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, 1998
[ ] 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. $1,028,295
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 _____
- --------------------------------------------------------------------
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 had its initial and final closing on
December 31, 1996, and was funded with subscriptions of $7,992,240 to
drill natural gas development wells. Also, on the closing, the
Managing General Partner was credited with a total capital contribution
of $1,654,740 because of certain expenditures it made on behalf of the
Partnership and certain prospects it contributed to the Partnership.
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 costs pursuant to the drilling and operating agreement with
Atlas, on December 31, 1996, in an amount equal to $6,391,298. The
drilling and operating agreement provided that 35.91 development wells
would be drilled to the Clinton/Medina geological formation in Mercer,
Lawrence and Butler Counties, Pennsylvania. Atlas and its affiliates
had sufficient leasehold inventory to provide the prospects to be
developed by the Partnership. See "Description of Property."
For the next 12 months management believes that the Partnership has
adequate capital in order to conduct its operations. 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 payment of
operation and maintenance costs did not begin until the Partnership
wells began 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. Atlas, however, is not contractually committed to
make such a loan. 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. No borrowings will
be obtained from third parties.
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 charges 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. The free trade
agreement between Canada and the United States has eased restrictions
on imports of Canadian gas to the United States. Additionally, the
passage in November, 1993, of the North American Free Trade Agreement
will have some impact on the American gas industry by eliminating trade
and investment barriers in the United States, Canada and Mexico. 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 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 the gas sold to its customers in a
geographic area is divided by the volume of all gas sold from the wells
in the area. On occasion, Atlas has reduced the amount of production
it normally sells on the spot market until the spot market price
increased. Atlas, however, has not voluntarily restricted its gas
production in the past two years. (See "Properties - Production.")
In the Mercer County area, a portion of the Partnership's gas is
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 is transported through Atlas' and
its affiliates' 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 300 customers.
Atlas is currently delivering an average 27,000 MCF of natural gas per
day from the Mercer County area to all the aforementioned markets and
has the capacity of delivering 33,000 MCF per day from the Mercer
County area. Atlas anticipates that Wheatland Tube Company and Carbide
Graphite each will purchase approximately 10% to 15% of the
Partnership's gas production in 1999, pursuant to gas contracts between
them and an affiliate of Atlas, and it is possible that other
purchasers of the Partnership's gas production may account for 10% of
the Partnership's gas sales revenues in 1999. 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 risk of a portion of
all of its programs' gas production which includes the Partnership. 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, 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.
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 phases, including 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, although there can be no assurance of the price to
be received by the Partnership for the 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, the regulations involve: (i) new
well permit and well registration requirements, procedures and fees;
(ii) minimum well spacing requirements; (iii) restrictions on well
locations and underground gas storage; (iv) certain well site
restoration, groundwater protection and safety measures; (v) landowner
notification requirements; (vi) certain bonding or other security
measures; (vii) various reporting requirements; (viii) well plugging
standards and procedures; and (ix) 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 these regulations will have a material adverse impact upon the
operations of the Partnership. 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 ("NGPA") the price of intrastate gas. Price controls for natural
gas production from new wells, however, were deregulated on December
31, 1992. Deregulated gas production may be sold at market prices
determined by supply, demand, BTU content, pressure, location of the
wells, and other factors. The Managing General Partner anticipates that
all gas produced by the Partnership wells will be price decontrolled
gas and sold at fair market value.
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. For example, FERC Order 500
requires interstate pipelines that transport gas for others to provide
transportation service to producers, distributors, and all other
shippers of natural gas on a non-discriminatory, "first-come, first-
served" basis so that producers and other shippers can sell natural gas
directly to end-users. FERC Order 636, which became effective in 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. It is difficult to assess
the effect of the order on the Partnership.
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, 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 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.
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. The liability is
unlimited in cases of willful negligence or misconduct. There also 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. 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 the natural gas and oil. These laws and regulations,
however, are constantly being revised and changed. The Partnership is
unable to predict the ultimate costs of complying with present and
future environmental laws and regulations, although it does not believe
the costs will be substantial. The Partnership is unable to obtain
insurance to protect against many environmental claims.
YEAR 2000 ISSUE
The "year 2000 issue" is the result of computer programs being
written using two digits, rather than four digits, to identify the year
in a date field. Any computer programs using such a system which have
date sensitive software will not be able to distinguish between the
year 2000 and the year 1900. This could result in miscalculations or
an inability to process transactions, send invoices or engage in
similar normal business activities. As is the case with most other
businesses, Atlas is in the process of evaluating and addressing Year
2000 compliance of both its information technology and non-information
technology systems (collectively, the "Systems").
Based on a recent assessment by Atlas, Atlas believes that the
Systems for its energy operations have completed approximately 85% of
the necessary remediation processes and that remediation (including
testing) will be completed by May 1999. Atlas believes that its
embedded systems (such as natural gas monitoring systems and
telephones) are Year 2000 compliant or , if not, are either not date
dependent or would not materially affect operations.
To date, Atlas' costs in remediation of its Systems has not been
material. Atlas anticipates that its remaining remediation costs will
not exceed $100,000.
Atlas has initiated communications with all of its significant
business partners through a Vendor Readiness Survey to determine their
Year 2000 compliance. Responses are evaluated as they are received to
determine if additional action is required to ensure compliance of the
business partner. As of December 31, 1998, all of Atlas' principal
business partners have advised Atlas that they are Year 2000 compliant
or have initiated programs that will render them Year 2000 compliant in
a timely fashion.
As a result of its internal assessment and survey of its business
partners, Atlas currently does not believe that Year 2000 matters will
have a material impact on its business, financial condition or results
of operations. To the extent that any of its business partners are
materially affected by Year 2000 problems, Atlas intends to seek
alternative firms providing the same services that are Year 2000
compliant. In view of the responses from its current business
partners, Atlas will identify alternative firms on an as-needed basis.
There can be no assurance, however, that Atlas would be able to make
appropriate arrangements should the need arise and, accordingly, it is
uncertain whether or to what extent Atlas may be affected if problems
with its business partners arise.
Atlas is aware of the potential for claims against it and other
companies for damages for products and services that were not Year 2000
compliant. Since Atlas is neither a hardware manufacturer nor a
software developer, Atlas believes that it does not have significant
exposure to liability for such claims.
ITEM 2: PROPERTIES
Drilling Activity. The Partnership drilled 35.91 net wells, of
which 35.91 net wells were productive. All the wells were drilled and
completed by the Partnership as of May 13, 1997. No further drilling
activities will be undertaken.
The following table summarizes the Partnership's drilling activity
since its formation. All the wells drilled were development wells
which means a well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon known to be
productive. A "dry hole" is an exploratory or a development well found
to be incapable of producing either oil or gas in sufficient quantities
to justify completion as an oil or gas well. A "productive well" is an
exploratory or a development well that is not a dry well.
Year Ended December 31,
1996 1997 1998
Gross Net Gross Net Gross Net
Development Wells:
Oil
0 0 0 0 0 0
Gas
0 0 36 35.91 0 0
Dry
0 0 0 0 0 0
Total
0 0 36 35.91 0 0
A "gross" well is a well in which the Partnership has a working
interest. A "net" well is deemed to exist when the sum of the
fractional ownership working interests owned by the Partnership in
gross wells equals one. The number of net wells is the sum of the
fractional working interests owned in gross wells expressed as whole
numbers and fractions thereof.
The Partnership has not participated, and will not participate, in any
exploratory wells which means a well drilled to find commercially
productive hydrocarbons in an unproved area, to find a new commercially
productive horizon in a field previously found to be productive of
hydrocarbons at another horizon, or to significantly extend a known
prospect.
Production. The following table shows the Partnership's net
production in barrels ("Bbls") of crude oil and in thousands of cubic
feet ("Mcf") of natural gas and the costs and weighted average selling
prices thereof, for the periods indicated.
Year Ended December 31,
1996 1997 1998
Production (1):
Oil (Bbls) 0 0 0
Natural Gas (Mcf) 0 569,305 465,941
Total (Equivalent Barrels) (2) 0 94,884 77,657
Average Sales Price:
Per Equivalent Barrel(2)(3) 0 $14.05 $13.24
Average Production Cost(lifting cost):
Per Equivalent Barrel (2)(4) 0 $1.59 $1.98
(1) The production shown in the table is determined by multiplying
the gross production of properties in which the Partnership has an
interest by the percentage of the leasehold interest owned by the
Partnership. The properties owned by the Partnership are subject to a
12.5% landowner's royalty and the Partnership has an 87.5% net revenue
interest.
(2) The ratio of energy content of oil and gas (six Mcf of gas
equals one barrel of oil) was used to convert natural gas production
into equivalent barrels of oil.
(3) The average sales price per Mcf of gas sold by the Partnership
was $2.38 in 1997 and $2.22 in 1998, after deducting all expenses,
including transportation expenses.
Production costs represent oil and gas operating expenses as reflected
in the financial statements of the Partnership plus depreciation of
support equipment and facilities.
Summary of Productive Wells. The table below gives the number of the
Partnership's productive gross and net wells at December 31, 1998.
Gas Wells Oil Wells Total
Location Gross Net Gross Net Gross Net
Pennsylvania 36 35.91 0 0 36 35.91
Total 36 35.91 0 0 36 35.91
"Productive wells" are producing wells and wells capable of production.
Oil and Gas Reserves. All of the Partnership's oil and gas reserves
are located in the United States. Estimates of the Partnership's net
proved developed and undeveloped oil and gas reserves as of December
31, 1998, and the present value (discounted at 10%) of estimated future
net revenue before income tax from those reserves are set forth in the
following table. This information is derived from the engineering
report dated January 1, 1999.
As of December 31, 1997 Present Value of
Net Proved Reserves Future Net Revenues
Oil Gas Total
(Bbls) (Mcf) (BOE) (in thousands)
Proved Developed
0 4,226,617 704,436 3,611
Proved Undeveloped
0 0 0 0
As of December 31, 1998 Present Value of
Net Proved Reserves Future Net Revenues
Oil Gas Total
(Bbls) (McF) (BOE) (in thousands)
0 3,010,133 501,689 2,199
Proved Undeveloped
0 0 0 0
Estimated future net revenues represent estimated future gross revenues
from the production of proved reserves, net of estimated production and
future development costs, using prices and costs in effect as of
December 31, 1998. These prices were held constant throughout the life
of the properties except where different prices were fixed and
determinable from applicable contracts. These price assumptions
resulted in a weighted average price of $2.33 per Mcf for gas over the
life of the properties. The amounts shown do not reflect non-property
related costs, such as general and administrative expenses, and future
income tax expense, or depreciation, depletion and amortization. The
present value of estimated future net revenues is calculated by
discounting estimated future net revenues by 10% annually. Prices used
in calculating the estimated future net revenues attributable to proved
reserves do not necessarily reflect market prices for oil and gas
production subsequent to December 31, 1998. There can be no assurance
that all of the proved reserves will be produced and sold within the
periods assumed, that the assumed prices will actually be realized for
such production, or that existing contracts will be honored. The
values expressed are estimates only, and may not reflect realizable
values or fair market values of the oil and gas ultimately extracted
and recovered. The standardized measure of discounted future net cash
flows may not accurately reflect proceeds of production to be received
in the future from the sale of oil and gas currently owned and does not
necessarily reflect the actual costs that would be incurred to acquire
equivalent oil and gas reserves. For additional information concerning
oil and gas reserves and activities, see Note 9 to the Financial
Statements.
"Proved reserves" means the estimated quantities of crude oil, natural
gas, and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions,
i.e., prices and costs as of the date the estimate is made. Prices
include consideration of changes in existing prices provided only by
contractual arrangements, but not on escalations based upon future
conditions.
(i) Reservoirs are considered proved if economic producibility is
supported by either actual production or conclusive formation
test. The area of a reservoir considered proved includes (a)
that portion delineated by drilling and defined by gas-oil
and/or oil-water contacts, if any; and (b) the immediately
adjoining portions not yet drilled, but which can be reasonably
judged as economically productive on the basis of available
geological and engineering data. In the absence of information
on fluid contacts, the lowest known structural occurrence of
hydrocarbons controls the lower proved limit of the reservoir.
(ii) Reserves which can be produced economically through
application of improved recovery techniques (such as fluid injection)
are included in the "proved" classification when successful testing by
a pilot project, or the operation of an installed program in the
reservoir, provides support for the engineering analysis on which the
project or program was based.
(iii) Estimates of proved reserves do not include the following:
(a) oil that may become available from known reservoirs but is
classified separately as "indicated additional reserves"; (b) crude
oil, natural gas, and natural gas liquids, the recovery of which is
subject to reasonable doubt because of uncertainty as to geology,
reservoir characteristics, or economic factors; (c) crude oil, natural
gas, and natural gas liquids, that may occur in undrilled prospects;
and (d) crude oil, natural gas, and natural gas liquids, that may be
recovered from oil shales, coal, gilsonite and other such sources.
"Proved developed oil and gas reserves" means reserves that can be
expected to be recovered through existing wells with existing equipment
and operating methods. Additional oil and gas expected to be obtained
through the application of fluid injection or other improved recovery
techniques for supplementing the natural forces and mechanisms of
primary recovery should be included as "proved developed reserves" only
after testing by a pilot project or after the operation of an installed
program has confirmed through production response that increased
recovery will be achieved.
The Partnership does not have any proved undeveloped reserves. "Proved
undeveloped reserves" are reserves that are expected to be recovered
from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion. Reserves on
undrilled acreage are limited to those drilling units offsetting
productive units that are reasonably certain of production when
drilled. Proved reserves for other undrilled units can be claimed only
where it can be demonstrated with certainty that there is continuity of
production from the existing productive formation. Under no
circumstances should estimates for proved undeveloped reserves be
attributable to any acreage for which an application of fluid injection
or other improved recovery technique is contemplated, unless such
techniques have been proved effective by actual tests in the area and
in the same reservoir.
No major discovery or other favorable or adverse event which would
cause a significant change in estimated reserves is believed by the
Company to have occurred since December 31, 1998. Reserves cannot be
measured exactly as reserve estimates involve subjective judgment. The
estimates must be reviewed periodically and adjusted to reflect
additional information gained from reservoir performance, new
geological and geophysical data and economic changes. The Partnership
has not filed any estimates (on a consolidated basis) of its oil and
gas reserves with, nor were such estimates included in any reports to,
any Federal or foreign governmental agency other than the Securities
and Exchange Commission within the 12 months prior to the date of this
filing.
Acreage. The following table sets forth, as of December 31, 1998, the
acres of developed and undeveloped oil and gas acreage in which the
Partnership had an interest.
Developed Acreage Undeveloped Acreage Total
Location Gross Net Gross Net Gross Net
Pennsylvania 1,753 1,749 0 0 1,753 1,749
Total 1,753 1,749 0 0 1,753 1,749
A "gross" acre is an acre in which the Partnership owns a working
interest. A "net" acre is deemed to exist when the sum of the
fractional ownership working interests owned by the Partnership in
gross acres equals one. The number of net acres is the sum of the
fractional working interests owned in gross acres expressed as whole
numbers and fractions thereof. "Undeveloped acreage" is those lease
acres on which wells have not been drilled or completed to a point
that would permit the production of commercial quantities of oil and
gas regardless of whether or not such acreage contains proved reserves.
Delivery Commitments. The Partnership is not obligated to provide any
determinable quantity of gas under any existing contracts or
agreements. The majority of the Partnership's gas production from the
wells was sold pursuant to short term contracts, which are term
contracts for a period of less than one year, with the remainder of the
Partnership gas production sold on the spot market and long term
contracts, which are term contracts for a period longer than one year.
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 record
keeping.
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. As of December 31, 1998 Atlas and its affiliates
operated approximately 1,399 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 1,842 natural gas
wells, approximately 1,781
of which were capable of production in commercial quantities. Atlas'
primary offices are located at 311 Rouser Road, Moon Township,
Pennsylvania 15108.
On September 29, 1998, Atlas Group, the former parent company of
Atlas, merged into Atlas America, Inc. ("AAI"), a newly formed wholly-
owned subsidiary of Resource America, Inc. ("RAI"). The merger was
consummated pursuant to an Agreement and Plan of Merger dated July 13,
1998, as amended by Amendment No. 1 thereto dated September 29, 1998 by
and among RAI, AAI, Atlas Group and certain shareholders of Atlas
Group, (collectively, the "Agreement"). RAI is a publicly-traded
company principally engaged in real estate finance, equipment leasing
and energy and energy finance.
AAI will continue the existing business of Atlas Group. AAI will
be headquartered in Atlas Group's existing suburban Pittsburgh offices.
There may be changes in the future in the directors and executive
officers of Atlas. However, Mr. James R. O'Mara will continue to serve
Atlas, as well as AAI, as President and Chief Executive Officer
pursuant to an employment agreement which can be renewed upon the
expiration of its term. Additionally, it is anticipated that current
RAI, AAI and/or Resource Energy, Inc. ("Resource Energy") staff and
directors of RAI will assume a variety of new operating
responsibilities in AAI. Although Resource Energy will maintain its
separate corporate existence, AAI will manage the employees and assets
of Resource Energy including sharing common employees.
Atlas and it's affiliates under AIC, Inc. employ a total of
approximately ninety-nine persons, consisting of three geologists (one
of whom is an exploration geologist), 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.
ORGANIZATIONAL DIAGRAM (1)
Resource America, Inc.Atlas America, Inc.AIC, Inc.Atlas Resources, Inc.
(Managing General Partner, Driller and Operator in Pennsylvania)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)Anthem Securities Inc. (Registered Broker-
Dealer and Dealer-Manager)Atlas Energy Group, Inc. (Driller and
Operator in Ohio)Atlas Information Management, L.L.C. (Markets
Information and Technology Services)ARD Investments, Inc.AED
Investments, Inc.
Resource Energy, Inc., a subsidiary of Resource America, Inc., is also
engaged in the oil and gas business.
As a result of the merger there may, in the future, be a
consolidation of the existing entities. In addition, AAI has agreed to
sell its gas marketing subsidiary, Atlas Gas Marketing, Inc., to an
Affiliate of First Energy ( a company listed on the New York Stock
Exchange). The Managing General Partner anticipates that the
Partnership's gas would be markedted by First Energy's Affiliate,
Northeast Ohio Gas Marketing.
Directors, Executive Officers and Significant Employees of Atlas.
The executive officers, directors and significant employees of Atlas
are as follows:
NAME AGE POSITION OR OFFICE
Charles T. Koval 65 Chairman of the Board and a Director
James R. O'Mara 55 President, Chief Executive Officer and a
Director
Bruce M. Wolf 50 General Counsel, Secretary and a Director
Donald P. Wagne 56 Vice President -Drilling and Completion
Frank P. Carolas 38 Vice President of Geology
Tony C. Banks 43 Senior Vice President of Finance and Chief
Financial Officer
Michael L. Staines 49 Senior Vice President and Chief Operating
Officer
Jacqueline B. Polok 47 Controller
Eric D. Koval 33 President of Anthem Securities, Inc.
Jeffrey C. Simmons 39 Vice President of Production
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. and A.A.I.
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.
Donald P. Wagner. Vice President-Drilling and Completion. Mr. Wagner
joined Atlas Energy in 1979.
Frank P. Carolas. Vice President of Geology. Mr. Carolas joined Atlas
Energy in 1981.
Tony C. Banks. Senior Vice President of Finance and Chief Financial
Officer. Mr. Banks joined Atlas Group in 1995. 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.
Michael L. Staines. Senior Vice President and Chief Operating Officer.
Senior Vice President and Secretary of RAI since 1989 and President,
Chief Executive Officer and director of Resource Energy, Inc.
("Resource Energy") (a wholly owned subsidiary of RAI) since 1997.
Jacqueline B. Poloka. Controller. Ms. Poloka joined Atlas Energy in
1980.
Eric D. Koval. President of Anthem Securities, Inc. Mr. Koval joined
Atlas in 1993 as a production engineer specializing in acquisitions and
dispositions. He subsequently moved into the investor relations
department in 1994. Mr. Koval is a registered broker-dealer principal,
and is the son of Charles Koval.
Jeffrey C. Simmons. Vice President of Production. Executive Vice
President, Chief Operating Officer and director of Resource Energy
since 1997. From 1994 to 1997, he was Vice President - Exploration of
RAI and, from 1988 to 1994, he was Director of Well Services of RAI.
ITEM 4. REMUNERATION OF DIRECTORS AND OFFICERS
The Partnership, as previously stated, has no employees. The following
table, however, sets forth the aggregate remuneration paid during the
calendar years ended December 31, 1998 and 1997, to the five most
highly compensated persons who are executive officers of the Managing
General Partner and whose aggregate remuneration exceeded $100,000 and
to all executive officers of the Managing General Partner as a group,
for services in all capacities while acting as executive officers of
the Managing General Partner and its Affiliates, was as follows:
(A) (B) (C) (D) (E)
Name of Individual
or number of persons
in group(3) Capacities in which
served (4)
Cash Compensation (1)
Compensation pursuant to
Plans (2)
Aggregate of
contingent forms
of remuneration
James R. O'Mara President, Chief Executive Officer and a Director
$307,450 $21,457 -----
$305,300 $12,066 -----
Charles T. Koval Chairman of the Board and a Director
$298,000 $5,000 -----
$296,500 $5,281 -----
Bruce M. Wolf General Counsel, Secretary and a Director
$234,170 $15,626 -----
$217,150 $11,735 -----
Donald P. Wagner Vice President-Drilling and Completion
$147,560 $14,059 -----
$125,604 $5,281 -----
Tony C. Banks Senior Vice President and Chief Financial Officer
$ 143,034 $12,269 -----
$124,000 $3,926 -----
Executive Officers as a Group (8 persons)
$1,534,085 $179,189
$1,383,530 $70,703
- -
(1)The amounts indicated were composed of salaries and all cash bonuses
for services rendered to the Managing General Partner and its
Affiliates during the last fiscal year, including compensation that
would have been paid in cash but for the fact the payment of the
compensation was deferred.
(2)Atlas Group and its Affiliates had an Employee Stock Ownership Plan
("ESOP") for the benefit of its employees, other than Messrs. Koval and
Joseph R. Sadowski (a retired founder), to which it contributed
annually approximately 6% of annual compensation in the form of shares
of Atlas Group, and a 401(K) plan which allowed employees to contribute
the lesser of 15% of their compensation or $10,000 for the calendar
years 1998 and 1997. Atlas Energy contributed an amount equal to 50% of
each employee's contribution for the calendar years 1998 and 1997.
(3)During the Managing General Partner's fiscal year ended July 31,
1998, each director was paid a director's fee of $12,000 for the year.
There were no other arrangements for remuneration of directors.
ITEM 5. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
As of December 31, 1998, 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.
RAI owns 100% of the common stock of AAI, which owns 100% of the
common stock of AIC, Inc., which owns 100% of the common stock of the
Managing General Partner. See above regarding the stock options in RAI
to the executive officers.
ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Oil and Gas Revenues. The Managing General Partner is 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. During the calendar years ending December 31, 1997 and
1998, the Managing General Partner received $295,507 and $218, 572,
respectively from the Partnership's oil and gas net revenues.
Leases. The Managing General Partner initially 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. During 1998, the Managing General Partner did not enter into
any further lease transactions and none are anticipated.
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, which will be
proportionately reduced if less than 100% of the working interest in a
well is acquired. With respect to the net wells during the calendar
years ending December 31, 1997and 1998, the Managing General Partner
received $25,912 and $29,101, respectively.
Direct Costs. The Managing General Partner and its affiliates are
reimbursed for all direct costs expended on behalf of the Partnership.
With respect to the net wells during the calendar years ending December
31, 1997 and 1998, the Managing General Partner received $ 61,660 and
38,992, respectively.
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. During 1998,
the Partnership did not enter into any further drilling transactions
and none are anticipated.
Per Well Charges. Atlas, as operator, is reimbursed at actual cost for
all direct expenses incurred on behalf of the Partnership and receives
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
during the calendar years ending December 31, 1997 and 1998, the
Managing General Partner received $89,434 and $115,015, respectively.
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. For the calendar year ending
December 31, 1998, Atlas did not advance any funds nor did it provide
any equipment, supplies or other services.
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: (i) the
consent of the Managing General Partner is required; and (ii) 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.
An assignee may become a substituted Limited Partner or Investor
General Partner only upon meeting certain further conditions, which
include: (i) the assignor gives the assignee such right; (ii) the
Managing General Partner consents to such substitution, which consent
shall be in the Managing General Partner's absolute discretion; (iii)
the assignee pays to the Partnership all costs and expenses incurred in
connection with such substitution; and (iv) 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, 1998, there were 378 investors.
Dividends. 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 the revenues and costs will 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. During the calendar years ending December
31, 1997 and 1998, the Partnership distributed $158,745 and $268,764
respectively to the Participants and $636,977 and $806,293,
respectively to the Managing General Partner.
ITEM 8. LEGAL PROCEEDINGS
None.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None, however, see Item 12 below.
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 one report on Form 8-K during the last quarter of
the period covered by this report. In December 1998, the Partnership
engaged Grant Thornton, L.L.P., as the independent certified public
accountants to audit the Partnership's financial statements for the
calendar year ended December 31, 1998. At that time, the Partnership
chose not to renew the engagement of McLaughlin & Courson, who
previously served as the Partnership's independent certified public
accountants. The decision to change accountants was approved by the
Board of Directors of the Managing General Partner, Atlas.
During the two most recent fiscal years of the Partnership and
each subsequent interim period, there were no disagreements with the
former accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of the former
accountants would have caused them to make reference in connection with
their report to the subject matter of the disagreements.
The reports of the former principal accountants on the financial
statements of the Partnership for the past two years contained no
adverse opinion or disclaimer of opinion, nor was either qualified or
modified as to uncertainty, audit scope, or accounting principles.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
BALANCE SHEETS
December 31
ASSETS
1998 1997
Cash $ 3,781 $ 7,979
Accounts receivable 161,928 393,734
Oil and gas wells and leases (Successful Efforts)
8,358,997 8,358,997
Less accumulated depletion and depreciation(1,766,623) (946,005)
6,592,374 7,412,992
Organizational and syndication costs, net of accumulated
amortization of $253,367 and $135,675, respectively
945,470 1,063,161
$ 7,703,553 $ 8,877,866
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 11,389 $ 12,099
Partners' capital 7,692,164 8,865,767
$ 7,703,553 $ 8,877,866
The accompanying notes are an integral part of these financial
statements.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
STATEMENTS OF OPERATIONS
For the years ended December 31
1998 1997
Revenues
Natural gas sales $ 1,028,295 $ 1,333,121
Interest income 5,670 3,800
Total revenues 1,033,965 1,336,921
Expenses
Well operating expense 154,007 151,094
Depletion and depreciation of oil and gas wells and leases
820,618 946,005
Amortization of organizational and syndication costs
117,691 135,675
General and administrative fees 40,195 37,469
Total expenses 1,132,511 1,270,243
NET (LOSS) EARNINGS $ (98,546) $ 66,678
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the years ended December 31, 1998 and
MANAGING
GENERAL OTHER
PARTNER PARTNERS TOTAL
BALANCE AT JANUARY 1, 1997 $ 1,592,338 8,013,879 $9,606,217
Participation in revenue
and expenses
Net production revenues 295,507 86,520 1,182,027
Interest income 950 2,850 3,800
Depletion and depreciation:
Oil and gas wells
and leases (43,213) (902,792) (946,005)
Amortization (135,675) - (135,675)
General and
administrative fees (9,367) (28,102) (37,469)
Net (loss) earnings 108,202 (41,524) 66,678
Adjustments to assets contributed by
Managing General Partner (11,406) - (11,406)
Distributions (158,745) (636,977) (795,722)
BALANCE AT DECEMBER 31, 1997 1,530,389 7,335,378 8,865,767
Participation in revenue and expenses:
Net production revenues 218,572 655,716 874,288
Subordination of Managing General
Partner's income 14,229 (14,229) -
Interest income 1,417 4,253 5,670
Depletion and depreciation:
Oil and gas wells (114,887) (705,731) (820,618)
Amortization (117,691) - (117,691)
General and administrative fees(10,049) (30,146) (40,195)
Net loss (8,409) (90,137) (98,546)
Distributions (268,764) (806,293) (1,075,057)
BALANCE AT DECEMBER 31, 1998 $ 1,253,216 $ 6,438,948 $7,692,164
The accompanying notes are an integral part of these financial
statements.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
STATEMENTS OF CASH FLOWS
For the years ended December 31
1998 1997
Cash flows from operating activities:
Net (loss) earnings $ (98,546) $ 66,678
Adjustments to reconcile net (loss) earnings to net cash
provided by operating activities:
Depletion and depreciation 820,618 946,005
Amortization 117,691 135,675
Adjustment to oil and gas wells and leases - 15,339
Decrease (increase) in accounts receivable 231,806 (393,734)
(Decrease) increase in accounts payable and
accrued liabilities (710) 12,099
Net cash provided by operating activities 1,070,859 782,062
Cash flows used in financing activities:
Capital distributions (1,075,057) (795,722)
NET DECREASE IN CASH (4,198) (13,660)
Cash at beginning of year 7,979 21,639
Cash at end of year $ 3,781 $ 7,979
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Adjustments to assets contributed by
Managing General Partner $ - $ (11,406)
The accompanying notes are an integral part of these financial
statements.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
A summary of significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
1. NATURE OF OPERATIONS
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
Investor General Partners or Limited Partners. The Partnership
was funded to drill and operate oil and gas wells located
primarily in Mercer County, Pennsylvania. At December 31, 1998,
the Partnership has various working interests in 36 wells.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements are prepared in accordance with generally
accepted accounting principles.
The Partnership uses 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. Depreciation and depletion is computed on a
field-by-field basis by the unit-of-production method based on
periodic estimates of oil and gas reserves.
Undeveloped leaseholds and proved properties are assessed
periodically or whenever events or circumstances indicate that the
carrying amount of these assets may not be recoverable. Proved
properties are assessed based on estimates of future cash flows.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.
In 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5"),
Reporting on the Costs of Start-Up Activities. This statement requires
costs of start-up activities and organization costs, as defined,
to be expensed as incurred. The Partnership is required to adopt
the provisions of SOP 98-5 effective January 1, 1999 and as a
result will write-off the unamortized organization and syndication
costs as a charge against Partners' Capital.
3. 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.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
4. PARTICIPATION IN REVENUES AND COSTS
Atlas and the other partners generally participate in revenues and
costs in the following manner:
ATLAS SUBSCRIBING
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%
5. TRANSACTIONS WITH ATLAS AND ITS AFFILIATES
The Partnership has entered into the following significant
transactions with Atlas and its affiliates, as provided under the
Partnership agreement:
Drilling contracts to drill and complete Partnership wells at
a
cost of $37.39 per foot on completed wells.
Administrative costs at $75 per well per month.
Administrative costs
totaled $29,101 and $25,912 in 1998 and 1997, respectively.
Well supervision fees initially of $275 per well per month
plus
the cost of third party materials and services. Well
supervision fees
totaled $115,015 and $89,434 in 1998 and 1997, respectively.
Reimbursement of gas transportation and marketing charges.
6. 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.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
7. 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
approximately $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 (June
1997).
Cash distributions to participants in 1997 for the subordination
year ending in 1998 amounted to $600,000, including the
subordination of $30,942 of Atlas revenues.
Cash distributions to participants in 1998 for the subordination
year ending in 1999 amounted to $785,828. The Managing General
Partner recovered $14,229 of revenues from other partners that had
been subordinated in 1997.
8. INDEMNIFICATION
In order to limit the potential liability of the investor general
partners, Atlas and Atlas America, Inc., formerly The Atlas Group,
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.
9. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED)
The supplementary information summarized below presents the
results of natural gas and oil activities in accordance with SFAS
No. 69, "Disclosures About Oil and Gas Producing Activities".
No consideration has been given in the following information to
the income tax effect of the activities as the Partnership is not
treated as a taxable entity for income tax purposes.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
9. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED)
(CONTINUED)
(1) CAPITALIZED COSTS
The following table presents the capitalized costs related to
natural gas and oil production activities:
1998 1997
Capitalized costs at December 31:
Proved properties $8,358,997 $8,358,997
Accumulated depreciation and depletion (1,766,623) (946,005)
Net capitalized costs $6,592,374 $7,412,992
Costs incurred during the year:
Development costs $ - $8,358,997
Development costs include costs to gain access to and prepare
development well locations for drilling, to drill and equip
development wells and to provide facilities to extract, treat,
gather and store oil and gas.
(2) RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
The following table presents the results of operations related to
natural gas and oil production for the year ended December 31,
1998 and 1997:
1998 1997
Natural gas sales $1,028,295 $1,333,121
Production costs (154,007) (151,094)
Depreciation, depletion and amortization (820,618) (946,005)
---------- -----------
Results of operations from
producing activities $ 53,670 $236,022
Depreciation and depletion of natural gas and oil properties are
expensed at unit cost rates calculated annually based on the
estimated volume of recoverable gas and the related costs.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
9. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED)
(CONTINUED)
(3) RESERVE INFORMATION
The information presented below represents estimates of proved
natural gas and oil reserves. Proved developed reserves represent
only those reserves expected to be recovered from existing wells
and support equipment. All reserves are proved developed reserves
and are located in Western Pennsylvania.
There are numerous uncertainties inherent in estimating quantities
of proved reserves and in projecting future net revenues and the
timing of development expenditures. The reserve data presented
represents estimates only and should not be construed as being
exact. In addition, the standarized measures of discounted future
net cash flows may not represent the fair market value of the
Company's oil and gas reserves or the present value of future cash
flows of equivalent reserves, due to anticipated future changes in
oil and gas prices and in production and development costs and
other factors for which effects have not been provided.
1998 1997
NATURAL GAS NATURAL GAS
MCF MCF
Proved developed reserves:
Beginning of period 4,226,617 -
Production (465,941) (569,305)
Current additions - 4,795,922
Revisions to previous estimates (750,543) -
--------- ---------
END OF PERIOD 3,010,133 4,226,617
(4) STANDARD MEASURE OF DISCOUNTED FUTURE CASH FLOWS
The standardized measure of discounted future net cash flows is
information provided for the financial statement user as a common
base for comparing oil and gas reserves of enterprises in the
industry. The following schedule presents the standardized
measure of estimated discounted future net cash flows from the
Company's proved reserves. Estimated future cash flows are
determined by using the weighted average price received for the
month of December 1998 adjusted only for fixed and determinable
increases in natural gas prices provided by contractual
agreements. The standardized measure of future net cash flows was
prepared using the prevailing economic conditions existing at
December 31, 1998 and such conditions continually change.
Accordingly, such information should not serve as a basis in
making any judgement on the potential value of recoverable
reserves or in estimating future results of operations.
Atlas-Energy for the Nineties - Public #5 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
9. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED)
(CONTINUED)
(4) STANDARD MEASURE OF DISCOUNTED FUTURE CASH FLOWS - CONTINUED
1998 1997
Future cash inflows $7,022,639 $10,618,200
Future production costs (3,229,315) (4,370,773)
----------- ------------
Future net cash flow 3,793,324 6,247,427
10% annual discount for
estimated timing of cash flows (1,594,111) (2,636,329)
STANDARDIZED MEASURE OF ----------- ------------
DISCOUNTED FUTURE NET CASH FLOWS $2,199,213 $3,611,098
Summary of changes in the standardized measure of discounted
future net cash flows:
1998 1997
Sales of gas and oil produced
- - net of related costs $(874,288) $(1,156,114)
Discoveries and extensions - 4,767,212
Revisions of previous quantity estimates (543,349) -
Accretion of discount 361,110 -
Net change in prices and production costs (272,736) -
Other (77,622) -
---------- -----------
Net (decrease) increase (1,411,885) 3,611,098
Beginning of period 3,611,098 -
---------- -----------
END OF PERIOD $2,199,213 $3,611,098
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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, 1998, and the related statements of operations, changes in
partners' capital accounts and cash flows for the year then ended.
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. as of December 31, 1998 and
the results of its operations and cash flows for the year then ended,
in conformity with generally accepted accounting principles.
Cleveland, Ohio
March 1, 1999
EXHIBIT INDEX
Description
Location
4(a)Certificate of Limited Partnership for
Atlas-Energy for the Nineties-Public #5 Ltd.
Previously filed in the Form 10-KSB for the period ending December 31,
1996.
4(b)Amended and Restated Certificate and Agreement
of Limited Partnership for Atlas-Energy for the
Nineties-Public #5 Ltd. dated December 31, 1996
Previously filed in the Form 10-KSB for the period ending December 31,
1996.
10(a)Drilling and Operating Agreement with exhibits
Previously filed in the Form 10-KSB for the period ending December 31,
1996.
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):
James R. O'Mara, President, Chief Executive Officer
and a Director
Date: April 15, 1999
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):
Charles T. Koval, Chairman of the Board and a Director
Date: April 15, 1999
By (Signature and Title):
James R. O'Mara, President, Chief Executive Officer and
a Director
Date: April 15, 1999
By (Signature and Title):
Bruce M. Wolf, General Counsel, Secretary and a Director
Date: April 15, 1999
By (Signature and Title):
Tony C. Banks, Vice President of Finance and Chief Financial Officer
Date: April 15, 1999
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 ____, 1999
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 ____, 1999
By (Signature and Title): /s/ James R. O'Mara
James R. O'Mara, President, Chief Executive Officer and
a Director
Date: March ____, 1999
By (Signature and Title): /s/ Bruce M. Wolf
Bruce M. Wolf, General Counsel, Secretary and a Director
Date: March ____, 1999
By (Signature and Title): /s/ Tony C. Banks
Tony C. Banks, Vice President of Finance and Chief Financial Officer
Date: March ____, 1999
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.
CONSENT OF INDEPENDENT AUDITOR
McLAUGHLIN & COURSON
CERTIFIED PUBLIC ACCOUNTANTS
2002 LAW & FINANCE BUILDING
PITTSBURGH, PA 15219
412/261-0630
FAX 412/261-3582
ATLAS-ENERGY FOR THE NINETIES-PUBLIC 5 LTD.
The firm, as Independent Certified Public Accountants, hereby consents
to the use of
the audit report dated February 10, 1998, on the balance sheet of
Atlas-Energy for the
Nineties-Public #5 Ltd., a Pennsylvania Limited Partnership as of
December 31, 1997,
and the related statements of income, changes in partners, capital
accounts and cash
flows for the year then ended, in the U.S. Securities and Exchange
Commission Form
10-KSB for the year ended December 31, 1998 and any amendments thereto
for Atlas-Energy
for the Nineties-Public #5 Ltd.
/s/McLaughlin & Courson
Certified Public Accountants
April 9, 1999
Pittsburgh, Pennsylvania
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,781
<SECURITIES> 0
<RECEIVABLES> 161,928
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 165,709
<PP&E> 9,557,834
<DEPRECIATION> (2,019,990)
<TOTAL-ASSETS> 7,703,553
<CURRENT-LIABILITIES> 11,389
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,703,553
<SALES> 1,028,295
<TOTAL-REVENUES> 1,033,965
<CGS> 974,625
<TOTAL-COSTS> 974,625
<OTHER-EXPENSES> 157,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (98,546)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98,546)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,546)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
