Atlas: Well-Positioned in Marcellus Shale

MICHAEL SCIALLA, Thomas Weisel Partners (01/05/2010)
"An early mover in the Marcellus Shale, Atlas has assembled the sixth largest position of any public company in the play. More than half of this acreage is a largely contiguous block in the southwestern Pennsylvania core. During 3Q09, Atlas America, Inc. (ATLS) and Atlas Energy Resources, LLC (ATN) merged to form Atlas Energy, Inc. (ATLS). The transaction restructured the oil and gas E&P business to a C-Corp from a master limited partnership (MLP).

Unlike the MLP, which distributed most of its cash flow to its unit holders, the new structure will allow the company to reinvest its cash in one of the strongest shale plays in North America. Despite near-term bottlenecks, we project annual production growth of 28% and 40% over the next two years while finding and development costs and reinvestment efficiency should rank among the best in our peer group.

. . .We are initiating coverage with an Overweight rating and a 12-month price target of $40, which assumes the shares maintain a 10% to 15% premium as the company delineates its Marcellus acreage and generates robust organic growth and returns."

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