ENERGYNEWSLINE THE QUARTERLY NEWSLETTER FOR THE ATLAS ENERGY RESOURCES, LLC INVESTMENT COMMUNITY
1ST QUARTER 2009
VOLUME 8, ISSUE 1
In This Issue Year-End Drilling Program Update Page 1
— It’s Tax Time Again Page 1-2
— Tommy Thompson named VP, Horizontal Drilling Page 2
— New Uses For Natural Gas: Natural Gas in Our Homes Page 3
— Notes from the Road Page 4
Energy NewsLine is published by Atlas Energy Resources, LLC Editorial staff: Marci F. Bleichmar, Senior Vice President, Marketing Jack L. Hollander, Senior Vice President, Direct Participation Programs
Year-End Drilling Program Update Atlas Energy Resources recently announced that it completed the sale of its year-end drilling program with subscriptions totaling $201,551,000 in investor capital. This represents a 23.3% increase from the 2007 year-end program, which raised $163,459,000. Drilling for the program commenced in late November 2008. All told, Atlas Energy raised $437,992,000 in new investor drilling funds during calendar year 2008, constituting an increase of approximately $74.5 million, or 20.5%, compared with funds raised in 2007. Atlas Energy's subsidiary serves as managing general partner of the partnership. SOURCE: Atlas Energy Resources, LLC NOTE: Past performance is not a predictor of future results. Factors that could cause future results to differ materially from expectations include financial performance, regulatory changes, changes in local or national economic conditions and other risks detailed from time to time in Atlas Energy's reports filed with the SEC, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K.
Bruce Bundy, Regional Marketing Director, Central Vicki Burbridge, Regional Marketing Director, Southwest Barry Dow, Regional Marketing Director, South
It’s Tax Time Again Tax time is fast approaching, which means it’s time to collect the paperwork and information needed to file our tax returns. Investors in Atlas partnerships can expect to receive their Schedule K-1s by mid-March. The mailing of the Schedule K-1 will be accompanied by short-version instructions, and the full text of the instructions will be posted on our website, www.atlasenergyresources.com. It’s important to have the tax preparer review the instructions since he or she serves as a guide in reporting the various items found on the partnership’s Schedule K-1 on the individual tax return.
Three Common Reporting Errors
Andrew Eisen, Regional Marketing Director, Northeast
Even the most experienced of tax preparers needs to look out for three very common reporting errors for the first reporting year of a partnership. We suggest that before investors file their returns that they confer with their financial advisors to review the reporting of the intangible drilling cost (IDC) deduction on the federal income tax return.
Robert Gourlay, Regional Marketing Director, Southeast Brannon McPherson, Regional Marketing Director, Midwest Jason Napoli, Regional Marketing Director, Northwest Jim O’Mara, Regional Marketing Director, Appalachia Nancy Hiler, Managing Editor Karen Morstad & Associates, Designer We welcome your comments/questions. Contact InvestorServices@AtlasAmerica.com or 800-251-0171 option 3
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Itâ€™s Tax Time Again (continued from page 1) First, if you invested in Atlas Resources Public 17(B)-2008 and/or Atlas Resources Public 18-2008(A) L.P. during 2008 as a general partner, then the partnershipâ€™s Schedule K-1 will reflect that designation. An investor general partner can treat the IDC deduction (line 13J on the Schedule K-1) as an ordinary loss and not as a loss from a passive activity. This distinction is important as it allows the investor to use this ordinary loss as an offset to income that is derived from any source during the 2008 tax year. The IDC deduction is to be reported on Schedule E Part II of the 1040 tax return (not on Schedule C) as a non-passive item, so that and from there it will wind up on line 17 on the front of Form 1040. Second, probably the most common reporting error is treating the full amount of the IDC deduction as a tax preference item. As long as the IDC deduction does not reduce alternative minimum taxable income by more than 40%, then there is no tax preference associated with the investment. Many preparers do not know this rule and mistakenly report the full IDC deduction as a tax preference item. Finally, for those investor general partners who are self-employed, the IDC deduction can be treated as net earnings from self-employment and used to offset Schedule C net income when computing the self-employment tax (Form SE). All of these tax reporting provisions are supported by sections of the Internal Revenue Code. The back page of the tax form instructions provides the various tax code sections to which tax preparers can and should refer to verify the tax treatment. Improper reporting of the intangible drilling cost deduction can cost you thousands of dollars of tax savings. NOTE: Taxpayers are urged to seek advice and consult with their own licensed financial professionals or independent tax advisors regarding tax reporting based on their particular financial circumstances. This summary is provided as a general explanation and is not intended to be, nor should it be construed as, tax advice with regard to the preparation of your individual tax return. The partnership tax laws are very complex and may be subject to varying interpretations.
Tommy Thompson named VP, Horizontal Drilling Atlas Energy Resources recently appointed Tommy L. Thompson to the position of Vice President, Horizontal Drilling. Mr. Thompson's primary responsibilities include the oversight of Atlas Energy's horizontal drilling efforts, particularly in the Marcellus Shale in southwestern Pennsylvania. "We are thrilled that Tommy has joined Atlas as a senior member of our operating team," said Richard Weber, President and Chief Operating Officer Tommy L. Thompson of Atlas Energy. "He is a proven Vice President, Horizontal Drilling manager of large-scale horizontal drilling programs and is the perfect complement to our already deep bench of talent. Tommy is already making contributions, most notably in our horizontal development of the Marcellus Shale." Mr. Thompson comes to Atlas Energy with 30 years of experience in drilling engineering, including in horizontal and extended reach drilling. Most recently, Mr. Thompson was with Wagner & Brown, a Texas-based oil and gas producer, where he managed the vertical and horizontal drilling operations in the Woodford Shale in eastern Oklahoma. Prior to that Mr. Thompson worked for Occidental Petroleum for over 28 years, where he eventually led drilling operations in the Permian Basin of western Texas, Ecuador and Qatar. Mr. Thompson has a Bachelor of Science degree in Petroleum Engineering from Louisiana Tech University.
In this second part of our series of articles on the many uses of natural gas, we focus on some of its varied residential applications.
Natural Gas in Our Homes Although the industrial sector accounts for the greatest proportion of natural gas use in the United States, the residential sector consumes the second greatest amount â€” about 4.4 trillion cubic feet (Tcf ) of the 21.6 Tcf consumed annually, or about 20% of the total, according to the Energy Information Administration. PIPELINE FUEL - 2.7%
VEHICLE FUEL 0.1%
OIL & GAS INDUSTRY OPERATIONS 5.2%
Although natural gas air conditioner units are initially more expensive than comparable electric units, they are considerably more efficient and require less maintenance. Modern residential air conditioner units use close to 30 percent less energy than in years past, and have an expected working life of 20 years with very little maintenance. Cooking with a natural gas range or oven can provide many benefits, including easy temperature control, self ignition and self cleaning, as well as being approximately one-half the cost of cooking with an electric range, according to the Department of Energy. And, many top chefs prefer natural gas ranges for their quick heating ability and temperature control.
ELECTRIC POWER 28.7% INDUSTRIAL 30.0%
SOURCE: Energy Information Administration, October 2008
More than 60 million American households use natural gas today, according to the national industry trade group the American Petroleum Association. Natural gas is one of the least expensive forms of energy available to the residential consumer, the Department of Energy reports, in particular, historically much cheaper than electricity as a source of energy. The most common residential applications for natural gas include home heating â€“ and cooling --cooking, washing and drying clothes, and heating water. Additionally, natural gas-powered appliances have become increasingly popular in recent years.
Heating, Cooling and Cooking Heating and cooking are the two most popular uses of natural gas in our homes. As far as home heating, the Department of Energy reports that modern, top-of-the-line residential gas furnaces can achieve efficiencies of over 90 percent. This means that only 10 percent of the energy contained in the natural gas is lost as waste heat. Even low-end natural gas furnaces achieve high efficiencies, usually at about 78 percent. Although it might sound surprising, cooling a home with natural gas is not new. In fact, according to the Natural Gas Supply Association, natural gas air conditioning provided most of the air conditioning requirements of the 1940s and 1950s. Due to new advancements in technology and efficiency natural gas air conditioning is currently experiencing a resurgence in popularity.
Natural Gas Appliances Natural gas appliances have improved considerably in recent years in terms of functioning economically and safely. In general, long-term operating costs of natural gas equipment are often lower than those of other energy sources, according to the Natural Gas Supply Association. This is the case because, although many gas powered appliances are initially more expensive than their electric counterparts, they are commonly much less expensive to operate, have a longer expected life, and require relatively low maintenance. Modern natural gas appliances run the gamut. Today, natural gas is used to generate the energy for use in stoves/ranges, clothes dryers, water heaters, fireplaces, barbecues, patio heaters, pool and hot tub heaters, and outdoor lighting. Although natural gas has many uses, and can supply energy to a vast number of residential appliances, there are some energy requirements around the house which currently cannot be satisfied by natural gas. A television or a computer, to name two examples, will likely never be powered directly by natural gas, but will instead require electricity. However, taken a step further, natural gas is often the source of energy that generates the electricity produced by the local utility company, which means that natural gas is actually the originating energy source for these appliances. SOURCES: American Petroleum Institute, Natural Gas Supply Association/ naturalgas.org, and Energy Information Administration.
Notes from the Road A series highlighting the work of Atlas’ Regional Marketing Directors. Brannon McPherson Regional Marketing Director, Midwest Specific niche As the Regional Marketing Director in the Midwest, Brannon assists financial planners in helping their clients to understand Atlas’ oil and natural gas partnerships as one of the diverse array of investments available.
ATLAS ENERGY RESOURCES, LLC
“Our product fills one specific niche,” he said. “It is an investment to be considered for tax and financial planning. We provide scenarios about how it best works for the individual.” Regional Marketing Director, Midwest Brannon McPherson shown here in Denver, Colorado.
Westpointe Corporate Center One 1550 Coraopolis Heights Road, 2nd Floor Moon Township, PA 15108 Phone: 800-251-0171 Local: 412-262-2830 Fax: 412-262-7430 www.atlasenergyresources.com
rec • la• ma• tion [rek-luh-mey-shuhn] –noun The restoration of land for cultivation or other use. Example: Atlas ensures the reclamation of all drilling sites to their original, natural state or better. This newsletter is written for informational purposes only. It is not to be represented as policy or as a promotion of or solicitation of an offer to buy or sell oil and gas interests. An offering can only be made to qualified investors through a current, effective prospectus or private placement memorandum. This newsletter does not constitute an offer to sell or a solicitation of an offer to buy securities in Atlas Energy Resources, LLC.
Westpointe Corporate Center One 1550 Coraopolis Heights Road, 2nd Floor Moon Township, PA 15108
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