00
    
    
    
    2011
    
    Calls sold
    
    
    27,000
    
    
    $
    110.81
    
    
    
    (196
    )2012
    
    Puts purchased
    
    
    21,500
    
    
    $
    85.00
    
    
    
    2012
    
    Calls sold
    
    
    21,500
    
    
    $
    110.06
    
    
    
    (165
    )2013
    
    Puts purchased
    
    
    6,000
    
    
    $
    85.00
    
    
    
    2013
    
    Calls sold
    
    
    6,000
    
    
    $
    110.09
    
    
    
    (47
    )$
    (682
    )Total ATN net derivative liability
    
    
    
    
    
    $
    (3,344
    )
 
 (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 Partners.
 75




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##### Table of Contents



Early Termination of Derivative ContractsThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net cash derivative
expense included
within gain (loss)
on mark-to-market
derivatives on our
consolidated
statements of
operations
    
    $
    (70,258
    )
    
    $
    
    
    
    $
    (186,068
    )
    
    $
    Net cash derivative
expense included
transmission,
gathering and
processing revenue
on our consolidated
statements of
operations
    
    
    (1,258
    )
    
    
    
    
    
    
    (1,573
    )
    
    
    Net non-cash
derivative income
(expense) included
within gain (loss)
on mark-to-market
derivatives, net on
our consolidated
statements of
operations
    
    
    6,488
    
    
    
    
    
    
    
    (39,857
    )
    
    
    Net non-cash
derivative expense
included within
transmission,
gathering and
processing revenue
on our consolidated
statements of
operations
    
    
    (19,514
    )
    
    
    
    
    
    
    (19,514
    )
    
    
    
  76




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Loss from cash settlement of
qualifying hedge
instruments(1)
    
    $
    (27,419
    )
    
    $
    (12,850
    )
    
    $
    (78,214
    )
    
    $
    (23,548
    )Gain/(loss) from change in
market value of non-qualifying
derivatives(2)
    
    
    (190,013
    )
    
    
    (15,595
    )
    
    
    17,919
    
    
    
    (35,731
    )Gain/(loss) from change in
market value of ineffective
portion of qualifying
derivatives(2)
    
    
    (44,997
    )
    
    
    7,164
    
    
    
    (41,271
    )
    
    
    (3,526
    )Loss from cash settlement of
non-qualifying
derivatives(2)
    
    
    (84,207
    )
    
    
    (3,037
    )
    
    
    (280,696
    )
    
    
    (3,037
    )Loss from cash settlement of
interest rate
derivatives(3)
    
    
    (708
    )
    
    
    
    
    
    
    (915
    )
    
    
    
 
 (1)
    
    Included within transmission, gathering and processing revenue on our
consolidated statements of operations.(2)
    
    Included within gain (loss) on mark-to-market derivatives, net on our consolidated statements
of operations.(3)
    
    Included within interest expense on our consolidated statements of operations.  Interest Fixed-Rate Swap
 Notional
    
    
    
    
    Contract Period
    
    Fair ValueTerm
    
    Amount
    
    
    Type
    
    Ended December 31,
    
    Asset/(Liability)(1)(in thousands)May 2008- May 2010
    
    $
    25,000,000
    
    
    Pay 3.01% Receive LIBOR
    
    2008
    
    $
    462009
    
    
    (4
    )2010
    
    
    40Total AHD net derivative asset
    
    $
    82
 
 (1)
    
    Fair value based on independent, third-party statements, supported by
observable levels at which transactions are executed in the marketplace.  Interest Fixed-Rate Swap
 Notional
    
    
    
    
    Contract Period
    
    Fair ValueTerm
    
    Amount
    
    
    Type
    
    Ended December 31,
    
    Asset/(Liability)(1)(in thousands)January 2008- January 2010
    
    $
    200,000,000
    
    
    Pay 2.88% Receive LIBOR
    
    2008
    
    $
    4132009
    
    
    2382010
    
    
    65$
    716
 77




---



##### Table of Contents



Notional
    
    
    
    
    Contract Period
    
    Fair ValueTerm
    
    Amount
    
    
    Type
    
    Ended December 31,
    
    Asset/(Liability)(1)(in thousands)April 2008- April 2010
    
    $
    250,000,000
    
    
    Pay 3.14% Receive LIBOR
    
    2008
    
    $
    3652009
    
    
    (339
    )2010
    
    
    197$
    223
 Natural Gas Liquids Sales  Fixed Price Swaps
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Liability(2)(gallons)
    
    
    (per gallon)
    
    
    (in thousands)2008
    
    
    7,434,000
    
    
    $
    0.697
    
    
    $
    (3,642
    )2009
    
    
    8,568,000
    
    
    $
    0.746
    
    
    
    (3,607
    )$
    (7,249
    )
 Crude Oil Sales Options (associated with NGL volume)
 Production Period
    
    
    
    
    
    Associated
    
    
    AverageEnded
    
    Crude
    
    
    NGL
    
    
    Crude
    
    
    Fair ValueDecember 31,
    
    Volume
    
    
    Volume
    
    
    Strike Price
    
    
    Asset/(Liability)(3)
    
    
    Option Type(barrels)
    
    
    (gallons)
    
    
    (per barrel)
    
    
    (in thousands)2008
    
    
    536,400
    
    
    
    29,972,124
    
    
    $
    70.16
    
    
    $
    110
    
    
    Puts purchased2008
    
    
    126,000
    
    
    
    11,219,040
    
    
    $
    127.55
    
    
    
    (3,531
    )
    
    Puts sold(4)2008
    
    
    126,000
    
    
    
    11,219,040
    
    
    $
    140.00
    
    
    
    65
    
    
    Calls purchased(4)2008
    
    
    473,400
    
    
    
    25,764,984
    
    
    $
    80.13
    
    
    
    (10,104
    )
    
    Calls sold2009
    
    
    1,584,000
    
    
    
    85,038,534
    
    
    $
    80.00
    
    
    
    2,372
    
    
    Puts purchased2009
    
    
    304,200
    
    
    
    27,085,968
    
    
    $
    126.05
    
    
    
    (9,082
    )
    
    Puts sold(4)2009
    
    
    304,200
    
    
    
    27,085,968
    
    
    $
    143.00
    
    
    
    1,026
    
    
    Calls purchased(4)2009
    
    
    2,121,600
    
    
    
    114,072,336
    
    
    $
    81.01
    
    
    
    (51,161
    )
    
    Calls sold2010
    
    
    3,127,500
    
    
    
    202,370,490
    
    
    $
    81.09
    
    
    
    (90,981
    )
    
    Calls sold2010
    
    
    714,000
    
    
    
    45,415,440
    
    
    $
    120.00
    
    
    
    8,966
    
    
    Calls purchased(4)2011
    
    
    606,000
    
    
    
    32,578,560
    
    
    $
    95.56
    
    
    
    (13,597
    )
    
    Calls sold2011
    
    
    252,000
    
    
    
    13,547,520
    
    
    $
    120.00
    
    
    
    3,462
    
    
    Calls purchased(4)2012
    
    
    450,000
    
    
    
    24,192,000
    
    
    $
    97.10
    
    
    
    (9,981
    )
    
    Calls sold2012
    
    
    180,000
    
    
    
    9,676,800
    
    
    $
    120.00
    
    
    
    2,629
    
    
    Calls purchased(4)$
    (169,807
    )
 Natural Gas Sales  Fixed Price Swaps
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset/(Liability)(3)(mmbtu)(5)
    
    
    (per mmbtu)(5)
    
    
    (in thousands)2008
    
    
    1,371,000
    
    
    $
    8.823
    
    
    $
    1,7222009
    
    
    5,724,000
    
    
    $
    8.611
    
    
    
    2,6672010
    
    
    4,560,000
    
    
    $
    8.526
    
    
    
    (269
    )2011
    
    
    2,160,000
    
    
    $
    8.270
    
    
    
    (583
    )2012
    
    
    1,560,000
    
    
    $
    8.250
    
    
    
    (251
    )$
    3,286
 78




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##### Table of Contents



Natural Gas Basis Sales
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset(3)(mmbtu)(5)
    
    
    (per mmbtu)(5)
    
    
    (in thousands)2008
    
    
    1,371,000
    
    
    $
    (0.744
    )
    
    $
    2,0422009
    
    
    5,724,000
    
    
    $
    (0.558
    )
    
    
    1,5992010
    
    
    4,560,000
    
    
    $
    (0.622
    )
    
    
    7322011
    
    
    2,160,000
    
    
    $
    (0.664
    )
    
    
    2172012
    
    
    1,560,000
    
    
    $
    (0.601
    )
    
    
    97$
    4,687
 Natural Gas Purchases  Fixed Price Swaps
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Asset/(Liability)(3)(mmbtu)(5)
    
    
    (per mmbtu)(5)
    
    
    (in thousands)2008
    
    
    4,065,000
    
    
    $
    8.274
    (6)
    
    $
    (5,622
    )2009
    
    
    15,564,000
    
    
    $
    8.680
    
    
    
    (8,329
    )2010
    
    
    8,940,000
    
    
    $
    8.580
    
    
    
    1962011
    
    
    2,160,000
    
    
    $
    8.270
    
    
    
    5832012
    
    
    1,560,000
    
    
    $
    8.250
    
    
    
    251$
    (12,921
    )
 Natural Gas Basis Purchases
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Liability(3)(mmbtu)(5)
    
    
    (per mmbtu)(5)
    
    
    (in thousands)2008
    
    
    4,065,000
    
    
    $
    (1.114
    )
    
    $
    (6,761
    )2009
    
    
    15,564,000
    
    
    $
    (0.654
    )
    
    
    (5,362
    )2010
    
    
    8,940,000
    
    
    $
    (0.600
    )
    
    
    (2,118
    )2011
    
    
    2,160,000
    
    
    $
    (0.700
    )
    
    
    (50
    )2012
    
    
    1,560,000
    
    
    $
    (0.610
    )
    
    
    (49
    )$
    (14,340
    )
 Ethane Put Options
 Production Period
    
    Associated
    
    
    AverageEnded
    
    NGL
    
    
    Crude
    
    
    Fair ValueDecember 31,
    
    Volume
    
    
    Strike Price
    
    
    Asset(2)
    
    
    Option Type(gallons)
    
    
    (per gallon)
    
    
    (in thousands)2008
    
    
    7,560,000
    
    
    $
    0.7885
    
    
    $
    399
    
    
    Puts purchased2009
    
    
    16,254,000
    
    
    $
    0.6928
    
    
    
    196
    
    
    Puts purchased$
    595
 Propane Put Options
 Production Period
    
    Associated
    
    
    AverageEnded
    
    NGL
    
    
    Crude
    
    
    Fair ValueDecember 31,
    
    Volume
    
    
    Strike Price
    
    
    Asset(2)
    
    
    Option Type(gallons)
    
    
    (per gallon)
    
    
    (in thousands)2008
    
    
    8,946,000
    
    
    $
    1.4752
    
    
    $
    174
    
    
    Puts purchased2009
    
    
    23,310,000
    
    
    $
    1.3935
    
    
    
    368
    
    
    Puts purchased$
    542
 79




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##### Table of Contents



Crude Oil Sales
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Fixed Price
    
    
    Liability(3)(barrels)
    
    
    (per barrel)
    
    
    (in thousands)2008
    
    
    14,100
    
    
    $
    60.569
    
    
    $
    (563
    )2009
    
    
    33,000
    
    
    $
    62.700
    
    
    
    (1,305
    )$
    (1,868
    )
 Crude Oil Sales Options
 Production Period
    
    
    
    
    
    Average
    
    
    Fair ValueEnded December 31,
    
    Volumes
    
    
    Strike Price
    
    
    Asset/(Liability)(3)
    
    
    Option Type(barrels)
    
    
    (per barrel)
    
    
    (in thousands)2008
    
    
    69,000
    
    
    $
    68.000
    
    
    $
    10
    
    
    Puts purchased2008
    
    
    69,000
    
    
    $
    78.055
    
    
    
    (1,589
    )
    
    Calls sold2009
    
    
    168,000
    
    
    $
    90.000
    
    
    
    253
    
    
    Puts purchased2009
    
    
    306,000
    
    
    $
    80.017
    
    
    
    (13,525
    )
    
    Calls sold2010
    
    
    234,000
    
    
    $
    83.027
    
    
    
    (9,382
    )
    
    Calls sold2011
    
    
    72,000
    
    
    $
    87.296
    
    
    
    (1,938
    )
    
    Calls sold2012
    
    
    48,000
    
    
    $
    83.944
    
    
    
    (1,380
    )
    
    Calls sold$
    (27,551
    )Total APL net derivative liability
    
    $
    (223,687
    )Total Company net derivative liability
    
    $
    (226,949
    )
 
 (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 costless collars
entered into by APL as offsetting positions for the calls sold related to ethane and
propane production. In addition, calls were purchased by APL for 2010 through 2012 to
offset positions for calls sold. These offsetting positions were entered into to limit
the loss which could be incurred if crude oil prices continued to rise.(5)
    
    Mmbtu represents million British Thermal Units.(6)
    
    Includes APLs premium received from its sale of an option for it to sell
234,000 mmbtu of natural gas for the year ended December 31, 2008 at $18.00 per mmbtu. Atlas America.
 
 ITEM 4.
    
    CONTROLS AND PROCEDURES
  80




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  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.
  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.
  81




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##### Table of Contents



ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Maximum NumberShares Purchased As
    
    
    of Shares that MayPart of Publicly
    
    
    Yet Be PurchasedTotal Number of
    
    
    Average Price
    
    
    Announced Plans
    
    
    Under the PlansShares Purchased
    
    
    paid Per Share
    
    
    or Programs
    
    
    or ProgramsJuly 1  31, 2008
    
    
    
    
    
    $
    
    
    
    
    August 1  31, 2008
    
    
    392,791
    
    
    
    36.35
    
    
    
    392,791September 130, 2008
    
    
    610,086
    
    
    
    34.36
    
    
    
    610,086Total
    
    
    1,002,877
    
    
    $
    34.76
    
    
    
    1,002,877
    
    
    See Note 1
  82




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##### Table of Contents



ITEM 6.
    
    EXHIBITS
 Exhibit No.
    
    Description3.1
    
    
    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 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)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) Certification31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification32.1
    
    
    Section 1350 Certification32.2
    
    
    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. 333-112653)(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 83




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##### Table of Contents



SIGNATURES
  ATLAS AMERICA, INC.Date:  November 7, 2008
    By:
    /s/ EDWARD E. COHENEdward E. CohenChairman of the Board and Chief Executive OfficerDate:  November 7, 2008
    By:
    /s/ MATTHEW A. JONESMatthew A. JonesChief Financial OfficerDate:  November 7, 2008
    By:
    /s/ NANCY J. MCGURKNancy J. McGurkSenior Vice President and Chief Accounting Officer 84