U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _____ to _____
Commission file number 333-09991
Atlas-Energy for the Nineties-Public #5 Ltd.
(Name of small business issuer in its charter)
Pennsylvania 25-1795703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
311 Rouser Road, Moon Township, Pennsylvania 15108
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (412) 262-2830
Securities registered under Section 12(b) of the Exchange Act
Title of each class Name of each exchange on which
registered
None None
Securities registered under Section 12(g) of the Exchange Act
None
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year. -0-
State the aggregate market value of the voting stock held by non-
affiliates of the Registrant. Not Applicable.
Transitional Small Business Disclosure Format (check one):
Yes X No _____
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PART I
Item 1. Description of Business
Atlas-Energy for the Nineties-Public #5 Ltd. (the "Partnership") was
formed under the Pennsylvania Revised Uniform Limited Partnership Act on
July 26, 1996, with Atlas Resources, Inc. ("Atlas") as Managing General
Partner. The Partnership offered a maximum of 800 Units. The
Partnership had its initial and final closing on December 31, 1996, and
was funded with subscriptions of 800 Units ($7,992,240 excluding
accountable due diligence fees, sales commissions and marketing expenses
of $902,833 reimbursed to registered broker-dealers) from 378 investors
thus reaching its required minimum aggregate Capital Contributions of
$1,000,000. Eight investors subscribed for 11.2 Units ($112,000) as
Limited Partners and the remaining 370 investors subscribed for 788.8
Units ($7,880,240) as Investor General Partners. Also, on the closing,
the Managing General Partner was credited with a total capital
contribution of $1,592,068 because of certain expenditures it made on
behalf of the Partnership and certain prospects it contributed to the
Partnership. The Managing General Partner paid the organization and
offering costs of the Partnership in the amount of $1,198,836. In
addition, the Managing General Partner contributed 35.91 prospects to the
Partnership at its cost of $3,600 per prospect (proportionately reduced
to the extent less than 100% of the working interest is acquired) for a
total credit of $129,276. Finally, under the Partnership Agreement the
Managing General Partner paid 14% ($264,226) of the Partnership's
tangible costs.
The Partnership has not filed bankruptcy nor has the Partnership been
involved in any material reclassification, merger, consolidation,
receivership or similar proceeding or purchase or sale of a significant
amount of assets not in the ordinary course of business.
The Partnership was funded to drill natural gas development wells with
the objective being the discovery and production of natural gas in
commercially marketable quantities. Because the initial and final
closing date was December 31, 1996, the Partnership did not conduct any
drilling activities in 1996; however, the Partnership did prepay the
drilling and operating agreement on December 31, 1996, in an amount equal
to $6,391,298, in order to claim a 1996 deduction for intangible drilling
and development costs of wells to be drilled in 1996. In this regard, on
December 31, 1996, the Partnership, which has no employees, entered into
the drilling and operating agreement with Atlas to drill 35.91
development wells to the Clinton/Medina geological formation. All of the
prospects selected by Atlas for drilling are located in Mercer, Lawrence
and Butler Counties, Pennsylvania. Atlas and its affiliates had
sufficient leasehold inventory to provide all of the prospects to be
developed by the Partnership. See "Description of Property".
Under the drilling and operating agreement Atlas was responsible for
drilling and completing (or plugging) the Partnership wells. All of the
wells have been or will be drilled to depths sufficient to test
thoroughly the Clinton/Medina formation. The Partnership paid its
proportionate share of the cost of drilling and completing the
Partnership's wells as follows: for each well, an amount equal to the
depth of the well in feet at its deepest penetration as recorded by the
drilling contractor multiplied by $37.39 per foot. The footage price
included all ordinary costs of drilling, testing and completing such well
and installing gathering lines and other necessary facilities for the
production of natural gas, including the cost of a second completion and
Frac where Atlas considered it justified.
For the next twelve months management believes that the Partnership
has adequate capital in order to develop its wells. The Partnership had
sufficient capital resources from the closing to drill and develop
approximately 35.91 net wells. No other wells will be drilled and
therefore no additional funds will be required. The Partnership also
anticipates that the payment of operation and maintenance costs will not
begin until the Partnership wells begin to generate revenue. Although
management does not anticipate that the Partnership will have to do so,
any additional funds which may be required will be obtained from
production revenues from Partnership wells or from borrowings by the
Partnership from Atlas or its affiliates, although Atlas is not
contractually committed to make such a loan. No borrowings will be
obtained from third parties. The amount that may be borrowed by the
Partnership from Atlas and its affiliates, if any amounts are borrowed,
may not at any time exceed 5% of the Partnership subscription.
With respect to operating and maintenance costs, the Partnership's
commitments pursuant to the drilling and operating agreement are expected
to be fulfilled through revenues generated from the sale of gas and oil.
During producing operations Atlas, as operator, will receive a monthly
well supervision fee of $275 (proportionately reduced to the extent less
than 100% of the working interest was acquired) for each producing well
for which it has responsibility under the drilling and operating
agreement. The well supervision fee covers all normal and regularly
recurring operating expenses for the production, delivery and sale of
gas, such as well tending, routine maintenance and adjustment, reading
meters, recording production, pumping, maintaining appropriate books and
records, preparing reports to the Partnership and to government agencies,
and collecting and disbursing revenues. The well supervision fees do not
include costs and expenses related to the production and sale of oil,
purchase of equipment, materials or third party services, brine disposal,
and rebuilding of access roads, all of which will be billed at the
invoice cost of materials purchased or third party services performed.
As operator Atlas will charge the Partnership at cost for third party
services and materials provided for each well which has been placed in
operation, and a reasonable charge for services performed directly by
Atlas or its affiliates. The drilling and operating agreement also gives
the operator the right at any time after three years from the date a
Partnership well has been placed into production to retain $200 per month
to cover future plugging and abandonment of such well.
Natural gas and any oil produced by the wells developed by the
Partnership must be marketed in order for the Partnership to realize
revenues from such production. The Partnership did not purchase and does
not anticipate selling, any producing wells. In recent years natural gas
and oil prices have been volatile. The marketing of natural gas and oil
production, if any, will be affected by numerous factors beyond the
control of the Partnership and the effect of which cannot be accurately
predicted. These factors include the availability and proximity of
adequate pipeline or other transportation facilities; the amount of
domestic production and foreign imports of oil and gas; competition from
other energy sources such as coal and nuclear energy; local, state and
federal regulations regarding production and the cost of complying with
applicable environmental regulations; and fluctuating seasonal supply and
demand. For example, the demand for natural gas is greater in the winter
months than in the summer months, which is reflected in a higher spot
market price paid for such gas. Also, increased imports of oil and
natural gas have occurred and are expected to continue, and the free
trade agreement between Canada and the United States has eased
restrictions on imports of Canadian gas to the United States. In the
past the reduced demand for natural gas and/or an excess supply of gas
has resulted in a lower price paid for the gas. It has also resulted in
some purchasers curtailing or restricting their purchases of natural
gas; renegotiating existing contracts to reduce both take-or-pay levels
and the price paid for delivered gas; and other difficulties in the
marketing of production.
The Clean Air Act Amendments of 1990 contain incentives for the future
development of "clean alternative fuel," which includes natural gas and
liquefied petroleum gas for "clean-fuel vehicles". The Partnership
believes the amendments ultimately will have a beneficial effect on
natural gas markets and prices.
The Managing General Partner is responsible for selling the
Partnership's gas and oil production. Atlas' policy is to treat all
wells in a given geographic area equally. This reduces certain potential
conflicts of interest among the owners of the various wells, including
the Partnership, concerning to whom and at what price the gas will be
sold. Atlas calculates a weighted average selling price for all of the
gas sold in the geographic area, such as the Mercer County area. To
arrive at the average weighted selling price the money received from the
sale of all of the gas sold to its customers is divided by the volume of
all gas sold from the wells in the area.
During 1996 Atlas received an average selling price of $2.29 per MCF
for gas sold in the Mercer County area after deducting all expenses,
including transportation expenses. On occasion, Atlas has reduced the
amount of production it normally sells on the spot market until the spot
market price increased.
In the Mercer County area, Atlas estimates that a portion of the
Partnership's gas will be transported through Atlas' own pipeline system
and sold directly to industrial end-users in the area where the wells
were drilled. This will generally result in the Partnership receiving
higher prices for the gas than if the gas were transported a farther
distance through interstate pipelines because of increased transportation
charges. The remainder of the Partnership's gas will be transported
through Atlas' pipelines to the interconnection points maintained with
Tennessee Gas Transmission Co., National Fuel Gas Supply Corporation,
National Fuel Gas Distribution Company, East Ohio Natural Gas Company and
Peoples Natural Gas Company. These delivery points are utilized by Atlas
Gas Marketing, Inc. to service its end-user markets in the northeast
United States which include in excess of 100 customers. Atlas is
currently delivering an average 27,000 MCF of natural gas per day from
the Mercer County area to all of the aforementioned markets and has the
capacity of delivering 33,000 MCF per day from the Mercer County area.
Atlas anticipates that Carbide Graphite will purchase approximately 20%
of the Partnership's gas production through September, 1997, pursuant to
a gas contract between Carbide Graphite and an affiliate of Atlas. Atlas
does not believe that any other purchaser of the Partnership's gas
production will account for 10% of the Partnership's gas sales revenues
in 1997. See "Financial Statements".
In order to optimize the price it receives for the sale of natural
gas, Atlas markets portions of the gas through long term contracts, short
term contracts, and monthly spot sales. The marketing of natural gas
production has been influenced by the availability of certain financial
instruments, such as gas futures contracts, options and swaps which, when
properly utilized as hedge instruments, provide producers or consumers of
gas with the ability to lock in the price which will ultimately be paid
for the future deliveries of gas. Atlas is utilizing financial
instruments to hedge the price risks of the Partnership's gas production.
To assure that the financial instruments will be used solely for hedging
price risks and not for speculative purposes, Atlas has established an
Energy Price Risk Committee comprised of the President, General Counsel,
Chief Financial Officer (chairperson) and Director of Marketing, whose
responsibility will be to ascertain that all financial trading is done in
compliance with hedging policies and procedures. Atlas does not intend
to contract for positions that it cannot offset with actual production.
Any crude oil produced from the wells will flow directly into storage
tanks where it will be picked up by the oil company, a common carrier or
pipeline companies acting for the oil company which is purchasing the
crude oil. Crude oil usually does not present any transportation
problem. Atlas anticipates selling any oil produced by the wells to
Quaker State Oil Refining Company ("Quaker State") in spot sales. Atlas
was receiving approximately $21.50 per barrel in December, 1996, from
Quaker State for oil produced in the Mercer County area.
There are many companies, partnerships and individuals engaged in
natural gas exploration, development and operations in the areas where
the Partnership is conducting its activities. The industry is highly
competitive in all of its phases, including acquiring suitable
properties for development and the marketing of natural gas and oil.
With respect to the marketing of the Partnership's gas and oil the
Partnership should, through the use of Atlas' distribution system and
Atlas' experienced marketing staff, be able to sell the Partnership's
gas.
The Partnership has not and will not devote any funds to research and
development activities. There are no new products or services and the
Partnership does not have any patents, trademarks, licenses, franchises,
concessions, royalty agreements or labor contracts.
Oil and gas operations are regulated in Pennsylvania by the
Department of Environmental Resources, Division of Oil and Gas, which
imposes a comprehensive statutory and regulatory scheme with respect to
oil and gas operations. Among other things, such regulations involve
(a) new well permit and well registration requirements, procedures and
fees, (b) minimum well spacing requirements, (c) restrictions on well
locations and underground gas storage, (d) certain well site
restoration, groundwater protection and safety measures, (e) landowner
notification requirements, (f) certain bonding or other security
measures, (g) various reporting requirements, (h) well plugging
standards and procedures, and (i) broad enforcement powers. Generally,
the regulatory agency in the state where a producing natural gas well is
located supervises production activities and the transportation of
natural gas sold intrastate. Atlas does not expect that such regulations
will have a material adverse impact upon the operations of the
Partnership, and the Partnership believes it has complied in all material
respects with applicable state regulations and will continue to do so.
The Federal Energy Regulatory Commission ("FERC") regulates the
interstate transportation of natural gas and the pricing of natural gas
sold for resale interstate; and under the Natural Gas Policy Act of 1978
("NEPA") the price of intrastate gas. However, price controls for
natural gas production from new wells were deregulated on December 31,
1992, and such deregulated gas production may be sold at market prices
determined by supply, demand, BTU content, pressure, location of the
wells, and other factors.
Although the transportation and sale of gas in interstate commerce
remains heavily regulated, FERC has sought to promote greater competition
in natural gas markets by encouraging open access transportation by
interstate pipelines, with the goal of expanding opportunities for
producers to contract directly with local distribution companies and end-
users. FERC Order 636 which became effective May 18, 1992, requires gas
pipeline companies to, among other things, separate their sales services
from their transportation services; and provide an open access
transportation service that is comparable in quality for all gas
suppliers. The premise behind FERC Order 636 was that the gas pipeline
companies had an unfair advantage over other gas suppliers because they
could bundle their sales and transportation services together. FERC
Order 636 is designed to create a regulatory environment in which no gas
seller has a competitive advantage over another gas seller because it
also provides transportation services which should provide a benefit to
the Partnership.
The price of oil is not regulated and is subject only to supply,
demand, competitive factors, the gravity of the crude oil, sulfur content
differentials and other factors. The Partnership expects to sell only
small quantities of oil, if any.
From time to time there are a number of proposals being considered in
Congress and in the legislatures and agencies of various states that if
enacted would significantly and adversely affect the oil and natural gas
industry. Such proposals involve, among other things, the imposition of
new taxes on natural gas and limiting the disposal of waste water from
wells. At the present time, it is impossible to accurately predict what
proposals, if any, will be enacted by Congress or the legislatures and
agencies of various states and what effect any proposals which are
enacted will have on the activities of the Partnership.
Various federal, state and local laws and regulations covering the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, may affect the Partnership's operations
and costs as a result of their effect on oil and gas exploration,
development and production activities. The Partnership may generally be
liable for cleanup costs to the United States Government under the
Federal Clean Water Act for oil or hazardous substance pollution and
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA" or Superfund) for hazardous substance
contamination. Such liability is unlimited in cases of willful
negligence or misconduct, and there is no limit on liability for
environmental cleanup costs or damages with respect to claims by the
state or private persons or entities. In addition, the Environmental
Protection Agency will require the Partnership to prepare and implement
spill prevention control and countermeasure plans relating to the
possible discharge of oil into navigable waters and will further require
permits to authorize the discharge of pollutants into navigable waters.
State and local permits or approvals will also be needed with respect to
wastewater discharges and air pollutant emissions. Violations of
environment-related lease conditions or environmental permits can result
in substantial civil and criminal penalties as well as potential court
injunctions curtailing operations. Such enforcement liabilities can
result from either government or citizen prosecution. Compliance with
these statutes and regulations may cause delays in producing natural gas
and oil from the wells and may increase substantially the cost of
producing such natural gas and oil. However, such laws and regulations
are constantly being revised and changed, and the Partnership is unable
to predict the ultimate costs of complying with present and future
environmental laws and regulations, although it does not believe such
costs will be substantial. The Partnership is unable to obtain insurance
to protect against many environmental claims.
Item 2. Description of Property
The Partnership was closed on December 31, 1996, and 35.91 prospects
were designated by the Managing General Partner on that date. Based on
drilling results, 9 prospects originally designated by Atlas to be
drilled by the Partnership (Babyak, Byler #15, Doolin #1, Dye #2,
Fletcher #2, Gott #4, Kelly #1, Kingerski #1 and McCurdy #1) were
replaced with the following 9 prospects: Barber #2, Byler #11, Clark #5,
Harris #3, Hostetler #3, Kingerski #2, McDowell #14, McEwen #1 and
Reuberger #1. The Partnership will not acquire any additional prospects.
For purposes of the Drilling Activity table and the Productive Wells
table set forth below, a "gross well" is one in which the Partnership has
a working interest and a "net well" is a gross well multiplied by the
Partnership's working interest to which it is entitled under its drilling
agreement. The Partnership owns 100% of the working interest in 35 wells
and expects to own approximately 91% of the working interest in one well.
See "Productive Wells," below. All of the wells are subject to a 12.5%
landowner's royalty and have an 87.5% net revenue interest. Thirty-one
of the wells are each situated on a prospect of approximately 50 acres
and the prospect acreage for the remaining 5 wells ranges from
approximately 18 acres to 65 acres.
Drilling Activity. The following table sets forth the results from
July 26, 1996, (date of formation) to March 17, 1997, of the
Partnership's drilling activities. All of the wells in Mercer, Butler,
and Lawrence Counties, Pennsylvania. Currently, 33 wells have been spudded,
and no dry holes have been drilled.
Development Wells
Gross Net
Productive Dry Total Productive Dry Total
Period Ended March 17, 1997 33 0 33 33 0 33
The Partnership has not participated, and will not participate, in any
exploratory wells.
Present Activities. As of March 17, 1997, 18 of the wells were in
production, 11 of the wells were capable of production but not yet on line,
4 of the wells were spudded and were in the process of being drilled and
completed and the drilling of the remaining 2.91 wells was expected to be
commenced by March 30, 1997.
Productive Wells. The following table summarizes the Partnership's total
gross and net interest in productive natural gas wells at March 17, 1997.
Name of Well State County Gross Net
1. Babcock #1 Pennsylvania Mercer 1 1
2. Barber #2 Pennsylvania Mercer 1 1
3. Black #2 Pennsylvania Mercer 1 1
4. Byler #11 Pennsylvania Lawrence 1 1
5. Byler #14 Pennsylvania Lawrence 1 1
6. Carrier #1 Pennsylvania Mercer 1 1
7. Clark #5 Pennsylvania Mercer 1 1
8. Coast #1 Pennsylvania Butler 1 1
9. Court #1 Pennsylvania Mercer 1 1
10. Dye #1 Pennsylvania Mercer 1 1
11. Hall #1 Pennsylvania Mercer 1 1
12. Hissom #1 Pennsylvania Mercer 1 1
13. Hostetler #3 Pennsylvania Lawrence 1 1
14. Kelly #2 Pennsylvania Mercer 1 1
15. Kingerski #2 Pennsylvania Mercer 1 1
16. Kloos #4 Pennsylvania Mercer 1 1
17. Kurtek #1 Pennsylvania Mercer 1 1
18. Kurtz #2 Pennsylvania Lawrence 1 1
19. McCullough #11 Pennsylvania Mercer 1 1
20. McDowell #11 Pennsylvania Mercer 1 1
21. McDowell #14 Pennsylvania Mercer 1 1
22. McEwen #1 Pennsylvania Mercer 1 1
23. Morley Unit #1 Pennsylvania Mercer 1 1
24. Myers #2 Pennsylvania Butler 1 1
25. Peterka #2 Pennsylvania Mercer 1 1
26. Rains #1 Pennsylvania Mercer 1 1
27. Reuberger #1 Pennsylvania Mercer 1 1
28. Sines #3 Pennsylvania Mercer 1 1
29. Steele #1 Pennsylvania Mercer 1 1
30. Tait #3 Pennsylvania Mercer 1 1
31. Vernam #1 Pennsylvania Mercer 1 1
32. Vogan #3 Pennsylvania Mercer 1 1
33. Winger #1 Pennsylvania Mercer 1 1
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TOTAL 33 33.00
The name of each well is the same as the name of the Prospect. The
Partnership has begun selling production from 18 of the wells; however,
revenues are not anticipated until June, 1997. The remaining wells
should go on-line shortly. (See "Description of Business".) Although
there has been production from 18 of the wells, no reserve estimate on
such wells has been obtained from an independent petroleum engineer.
Item 3. Directors, Executive Officers and Significant Employees
Responsibilities of Atlas. The Partnership has no employees and
relies on Atlas as Managing General Partner of the Partnership. Atlas
also serves as driller/operator of the wells. Atlas has complete and
exclusive discretion and control over the operations and activities of
the Partnership and will make all of the Partnership's decisions
affecting the wells developed by the Partnership. Atlas will provide
continuing review and analysis of all wells developed by the Partnership
and will monitor all expenditures and commitments made on behalf of the
Partnership. In addition, Atlas will perform administrative services
relating to the funding and operation of the Partnership, Participant
reporting, financial budgeting and recordkeeping.
Business of Atlas. Atlas, a Pennsylvania corporation, was
incorporated in 1979 and Atlas Energy Group, Inc. ("Atlas Energy"), an
Ohio corporation, was incorporated in 1973. Atlas and Atlas Energy are
wholly owned subsidiaries of AIC, Inc., a corporation formed in July,
1995, which is a wholly owned subsidiary of The Atlas Group, Inc.,
("Atlas Group") that was formerly known as AEG Holdings, Inc., a
corporation which was also formed in July, 1995. As of December 31,
1996, Atlas and its affiliates operated approximately 1,172 natural gas
wells located in Ohio and Pennsylvania. Atlas and Atlas Energy have
acted as operator with respect to the drilling of a total of
approximately 1,611 natural gas wells, approximately 1,562 of which were
capable of production in commercial quantities. Atlas' primary offices
are located at 311 Rouser Road, Moon Township, Pennsylvania 15108.
Atlas and its affiliates employ a total of approximately ninety-nine
persons, consisting of three geologists, five landmen, five engineers,
thirty-three operations staff, eight accounting, one legal, eight gas
marketing, and eighteen administrative personnel. The balance of the
personnel are engineering, pipeline and field supervisors.
The other subsidiaries of AIC, Inc. are: (i) Atlas Gas Marketing,
Inc., a gas marketing company; (ii) Mercer Gas Gathering, Inc., a gas
gathering company which gathers gas from wells in Mercer County,
Pennsylvania, and delivers such gas directly to industrial end-users or
to interstate pipelines and local distribution companies; (iii)
Pennsylvania Industrial Energy, Inc., which sells natural gas to
industrial end-users in Pennsylvania; (iv) Transatco, Inc., which owns a
50% interest in Topico which operates a pipeline in Ohio; (v) Atlas
Energy Corporation, which serves as managing general partner of
exploratory programs and driller and operator; and (vi) Anthem
Securities, Inc., which is registering as a broker-dealer and becoming a
member firm of the NASD. In addition, Atlas is the sole owner of ARD
Investments, Inc., a corporation formed in July, 1995, and Atlas Energy
is the sole owner of AED Investments, Inc., a corporation formed in July,
1995. Prior to July, 1995, all of the Atlas companies were wholly owned
by Atlas Energy. The purpose of forming Atlas Group, AIC, Inc., ARD
Investments, Inc. and AED Investments, Inc. was to achieve more efficient
concentration of funds of the Atlas group of companies, thereby
minimizing transaction costs and maximizing returns on investment
vehicles.
Atlas and its affiliates have constructed for their use over 600
miles of gas transmission lines and produce in excess of twelve billion
cubic feet of natural gas annually from wells they operate. In addition,
Atlas Gas Marketing, Inc. (an affiliate) purchases for resale an
additional nine billion cubic feet of natural gas annually from third
party producers locally and in the south/southwest United States which is
marketed as described in "Description of Business."
ORGANIZATIONAL DIAGRAM
The Atlas Group, Inc.
|
AIC, Inc.
|
- -------------------------------------|
|
|--Atlas Resources, Inc. (Managin General Partner of Development Drilling
| Programs, Driller and Operator in Pennsylvania)
| |
| ARD Investments, Inc.
|
|--Mercer Gas Gathering, Inc. (Gas Gathering Company)
|
|--Pennsylvania Industrial Energy, Inc. ("PIE") (Sells Gas to Pennsylvania
| Industry)
|
|--Atlas Energy Corporation (Managing General Partner of Exploratory Drilling
| Programs and Driller and Operator)
|
|--Transatco, Inc., which owns 50% of Topico (Operates Pipeline in Ohio)
|
|--Atlas Gas Marketing, Inc. (Markets Natural Gas)
|
|--Anthem Securities Inc. (In the Process of Registering as a Broker-Dealer)
|
|--Atlas Energy Group, Inc. (Driller and Operator in Ohio)
|
AED Investments, Inc.
Directors, Executive Officers and Significant Employees of Atlas.
The executive officers, directors and significant employees of Atlas who
are also officers, directors and significant employees of Atlas Group and
Atlas Energy are as follows:
Name Age Positions or Office
Charles T. Koval 63 Chairman of the Board and a Director
James R. O'Mara 53 President, Chief Executive Officer and a Director
Bruce M. Wolf 48 General Counsel, Secretary and a Director
James J. Kritzo 62 Vice President of the Land Department
Donald P. Wagner 55 Vice President of Operations
Frank P. Carolas 37 Vice President of Geology
Tony C. Banks 42 Vice President of Finance and Chief Financial Officer
Barbara J. Krasnicki 52 Vice President of Administration
Jacqueline B. Poloka 46 Controller
John A. Ranieri 37 Director of Gas Marketing
Joseph R. Sadowski 66 Director
Charles T. Koval. Chairman of the Board and a director. He co-
founded Atlas Energy. Mr. Koval is serving and has served as a director
of Imperial Harbors since 1980.
James R. O'Mara. President, chief executive officer and a director.
Mr. O'Mara joined Atlas Energy in 1975. He is the President of Mercer
Gas Gathering, Inc.
Bruce M. Wolf. General Counsel, Secretary and a director. Mr. Wolf
joined Atlas Energy in January, 1980. Mr. Wolf is the President of Atlas
Gas Marketing, Inc., AIC, Inc., ARD Investments, Inc. and AED
Investments, Inc.
James J. Kritzo. Vice President of the Land Department. Mr. Kritzo
joined the Land Department of Atlas Energy in 1979.
Donald P. Wagner. Vice President of Operations. Mr. Wagner joined
Atlas Energy in 1979.
Frank P. Carolas. Vice President of Geology. Mr. Carolas joined
Atlas Energy in 1981.
Tony C. Banks. Vice President of Finance and Chief Financial
Officer. Mr. Banks joined Atlas in December, 1994. Prior to Mr. Banks
joining Atlas he had been with affiliates of Consolidated Natural Gas
Company ("CNG") since 1974. Mr. Banks started as an accounting clerk
with CNG's parent company in 1974 and progressed through various
positions with CNG's Appalachian producer, northeast gas marketer and
southwest producer to his last position as Treasurer of CNG's national
energy marketing subsidiary.
Barbara J. Krasnicki. Vice President of Administration, Ms.
Krasnicki has been with Atlas Energy since its inception in 1971.
Jacqueline B. Poloka. Controller. Ms. Poloka joined Atlas Energy in
1980.
John A. Ranieri. Director of Gas Marketing for Atlas Gas Marketing,
Inc. Mr. Ranieri was promoted to Gas Procurement Manager of Columbia Gas
of Pennsylvania in 1984 and remained with that organization until joining
Atlas in July, 1990.
Joseph R. Sadowski. A director. He co-founded Atlas Energy. Mr.
Sadowski has served as a director of Dixon Ticonderoga since 1987.
Item 4. Remuneration of Directors and Officers
The Partnership, as previously stated, has no employees. The
following table, however, sets forth all cash compensation paid by Atlas
(which has complete and exclusive discretion and control over the
operations and activities of the Partnership) during Atlas' fiscal year
ended July 31, 1996, to the three most highly compensated persons who are
executive officers or directors and to all executive officers and
directors of Atlas as a group, for services in all capacities while
acting as executive officers or directors of Atlas:
Name of individual
or identity of Capacities in which Cash
group (3) remuneration was received(4) Compensation (1)(2)
James R. O'Mara President, Chief Executive Officer $ 305,300
and a Director
Charles T. Koval Chairman of the Board $ 296,500
and a Director
Bruce M. Wolf General Counsel, Secretary $ 217,150
and a Director
Executive Officers $ 1,383,530
as a Group
(8 persons)
(1) The amounts indicated were composed of salaries and all cash bonuses
for services rendered to Atlas and its affiliates during the last
fiscal year, including compensation that would have been paid in cash
but for the fact the payment of such compensation was deferred.
(2) Atlas has an "ESOP" retirement plan, described below, and has a
401(K) plan which allowed employees to contribute the lesser of 15%
of their compensation or $9,500 for the calendar year 1996 or $9,240
for the calendar year 1995. Atlas contributed an amount equal to 50%
and 30% of each employee's contribution for the calendar years July
31, 1996 and 1995, respectively.
(3) There were no stock options granted or exercised during the fiscal
year ended July 31, 1996, to the above individuals.
(4) During the fiscal year ended July 31, 1996, each director was paid a
director's fee of $12,000 for the year. There are no other
arrangements for remuneration of directors.
Item 5. Security Ownership of Management and Certain Securityholders
As of December 31, 1996, the Partnership had issued and outstanding
800 Units. No officer or director of Atlas owns any Units, and no
partner beneficially owns more than 10% of the outstanding Units of the
Partnership.
Atlas Group owns 100% of the common stock of AIC, Inc. which owns
100% of the common stock of Atlas and Atlas Energy. The following table
sets forth, as of December 31, 1996, information as to the beneficial
ownership of common stock of Atlas Group by each person known to Atlas
Group to own beneficially 5% or more of the outstanding common stock of
Atlas Group, by directors and nominees, naming them individually, and by
all directors and officers of Atlas Group as a group:
Shares of Common Percent of Class
Charles T. Koval . . . . 109,391 26.445%
Joseph R. Sadowski . . 109,142 26.384%
James R. O'Mara . . . . 95,164 (1) 23.005%
Bruce M. Wolf . . . . . . . . 44,710 (2) 10.808%
Directors and Officers as
Group (9 persons) 377,654 (1)(2) 91.344%
(1) Includes 22,164 shares of Atlas Group issuable upon the exercise
of stock options held by Mr. O'Mara.
(2) Includes 14,210 shares of Atlas Group issuable upon the exercise
of stock options held by Mr. Wolf.
Atlas Group has adopted Atlas Energy's existing Employee Stock
Ownership Plan ("ESOP") for the benefit of its employees, other than
Messrs. Koval and Sadowski, to which it will contribute annually
approximately 6% of annual compensation in the form of shares of Atlas
Group. Atlas Group anticipates that it will contribute approximately
3,000 shares of its stock to the ESOP each year.
Pursuant to agreements entered into between Atlas Group and its
shareholders to accommodate the desire of Messrs. Sadowski and Koval to
gradually liquidate a majority of their stock ownership in Atlas Group in
preparation for their respective retirement from Atlas Group it is
anticipated that by the year 2003 the stock ownership of Atlas Group by
Messrs. Koval and Sadowski will be reduced through a series of stock
redemptions to approximately 15% each; the stock ownership of certain of
the remaining officers will be increased to approximately 60%, in the
aggregate; and the stock ownership of the ESOP will be approximately 10%.
The stock redemptions require Atlas Group to execute promissory notes,
from time to time, in favor of Messrs. Koval and Sadowski, the first of
which, in the original principal amount of $4,974,340 each, plus
interest at 13.5% were executed by Atlas Energy and were assumed by Atlas
Group. These promissory notes are totally subordinated to Atlas Group's
obligations to banks, the ESOP and any and all other debts or obligations
of Atlas Group, including its indemnification obligations and Atlas'
drilling obligation to the Partnership. If Atlas Group defaults on a
promissory note, Messrs. Koval and Sadowski are entitled to purchase up
to approximately an additional 1,500,000 shares of Atlas Group to regain
management control.
Atlas views the transactions discussed above as a natural transition
which will have no adverse effect on the operations or activities of
Atlas or the Partnership. In 1990, Messrs. Koval and Sadowski entered
into five year employment agreements with Atlas Energy which agreements
have been transferred to Atlas Group, renewable for an additional five
year term and on an annual basis after the first ten years. In this
regard, Mr. Sadowski retired other than as a director in 1996. The terms
and provisions of the employment agreement with Mr. Koval are subject to
negotiation at the time of each renewal and currently such agreement does
not provide for any severance payments. Also, during the terms of the
promissory notes Messrs. Koval and Sadowski have the right to serve as
directors of Atlas Group and as one of the two trustees of the ESOP.
On November 8, 1990, Atlas Energy entered into a Stock Option
Agreement which established a management employee stock option plan to
provide incentive compensation for certain of its key employees to
acquire up to 47,578 shares of common stock of Atlas Energy. Pursuant to
the plan, Messrs. O'Mara and Wolf were granted stock options for 22,164
and 14,210 shares, respectively. The options are 100% vested with an
option price of $1.00 per share and may be exercised when the promissory
notes to Messrs. Koval and Sadowski have been satisfied and will
terminate on August 15, 2012. The issuance of future options will be
determined at a later date. On November 14, 1990, Atlas Energy granted
92,098 shares of restricted common stock to certain management investors
of the company, which was valued at the time by Atlas Energy at
$2,695,708. The restrictions lapsed with respect to 25% of the shares on
November 14, 1990, 1991, 1992 and 1993. The Stock Option Agreement and
the outstanding stock options have been converted from Atlas Energy to
Atlas Group. The shareholders are also subject to a Shareholders
Agreement which provides, among other things, that such shareholders may
not transfer their shares in Atlas Group unless the shares have first
been offered to Atlas Group and the other shareholders.
Item 6. Interest of Management and Others in Certain Transactions
Oil and Gas Revenues. The Managing General Partner was allocated 25%
of the oil and gas revenues of the Partnership in return for paying
organization and offering costs equal to 15% of the Partnership
Subscription, 14% of tangible costs and contributing all leases to the
Partnership.
Leases. The Managing General Partner contributed (at the lower of
fair market value or the Managing General Partner's cost of such
prospects) 36 undeveloped prospects to the Partnership to drill
approximately 35.91 net wells. With respect to the prospects
contributed for these wells, Atlas received a credit in the amount of
$129,276.
Administrative Costs. The Managing General Partner and its
affiliates will receive an unaccountable, fixed payment reimbursement for
their administrative costs determined by the Managing General Partner to
be an amount equal to $75 per well per month, proportionately reduced if
less than 100% of the working interest in a well is acquired. With
respect to the net wells, Atlas will receive $32,319 for the
Partnership's first twelve months of operations.
Direct Costs. The Managing General Partner and its affiliates will
be reimbursed for all direct costs expended on behalf of the Partnership.
Drilling Contracts. On December 31, 1996, the Partnership entered
into a drilling contract with Atlas to drill and complete 35.91 net
wells. The Partnership paid Atlas for drilling and completing the
Partnership wells an amount equal to $37.39 per foot to the depth of the
well at its deepest penetration, proportionately reduced if less than
100% of the working interest in a well is acquired. With respect to the
net wells the total amount received by Atlas was $8,256,466.
Per Well Charges. As the wells commence production Atlas, as
operator, will be reimbursed at actual cost for all direct expenses
incurred on behalf of the Partnership and will receive well supervision
fees for operating and maintaining the wells during producing operations
in the amount of $275 per well per month subject to an annual adjustment
for inflation. With respect to the net wells, Atlas will receive
$118,503 for the Partnership's first twelve months of operations. The
well supervision fees are proportionately reduced to the extent the
Partnership acquires less than 100% of the Working Interest in a well.
As operator Atlas charges the Partnership at cost for third party
services and materials provided for each well which has been placed in
operation.
Transportation and Marketing Fees. The Partnership will pay a
combined transportation and marketing charge at a competitive rate, which
is currently 29 cents per MCF, to affiliates of Atlas, with respect to
natural gas produced by the Partnership.
Other Compensation. Atlas or an affiliate will be reimbursed by the
Partnership for any loan Atlas or an affiliate may make to or on behalf
of the Partnership and Atlas or the affiliate will have the right to
charge a competitive rate of interest on any such loan. If Atlas
provides equipment, supplies and other services to the Partnership it may
do so at competitive industry rates.
The following discussion relates solely to certain relationships and
related transactions with respect to Atlas and does not relate to the
Partnership. The following discussion has been included because Atlas
has been granted by the Partnership Agreement and the drilling and
operating agreement the exclusive right, power and authority to control
the operations and activities of the Partnership.
Atlas, its officers, directors and affiliates have in the past
invested, and may in the future invest, as participants in oil and gas
programs sponsored by Atlas on the same terms as unrelated investors.
Atlas, its officers, directors and affiliates have also participated in
the past, and may in the future participate, as working interest owners
in wells in which Atlas or its oil and gas programs have an interest.
Frequently, such participation has been on more favorable terms than the
terms which were available to unrelated investors and Atlas Group has
loaned to its officers and directors amounts in excess of $60,000 from
time to time as necessary for participation in such wells. Prior to
1996, such loans were either non-interest bearing or accrued interest at
variable rates, but since 1995 all new loans for such purpose are
required to bear interest. Currently no such loans are outstanding.
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PART II
Item 7. Market for Registrant's Common Equity and Related Stockholder
Matters
Market Information. There is no established public trading market
for the Investor General Partner interests or the Limited Partner
interests and it is not anticipated that such a market will develop. The
Partnership interests may be transferred only in accordance with the
provisions of Article 6 of the Partnership Agreement. The principal
restrictions on transferability are as follows:
(1) no transfer may be made which would result in materially adverse
tax consequences to the Partnership or the violation of federal or
state securities laws; and
(2) the consent of the Managing General Partner is required.
An assignee may become a substituted Limited Partner or Investor
General Partner only upon meeting certain further conditions, which
include:
(1) the assignor gives the assignee such right;
(2) the Managing General Partner consents to such substitution, which
consent shall be in the Managing General Partner's absolute
discretion;
(3) the assignee pays to the Partnership all costs and expenses
incurred in connection with such substitution; and
(4) the assignee executes and delivers such instruments, in form and
substance satisfactory to the Managing General Partner, necessary
or desirable to effect such substitution and to confirm the
agreement of the assignee to be bound by all terms and provisions
of the Partnership Agreement.
A substitute Limited Partner or Investor General Partner is entitled to
all rights attributable to full ownership of the assigned Units,
including the right to vote.
Holders. As of December 31, 1996, there were 378 investors.
Dividends. It is not anticipated that the Managing General Partner
will distribute revenues from the sale of production until June, 1997.
Thereafter, the Managing General Partner will review the accounts of the
Partnership at least quarterly to determine whether cash distributions
are appropriate and the amount to be distributed, if any. The
Partnership will distribute funds to the Managing General Partner and the
Participants allocated to their accounts which the Managing General
Partner deems unnecessary to be retained by the Partnership. In no
event, however, will funds be advanced or borrowed for purposes of
distributions, if the amount of such distributions would exceed the
Partnership's accrued and received revenues for the previous four
quarters, less paid and accrued operating costs with respect to such
revenues. The determination of such revenues and costs shall be made in
accordance with generally accepted accounting principles, consistently
applied. Cash distributions from the Partnership to the Managing General
Partner may only be made in conjunction with distributions to
Participants and only out of funds properly allocated to the Managing
General Partner's account.
Item 8. Legal Proceedings
None.
Item 9. Changes in and Disagreements on Accounting and Financial
Disclosure
None.
Item 10. Submission of Matters to a Vote of Securities Holders
None.
Item 11. Compliance with Section 16(a) of the Exchange Act
There are no equity securities registered pursuant to Section 12 of
the Exchange Act.
Item 12. Reports on Form 8-K
The registrant filed no reports on Form 8-K during the last quarter
of the period covered by this report.
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PART F/S
Item 13. Financial Statements
The Partnership's Financial Statements for the last fiscal year,
together with the opinion of the accountants thereon, are on pages 17
through 21 hereof.
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PART III
Item 14. Exhibits
(a) Exhibits
See Below
- --------------------------------------------------------------------------
EXHIBIT INDEX
Description Location
4(a) Certificate of Limited Partnership for Certificate as filed
Atlas-Energy for the Nineties-Public #5 Ltd. with the Secretary of
the Commonwealth of
Pennsylvania, effective
July, 26 1996.
4(b) Amended and Restated Certificate and Agreement See attached File
of Limited Partnership for Atlas-Energy for the
Nineties-Public #5 Ltd. dated December 31, 1996
10(a) Drilling and Operating Agreement with exhibit See attached File
23(a) Consent of McLaughlin & Courson See attached File
- --------------------------------------------------------------------------
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Atlas-Energy for the Nineties-Public #5 Ltd.
By: (Signature and Title): Atlas Resources, Inc., Managing General
Partner
By (Signature and Title):
/s/James R. O'Mara, President, Chief Executive Officer
and a Director
Date: March 27, 1997
In accordance with the Exchange Act, this report has been signed by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By (Signature and Title):
/s/Charles T. Koval, Chairman of the Board and a
Director
Date: March 27, 1997
By (Signature and Title):
/s/James R. O'Mara, President, Chief Executive Officer
and a Director
Date: March 27, 1997
By (Signature and Title):
/s/Bruce M. Wolf, General Counsel, Secretary and a
Director
Date: March 27, 1997
By (Signature and Title):
/s/Tony C. Banks, Vice President of Finance and Chief
Financial Officer
Date: March 27, 1997
Supplemental information to be Furnished
With Reports Filed Pursuant to Section 15(d)
of the Exchange Act by Non-reporting Issuers
An annual report will be furnished to security holders subsequent to the
filing of this report.
- --------------------------------------------------------------------------
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Atlas-Energy for the Nineties-Public #5 Ltd.
By: (Signature and Title): Atlas Resources, Inc., Managing General
Partner
By (Signature and Title): /s/ James R. O'Mara
James R. O'Mara, President, Chief Executive Officer
and a Director
Date: March 27, 1997
In accordance with the Exchange Act, this report has been signed by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By (Signature and Title): /s/ Charles T. Koval
Charles T. Koval, Chairman of the Board and a
Director
Date: March 27, 1997
By (Signature and Title): /s/ James R. O'Mara
James R. O'Mara, President, Chief Executive Officer
and a Director
Date: March 27, 1997
By (Signature and Title): /s/ Bruce M. Wolf
Bruce M. Wolf, General Counsel, Secretary and a
Director
Date: March 27, 1997
By (Signature and Title): /s/ Tony C. Banks
Tony C. Banks, Vice President of Finance and Chief
Financial Officer
Date: March 27, 1997
Supplemental information to be Furnished
With Reports Filed Pursuant to Section 15(d)
of the Exchange Act by Non-reporting Issuers
An annual report will be furnished to security holders subsequent to the
filing of this report.
============================================================================
Page 17 - 21 Financial Information
AUDITED FINANCIAL STATEMENTS
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #5 LTD.
A PENNSYLVANIA LIMITED PARTNERSHIP
JULY 26, 1996 (DATE OF FORMATION) TO DECEMBER 31, 1996
- -----------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Partners
Atlas-Energy for the Nineties-Public #5 Ltd.
A Pennsylvania Limited Partnership
We have audited the accompanying balance sheet of Atlas-Energy for
the Nineties-Public #5 Ltd., A Pennsylvania Limited Partnership as of
December 31, 1996 and the related statements of income and changes in
partners' capital accounts and cash flows for the period July 26, 1996
(date of formation) to December 31, 1996. These financial statements
are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Atlas-
Energy for the Nineties-Public #5 Ltd., A Pennsylvania Limited
Partnership as of December 31, 1996 and the results of its operations,
changes in partners' capital accounts and cash flows for the period
July 26, 1996 (date of formation) to December 31, 1996 in conformity
with generally accepted accounting principles.
/s/McLaughlin & Courson
McLaughlin & Courson
Pittsburgh, Pennsylvania
February 11, 1997
- ----------------------------------------------------------------------------
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #5 LTD.
A PENNSYLVANIA LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Cash $ 21,639
Oil and gas well drilling contracts and leases 8,385,742
Organizational and syndication costs 1,198,836
$9,606,217
LIABILITIES AND PARTNERS' CAPITAL
Partners' capital $9,606,217
STATEMENT OF INCOME AND CHANGES IN PARTNERS' CAPITAL ACCOUNTS
FROM JULY 26, 1996 (DATE OF FORMATION) TO DECEMBER 31, 1996
MANAGING
GENERAL OTHER
PARTNER PARTNERS TOTAL
REVENUE
Interest income $ -0- $ 21,639 $ 21,639
PARTNERS' CAPITAL CONTRIBUTIONS
Cash -0- 7,992,240 7,992,240
Organizational and syndications costs 1,198,836 -0- 1,198,836
Tangible costs 264,226 -0- 264,226
Leasehold costs 129,276 -0- 129,276
PARTNERS' CAPITAL AT END OF YEAR $1,592,338 $8,013,879 $9,606,217
See notes to financial statements
=-------------------------------------------------------------------------=
STATEMENT OF CASH FLOWS
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #5 LTD.
A PENNSYLVANIA LIMITED PARTNERSHIP
FROM JULY 26, 1996 (DATE OF FORMATION) to DECEMBER 31, 1996
Increase (Decrease) In Cash)
Cash flows from operating activities:
Interest $ 21,639
Cash flows used in investing activities:
Oil and gas well drilling contracts (7,992,240)
Cash flows from financing activities:
Partners' capital contributions 7,992,240
Cash at December 31, 1996 $ 21,639
Supplemental cash flow information:
Assets contributed by Managing General Partner:
Tangible costs $ 264,226
Organizational and syndication costs 1,198,836
Lease costs 129,276
$1,592,338
See notes to financial statements
- ----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENT
ORGANIZATION AND DESCRIPTION OF BUSINESS
Atlas-Energy for the Nineties-Public #5 Ltd. (the "Partnership"), is a
Pennsylvania limited partnership which includes Atlas Resources, Inc.
("Atlas"), of Pittsburgh, Pennsylvania, as Managing General Partner and
Operator, and 378 other investors as either Limited Partners or Investor
General Partners. The Partnership was funded to drill and operate gas wells
located primarily in Mercer County, Pennsylvania.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statements are prepared in accordance with generally accepted
accounting principles.
The Partnership proposes to use the successful efforts method of
accounting for oil and gas producing activities. Costs to acquire mineral
interests in oil and gas properties and to drill and equip wells are
capitalized.
Capitalized costs are to be expensed at unit cost rates calculated
annually based on the estimated volume of recoverable gas and the related
costs.
FEDERAL INCOME TAXES
The Partnership is not treated as a taxable entity for federal income
tax purposes. Any item of income, gain, loss, deduction or credit flows
through to the partners as though each partner had incurred such item
directly. As a result, each partner must take into account his pro rata
share of all items of partnership income and deductions in computing his
federal income tax liability. Many provisions of the federal income tax
laws are complex and subject to various interpretations.
PARTICIPATION IN REVENUES AND COSTS
Atlas and the other partners will generally participate in revenues and
costs in the following manner:
OTHER
ATLAS PARTNERS
Organization and offering costs 100 % 0 %
Lease costs 100 % 0 %
Revenues 25 % 75 %
Direct operating costs 25 % 75 %
Intangible drilling costs 0 % 100 %
Tangible costs 14 % 86 %
Tax deductions: Intangible drilling
and development costs 0 % 100 %
Depreciation 14 % 86 %
Depletion allowances 25 % 75 %
TRANSACTIONS WITH ATLAS AND ITS AFFILIATES
The Partnership has entered into the following significant transactions
with Atlas and its affiliates.
Drilling contracts to drill and complete Partnership wells at an
anticipated cost of $37.39 per foot on completed wells.
Administrative costs at $75 per well per month
Well supervision fees initially of $275 per well per month plus the
cost of third party materials and services
Gas transportation and marketing charges at competitive rates which
currently is 29 cents per MCF
PURCHASE COMMITMENT
Subject to certain conditions, investor partners may present their
interests beginning in 2000 for purchase by Atlas. Atlas is not obligated
to purchase more than 10% of the units in any calendar year.
SUBORDINATION OF MANAGING GENERAL PARTNER'S REVENUE SHARE
Atlas will subordinate a part of its partnership revenues in an amount
up to 10% of production revenues of the Partnership net of related operating
costs, administrative costs and well supervision fees to the receipt by
participants of cash distributions from the Partnership equal to at least
10% of their agreed subscriptions of $8,000,000 determined on a cumulative
basis, in each of the first five years of Partnership operations, commencing
with the first distribution of revenues to the Participants.
INDEMNIFICATION
In order to limit the potential liability of the investor general
partners, Atlas and AEG Holdings, Inc. (parent company of Atlas) have agreed
to indemnify each investor general partner from any liability incurred which
exceeds such partner's share of Partnership assets.