KUNZMAN & BOLLINGER, INC.
ATTORNEYS-AT-LAW
5100 N. BROOKLINE, SUITE 600
OKLAHOMA CITY, OKLAHOMA 73112
Telephone (405) 942-3501
Fax (405) 942-3527
June 17, 2005
ELECTRONIC FILING
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Mr. H. Roger Schwall
Securities and Exchange Commission
Mail Stop 0405
450 Fifth Street N.W.
Washington, DC 20549
RE: Atlas America Series 25-2004 (A) L.P.
Atlas America Series 25-2004 (B) L.P.
Registration Statements on Forms 10
Filed April 29, 2005
File Nos. 0-51271 and 0-51272, respectively
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Dear Mr. Schwall:
This letter is in response to your comment letter dated June 6, 2005
for the above-referenced filings. For your convenience, we first restate your
comment in italics and then provide our response. Also, comments in our
responses relating to revisions in an amended registration statement are
intended to apply to the respective amended registration statements for both
Atlas America Series 25-2004(A) L.P. (which we sometimes refer to in our
responses as "Series 25(A)") and Atlas America Series 25-2004(B) L.P. (which we
sometimes refer to in our responses as "Series 25(B)"), unless otherwise noted.
Also, we sometimes refer to Series 25(A) and/or Series 25(B) in our responses as
a "partnership" or the "partnerships," as the context requires.
General
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1. Please be advised that both Form 10 registration statements will
automatically become effective 60 days from the date of the first
filing. Upon effectiveness, you will become subject to the reporting
requirements of the Securities Exchange Act of 1934. In the event that
it appears that you will not be able to respond by the 60th day, you
may wish to consider withdrawing your registration statement and
refiling when you have prepared a response to our comments.
We acknowledge the comment concerning the effective dates of
both Form 10 registration statements, however, under the
Securities Exchange Act of 1934 there is no procedure for us
to withdraw the registration statements.
2. Where comments in one section or documents also relate to disclosure in
another section or document, please make parallel changes to all
affected disclosure. This will eliminate the need for us to repeat
similar comments.
We acknowledge your comment and we have made parallel changes
to all affected disclosure which relate to your comments.
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 2
3. We acknowledge receipt of your letter dated May 10, 2005. We note that
you have not filed this letter as correspondence on EDGAR. Please
ensure that you file the May 10, 2005 letter and, unless the subject of
a Rule 83 or confidential treatment request, all other future written
communications, as correspondence on EDGAR.
Pursuant to your comment, our letter dated May 10, 2005 was
filed on June 6, 2005 with the SEC as correspondence on EDGAR,
in a separate filing for Series 25(A) and in a separate filing
for Series 25(B). Also, subject to the exceptions set forth in
your comment, all other future written communications from us
concerning this matter will be filed as correspondence on
EDGAR.
Item 1. Business
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4. Please provide us with an organizational chart depicting the Atlas
Resources, Inc. entities and affiliated entities with respective unit
ownership delineated.
Each amended registration statement has been revised to
include two organizational charts which depict Atlas
Resources, Inc. and its affiliated entities, with the
respective ownership delineated. We have included two
organizational charts because Resource America, Inc., the
indirect parent company of Atlas Resources, and certain other
affiliated entities of Atlas Resources, are currently in the
process of a corporate spin-off, two mergers and other
corporate actions, as previously disclosed in Item 5.
"Directors and Executive Officers - Managing General Partner,"
and as disclosed in a new subsection in Item 5, which has the
subheading "Organizational Charts," in the amended
registration statements. Upon the conclusion of these
corporate transactions, there will be material changes in the
organizational chart as illustrated in the charts included in
the amended registration statements. The corporate
transactions which are disclosed in the amended registration
statements are described below.
In 2004 Resource America conducted a public offering of a
portion of its common stock in Atlas America, Inc., which is
another indirect parent company of Atlas Resources, Inc. After
the conclusion of the offering, Resource America continued to
own approximately 80.2% of Atlas America's common stock.
Resource America has advised Atlas Resources that it intends
to distribute all of its remaining shares of common stock in
Atlas America to its common stockholders on or before June 30,
2005. In addition, Resource America has advised Atlas
Resources that the following corporate transactions, among
others, will occur before the distribution of the Atlas
America stock is made by Resource America:
o Atlas Energy Group, Inc., the driller and operator in Ohio
and a wholly-owned subsidiary of AIC, Inc., will be
acquired by merger by Atlas America. Atlas Energy Group
will then cease to exist and its subsidiary AED
Investments, Inc. will become a direct wholly-owned
subsidiary of Atlas America, and Atlas America will assume
Atlas Energy Group's business as driller and operator in
Ohio; and
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 3
o Atlas Energy Holdings, Inc., a holding company which is
wholly-owned by Resource America, will be merged into
Resource America and Atlas Energy Holdings will cease to
exist.
Thus, the first organizational chart included in the amended
registration statements currently applies. The second
organizational chart will apply after the spin-off, mergers
and other corporate actions discussed above have occurred,
which Resource America has advised Atlas Resources will be on
or before June 30, 2005.
5. Please disclose the price at which each unit was originally sold.
The registration statements have been revised in the first
paragraph under Item 1 "Business - General," to disclose the
price at which each unit was originally sold. The units were
offered at $25,000 per unit, however, the terms of the
offering, which were disclosed to all potential investors in
Series 25(A) and Series 25(B), permitted registered investment
advisors and their clients, and selling agents and their
registered representatives and principals, to pay a discounted
price of $23,000 per unit, and the managing general partner,
its officers, directors and affiliates, and investors who
bought units through the officers and directors of the
managing general partner to pay a discounted price of $21,625
per unit. The discounted unit prices for those groups of
investors reflected certain offering fees and sales
commissions which were not paid for the sale of those units.
6. Revise to describe in greater detail the investment objectives to which
you refer. For example, what is the likelihood that investors will
receive the $2,500 distribution? Likewise, is the $22,500 deduction to
which you refer guaranteed for each investor?
We have revised the disclosure of investment objectives in
Item 1 "Business," in both amended registration statements to
describe them in greater detail. In particular, we addressed
the likelihood that the investors will receive the aggregate
annual distributions of $2,500 per unit, and disclosed that
each participant is guaranteed a deduction for intangible
drilling costs in an amount equal to not less than 90% of the
subscription price he paid for his units, subject to certain
conditions, as discussed below.
Also, we added a new risk factor to Item 1 "Business - Risk
Factors - Risks Relating to Our Business," as the seventh risk
factor, which has the subheading "Our Total Cash Distributions
During Our First Five Years May be Less Than $2,500 Per Unit
Per Year." This new risk factor discloses in greater detail
that the minimum aggregate annual distributions of $2,500 per
unit during the first five years described with respect to the
managing general partner's subordination obligation is not a
guarantee and could be less than that amount.
In Item 1 "Business - General," both registration statements
set forth obtaining a 2004 tax deduction for intangible
drilling costs of approximately $22,500 per unit, 90%, for
each unit purchased for $25,000, as one of the investment
objectives. In this regard, a deduction of $22,500 per unit
for intangible drilling costs was not guaranteed to each
investor, because the units were sold at different prices as
discussed in our response to Comment 5. Instead, the
allocation provisions of the partnership agreements, which
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 4
were filed as Exhibits 4.2 to the respective registration
statements, have the same effect, as a practical matter, of a
guarantee that each investor's deduction for intangible
drilling costs will not be less than 90% of the subscription
price paid by each participant for his units. These allocation
provisions are set forth in Section 5.01(a) and its
subsections of the partnership agreements, and they generally
provide that:
o not more than 10% of the amount paid by an investor for
his units can be used by the partnership to pay the
equipment costs of its wells; and
o all of the remaining amount paid by the investor for his
units (i.e., 90%) must be used by the partnership to pay
the intangible drilling costs of its wells.
Thus, the effect of these allocation provisions is that each
investor is guaranteed a deduction for intangible drilling
costs in an amount equal to not less than 90% of the amount
the investor paid for his units. We have revised the
investment objective accordingly in each amended registration
statement. Theoretically, it is possible that the investors'
share of a partnership's equipment costs could be less than
10% of the partnership's subscription proceeds. In that event,
however, the investors' deduction would be more than 90%, but
the deduction could never be less than 90%.
We also revised this investment objective to clarify that
although the 90% deduction for intangible drilling costs is
guaranteed, the IRS' treatment of the deduction is not
guaranteed by either Series 25(A) or Series 25(B). We
disclosed that if the IRS were to reduce the amount of the
deduction for intangible drilling costs or defer part of the
deduction to 2005 for wells that were prepaid in 2004, the
investors would have no right to reimbursement from Series
25(A) or Series 25(B), as the case may be, for any increase in
taxes, penalties or interest owed by the investors. Also,
parallel disclosure was made concerning the additional
aggregate 10% depreciation deductions.
7. You note in the registration statement for Atlas America Series 25-2004
(A) L.P. that UGI Energy Services, Inc. and Colonial Energy, Inc.
accounted for 57% and 24% respectively, of the company's total revenues
in 2004. Did any other customer account for in excess of 10% of your
revenues? Please disclose.
We have revised the registration statement to disclose in Item
1 "Business - General - Major Customers," that no other
customer accounted for more than 10% of Series 25(A)'s total
revenues for the period ended December 31, 2004. This
information has been confirmed to us by Atlas Resources, Inc.,
the managing general partner of Series 25(A).
8. Likewise, you note in the registration statement for Atlas America
Series 25-2004 (B) L.P. that UGI Energy Services, Inc., First Energy
Solutions Corporation, and American Energy Refining accounted for 35%,
18% and 17%, respectively, of the company's total revenues in 2004. Did
any other customer account for in excess of 10% of your revenues?
Please disclose.
We have revised the registration statement to disclose in Item
1 "Business - General - Major Customers," that no other
customer accounted for more than 10% of Series 25(B)'s total
revenues for the period ended December 31, 2004. This
information has been confirmed to us by Atlas Resources, Inc.,
the managing general partner of Series 25(B).
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 5
Risk Factors
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9. Many of the subheadings merely state a fact about your business without
fully describing the risks associated with that fact. For example, we
note "Natural Gas And Oil Prices Are Volatile And Uncertain," "Drilling
Wells Is Highly Speculative," and "Estimates of Proved Reserves are
Uncertain." Please revise each of your subheadings to ensure that it
discloses the specific risk or risks that you are discussing in the
text. Rather than stating that a factor could "adversely affect" your
business, the subheading should indicate what the adverse effects may
be, such as reduced income or revenues or loss of customers.
The risk factor subheadings in the amended registration
statements have been revised to fully disclose and describe
the specific risks associated with the facts stated in the
subheading and the risk or risks discussed in the text, and to
indicate what the adverse effects may be. As noted in Comment
11 concerning bundling separate risk factors, and in
accordance with our response to Comment 2 to make parallel
revisions, we have broken-out the previous risk factor with
the subheading "Government Regulation of the Oil and Natural
Gas Industry is Stringent," into two separate risk factors
which are set forth as risk factors (5) and (6), below. In
this regard, set forth below are the risk factor subheadings
in the registration statements filed on April 29, 2005, and
the revised subheading for that risk factor which is included
in the amended registration statements. Also set forth below
are the subheadings of the new risk factors which are
discussed above and elsewhere in this letter, and are
designated "New Risk Factor:" in bold.
(1) "Natural Gas and Oil Prices are Volatile and Uncertain,"
has been revised to "Natural Gas and Oil Prices are
Volatile and a Substantial Decrease in Prices,
Particularly Natural Gas Prices, Would Decrease Our
Revenues, Our Cash Distributions and the Value of Our
Properties and Could Reduce Our Managing General
Partner's Ability to Loan Us Funds and Meet Its Ongoing
Obligations to Indemnify Our Investor General Partners
and Purchase Units Under Our Presentment Feature";
(2) "Drilling Wells is Highly Speculative," has been revised
to "Drilling Wells is Highly Speculative and We Could
Drill Some Wells Which Are Nonproductive or Which Are
Productive, But Fail to Return the Costs of Drilling and
Operating Them, and the Drilling of Some of Our Wells
Could Be Curtailed, Delayed or Cancelled If Unexpected
Events Occur";
(3) NEW RISK FACTOR: "Our Managing General Partner's
Management Obligations to Us Are Not Exclusive, and if
It Does Not Devote the Necessary Time to Our Management,
There Could Be Delays in Providing Timely Reports and
Distributions to Our Participants, and Our Managing
General Partner, Serving As Operator of Our Wells, May
Not Supervise the Wells Closely Enough";
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 6
(4) "Estimates of Proved Reserves are Uncertain," has been
revised to "Current Conditions May Change and Reduce Our
Proved Reserves, Which Could Reduce Our Revenues";
(5) "Government Regulation of the Oil and Natural Gas
Industry is Stringent," has been revised to "Government
Regulation of the Oil and Natural Gas Industry is
Stringent, and Could Cause Us to Incur Substantial
Unanticipated Costs for Regulatory Compliance,
Environmental Remediation of Our Well Sites (Which May
Not Be Fully Insured) and Penalties, and Our Drilling
Operations May Be Delayed or Limited";
(6) NEW RISK FACTOR: "Our Natural Gas and Oil Activities Are
Subject to Drilling and Operating Hazards Which Could
Result in Substantial Losses to Us";
(7) NEW RISK FACTOR: "Our Total Cash Distributions During
Our First Five Years May be Less than $2,500 Per Unit
Per Year";
(8) "Increases in Drilling and Operating Costs," has been
revised to "Increases in Drilling and Operating Costs
Could Decrease Our Net Revenues from Our Wells";
(9) NEW RISK FACTOR: "Our Limited Operating History Creates
Greater Uncertainty Regarding Our Ability to Operate
Profitably";
In response to Comment 11, as discussed below, "Adverse Events
in Marketing Our Natural Gas Could Reduce Our Distributions"
has been broken up into three separate risk factors and the
subheading has been revised accordingly as set forth in (10),
(11) and (12) below:
(10) "Competition May Reduce Our Revenues from the Sale of
Our Natural Gas";
(11) "We Sell Our Natural Gas to a Limited Number of
Purchasers Without Guaranteed Prices, and if the Prices
Paid by the Purchasers Decrease, Our Revenues Also Will
Decrease, and if a Purchaser Stops Buying Some or All of
Our Natural Gas, the Sale of Our Natural Gas Could be
Delayed Until We Find Another Purchaser and the
Substitute Purchaser We Find May Pay a Lower Price,
Which Would Reduce Our Revenues";
(12) "We Could Incur Delays in Payment, or Substantial Losses
if Payment is Not Made, for Natural Gas We Previously
Delivered to the Purchaser, Which Could Delay or Reduce
Our Revenues and Cash Distributions";
(13) "Participation with Third-Parties in Drilling Wells May
Require Us to Pay Additional Costs," has been revised to
"If the Third-Parties Which Are Participating in
Drilling Some of Our Wells Fail to Pay Their Share of
the Well Costs, We Would Have to Pay Those Costs in
Order to Get the Wells Drilled, and If We Are Not
Reimbursed the Increased Costs Would Reduce Our Cash
Flow and Possibly Could Reduce the Number of Wells We
Can Drill";
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 7
(14) "We Expect to Incur Costs in Connection with Exchange
Act Compliance and We May Become Subject to Liability
for Any Failure to Comply," has been revised to "We
Expect to Incur Costs in Connection with Exchange Act
Compliance and We May Become Subject to Liability for
Any Failure to Comply, Which Will Reduce Our Cash
Available for Distribution";
(15) "Illiquidity of Our Oil and Gas Properties," has been
revised to "We Intend to Produce Natural Gas and/or Oil
from Our Wells Until They Are Depleted, Regardless of
Any Changes in Current Conditions, Which Could Result in
Lower Returns to Our Participants as Compared With Other
Types of Investments Which Can Adapt to Future Changes
Affecting Their Portfolios"; and
(16) NEW RISK FACTOR: "Since Our Managing General Partner is
Not Contractually Obligated to Loan Funds to Us, We
Could Have to Curtail Operations or Sell Properties if
We Need Additional Funds and Our Managing General
Partner Does Not Make the Loan."
10. Include a risk factor that addresses your limited operating history.
A new risk factor has been included as the ninth risk factor
in Item 1 "Business - Risk Factors - Risks Relating to Our
Business," of the amended registration statements, which
addresses the limited operating histories of Series 25(A) and
Series 25(B), respectively. The subheading of this new risk
factor is "Our Limited Operating History Creates Greater
Uncertainty Regarding Our Ability to Operate Profitably."
Adverse Events in Marketing Our Natural Gas Could Reduce Our Distributions
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11. It appears that you have bundled a number of separate risks under this
risk factor heading. Please separately discuss the risks associated
with competition, your limited number of customers and the credit risks
associated with natural gas purchasers under appropriate risk factor
headings. Where you discuss your substantial dependence on a limited
number of customers, you must include the name of any such customer
that accounts for in excess of 10% of your revenues.
We have revised the amended registration statements to
separately discuss under appropriate risk factor headings the
risks associated with competition, the limited number of
customers and the credit risks associated with natural gas
purchasers. Also, where we discuss the substantial dependence
of Series 25(A) or Series 25(B) on a limited number of
customers, we have revised the amended registration statements
to include the name of any such customer that accounts for in
excess of 10% of the revenues of Series 25(A) or Series 25(B),
respectively. The subheadings of the three new risk factors
which replace the former risk factor in the amended
registration statements are set forth below:
o "Competition May Reduce Our Revenues from the Sale of Our
Natural Gas";
o "We Sell Our Natural Gas to a Limited Number of Purchasers
Without Guaranteed Prices, and if the Prices Paid by the
Purchasers Decrease, Our Revenues Also Will Decrease, and
if a Purchaser Stops Buying Some or All of Our Natural
Gas, the Sale of Our Natural Gas Could be Delayed Until We
Find Another Purchaser and the Substitute Purchaser We
Find May Pay a Lower Price, Which Would Reduce Our
Revenues"; and
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 8
o "We Could Incur Delays in Payment, or Substantial Losses
if Payment is Not Made, for Natural Gas We Previously
Delivered to the Purchaser, Which Could Delay or Reduce
Our Revenues and Cash Distributions."
12. Consider including a risk factor discussing the company's lack of
employees and its reliance on the managing general partner for the
management of its operations. We note that the managing general partner
performs its management duties through its officers and directors and
that these individuals divide their time between the company and
affiliates of the company. Accordingly, discuss how this time
allocation affects the company's operations.
We have revised the amended registration statements to
include, as the third risk factor, a new risk factor which
discusses how the allocation of the managing general partner's
time affects Series 25(A) and Series 25(B), respectively. The
subheading of this new risk factor is "Our Managing General
Partner's Management Obligations to Us Are Not Exclusive, and
if It Does Not Devote the Necessary Time to Our Management,
There Could Be Delays in Providing Timely Reports and
Distributions to Our Participants, and Our Managing General
Partner, Serving As Operator of Our Wells, May Not Supervise
the Wells Closely Enough."
13. Please disclose how long you believe you can continue operations with
the cash you currently have.
We have revised our discussion in the amended registration
statements to discuss in greater detail the cash requirements
of Series 25(A) and Series 25(B), respectively, for their next
12 months of operations. See the fifth paragraph in Item 2
"Financial Information - Liquidity and Capital Resources" for
Series 25(A) and the third paragraph for Series 25(B).
14. We note your statement that the company will borrow funds from the
managing general partner if it incurs a shortfall in funding its
ongoing expenses. You state, however, that the managing general partner
is not contractually obligated to make any loans to the company and
that the company will not borrow from third parties. Please discuss in
a risk factor how this non-commitment by either the managing general
partner or third parties to extend any loans to the company might
affect the company's operations.
We have revised the amended registration statements to
include, as the sixteenth risk factor, a new risk factor which
discusses how this non-commitment by either the managing
general partner or third parties to extend any loans to Series
25(A) or Series 25(B) might affect their operations. The
subheading of this risk factor is "Since Our Managing General
Partner Is Not Contractually Obligated to Loan Funds to Us, We
Could Have to Curtail Operations or Sell Properties if We Need
Additional Funds and Our Managing General Partner Does Not
Make the Loan."
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 9
Item 4. Security Ownership of Certain Beneficial Owners and Management
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15. The table in the registration statement for Atlas America Series
25-2004(B) appears to suggest that none of the identified individuals
holds any of the partnership securities. Please confirm. We may have
further comments.
Atlas Resources believes that the table in Item 4 "Security
Ownership of Certain Beneficial Owners and Management" clearly
shows that none of the identified individuals owns any of the
units in Series 25(B). Also, Atlas Resources, Inc., the
managing general partner of Series 25(B), has authorized us to
confirm to you, on its behalf, that none of the individuals
identified in that table in the amended registration statement
purchased, or currently holds, any units which have been
issued by Series 25(B).
Item 7. Certain Relationships and Related Transactions
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16. Please include as exhibits all contracts and agreements giving rise to
the related party transactions discussed in this section.
All of the related party transactions discussed in Item 7
"Certain Relationships and Related Transactions" in the
respective registration statements arise from, and are
governed by, the Amended and Restated Certificate and
Agreement of Limited Partnership for Atlas America Series
25-2004(A) L.P. and the Amended and Restated Certificate and
Agreement of Limited Partnership for Atlas America Series
25-2004(B) L.P. (the "partnership agreements"), which were
filed as Exhibit 4.2 to the Form 10 for Series 25(A) and to
the Form 10 for Series 25(B), respectively, both of which were
filed on April 29, 2005.
In addition to the partnership agreements referred to above,
the Drilling and Operating Agreement for Atlas America Series
25-2004(A) L.P. and the Drilling and Operating Agreement for
Atlas America Series 25-2004(B) L.P., which were filed as
Exhibit 10.1 to the Form 10 for Series 25(A) and to the Form
10 for Series 25(B), respectively, both of which were filed on
April 29, 2005, also gave rise to the related party
transactions described under the following subheadings in Item
7:
o "- Drilling Contracts"; and
o "- Per Well Charges."
Also, we are including as Exhibit 1.1 to the amended
registration statements for Series 25(A) and Series 25(B), the
Atlas America Series 25-2004 Program Dealer-Manager Agreement
for Anthem Securities, Inc., which served as Anthem's
Dealer-Manager Agreement for both Series 25(A) and Series
25(B). In addition to the partnership agreements referred to
above, Anthem's Dealer-Manager Agreement for Atlas America
Series 25-2004 Program also gave rise to the related party
transactions described under the subheading "Dealer-Manager
Fees" in Item 7.
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 10
Item 10. Recent Sales of Unregistered Securities
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17. We note your letter of May 10, 2005. Please tell how many potential
investors were contacted and how you were able to do so without
conducting a general solicitation. We note that units were sold to 635
investors.
In response to your first question concerning the number of
offerees, Anthem Securities, Inc., an affiliate of Atlas
Resources and a broker/dealer member firm of the National
Association of Securities Dealers, Inc. (the "NASD"), which
acted as dealer-manager of both offerings, has advised us that
a total of 936 offerees in Series 25(A) and a total of 1,895
offerees in Series 25(B) were reported to it by the persons
who directly offered and sold partnership units in the
offerings.
Anthem and another NASD member broker/dealer firm, which is
not affiliated with Atlas Resources, served as dealer-managers
of both offerings, and are sometimes referred to together in
the singular by us as the "dealer-manager." The dealer-manager
formed a selling group consisting of other NASD member
broker/dealer firms (the "selling agents") to offer and sell
units in the offerings. Each selling agent executed a selling
agent agreement, the form of which is attached as Exhibit "B"
to the dealer-manager agreement for Anthem, which covered both
Series 25(A) and Series 25(B) and is included as Exhibit 1.1
to each of the amended registration statements. Also, one
registered investment advisor signed a selected investment
advisor agreement. The form of the selected investment advisor
agreement is included as Exhibit 1.2 to each of the amended
registration statements. Although each partnership sold one
unit to a client of the registered investment advisor, no
commissions or other compensation for those sales were paid by
Anthem, Atlas Resources or the partnerships. The
dealer-manager agreement, selling agent agreement and selected
investment advisor agreement are sometimes referred to
together by us as the "selling agreements." Anthem, however,
acted only as dealer-manager, not as a selling agent, and it
did not directly offer or sell any units to offerees or
investors, respectively, in Series 25(A) or Series 25(B).
Your second question asked for an explanation of how the
potential investors were contacted without conducting a
general solicitation, noting that there were 635 investors. In
this regard, we would like to clarify that Atlas Resources has
advised us that there are 635 investors in Series 25(A) and
634 investors in Series 25(B).
Both Series 25(A) and Series 25(B) were offered under the
exemption provided by Rule 506 of Regulation D. We believe,
based on the SEC interpretive letters and no-action letters
which have addressed the issue of general solicitation under
Rule 502(c) of Regulation D, that a solicitation in a Rule 506
offering is not a prohibited general solicitation merely
because there is a relatively large number of offerees as
compared with offerings which rely solely on the exemption
provided under Section 4(2) of the Securities Act of 1933, as
amended. For example, the SEC staff had no objection to a
proposed offering of partnership interests by the general
partner of a new partnership to 330 previous investors in the
general partner's prior partnership offerings.
Woodtrails-Seattle, Ltd., SEC Interpretive Letter (available
August 9, 1982). Nor did the staff comment on the number of
proposed offerees where a company proposed to offer securities
to 600 persons who were existing clients of an officer of the
company who was an insurance broker. Mineral Lands Research &
Marketing Corp. (dated December 4, 1985).
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 11
Instead of looking at the number of offerees or investors,
neither of which is limited by Rule 506 of Regulation D, the
staff responses in the interpretive letters cited above, and
many others, have focused on whether there was a pre-existing
substantive relationship between the issuer (or its agents)
and the prospective offerees. With regard to a "pre-existing"
relationship, the staff determined that "sufficient time" had
elapsed between the establishment of the relationship and an
offer, and that Rule 502(c) would not be violated, where the
relationship was established before the broker/dealer began
participating in a Regulation D offering. E.F. Hutton & Co.
(available December 3, 1985). The staff's response in E.F.
Hutton & Co. also stated that a substantive relationship would
be established if the broker/dealer had sufficient information
to evaluate the prospective offeree's sophistication and
financial circumstances. This description of a pre-existing
substantive relationship is consistent with the staff's
descriptions of a pre-existing substantive relationship in
Woodtrails-Seattle and Mineral Lands, cited above. Based on
the foregoing, Atlas Resources believes that a solicitation of
an offeree is permitted under Rule 502(c) if the issuer (or
its agent) has a pre-existing substantive relationship with
the offeree, regardless of the number of offerees, assuming
the other requirements of Rule 502(c) are satisfied (e.g., no
general advertising).
Series 25(A), Series 25(B) and Atlas Resources, as each
partnership's managing general partner, relied on the
dealer-manager agreements, the selling agent agreements and
the selected investment advisor agreements to ensure that the
offering of units in both Series 25(A) and Series 25(B) was
not made by means of a general solicitation. These selling
agreements imposed legal obligations on the selling agents to:
o conduct the offerings in accordance with Regulation D;
o comply with the prohibition of general solicitation and
general advertising set forth in Rule 502(c) of Regulation
D (in fact, Rule 502(c) was repeated essentially verbatim
in the agreements as set forth below); and
o distribute only the offering materials which had been
approved by the managing general partner and were provided
to them by the dealer-manager or the managing general
partner.
For example, the selling agent agreement contained the
following representations and warranties of the selling
agents, among others, to the dealer-manager:
"1.(e) Pursuant to your appointment as a Selling Agent,
you shall comply with all the provisions of Regulation D,
insofar as Regulation D applies to your activities under
this Agreement. Further, you shall not engage in any
activity which would cause the offer and/or sale of the
Units not to comply with Regulation D, the Act, the Act of
1934, the applicable rules and regulations of the
Securities and Exchange Commission, which is referred to
as the "Commission," the applicable state securities
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 12
laws and regulations, this Agreement, and the NASD Conduct
Rules including Rules 2420, 2730, 2740, and 2750, and
specifically you agree as set forth below.
....
(ii) Units shall not be offered and/or sold by you by
means of any form of general solicitation or general
advertising, including, but not limited to, the
following:
(1) any advertisement, article, notice, or other
communication published in any newspaper,
magazine, or similar media or broadcast over
television or radio;
(2) any seminar or meeting whose attendees have been
invited by any general solicitation or general
advertising; or
(3) any letter, circular, notice or other written
communication constituting a form of general
solicitation or general advertising."
....
(v) In connection with any offer or sale of the Units,
you agree to the following:
....
(4) not to provide any written information,
statements, or sales materials other than the
Private Placement Memorandum, the Sales
Literature, and any supplements or amendments to
the Private Placement Memorandum unless approved
in writing by the Managing General Partner."
Also, both Series 25(A) and Series 25(B) were offered and
closed in 2004. Prior to those offerings, Anthem had developed
business relationships with many broker/dealer firms, and it
has advised us that 44 broker/dealer firms participated as
selling agents in offering Series 25(A) and 68 broker/dealer
firms participated as selling agents in offering Series 25(B).
These participating broker/dealer firms varied in size. Some
of these selling agents had only a few registered
representatives, while others had hundreds or even thousands
of registered representatives. In addition, some of the
broker/dealers were licensed as broker/dealers in only a few
states, but many of them were licensed in all 50 states.
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 13
The end result, however, was that hundreds of registered
representatives participated in offering units in both Series
25(A) and Series 25(B) under the selling agent agreements
their respective broker/dealer firms signed with the
dealer-manager. In doing so, those registered representatives
brought with them their customers with whom they had
established a pre-existing substantive relationship as that
term has been described by the SEC in its interpretive letters
and no-action letters as described above. This, in turn,
created a relatively large pool of thousands of qualified
potential offerees as discussed below, however, based on the
number of the offerees reported to Anthem by the selling
agents and the limited manner in which the offerings could be
conducted as described in the selling agreements, Atlas
Resources does not believe that the registered representatives
contacted all of these qualified potential offerees.
As discussed above, Atlas Resources believes that each
registered representative could properly offer an investment
in Series 25(A) or Series 25(B) to each of his or her
customers with whom the registered representative had a
pre-existing substantive relationship. Of course, the
determination as to whether a selling agent had sufficient
information concerning its customers' financial condition and
sophistication to form the type of relationship required under
the SEC staff's interpretive letters and no-action letters,
before it could properly offer units in Series 25(A) and/or
Series 25(B) to its customers, was a decision that had to be
made by each selling agent on a customer-by-customer basis.
Thus, Anthem, as dealer-manager, and Atlas Resources, as
managing general partner, relied on the selling agreements and
the selling agents' duty to comply with their applicable
regulatory obligations (e.g., NASD Conduct Rules), to properly
determine which of their customers could be offered
investments in Series 25(A) and Series 25(B). Also, the
selling agent agreements required the selling agents to report
the number of their respective offerees of units in Series
25(A) and Series 25(B) to Anthem as set forth above.
In addition, Atlas Resources, as managing general partner,
made its own determination with respect to whether to accept
or reject, as an investor, each offeree who subscribed for
units in Series 25(A), Series 25(B) or both, including its
determination, at the time of sale, that it had a reasonable
belief as to whether or not each subscriber was an accredited
investor under Rule 501(a) of Regulation D.
Engineering Comments
- --------------------
Risks Relating to Our Business
- ------------------------------
Estimates of Proved Reserves Are Uncertain
- ------------------------------------------
18. Proved reserves are those volumes that engineering and geological data
support as being reasonably certain of being produced under existing
conditions. Although existing conditions such as prices and costs may
change in the future, under current conditions, if you are not
reasonably certain of recovering the estimates you state are proved,
they do not meet the definition of proved reserves as found in Rule
4-10(a) of Regulation S-X. Please reword this so as not to imply that
you are uncertain of recovering your proved reserve estimates under
current conditions.
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 14
This risk factor is the fourth risk factor in the amended
registration statements and its subheading has been changed to
"Current Conditions May Change and Reduce Our Proved Reserves,
Which Could Reduce Our Revenues." In addition, this risk
factor has been reworded in the amended registration
statements to affirmatively state that the managing general
partner is reasonably certain that Series 25(A) and Series
25(B) will produce their respective proved reserves under
current conditions.
Properties
- ----------
Drilling Activities
-------------------
19. We note your disclosure in the registration statement for Atlas America
Series 25-2004(B) L.P. that all of your wells were drilled during 2004,
except approximately 106.40 wells. However, the table indicates that
you had 47 gross productive development wells and 4 gross dry
development wells at year-end. Please clarify your document as to the
number of wells owned.
We have revised the amended registration statements to clarify
the disclosure of the number of wells owned by Series 25(A)
and Series 25(B), respectively, at December 31, 2004, in Item
3 "Properties - Drilling Activity." For example, the statement
as to the number of wells drilled by the partnership as of
December 31, 2004, in the paragraph preceding the table, has
been cross-referenced to the table in both registration
statements.
Natural Gas and Oil Producing Activities
- ----------------------------------------
20. The bottom line of the reserve table contains a dollar sign ($). As
these columns are in units of MCF of natural gas and barrels of oil
please remove the dollar sign.
The dollar signs have been removed from the bottom lines of
the reserve table under the subheading "Natural Gas and Oil
Producing Activities" in Note 9 of "Notes to Financial
Statements" in Item 15 "Financial Statements," in the amended
registration statements for both Series 25(A) and Series
25(B).
21. Please include the Standardized Measure of Estimated Future Net Cash
Flows calculation as prescribed by FASB 69.
In a telephone conversation on June 10, 2005, Mr. James Murphy
advised us that Comment 21 is waived. In this telephone
conversation, we discussed an SEC Interpretive Response with
Mr. Murphy which included in its statement of facts that the
need for disclosure of reserve value information may not be
significant to investors in limited partnerships which have
buy-out provisions where the general partner agrees to
purchase partnership interests that are offered for sale based
on a specified valuation formula. We also discussed that the
staff concluded in this interpretive response that certain
reserve value information and supplemental information
specified in FASB 69 generally may be omitted from Forms 10-K
filed by a limited partnership if reserve value information is
available to the investors pursuant to the partnership
agreement, with the exception, however, of mergers or exchange
offers. We further discussed that the partnership agreements
for both Series 25(A) and Series 25(B) contain similar buy-out
provisions in Section 6.04 and its subsections (i.e., the
presentment feature), and the partnerships generally are
KUNZMAN & BOLLINGER, INC.
Mr. H. Roger Schwall
Securities and Exchange Commission
June 17, 2005
Page 15
analogous to the type of limited partnership described in the
interpretive response's statement of facts regarding limited
partnership Form 10-K's. Finally, we discussed that the units
in Series 25(A) and Series 25(B) are not listed and have no
public market. The presentment feature is set forth in Section
6.04 and its subsections of the partnership agreements for
both Series 25(A) and Series 25(B), and is described in the
amended registration statements in Item 11 "Description of
Registrant's Securities to be Registered - Presentment
Feature."
Also, pursuant to your request, a signed letter from Atlas Resources,
Inc. which contains all of the representations you requested in your comment
letter is enclosed with this letter.
In addition to the revisions to the registration statements described
above, we also made certain updating and conforming revisions. Please contact
the undersigned or Gerald A. Bollinger if you have any questions or comments
concerning this response.
Very truly yours,
KUNZMAN & BOLLINGER, INC.
/s/ Wallace W. Kunzman, Jr.
Wallace W. Kunzman, Jr.
cc: Mr. Freddie Kotek
Ms. Nancy McGurk
Ms. Carmen Moncada-Terry