Atlas Pipeline Partners, L.P. Reports Third Quarter 2010 Results

Atlas Pipeline Partners, L.P. (NYSE: APL) ("APL” or the "Partnership”) today reported adjusted earnings before interest, income taxes, depreciation and amortization ("Adjusted EBITDA”), a non-GAAP measure, of $48.4 million in the third quarter of 2010, an increase of 56% as compared to $31.0 million in the third quarter of 2009. Net income was $288.5 million for the third quarter of 2010, including a gain on the sale of the Elk City/Sweetwater system of $311.5 million, compared with a net loss of $12.3 million for the prior year third quarter. Adjusted EBITDA was higher compared to the third quarter of last year primarily due to higher realized natural gas liquids ("NGL”) and condensate prices in the current quarter. Adjusted EBITDA excludes gains and losses from asset sales outside the ordinary course of business, option premium expense and non-cash items that impact net income. The Partnership believes this measure provides a more accurate comparison of the operating results for the periods presented.

Distributable Cash Flow, a non-GAAP measure, was $21.5 million for the third quarter of 2010, a $24.7 million increase compared to the third quarter of 2009. The increase was attributed to higher Adjusted EBITDA along with lower cash interest expense. Distributable Cash Flow per average common limited partner unit for the quarter was $0.40, or approximately $1.60 annualized. On October 18, 2010, the Partnership declared a distribution for the third quarter of 2010 of $0.35 per common limited partner unit to holders of record on November 8, 2010, and payable on November 12, 2010. This distribution represents Distributable Cash Flow coverage of 1.1x for the third quarter of 2010 and 1.2x pro forma for the Elk City transaction assuming effective July 1, 2010. A reconciliation of non-GAAP measures, including Adjusted EBITDA and Distributable Cash Flow, is provided within the financial tables of this release.

"We are pleased to report solid results for the third-quarter of this year. We have had consistent, organic growth across all of our systems, especially within our most abundant liquid-rich plays in the Mid-Continent. We continue to experience increased drilling in all of our areas affording us opportunities to manage our operating capacity in 2011. In addition to our positive organic growth, we have made meaningful financial improvements to the business during the quarter. Upon the successful closing of the sale of our Elk City system, we have transformed the balance sheet of the company to a position of strength and flexibility. Relative to the industry, we now have significant liquidity and are operating at lower leverage than many of our peers. We now look forward to capitalizing on projects and opportunities in the future that complement our current business and increase value for our stakeholders. Finally, we are very pleased to reinstate the distribution this quarter at $0.35 per common unit. This positive development, a quarter earlier than anticipated, allows us to resume a sustainable distribution that we expect to grow through 2011 and beyond,” stated Eugene Dubay, Chief Executive Officer of the Partnership.

On September 17, 2010, the Partnership announced it completed the sale of the Elk City/Sweetwater system to Enbridge Energy Partners, L.P. (NYSE: EEP) for $682 million in cash, excluding working capital adjustments and transactions costs. The Partnership utilized the proceeds from this transaction to repay its senior secured term loan and a significant portion of its revolving credit facility. A pro forma presentation of the Partnership’s third quarter 2010 Adjusted EBITDA and Distributable Cash Flow, assuming this transaction had occurred on July 1, 2010 is as follows (in thousands):

Capitalization, Liquidity and Hedging

The Partnership had total liquidity (cash plus available capacity on its revolving credit facility) of $363.0 million as of September 30, 2010, up $318.1 million from December 31, 2009. Total debt outstanding was reduced to $507.9 million at September 30, 2010, from $1,254.2 million at December 31, 2009, a decrease of $746.3 million.

The $507.9 million of total debt includes $495.1 million of 8 1/8% and 8 3/4% senior unsecured notes that mature in 2015 and 2018, respectively, $12.0 million of outstanding borrowings under its $380.0 million revolving credit facility that matures in 2013, as well as other debt totaling $0.8 million. The Partnership had $362.9 million of available capacity under its revolving credit facility as of September 30, 2010.

The Partnership continues to enhance its risk management portfolio. Recently, the Partnership entered into additional ethane and propane swaps for the fourth quarter 2010 and the first and second quarter of 2011. As of November 8, 2010, the Partnership has natural gas liquids and condensate hedges in place for the remainder of 2010 and into 2011. As of November 8, 2010, the Partnership has price hedges in place for approximately 56% of margin value for the fourth quarter of 2010; and approximately 54% for the first half of 2011. Counterparties to the Partnership’s risk management activities consist primarily of investment grade commercial banks that are lenders under the Partnership’s credit facilities, or affiliates of such banks.

Operating Results

Gross margin was $47.2 million for the third quarter 2010, compared to $44.8 million for the prior year period. Gross margin includes total revenues and other income (or loss) less natural gas and liquids expense. The increase in gross margin was primarily due to increased commodity prices, along with increased volumes on the Midkiff/Benedum and Velma systems, partially offset by lower production volumes on our Chaney Dell system. Year-over-year volume increases on Midkiff/Benedum are a direct result of the completion of the Partnership’s Consolidator Plant to support additional development drilling in the Permian Basin. Compared to the third quarter of 2009, volumes on Chaney Dell are lower due to decreased producer drilling activity in these areas for much of last year, which was primarily driven by lower commodity prices. Volumes on the Velma system increased during the current quarter due to production added on the new Madill to Velma gathering system. Compared to the second quarter of 2010, volumes have increased on all of the Partnership’s systems.

Midkiff/Benedum

The Midkiff/Benedum system’s average natural gas processed volume was 171.0 million cubic feet per day ("Mmcfd”) for the third quarter 2010, compared with 152.3 Mmcfd for the prior year comparable quarter. Average gross NGL production volumes increased to 28,557 barrels per day ("bpd”), up 43.3% when compared to the prior year comparable quarter. Increased volumes are primarily due to the completion of the new Consolidator Plant, which processes gas in the growing Spraberry and Wolfberry Trends. The plant offers increased capacity and higher ethane and propane recoveries over the legacy facility. The Partnership expects volumes on this system to continue to increase as its partner, Pioneer Natural Resources Company (NYSE: PXD), continues to pursue its 440 well drilling plan for 2010 and 700 wells in 2011. The Partnership is also seeing significant growth in natural gas volumes from other producers in the Spraberry and Wolfberry Trends.

Chaney Dell

The Chaney Dell system had average NGL production of 11,561 bpd, which represents a 13.6% reduction for the third quarter 2010 from the prior year comparable period. NGL production was lower because of ethane rejection for approximately one month during the current quarter. Gathered volumes were lower in the third quarter 2010 due to decreased drilling in western Oklahoma, however processed volumes were 211.5 Mmcfd, or 4.5% higher than the comparable quarter last year. The Partnership completed the Woolsey expansion of its Chaney Dell system into Kansas during June 2010, on-time and on-budget, and experienced a 22.2% increase in processed gas volumes compared to second quarter 2010 due to this project and the completion of a planned turn-around during second quarter 2010. The Partnership expects volumes to continue to increase in the fourth quarter 2010 as volumes from Kansas continue to be added to the system.

Velma

The Velma system’s average natural gas processed volume was 84.3 Mmcfd for the third quarter 2010, an increase of approximately 7.0% compared with the prior year comparable quarter. The increase is primarily due to new production gathered on the Madill to Velma pipeline system. Gathered volumes were up 8.8 Mmcfd, or 10.8% compared to the same quarter last year. Average NGL production increased to 10,231, up approximately 14.7%, compared to 8,922 bpd for the prior year third quarter due to the increased processed volumes.

Appalachia

Volumes on the Laurel Mountain system averaged 114.9 Mmcfd during the third quarter 2010, up 19.3% compared to the third quarter 2009.

Corporate and Other

General and administrative expense, net of non-cash compensation, decreased 19.5% to $6.8 million for the third quarter 2010, compared with $8.5 million for the prior year comparable period. The decrease is attributable to continued focus in costs and efficiencies reflective of our operating strategy.

Depreciation and amortization expense was $18.6 million for the third quarter 2010, up 3.9%, compared with $17.9 million for the prior year comparable quarter. Depreciation in the Mid-Continent increased primarily from expansion capital expenditures incurred subsequent to September 30, 2009.

Net of deferred financing costs, interest expense decreased to $21.5 million for the third quarter 2010, down 18.9%, as compared with $26.5 million for the prior year. This decrease was primarily due to a $735.2 million reduction in debt outstanding since September 30, 2009.

Interested parties are invited to access the live webcast of an investor call with management regarding the Partnership’s third quarter 2010 results on Tuesday, November 9, 2010 at 11:00 am ET by going to the Investor Relations section of the Partnership’s website at www.atlaspipelinepartners.com. An audio replay of the conference call will also be available beginning at 2:00 pm ET on Tuesday, November 9, 2010. To access the replay, dial 1-888-286-8010 and enter conference code 51004679.

Atlas Pipeline Partners, L.P. is active in the gathering and processing segments of the midstream natural gas industry. In the Mid-Continent region of Oklahoma, southern Kansas, and northern and western Texas, APL owns and operates five active gas processing plants as well as approximately 8,300 miles of active intrastate gas gathering pipeline. In Appalachia, APL is a 49% joint venture partner with Williams in Laurel Mountain Midstream, LLC, which manages a natural gas gathering system focused on the Marcellus Shale in southwestern Pennsylvania. For more information, visit the Partnership's website at www.atlaspipelinepartners.com or contact IR@atlaspipeline.com.

Atlas Pipeline Holdings, L.P. (NYSE: AHD) is a limited partnership which owns and operates the general partner of Atlas Pipeline Partners, L.P., through which it owns a 1.9% general partner interest, all the incentive distribution rights and approximately 5.8 million common limited partner units of Atlas Pipeline Partners, L.P.

Atlas Energy, Inc. (NASDAQ: ATLS) is one of the largest independent natural gas producers in the Appalachian and Michigan Basins, and a leading producer in the Marcellus Shale in Pennsylvania. Atlas Energy is also the country’s largest sponsor and manager of tax-advantaged energy investment partnerships. Atlas Energy controls and has a substantial economic interest in Atlas Pipeline Partners, L.P. (NYSE: APL) and Atlas Pipeline Holdings, L.P. (NYSE: AHD). For more information, please visit www.atlasenergy.com, or contact Investor Relations at InvestorRelations@atlasenergy.com.

Certain matters discussed within this press release are forward-looking statements. Although Atlas Pipeline Partners, L.P. believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Atlas Pipeline does not undertake any duty to update any forward-looking statement except as required by law. Factors that could cause actual results to differ materially from expectations include general industry considerations, regulatory changes, changes in commodity process and local or national economic conditions and other risks detailed from time to time in Atlas Pipeline’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.