ATLS: Positive Ops Update, Strong Q310 Production

MICHAEL HALL, Wells Fargo Securities, LLC (10/13/2010)
"Atlas announced record Appalachian production at 63.3 MMcfe/d with total company production averaging 118.3 MMcfe/d in Q310, up 18.4% Y/Y and 7.7% sequentially, and in line with our estimate of 118.1 MMcfe/d; production number likely to be viewed favorably given solid Q/Q growth and second sequential quarter of solid execution following rough post JV production guidance. Ops update is very positive with a stepout well in Westmoreland County flowing at 21 MMcf/d, a new company record. . .a well in Fayette County also stands out with a peak 24-hr IP of 10.4 MMcf/d. In Q310, ATLS drilled 19 Marcellus horizontal wells, completed 12 and turned six on line; of the six still awaiting infrastructure, four will be turned into line in October and the remaining two in 2011. Laurel Mountain Midstream expansion remains on track with initial phase one capacity expected in late Q410, with initial Shamrock deliveries expected in early 1Q11. We continue to view ATLS as a top idea and prime way to play the Marcellus. With its transformative Marcellus JV in place, we believe the company has secured some of the best full cycle economics in the industry. Importantly, shares are still trading at roughly the same price as when the deal was announced, which in our view leaves a substantial amount of value unaccounted for by the market."

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