U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 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 333-62167
Atlas-Energy for the Nineties-Public #7 Ltd.
(Name of small business issuer in its charter)
Pennsylvania 25-1814688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
311 Rouser Road, Moon Township, Pennsylvania 15108
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (412) 262-2830
Securities registered under Section 12(b) of the Exchange Act
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act
None
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No _____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year. -0-
State the aggregate market value of the voting stock held by non-
affiliates of the Registrant. Not Applicable.
Transitional Small Business Disclosure Format (check one):
Yes No. X
Page 1 of ____
Exhibit Index on Page ____
- --------------------------------------------------------------------
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Atlas-Energy for the Nineties-Public #7 Ltd. (the "Partnership")
was formed under the Pennsylvania Revised Uniform Limited Partnership
Act on July 16, 1998, with Atlas Resources, Inc. ("Atlas") as Managing
General Partner. The Partnership offered a maximum of 1,200 Units.
The Partnership had its initial closing on December 01, 1998, and
was funded with total subscriptions of 251 Units ($2,507,650 excluding
the dealer-manager fee, sales commissions and accountable due diligence
expenses of $ 0 paid to the Dealer-Manager and registered broker-
dealers) from 63 investors thus reaching its required minimum Capital
Contribution of $1,000,000. The Partnership had its final closing on
December 31, 1998, and was funded with total subscriptions of 1,200
Units ($11,988,350 excluding the dealer-manager fee, sales commissions
and the accountable due diligence expenses of $0 paid to the Dealer-
Manager and registered broker-dealers) from 366 investors.
5 investors subscribed for 27 Units ($270,000) as Limited Partners and
the remaining 361 investors subscribed for 1,173 Units ($11,718,350) as
Investor General Partners.
At the time of the initial and final closing, the Managing General
Partner was credited with a total capital contribution of $3,852,439
because of certain expenditures it made on behalf of the Partnership
and certain prospects it contributed to the Partnership. The Managing
General Partner paid the organization and offering costs of the
Partnership in the amount of $1,798,253. In addition, the Managing
General Partner contributed 61 prospects to the Partnership at its cost
of $3,600 per prospect (proportionately reduced to the extent less than
100% of the working interest is acquired) for a total credit of $
199,800. Finally, under the Partnership Agreement the Managing General
Partner paid 51% ($1,845,386) of the Partnership's tangible costs.
The Partnership has not filed bankruptcy nor has the Partnership been
involved in any material reclassification, merger, consolidation,
receivership or similar proceeding or purchase or sale of a significant
amount of assets not in the ordinary course of business.
The Partnership was funded to drill natural gas development wells
with the objective being the discovery and production of natural gas in
commercially marketable quantities. The initial closing date was
December 01, 1998, and the Partnership began its drilling activities
pursuant to the drilling and operating agreement. Additionally, the
Partnership prepaid drilling costs pursuant to the drilling and
operating agreement on December 31, 1998, in an amount equal to
$11,988,350, in order to claim a 1998 deduction for intangible drilling
and development costs of wells to be drilled in 1999. The drilling and
operating agreement provided that a total of 38 development wells would
be drilled to the Clinton/Medina geological formation in Mercer,
Lawrence and Counties, Pennsylvania and Stark and Trumbull Counties,
Ohio. Atlas and its affiliates had sufficient leasehold inventory to
provide the prospects to be developed by the Partnership. See
"Properties."
Under the drilling and operating agreement Atlas is responsible
for drilling and completing (or plugging) the Partnership wells. All
the wells have been or will be drilled to depths sufficient to test
thoroughly the Clinton/Medina formation. The Partnership paid its
proportionate share of the cost of drilling and completing the
Partnership's wells as follows: for each well, an amount equal to the
depth of the well in feet at its deepest penetration as recorded by the
drilling contractor multiplied by $39.15 per foot. The footage price
included all ordinary costs of drilling, testing and completing the
well and installing gathering lines and other necessary facilities for
the production of natural gas, including the cost of a second
completion and Frac where Atlas considered it justified.
With respect to operating and maintenance costs, the Partnership's
commitments pursuant to the drilling and operating agreement are
expected to be fulfilled through revenues generated from the sale of
gas and oil. During producing operations Atlas, as operator, will
receive a monthly well supervision fee of $275 (proportionately reduced
to the extent less than 100% of the working interest was acquired) for
each producing well for which it has responsibility under the drilling
and operating agreement. The well supervision fee covers all normal
and regularly recurring operating expenses for the production, delivery
and sale of gas, such as well tending, routine maintenance and
adjustment, reading meters, recording production, pumping, maintaining
appropriate books and records, preparing reports to the Partnership and
to government agencies, and collecting and disbursing revenues. The
well supervision fees do not include costs and expenses related to the
production and sale of oil, purchase of equipment, materials or third
party services, brine disposal, and rebuilding of access roads, all of
which will be billed at the invoice cost of materials purchased or
third party services performed. As operator Atlas will charge the
Partnership at cost for third party services and materials provided for
each well which has been placed in operation, and a reasonable charge
for services performed directly by Atlas or its affiliates. The
drilling and operating agreement also gives the operator the right at
any time after three years from the date a Partnership well has been
placed into production to retain $200 per month to cover future
plugging and abandonment of such well.
Natural gas and any oil produced by the wells developed by the
Partnership must be marketed in order for the Partnership to realize
revenues from such production. The Partnership did not purchase and
does not anticipate selling any producing wells. In recent years
natural gas and oil prices have been volatile.
The marketing of natural gas and oil production, if any, will be
affected by numerous factors beyond the control of the Partnership and
the effect of which cannot be accurately predicted. These factors
include the availability and proximity of adequate pipeline or other
transportation facilities; the amount of domestic production and
foreign imports of oil and gas; competition from other energy sources
such as coal and nuclear energy; local, state and federal regulations
regarding production and the cost of complying with applicable
environmental regulations; and fluctuating seasonal supply and demand.
For example, the demand for natural gas is greater in the winter months
than in the summer months, which is reflected in a higher spot market
price paid for such gas. Also, increased imports of oil and natural
gas have occurred and are expected to continue. 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 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.
In the Mercer County area, Atlas estimates that a portion of the
Partnership's gas will be transported through Atlas' own pipeline
system and sold directly to industrial end-users in the area where the
wells were drilled. This will generally result in the Partnership
receiving higher prices for the gas than if the gas were transported a
farther distance through interstate pipelines because of increased
transportation charges. The remainder of the Partnership's gas from
the Mercer County area will be 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 would include 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.
Any crude oil produced from the wells will flow directly into storage
tanks where it will be picked up by the oil company, a common carrier
or pipeline companies acting for the oil company which is purchasing
the crude oil. Crude oil usually does not present any transportation
problem. Atlas anticipates selling any oil produced by the wells in
spot sales.
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.
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 is also
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 such 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 such costs will be substantial. The
Partnership is unable to obtain insurance to protect against many
environmental claims.
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 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 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 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
The Partnership's first closing was December 01, 1998, and 12
prospects were designated by the Managing General Partner on that date.
The final closing was December 31, 1998, and an additional 52 prospects
were designated by the Managing General Partner on that date. For
purposes of the Drilling Activity table and the Productive Wells table
set forth below, a "gross well" is one in which the Partnership has a
working interest and a "net well" is a gross well multiplied by the
Partnership's working interest to which it is entitled under its
drilling agreement.
The Partnership owns 100% of the working interest in 51 wells and
expects to own approximately 50% of the working interest in 13 wells.
See "Productive Wells," below. All wells other than 2 are subject to a
12.5% landowner's royalty and have an 87.5% net revenue interest. One
well is also subject to a 3.125% overriding royalty interest and has an
84.375% net revenue interest. The other well is also subject to a 2.5%
overriding royalty and has a an 85.0% net revenue interest. 61 of the
wells are situated on a prospect of approximately 50 acres and the
prospect acreage for the remaining 3 wells is approximately 40 acres.
Drilling Activity. The following table sets forth the results from
July 16, 1998, (date of formation) to March 31, 1998, of the
Partnership's drilling activities. All wells are in Lawrence and
Mercer Counties, Pennsylvania and Stark and Trumbull Counties, Ohio.
Currently, 64 wells have been spudded, and 0 dry holes have been
drilled.
Period Ended March 31, 1998
Development Wells
Gross Net
Productive Dry Total Productive Dry Total
64 0 64 57.5 0 57.5
The Partnership has not participated, and will not participate, in any
exploratory wells.
Present Activities. As of March 31, 1998:
26 of the wells were in production;
18 of the wells were capable of production but not yet on-line; and
20 of the wells were spudded and were in the process of being drilled
and completed.
Productive Wells. The following table summarizes the Partnership's
total gross and net interest in productive natural gas wells at March
31, 1999.
Name of Well_State_County_Gross_Net__
Book #1 Pennsylvania Mercer 1 1.00
Byler #33 Pennsylvania Lawrence 1 1.00
Byler #38 Pennsylvania Lawrence 1 1.00
Byler #40 Pennsylvania Lawrence 1 1.00
Byler #43 Pennsylvania Lawrence 1 1.00
Byler #51 Pennsylvania Lawrence 1 1.00
Byler #56 Pennsylvania Lawrence 1 1.00
Byler #58 Pennsylvania Lawrence 1 1.00
Cameron #2 Pennsylvania Mercer 1 1.00
Campbell #6 Pennsylvania Mercer 1 0.50
Dick #2 Pennsylvania Mercer 1 1.00
Foreman #1 Pennsylvania Lawrence 1 1.00
Gibson #5 Pennsylvania Lawrence 1 1.00
Hostetler #7 Pennsylvania Lawrence 1 1.00
Hostetler #9 Pennsylvania Mercer 1 1.00
Kempf #2 Pennsylvania Lawrence 1 1.00
Lapinski #4 Pennsylvania Mercer 1 1.00
Maranuck #1 Pennsylvania Mercer 1 1.00
Martin #1 Pennsylvania Mercer 1 1.00
McFarland #5 Pennsylvania Mercer 1 1.00
McFarland #9 Pennsylvania Lawrence 1 1.00
Michaels Unit #3 Pennsylvania Mercer 1 1.00
Minner #1 Pennsylvania Mercer 1 1.00
North #4 Pennsylvania Mercer 1 1.00
Paglia #2 Pennsylvania Mercer 1 1.00
Shannon #4 Pennsylvania Lawrence 1 1.00
Swaney Unit #1 Pennsylvania Mercer 1 1.00
Swaney #3 Pennsylvania Mercer 1 1.00
Thompson #7 Pennsylvania Mercer 1 1.00
Wiese #1 Pennsylvania Mercer 1 1.00
Wengerd #3 Pennsylvania Mercer 1 0.50
Yoder #4 Pennsylvania Mercer 1 1.00
Badger #2 Pennsylvania Mercer 1 1.00
Hover Unit #4 Pennsylvania Mercer 1 1.00
Marshall #4 Pennsylvania Mercer 1 1.00
Muscarella #1 Pennsylvania Lawrence 1 1.00
Patton #1 Pennsylvania Mercer 1 1.00
Mast #6 Pennsylvania Mercer 1 1.00
Fickes #1 Pennsylvania Mercer 1 1.00
Jovenall #1 Pennsylvania Mercer 1 1.00
Winters #1 Ohio Stark 1 0.50
City of Alliance #1Ohio Stark 1 0.50
Kemme E. Unit #1 Pennsylvania Mercer 1 0.50
Mast #7 Pennsylvania Lawrence 1 1.00
Hostetler #11 Pennsylvania Mercer 1 1.00
McFarland #10 Pennsylvania Lawrence l 1.00
Dixon #4 Pennsylvania Mercer 1 1.00
Sines #4 Pennsylvania Mercer 1 0.50
Stallsmith #3 Pennsylvania Mercer 1 1.00
Winner Unit #1 Pennsylvania Mercer 1 1.00
Byler #60 Pennsylvania Lawrence 1 1.00
Gall #1 Pennsylvania Mercer 1 1.00
Johnston #4 Pennsylvania Lawrence 1 1.00
Buchkowski #1 Pennsylvania Lawrence 1 1.00
Strimbu #1 Ohio Trumbull 1 0.50
Thompson #11 Pennsylvania Lawrence 1 1.00
Lee #2 Pennsylvania Lawrence 1 1.00
Fulkman #1 Pennsylvania Lawrence 1 1.00
Byler #55 Pennsylvania Lawrence 1 0.50
Cypher Unit #1 Pennsylvania Mercer 1 0.50
Hostetler #10 Pennsylvania Mercer 1 0.50
Crawford #4 Pennsylvania Mercer 1 0.50
Besselman #1 Pennsylvania Mercer 1 0.50
Kempf #3 Pennsylvania Lawrence 1 0.50
64 57.50
The name of each well is the same as the name of the Prospect.
The Partnership has begun selling production from 26 of the wells;
however, revenues are not anticipated until the summer of 1999. The
remaining wells should go on-line shortly. (See "Description of
Business.") Although there has been production as set forth above, no
reserve estimate on such wells has been obtained from an independent
petroleum engineer.
=====================================================================
PART II
ITEM 3. LEGAL PROCEEDINGS
None.
====================================================================
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
====================================================================
ITEM 5. 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 366 interest holders.
Dividends. It is not anticipated that the Managing General Partner
will distribute revenues from the sale of production until the summer
of 1999. Thereafter, the Managing General Partner will review the
accounts of the Partnership at least quarterly to determine whether
cash distributions are appropriate and the amount to be distributed, if
any. The Partnership will distribute funds to the Managing General
Partner and the Participants allocated to their accounts which the
Managing General Partner deems unnecessary to be retained by the
Partnership. In no event, however, will funds be advanced or borrowed
for purposes of distributions, if the amount of such distributions
would exceed the Partnership's accrued and received revenues for the
previous four quarters, less paid and accrued operating costs with
respect to such revenues. The determination of 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
For the next 12 months management believes that the Partnership
has adequate capital in order to develop its wells. The Partnership
had sufficient capital resources from the closings to drill and develop
approximately 57.5 net wells. No other wells will be drilled and
therefore no additional funds will be required. The Partnership also
anticipates that the payment of operation and maintenance costs will
not begin until the Partnership wells begin to generate revenue.
Although management does not anticipate that the Partnership will
have to do so, any additional funds which may be required will be
obtained from production revenues from Partnership wells or from
borrowings by the Partnership from Atlas or its affiliates. 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.
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.
There are no expected purchases or sale of plant and significant
equipment. The Partnership has no employees and relies on Atlas for
its management. See Item 9.
================================================================
ITEM 7. FINANCIAL STATEMENTS
The Partnership's Financial Statements for the last fiscal year,
together with the opinion of the accountants
Atlas-Energy for the Nineties - Public #7 Ltd.
(A Pennsylvania Limited Partnership)
BALANCE SHEET
December 31, 1998
ASSETS
Interest receivable 29,592
Oil and gas well drilling contracts and leases 14,042,536
Organizational and syndication costs 1,798,253
$ 15,870,381
LIABILITIES AND PARTNERS' CAPITAL
Partners' capital $ 15,870,381
- ----------------------------------------------------------------
Atlas-Energy for the Nineties - Public #7 Ltd.
(A Pennsylvania Limited Partnership)
STATEMENT OF EARNINGS AND
CHANGES IN PARTNERS' CAPITAL ACCOUNTS
From July 16, 1998 (date of formation) to
December 31, 1998
MANAGING
GENERAL OTHER
PARTNER PARTNERS TOTAL REVENUE
Interest income - 29,592 29,592
Net earnings - 29,592 29,592
PARTNERS' CAPITAL CONTRIBUTIONS
Cash - 11,988,350 11,988,350
Organizational and
syndication costs 1,798,253 - 1,798,253
Tangible costs 1,845,386 - 1,845,386
Leasehold costs 208,800 - 208,800
PARTNERS' CAPITAL
AT END OF YEAR $ 3,852,439 $12,017,942 $15,870,381
Atlas-Energy for the Nineties - Public #7 Ltd.
(A Pennsylvania Limited Partnership)
STATEMENT OF CASH FLOWS
From July 16, 1998 (date of formation) to December 31, 1998
Cash flows from operating activities:
Interest income $ 29,592
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Increase in interest receivable (29,592)
Net cash provided by operating activities -
Cash flows used in investing activities:
Oil and gas well drilling contracts (11,988,350)
Cash flows from financing activities:
Partners' capital contributions 11,988,350
CASH AT DECEMBER 31, 1998 $ -
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Assets contributed by Managing General Partner
Tangible costs $ 1,845,386
Organizational and syndication costs 1,798,253
Lease costs 208,800
$ 3,852,439
Atlas-Energy for the Nineties - Public #7 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENT
December 31, 1998
A summary of significant accounting policies applied in the
preparation of the accompanying financial statements follows:
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Atlas-Energy for the Nineties - Public #7 Ltd. (the
"Partnership") is a Pennsylvania Limited Partnership that was
formed on July 16, 1998. Atlas Resources, Inc. ("Atlas") of
Pittsburgh, Pennsylvania, serves as Managing General Partner
and Operator, and the subscribers to Units will be either
Limited Partners or Investor General Partners depending on
their election.
The Partnership will be funded to drill Development Wells
which are located primarily in the Mercer County area of
Pennsylvania, although the Managing General Partner has
reserved the right to use up to 15% of the Partnership
Subscription to drill wells in other areas of the United
States.
Subscriptions at a cost of $10,000 per unit will be sold
through wholesalers and broker-dealers including Anthem
Securities, Inc., an affiliated company, which will be
compensated in an amount equal to 10% of the subscription
plus a .5% accountable due diligence expense. Commencement
of Partnership operations is subject to the receipt of
minimum Partnership subscriptions of $1,000,000 (to a maximum
of $12,000,000) by December 31, 1998. As of December 31,
1998, there were 366 investors which contributed $11,988,350.
2. PROPOSED ACCOUNTING POLICIES
The financial statements are prepared in accordance with
generally accepted accounting principles.
The Partnership proposes to use the successful efforts method
of accounting for oil and gas producing activities. Costs to
acquire mineral interests in oil and gas properties and to
drill and equip wells are capitalized. Depreciation and
depletion will be provided on a field-by-field basis using
the unit-of-production method based on periodic estimates of
oil and gas reserves.
The Partnership prepaid drilling costs of $11,988,350
pursuant to the drilling and operating agreement. All oil
and gas development activities are scheduled to be drilled in
the first quarter of 1999. Recoverability of the cost of oil
and gas properties is dependent upon the results of such
development activities.
Undeveloped leaseholds and proved properties will be assessed
periodically or whenever events or circumstances indicate
that the carrying amount of these assets may not be
recoverable. Proved properties will be assessed based on
estimates of future cash flows.
Atlas-Energy for the Nineties - Public #7 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENT - CONTINUED
December 31, 1998
2. PROPOSED ACCOUNTING POLICIES (CONTINUED)
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 these estimates.
In 1988, the AICPA issued Statement of Position 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 will be 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 to 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.
4. PARTICIPATION IN REVENUES AND COSTS
Atlas and the other partners will generally participate in
revenues and costs in the following manner:
ATLAS OTHER PARTNERS
Organization and offering costs 100% 0%
Lease costs 100% 0%
Revenues 31% 69%
Direct operating costs 31% 69%
Intangible drilling costs 0% 100%
Tangible costs 51% 49%
Tax deductions:
Intangible drilling and development costs 0% 100%
Depreciation 51% 49%
Depletion allowances 31% 69%
Atlas-Energy for the Nineties - Public #7 Ltd.
(A Pennsylvania Limited Partnership)
NOTES TO FINANCIAL STATEMENT - CONTINUED
December 31, 1998
5. TRANSACTIONS WITH ATLAS AND ITS AFFILIATES
The Partnership intends to enter 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 ananticipated cost of $39.15 per foot on
completed wells.
Administrative costs at $75 per well per month.
Well supervision fees initially of $275 per well per
month plus the cost of third party materials and
services.
Gas transportation and marketing charges at competitive
rates
which currently is 29 cents per MCF.
6. PURCHASE COMMITMENT
Subject to certain conditions, investor partners may present
their interests beginning in 2003 for purchase by Atlas.
Atlas is not obligated to purchase more than 5% of the units
in any calendar year.
7. SUBORDINATION OF MANAGING GENERAL PARTNER'S
REVENUE SHARE
Atlas will subordinate a part of its partnership revenues in
an amount up to 12.4% 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, 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.
8. INDEMNIFICATION
In order to limit the potential liability of the investor
general partners, Atlas Resources, Inc. has 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
The supplementary information of natural gas and oil
activities required by SFAS No. 69, Disclosures About Oil and Gas
Producing Activities, has not been presented because the Partnership
did not commence operations until 1999.
- ---------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
ATLAS-ENERGY FOR THE NINETIES - PUBLIC #7 LTD.
A PENNSYLVANIA LIMITED PARTNERSHIP
We have audited the accompanying balance sheet of Atlas-Energy for
The Nineties - Public #7 Ltd., A Pennsylvania Limited Partnership,
as of December 31, 1998, and the related statements of earnings
and changes in partners' capital and cash flows for the period
July 16, 1998 (date of formation) to December 31, 1998. 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 statement. 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
presents fairly, in all material respects, the financial position
of Atlas-Energy for The Nineties - Public #7 Ltd. as of December
31, 1998 and the results of its operations and cash flows for the
period July 16, 1998 (date of formation) to December 31, 1998, in
conformity with generally accepted accounting principles.
Cleveland, Ohio
March 1, 1999
- -----------------------------------------------------------------
ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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 period since the formation of the Partnership on July
16, 1998, 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 report of the former principal accountants on the financial
statements of the Partnership since its formation on July 16, 1998,
contained no adverse opinion or disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope, or accounting
principles.
================================================================
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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.
Because there are no equity securities registered pursuant to
Section 12 of the Exchange Act there is no required compliance with
Section 16(A) of the Exchange Act.
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 its 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 marketed 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. Wagner 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. Poloka 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 AAI.
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 10. EXECUTIVE COMPENSATION
The Partnership, as previously stated, has no employees. The following
table, however, sets forth all cash compensation paid by Atlas (which
has complete and exclusive discretion and control over the operations
and activities of the Partnership) during the calendar year ended
December 31, 1998, to the five most highly compensated persons who are
executive officers or directors and to all executive officers and
directors of Atlas as a group, for services in all capacities while
acting as executive officers or directors of Atlas:
Name of Individual (3)_
Capacities in which served
Cash Compensation (Compensation pursuant to Plans .
. Aggregate of contingent forms of remuneration__
James R. O'Mara_
President, Chief Executive Officer and a Director_$307,450_ $21,457_-
Charles T. Koval_
Chairman of the Board and a Director_ $298,000_ $5,000_-__
Bruce M. Wolf_
General Counsel, Secretary and a Director _$234,170_ $15,626_
- -__
Donald P. Wagner_
Vice President of Operations_ $147,560_ $14,059_
- -__
Tony C. Banks_
Vice President and Chief Financial Officer_ $143,034 $12,269
- -__
Executive Officers as a Group (8 persons)
(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
year 1998. Atlas Energy contributed an amount equal to 50% of each
employee's contribution for the calendar year 1998.
(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 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of December 31, 1998, the Partnership had issued and outstanding
366 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 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Oil and Gas Revenues.
The Managing General Partner will be 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, 51% of
tangible costs and contributing all leases to the Partnership.
Leases.
The Managing General Partner contributed (at the lower of fair
market value or the Managing General Partner's cost of such prospects)
60 undeveloped prospects to the Partnership to drill approximately 55.5
net wells. Atlas received a credit in the amount of $ 199,800 for
these prospects.
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 Atlas will receive $50,850 for the
Partnership's first 12 months of operations.
Direct Costs. The Managing General Partner and its affiliates will be
reimbursed for all direct costs expended on behalf of the Partnership.
Drilling Contracts.
On December 01, 1998, the Partnership entered into a drilling
contract with Atlas to drill and complete 12 net wells which was
amended on December 31, 1998, to drill and complete an additional 52
wells. The Partnership paid Atlas for drilling and completing the
Partnership wells an amount equal to $39.15 per foot to the depth of
the well at its deepest penetration, which was 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
$11,988,350.
Per Well Charges.
As the wells commence production Atlas, as operator, will be
reimbursed at actual cost for all direct expenses incurred on behalf of
the Partnership and will receive well supervision fees for operating
and maintaining the wells during producing operations in the amount of
$275 per well per month subject to an annual adjustment for inflation.
With respect to the net wells Atlas will receive $183,150 for the
Partnership's first 12 months of operations. The well supervision fees
are proportionately reduced to the extent the Partnership acquires less
than 100% of the Working Interest in a well.
As operator Atlas charges the Partnership at cost for third party
services and materials provided for each well which has been placed in
operation.
Transportation and Marketing Fees.
The Partnership will pay a combined transportation and marketing
charge at a competitive rate, which is currently 29 cents per MCF, to
affiliates of Atlas, with respect to natural gas produced by the
Partnership.
Dealer-Manager Fees.
The Dealer Manager, Anthem Securities, received a 2.5% dealer-
manager fee, a 7.5% sales commission and a .5% reimbursment of the
Selling Agent's accountable due diligence fees in the amount of
$948,250. Of this amount the Dealer-Manager reallowed $948,250 to the
Selling Agents. The Dealer-Manager will receive no further
compensation.
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.
================================================================
ITEM 13. EXHIBITS AND 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
aproved by the Board of Directors of the Managing General Partner,
Atlas.
16, 1998, 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 since its formation on July 16, 1998,
contained no adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainity, audit scope or accounting
principles.
================================================================
EXHIBIS
4(a)_Certificate of Limited Partnership for
Atlas-Energy for the Nineties-Public #7 Ltd.
- ---------------------------------------------------------------------
Microfilm Number 9853-1270
Filed with the Department of State on July 16 1998
Entity Number 2826977 Secretary of the Commonwealth
CERTIFICATE OF LIMITED PARTNERSHIP
DSCB:15-8511 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. 8511
(relating to certificate of limited partnership), the
undersigned, desiring to form a limited partnership,
hereby certifies that:
1. The name of the limited partnership is: Atlas -
Energy for the Nineties - Public #7 Ltd.
2. The (a) address of this limited partnership's
initial registered office in this Commonwealth or
(b) name of its commercial registered office
provider and the county of venue is: (a) 311
Rouser Road Moon Township PA 15108 Allegheny (b)
N/A
3. The name and business address of each general
partner of the partnership is:
Atlas Resources, Inc
311 Rouser Road Moon Township, Pennsylvania 15108
4. (Check, and if appropriate complete, one of the
following):
X The formation of the limited partnership shall be
effective upon filing this Certificate of Limited
Partnership in the Department of State.
The formation of the limited partnership shall be
effective on-------.
- ----------------------------------------------------------------
4(b)_Amended and Restated Certificate and Agreement
of Limited Partnership for Atlas-Energy for the
Nineties-Public #7 Ltd. dated December 31, 1998
Microfilm Number 9888-1342
Filed with the Department of State on 12-03-98
Entity Number 2826977
CERTIFICATE OF AMENDMENT-LIMITED PARTNERSHIP
DSCB:15-8512 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 8512
(relating to certificate of amendment), the undersigned limited
partnership, desiring to amend its Certificate of Limited Partnership,
hereby certifies that:
1. The name of the limited partnership is: ATLAS-ENERGY FOR THE
NINETIES-PUBLIC #7 LTD.
2. The date of filing of the original Certificate of Limited Partnership
is: JULY 16. 1998
3. (Check, and if appropriate complete, one of the following):
_____ The amendment adopted by the limited partnership, set forth in
full, is as follows:
__X__ The amendment adopted by the limited partnership is set forth in
full in Exhibit A attached hereto and made a part hereof.
4. (Check, and if appropriate complete, one of the following):
__X__ The amendment shall be effective upon filing this Certificate of
Amendment in the Department of State.
_____ The amendment shall be effective on: ________________________ at
__________________________
Date Hour
5. (Check if the amendment restates the Certificate of Limited
Partnership):
_____ The restated Certificate of Limited Partnership supersedes the
original Certificate of Limited Partnership and all amendments
thereto.
IN TESTIMONY WHEREOF, the undersigned limited partnership has
caused this Certificate of Amendment to be executed this 1 day of
DECEMBER, 1998
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #7
LTD.
By: Atlas Resources, Inc.
Managing General Partner
(Name of Partnership
By:
(Signature) J. R.
O'Mara
Title: President and CEO
- ----------------------------------------------------------------
4(c)_Amended and Restated Certificate and Agreement
of Limited Partnership for Atlas-Energy for the
Nineties-Public #7 Ltd. dated January 28, 1999
Microfilm Number _____________
Filed with the Department of State on 2-11-99
Entity Number 2826977_
CERTIFICATE OF AMENDMENT-LIMITED PARTNERSHIP
DSCB:15-8512 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 8512
(relating to certificate of amendment), the undersigned limited
partnership, desiring to amend its Certificate of Limited Partnership,
hereby certifies that:
6. The name of the limited partnership is: ATLAS-ENERGY FOR THE
NINETIES-PUBLIC #7 LTD.
7. The date of filing of the original Certificate of Limited Partnership
is: JULY 16. 1998
8. (Check, and if appropriate complete, one of the following):
_____ The amendment adopted by the limited partnership, set forth in
full, is as follows:
__X__ The amendment adopted by the limited partnership is set forth in
full in Exhibit A attached hereto and made a part hereof.
9. (Check, and if appropriate complete, one of the following):
__X__ The amendment shall be effective upon filing this Certificate of
Amendment in the Department of State.
_____ The amendment shall be effective on: ________________________ at
__________________________
Date Hour
10. (Check if the amendment restates the Certificate of Limited
Partnership):
_____ The restated Certificate of Limited Partnership supersedes the
original Certificate of Limited Partnership and all amendments
thereto.
IN TESTIMONY WHEREOF, the undersigned limited partnership has
caused this Certificate of Amendment to be executed this 28 day of
January 1999
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #7
LTD.
By: Atlas Resources, Inc.
Managing General Partner
______________________________________________
(Name of Partnership
By:
___________________________________________
(Signature) J. R.
O'Mara
Title: President and CEO
- ----------------------------------------------------------------
=================================================================
10(a)_Drilling and Operating Agreement with exhibits
DRILLING AND OPERATING AGREEMENT
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #7 LTD.
(THIS DRILLING AND OPERATING AGREEMENT WILL BE APPROPRIATELY
MODIFIED FOR OTHER AREAS OF THE UNITED STATES.)
- ---------------------------------------------------------------------
<PAGE>
INDEX
SECTION PAGE
1. Assignment of Well Locations; Representations; Designation of
Additional Well Locations;
Outside Activities 1
2. Drilling of Wells; Interest of Developer; Right of Substitution
2
3. Operator - Responsibilities in General; Term 3
4. Operator's Charges for Drilling and Completing Wells; Completion
Determination 4
5. Title Examination of Well Locations; Liability for Title Defects
5
6. Operations Subsequent to Completion of the Wells; Price
Determinations; Plugging and Abandonment 5
7. Billing and Payment Procedure with Respect to Operation of
Wells; Records, Reports and Information 6
8. Operator's Lien 8
9. Successors and Assigns; Transfers; Appointment of Agent 8
10. Insurance; Operator's Liability 9
11. Internal Revenue Code Election, Relationship of Parties; Right
to Take Production in Kind 9
12. Force Majeure 10
13. Term 10
14. Governing Law and Invalidity 10
15. Integration 11
16. Waiver of Default or Breach 11
17. Notices 11
18. Interpretation 12
19. Counterparts 12
Signature Page 12
Exhibit A Description of Leases and Initial Well Locations
Exhibits A-l through A-___ Maps of Initial Well Locations
Exhibit B Form of Assignment
Exhibit C Form of Addendum
- -------------------------------------------------------------
<PAGE>1
DRILLING AND OPERATING AGREEMENT
THIS AGREEMENT made this 1 day of December 1998, by and
between ATLAS RESOURCES, INC., a Pennsylvania corporation (hereinafter
referred to as "Atlas" or "Operator"),
and
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #7 LTD., a Pennsylvania limited
partnership, (hereinafter referred to as the "Developer").
WITNESSETH THAT:
WHEREAS, the Operator , by virtue of the Oil and Gas Leases (the
"Leases") described on Exhibit A attached hereto and made a part
hereof, has certain rights to develop the 38 initial
well locations identified on the maps attached hereto as Exhibits A-l
through 1-38_ (the "Initial Well Locations");
WHEREAS, the Developer, subject to the terms and conditions hereof,
desires to acquire certain of Atlas' rights to develop the aforesaid
38 Initial Well Locations and to provide for the
development upon the terms and conditions herein set forth of
additional well locations ("Additional Well Locations") which the
parties may from time to time designate; and
WHEREAS, the Operator is in the oil and gas exploration and development
business, and the Developer desires that Operator, as its independent
contractor, perform certain services in connection with its efforts to
develop the aforesaid Initial and Additional Well Locations
(hereinafter collectively referred to as the "Well Locations") and to
operate the wells completed thereon, on the terms and conditions herein
set forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and subject to the terms and conditions hereinafter set
forth, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. Assignment of Well Locations; Representations; Designation of
Additional Well Locations; Outside Activities.
(a) The Operator shall execute an assignment of an undivided
percentage of Working Interest in the Well Location acreage for each
well to the Developer as shown on Exhibit A attached hereto, which
assignment shall be limited to a depth from the surface to the top of
the Queenston formation in Mercer County, Pennsylvania and Ohio.
The assignment shall be substantially in the form of Exhibit B attached
hereto and made a part hereof. The amount of acreage included in each
Initial Well Location and the configuration thereof are indicated on
the maps attached hereto as Exhibits A-l through A38 The amount
of acreage included in each Additional Well Location and the
configuration thereof shall be indicated on the maps to be attached as
exhibits to the applicable addendum as provided in sub-section (c)
below.
(b) As of the date hereof, the Operator represents and warrants to
the Developer that the Operator is the lawful owner of said Lease and
rights and interest thereunder and of the personal property thereon or
used in connection therewith; that the Operator has good right and
authority to sell and convey the same, and that said rights, interest
and property are free and clear from all liens and encumbrances, and
that all rentals and royalties due and payable thereunder have been
duly paid. The foregoing representations and warranties shall also be
made by the Operator at the time of each recorded assignment of the
acreage included in each Initial Well Location and at the time of each
recorded assignment of the acreage included in each Additional Well
Location designated pursuant to sub-section (c) below, such
representations and warranties to be included in each recorded
assignment substantially in the manner set forth in the form of
assignment attached hereto and made a part hereof as Exhibit B. The
Managing General Partner agrees to indemnify, protect and hold the
Developer and its successors and assigns harmless from and against all
costs (including but not limited to reasonable attorneys' fees),
liabilities, claims, penalties, losses, suits, actions, causes of
action, judgments or decrees resulting from the breach of any of the
aforesaid representations and warranties. It is understood and agreed
that, except as specifically set forth above, the Managing General
Partner makes no warranty or representation, express or implied, as to
its title or the title of the lessors in and to the lands or oil and
gas interests covered by said Leases.
(c) In the event that the parties hereto desire to designate
Additional Well Locations to be developed in accordance with the terms
and conditions of this Agreement, each of said parties shall execute an
addendum substantially in the form of Exhibit C attached hereto and
made a part hereof specifying the undivided percentage of Working
Interest and the Oil and Gas Leases to be included as Leases hereunder,
specifying the amount and configuration of acreage included in each
such Additional Well Location on maps attached as exhibits to such
addendum and setting forth their agreement that such Additional Well
Locations shall be developed in accordance with the terms and
conditions of this Agreement.
- ----------------------------------------------------------------------
<PAGE> 2
(d) It is understood and agreed that the assignment of rights under
the Leases and the oil and gas development activities contemplated by
this Agreement relate only to the Initial Well Locations described
herein and to the Additional Well Locations designated pursuant to
sub-section (c) above. Nothing contained in this Agreement shall be
interpreted to restrict in any manner the right of each of the parties
hereto to conduct without the participation of any other party hereto
any additional activities relating to exploration, development,
drilling, production or delivery of oil and gas on lands adjacent to or
in the immediate vicinity of the aforesaid Initial and Additional Well
Locations or elsewhere.
2. Drilling of Wells; Interest of Developer; Right of Substitution.
(a) Operator, as Developer's independent contractor, agrees to
drill, complete (or plug) and operate 38 natural gas
wells on the 38 Initial Well Locations in accordance
with the terms and conditions of this Agreement. Developer, as a
minimum commitment, agrees to participate in and pay the Operator's
charges for drilling and completing the wells and any extra costs
pursuant to Section 4 hereof in proportion to the share of the Working
Interest owned by the Developer in the wells with respect to all
38 initial wells, it being expressly understood and
agreed that, subject to sub-section (e) below, Developer does not
reserve the right to decline participation in the drilling of any of
the 38 initial wells to be drilled hereunder.
(b) Operator will use its best efforts to commence drilling the
first well within thirty (30) days after the date of this Agreement and
to commence the drilling of each of said 38 initial
wells for which payment is made pursuant to Section 4(b) of this
Agreement, on or before March 31, 1999. Subject to the foregoing time
limits, Operator shall determine the timing of and the order of the
drilling of said 38 Initial Well Locations.
(c) The 38 initial wells to be drilled on the
Initial Well Locations designated pursuant to this Agreement and any
additional wells drilled hereunder on any Additional Well Locations
designated pursuant to Section l(c) above shall be drilled and
completed (or plugged) in accordance with the generally accepted and
customary oil and gas field practices and techniques then prevailing in
the geographical area of the Well Locations and shall be drilled to a
depth sufficient to test thoroughly the objective formation or the
deepest assigned depth, whichever is less.
(d) Except as otherwise provided herein, all costs, expenses and
liabilities incurred in connection with the drilling and other
operations and activities contemplated by this Agreement shall be borne
and paid, and all wells, gathering lines of up to approximately 1,500
feet on the Prospect, equipment, materials, and facilities acquired,
constructed or installed hereunder shall be owned, by the Developer in
proportion to the share of the Working Interest owned by the Developer
in the wells. Subject to the payment of lessor's royalties and other
royalties and overriding royalties, if any, production of oil and gas
from the wells to be drilled hereunder shall be owned by the Developer
in proportion to the share of the Working Interest owned by the
Developer in the wells.
(e) Notwithstanding the provisions of sub-section (a) above, in the
event the Operator or Developer determines in good faith, with respect
to any Well Location, before operations commence hereunder with respect
to such Well Location, based upon the production (or failure of
production) of any other wells which may have been recently drilled in
the immediate area of such Well Location, or upon newly discovered
title defects, or upon such other evidence with respect to the Well
Location as may be obtained, that it would not be in the best interest
of the parties hereto to drill a well on such Well Location, then the
party making the determination shall notify the other party hereto of
such determination and the basis therefor and, unless otherwise
instructed by Developer, such well shall not be drilled.
If such well is not drilled, Operator shall promptly propose a new well
location (including such information with respect thereto as Developer
may reasonably request) within Pennsylvania or Ohio to be substituted
for such original Well Location. Developer shall thereafter have the
option for a period of seven (7) business days to either reject or
accept the proposed new well location. If the new well location is
rejected, Operator shall promptly propose another substitute well
location pursuant to the provisions hereof.
- ----------------------------------------------------------------------
<PAGE>3
Once the Developer accepts a substitute well location or does not
reject it within said seven (7) day period, this Agreement shall
terminate as to the original Well Location and the substitute well
location shall become subject to the terms and conditions hereof.
3. Operator - Responsibilities in General; Term.
(a) Atlas shall be the Operator of the wells and Well Locations
subject to this Agreement and, as the Developer's
independent contractor, shall, in addition to its other
obligations hereunder:
make the necessary arrangements for the drilling and completion of
wells and the installation of the necessary gas gathering line systems
and connection facilities;
make the technical decisions required in drilling, testing, completing
and operating such wells;
manage and conduct all field operations in connection with the
drilling, testing, completing, equipping, operating and producing of
the wells;
maintain all wells, equipment, gathering lines and facilities in good
working order during the useful life thereof; and
perform the necessary administrative and accounting functions.
In the performance of work contemplated by this Agreement, Operator is
an independent contractor with authority to control and direct the
performance of the details of the work.
(b) Operator covenants and agrees that:
it shall perform and carry on (or cause to be performed and carried on)
its duties and obligations hereunder in a good, prudent, diligent and
workmanlike manner using technically sound, acceptable oil and gas
field practices then prevailing in the geographical area of the
aforesaid Well Locations;
all drilling and other operations conducted by, for and under the
control of Operator hereunder shall conform in all respects to federal,
state and local laws, statutes, ordinances, regulations, and
requirements;
unless otherwise agreed in writing by the Developer, all work performed
hereunder pursuant to a written estimate shall conform to the technical
specifications set forth in such written estimate and all equipment and
materials installed or incorporated in the wells and facilities
hereunder shall be new or used and of good quality;
in the course of conducting operations hereunder, it shall comply with
all terms and conditions of the Leases (and any related assignments,
amendments, subleases, modifications and supplements) other than any
minimum drilling commitments contained therein;
it shall keep the Well Locations subject to this Agreement and all
wells, equipment and facilities located thereon, free and clear of all
labor, materials and other liens or encumbrances arising out of
operations hereunder;
it shall file all reports and obtain all permits and bonds required to
be filed with or obtained from any governmental authority or agency in
connection with the drilling or other operations and activities which
are the subject of this Agreement; and
it will provide competent and experienced personnel to supervise the
drilling, completing (or plugging), and operating of the wells and use
the services of competent and experienced service companies to provide
any third party services necessary or appropriate in order to perform
its duties hereunder.
(c) Atlas shall serve as Operator hereunder until the earliest of:
the termination of this Agreement pursuant to Section 13 hereof;
- ----------------------------------------------------------------
<PAGE> 4
the termination of Atlas as Operator by the Developer which may be
effected by the Developer at any time in its discretion, with or
without cause; upon sixty (60) days advance written notice to the
Operator; or
the resignation of Atlas as Operator hereunder which may occur upon
ninety (90) days' written notice to the Developer at any time after
five (5) years from the date hereof, it being expressly understood and
agreed that Atlas shall have no right to resign as Operator hereunder
prior to the expiration of the aforesaid five-year period.
Any successor Operator hereunder shall be selected by the Developer.
Nothing contained in this sub-section (c) shall relieve or release
Atlas or the Developer from any liability or obligation hereunder which
accrued or occurred prior to Atlas' removal or resignation as Operator
hereunder. Upon any change in Operator pursuant to this provision, the
then present Operator shall deliver to the successor Operator
possession of all records, equipment, materials and appurtenances used
or obtained for use in connection with operations hereunder and owned
by the Developer.
4. Operator's Charges for Drilling and Completing Wells; Completion
Determination.
(a) All natural gas wells which are drilled and completed
hereunder shall be drilled and completed on a footage basis
for a price of $39.15 per foot to the depth of the well at
its deepest penetration as recorded by Operator. The
aforesaid footage price for each of said natural gas wells
shall be set forth in an AFE which shall be attached to this
Agreement as an Exhibit, and shall cover all ordinary costs
which may be incurred in drilling and completing each such
well for production of natural gas, including without
limitation, site preparation, permits and bonds, roadways,
surface damages, power at the site, water, Operator's
overhead and profit, rights-of-way, drilling rigs, equipment
and materials, costs of title examination, logging,
cementing, fracturing, casing, meters (other than utility
purchase meters), connection facilities, salt water
collection tanks, separators, siphon string, rabbit, tubing,
an average of 1,500 feet of gathering line per well,
geological and engineering services and completing two (2)
zones. Such footage price shall not include the cost of:
completing more than two (2) zones;
completion procedures, equipment, or any facilities necessary or
appropriate for the production and sale of oil and/or
natural gas liquids; and
equipment or materials necessary or appropriate to collect, lift or
dispose of liquids for efficient gas production, except that
the cost of saltwater collection tanks, separators, siphon
string and tubing shall be included in the aforesaid footage
price.
Any such extra costs shall be billed to Developer in proportion to the
share of the Working Interest owned by the Developer in the
wells on a direct cost basis equal to the sum of:
Operator's invoice costs of third party services performed and
materials and equipment purchased plus ten percent (10%) to
cover supervisory services and overhead; and
Operator's standard charges for services performed directly by it.
(b) In order to enable Operator to commence site preparation for
________________ 38 initial wells, to obtain suitable
subcontractors for the drilling and completion of such wells at
currently prevailing prices, and to insure the availability of
equipment and materials, the Developer shall pay to Operator, in
proportion to the share of the Working Interest owned by the Developer
in the wells, one hundred percent (100%) of the estimated price for all
38 initial wells upon execution of this
Agreement. The payment to be nonrefundable in all events, except that
Developer shall not be required to pay completion costs prior to the
time that a decision is made that the well warrants a completion
attempt and the share of such payments of the Managing General Partner
of the Developer shall be paid within five (5) business days of notice
from Operator that such costs have been incurred.
With respect to each additional well drilled on the Additional Well
Locations, if any, in order to enable Operator to commence site
preparation, to obtain suitable subcontractors for the drilling and
completion of such wells at currently prevailing prices, and to insure
the availability of equipment and materials, Developer shall pay
Operator, in proportion to the share of the Working Interest owned by
the Developer in the wells, one hundred percent (100%) of the estimated
price for such well upon execution of the applicable addendum pursuant
to Section l(c) above. The payment shall be nonrefundable in all
events, however, the Developer shall not be required to pay completion
costs prior to the time that a decision is made that the well warrants
a completion attempt and the share of such payments of the Managing
General Partner of the Developer shall be paid within five (5) business
days of notice from Operator that such costs have been incurred.
- ------------------------------------------------------------------
<PAGE> 5
With respect to each well, Developer shall pay to Operator, in
proportion to the share of the Working Interest owned by the Developer
in the wells, all other costs for such well within five (5) business
days of receipt of notice from Operator that such well has been drilled
to the objective depth and logged and is to be completed. Developer
shall pay, in proportion to the share of the Working Interest owned by
the Developer in the wells, any extra costs incurred with respect to
each well pursuant to sub-section (a) above within ten (10) business
days of its receipt of Operator's statement therefor.
(c) Operator shall determine whether or not to run the production
casing for an attempted completion or to plug and abandon
any well drilled hereunder; provided, however, that a well
shall be completed only if Operator has made a good faith
determination that there is a reasonable possibility of
obtaining commercial quantities of oil and/or gas.
(d) If Operator determines at any time during the drilling or
attempted completion of any well hereunder, in accordance with the
generally accepted and customary oil and gas field practices and
techniques then prevailing in the geographic area of the well location,
that such well should not be completed, it shall promptly and properly
plug and abandon the same. In such event, such well shall be deemed a
dry hole and the dry hole footage price for each well drilled hereunder
shall be $20.60 per foot multiplied by the depth of the well, as
specified in sub-section (a) above, and shall be charged to the
Developer in proportion to the share of the Working Interest owned by
the Developer in the well. Any amounts paid by the Developer with
respect to such dry hole which exceed the aforesaid dry hole footage
price shall be retained by Operator and shall be applied to the costs
for an additional well or wells to be drilled on the Additional Well
Locations.
5. Title Examination of Well Locations; Liability for Title
Defects.
(a) The Developer hereby acknowledges that Operator has furnished
Developer with the title opinions identified on Exhibit A, and other
documents and information which Developer or its counsel has requested
in order to determine the adequacy of the title to the Initial Well
Locations and leased premises subject to this Agreement. The Developer
hereby accepts the title to said Initial Well Locations and leased
premises and acknowledges and agrees that, except for any loss,
expense, cost or liability caused by the breach of any of the
warranties and representations made by the Operator in Section l(b)
hereof, any loss, expense, cost or liability whatsoever caused by or
related to any defect or failure of such title shall be the sole
responsibility of and shall be borne entirely by the Developer.
(b) Prior to commencing the drilling of any well on any Additional
Well Location designated pursuant to this Agreement, Operator shall
conduct, or cause to be conducted, a title examination of such
Additional Well Location, in order to obtain appropriate abstracts,
opinions and certificates and other information necessary to determine
the adequacy of title to both the applicable Lease and the fee title of
the lessor to the premises covered by such Lease. The results of such
title examination and such other information as is necessary to
determine the adequacy of title for drilling purposes shall be
submitted to the Developer for its review and acceptance, and no
drilling shall be commenced until such title has been accepted in
writing by the Developer. After any title has been accepted by the
Developer, any loss, expense, cost or liability whatsoever, caused by
or related to any defect or failure of such title shall be the sole
responsibility of and shall be borne entirely by the Developer, unless
such loss, expense, cost or liability was caused by the breach of any
of the warranties and representations made by the Operator in Section
l(b) of this Agreement.
6. Operations Subsequent to Completion of the Wells; Price
Determinations; Plugging and Abandonment.
(a) Commencing with the month in which a well drilled hereunder
begins to produce, Operator shall be entitled to an
operating fee of $275 per month for each well being operated
under this Agreement, proportionately reduced to the extent
the Developer owns less than 100% of the Working Interest in
the wells. This fee shall be in lieu of any direct charges
by Operator for its services or the provision by Operator of
its equipment for normal superintendence and maintenance of
such wells and related pipelines and facilities. Such
operating fees shall cover all normal, regularly recurring
operating expenses for the production, delivery and sale of
natural gas, including without limitation well tending,
routine maintenance and adjustment, reading meters,
recording production, pumping, maintaining appropriate books
and records, preparing reports to the Developer and
government agencies, and collecting and disbursing revenues.
The operating fees shall not cover costs and expenses
related to the:
- -----------------------------------------------------------------
<PAGE> 6
production and sale of oil;
collection and disposal of salt water or other liquids produced by the
wells;
rebuilding of access roads; and
purchase of equipment, materials or third party services, which,
subject to the provisions of sub-section (c) of this Section 6, shall
be paid by the Developer in proportion to the share of the Working
Interest owned by the Developer in the wells.
Any well which is temporarily abandoned or shut-in continuously for the
entire month shall not be considered a producing well for purposes of
determining the number of wells in such month subject to the aforesaid
operating fee.
(b) The monthly operating fee set forth in sub-section (a) above
may in the following manner be adjusted annually as of the first day of
January (the "Adjustment Date") each year beginning January l, 2000.
Such adjustment, if any, shall not exceed the percentage increase in
the average weekly earnings of "Crude Petroleum, Natural Gas, and
Natural Gas Liquids" workers, as published by the U.S. Department of
Labor, Bureau of Labor Statistics, and shown in Employment and Earnings
Publication, Monthly Establishment Data, Hours and Earning Statistical
Table C-2, Index Average Weekly Earnings of "Crude Petroleum, Natural
Gas, and Natural Gas Liquids" workers, SIC Code #131-2, or any
successor index thereto, since January l, 1997, in the case of the
first adjustment, and since the previous Adjustment Date, in the case
of each subsequent adjustment.
(c) Without the prior written consent of the Developer, pursuant to
a written estimate submitted by Operator, Operator shall not undertake
any single project or incur any extraordinary cost with respect to any
well being produced hereunder reasonably estimated to result in an
expenditure of more than $5,000, unless such project or extraordinary
cost is necessary to safeguard persons or property or to protect the
well or related facilities in the event of a sudden emergency. In no
event, however, shall the Developer be required to pay for any project
or extraordinary cost arising from the negligence or misconduct of
Operator, its agents, servants, employees, contractors, licensees or
invitees. All extraordinary costs incurred and the cost of projects
undertaken with respect to a well being produced hereunder shall be
billed at the invoice cost of third party services performed or
materials purchased together with a reasonable charge by Operator for
services performed directly by it, in proportion to the share of the
Working Interest owned by the Developer in the wells. Operator shall
have the right to require the Developer to pay in advance of
undertaking any such project all or a portion of the estimated costs
thereof in proportion to the share of the Working Interest owned by the
Developer in the wells.
(d) Developer shall have no interest in the pipeline gathering
system, which gathering system shall remain the sole property of
Operator and shall be maintained at Operator's sole cost and expense.
(e) Notwithstanding anything herein to the contrary, the Developer
shall have full responsibility for and bear all costs in proportion to
the share of the Working Interest owned by the Developer in the wells
with respect to obtaining price determinations under and otherwise
complying with the Natural Gas Policy Act of 1978 and the implementing
state regulations. Such responsibility shall include, without
limitation, preparing, filing, and executing all applications,
affidavits, interim collection notices, reports and other documents
necessary or appropriate to obtain price certification, to effect sales
of natural gas, or otherwise to comply with said Act and the
implementing state regulations. Operator agrees to furnish such
information and render such assistance as the Developer may reasonably
request in order to comply with said Act and the implementing state
regulations without charge for services performed by its employees.
(f) The Developer shall have the right to direct Operator to plug
and abandon any well which has been completed hereunder as a producer.
In addition, Operator shall not plug and abandon any such well prior
to obtaining the written consent of the Developer. However, if the
Operator in accordance with the generally accepted and customary oil
and gas field practices and techniques then prevailing in the
geographic area of the well location, determines that any such well
should be plugged and abandoned and makes a written request to the
Developer for authority to plug and abandon any such well and the
Developer fails to respond in writing to such request within forty-five
(45) days following the date of such request, then the Developer shall
be deemed to have consented to the plugging and abandonment of such
well(s). All costs and expenses related to plugging and abandoning the
wells which have been drilled and completed as producing wells
hereunder shall be borne and paid by the Developer in proportion to the
share of the Working Interest owned by the Developer in the wells.
- ---------------------------------------------------------------------
<PAGE> 7
At any time after three (3) years from the date each well drilled and
completed hereunder is placed into production, Operator shall have the
right to deduct each month from the proceeds of the sale of the
production from the well operated hereunder up to $200, in proportion
to the share of the Working Interest owned by the Developer in the
wells, for the purpose of establishing a fund to cover the estimated
costs of plugging and abandoning said well. All such funds shall be
deposited in a separate interest bearing escrow account for the account
of the Developer, and the total amount so retained and deposited shall
not exceed Operator's reasonable estimate of such costs.
7. Billing and Payment Procedure with Respect to Operation of
Wells; Records, Reports and Information.
(a) Operator shall promptly and timely pay and discharge on behalf
of the Developer, in proportion to the share of the Working
Interest owned by the Developer in the wells, all severance
taxes, royalties, overriding royalties, operating fees,
pipeline gathering charges and other expenses and
liabilities payable and incurred by reason of its operation
of the wells in accordance with this Agreement. Operator
shall also pay, in proportion to the share of the Working
Interest owned by the Developer in the wells, on or before
the due date any third party invoices rendered to Operator
with respect to such costs and expenses. Operator, however,
shall not be required to pay and discharge as aforesaid any
such costs and expenses which are being contested in good
faith by Operator.
Operator shall deduct the foregoing costs and expenses from the
Developer's share of the proceeds of the oil and/or gas sold from the
wells operated hereunder and shall keep an accurate record of the
Developer's account hereunder, showing expenses incurred and charges
and credits made and received with respect to each well. In the event
that such proceeds are insufficient to pay said costs and expenses,
Operator shall promptly and timely pay and discharge the same, in
proportion to the share of the Working Interest owned by the Developer
in the wells, and prepare and submit an invoice to the Developer each
month for said costs and expenses. The invoice shall be accompanied
by the form of statement specified in sub-section (b) below. Any such
invoice shall be paid by the Developer within ten (10) business days of
its receipt.
(b) Operator shall disburse to the Developer, on a quarterly basis,
the Developer's share of the proceeds received from the sale of oil
and/or gas sold from the wells operated hereunder, less:
the amounts charged to the Developer under sub-section (a) hereof; and
such amount, if any, withheld by Operator for future plugging costs
pursuant to sub-section (f) of Section 6.
Each such disbursement made and/or invoice submitted pursuant to sub-
section (a) above shall be accompanied by a statement itemizing with
respect to each well:
the total production of oil and/or gas since the date of the last
disbursement or invoice billing period, as the case may be, and the
Developer's share thereof;
the total proceeds received from any sale thereof, and the Developer's
share thereof;
the costs and expenses deducted from said proceeds and/or being billed
to the Developer pursuant to sub-section (a) above;
the amount withheld for future plugging costs; and
such other information as Developer may reasonably request, including
without limitation copies of all third party invoices listed thereon
for such period.
Operator agrees to deposit all proceeds from the sale of oil and/or gas
sold from the wells operated hereunder in a separate checking account
maintained by Operator. This account shall be used solely for the
purpose of collecting and disbursing funds constituting proceeds from
the sale of production hereunder.
(c) In addition to the statements required under sub-section (b)
above, Operator, within seventy-five (75) days after the
completion of each well drilled hereunder, shall furnish the
Developer with a detailed statement itemizing with respect
to such well the total costs and charges under Section 4(a)
hereof and the Developer's share thereof, and such
information as is necessary to enable the Developer:
- ----------------------------------------------------------------------
<PAGE> 8
to allocate any extra costs incurred with respect to such well between
tangible and intangible; and
to determine the amount of investment tax credit, if applicable.
(d) Upon request, Operator shall promptly furnish the Developer
with such additional information as it may reasonably request,
including without limitation geological, technical and financial
information, in such form as may reasonably be requested, pertaining to
any phase of the operations and activities governed by this Agreement.
The Developer and its authorized employees, agents and consultants,
including independent accountants shall, at Developer's sole cost and
expense:
upon at least ten (10) days' written notice have access during normal
business hours to all of Operator's records pertaining to operations
hereunder, including without limitation, the right to audit the books
of account of Operator relating to all receipts, costs, charges and
expenses under this Agreement; and
have access, at its sole risk, to any wells drilled by Operator
hereunder at all times to inspect and observe any machinery, equipment
and operations.
8. Operator's Lien.
(a) The Developer hereby grants Operator a first and preferred lien
on and security interest in the interest of the Developer covered by
this Agreement, and in the Developer's interest in oil and gas produced
and the proceeds thereof, and upon the Developer's interest in
materials and equipment, to secure the payment of all sums due from
Developer to Operator under the provisions of this Agreement.
(b) In the event that the Developer fails to pay any amount owing
hereunder by it to the Operator within the time limit for payment
thereof, Operator, without prejudice to other existing remedies, is
authorized at its election to collect from any purchaser or purchasers
of oil or gas and retain the proceeds from the sale of the Developer's
share thereof until the amount owed by the Developer, plus twelve
percent (12%) interest on a per annum basis and any additional costs
(including without limitation actual attorneys' fees and costs)
resulting from such delinquency, has been paid. Each purchaser of oil
or gas shall be entitled to rely upon Operator's written statement
concerning the amount of any default.
9. Successors and Assigns; Transfers; Appointment of Agent.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the undersigned parties and their respective successors and
permitted assigns; provided, however, that Operator may not assign,
transfer, pledge, mortgage, hypothecate, sell or otherwise dispose of
any of its interest in this Agreement, or any of the rights or
obligations hereunder, without the prior written consent of the
Developer, except that such consent shall not be required in connection
with:
the assignment of work to be performed for Operator by subcontractors,
it being understood and agreed, however, that any such assignment to
Operator's subcontractors shall not in any manner relieve or release
Operator from any of its obligations and responsibilities under this
Agreement;
\
any lien, assignment, security interest, pledge or mortgage arising
under or pursuant to Operator's present or future financing
arrangements, or
the liquidation, merger, consolidation or sale of substantially all of
the assets of Operator or other corporate reorganization.
Further, in order to maintain uniformity of ownership in the wells,
production, equipment, and leasehold interests covered by this
Agreement, and notwithstanding any other provisions to the contrary,
the Developer shall not, without the prior written consent of Operator,
sell, assign, transfer, encumber, mortgage or otherwise dispose of any
of its interest in the wells, production, equipment or leasehold
interests covered hereby unless such disposition encompasses either:
the entire interest of the Developer in all wells, production,
equipment and leasehold interests subject hereto; or
an equal undivided interest in all such wells, production, equipment,
and leasehold interests.
- ---------------------------------------------------------------------
<PAGE> 9
(b) Subject to the provisions of sub-section (a) above, any sale,
encumbrance, transfer or other disposition made by the
Developer of its interests in the wells, production,
equipment, and/or leasehold interests covered hereby shall
be made:
expressly subject to this Agreement;
without prejudice to the rights of the other party; and
in accordance with and subject to the provisions of the Lease.
(c) If at any time the interest of the Developer is divided among
or owned by co-owners, Operator may, at its discretion, require such
co-owners to appoint a single trustee or agent with full authority to
receive notices, reports and distributions of the proceeds from
production, to approve expenditures, to receive billings for and
approve and pay all costs, expenses and liabilities incurred
hereunder, to exercise any rights granted to such co-owners under this
Agreement, to grant any approvals or authorizations required or
contemplated by this Agreement, to sign, execute, certify, acknowledge,
file and/or record any agreements, contracts, instruments, reports, or
documents whatsoever in connection with this Agreement or the
activities contemplated hereby, and to deal generally with, and with
power to bind, such co-owners with respect to all activities and
operations contemplated by this Agreement; provided, however, that all
such co-owners shall continue to have the right to enter into and
execute all contracts or agreements for their respective shares of the
oil and gas produced from the wells drilled hereunder in accordance
with sub-section (c) of Section 11 hereof.
10. Insurance; Operator's Liability.
(a) Operator shall obtain and maintain at its own expense so long
as it is Operator hereunder all required Workmen's Compensation
Insurance and comprehensive general public liability insurance in
amounts and coverage not less than $1,000,000 per person per occurrence
for personal injury or death and $1,000,000 for property damage per
occurrence, which insurance shall include coverage for blow-outs and
total liability coverage of not less than $10,000,000.
Subject to the aforesaid limits, the Operator's general public
liability insurance shall be in all respects comparable to that
generally maintained in the industry with respect to services of the
type to be rendered and activities of the type to be conducted under
this Agreement; Operator's general public liability insurance shall, if
permitted by Operator's insurance carrier:
name the Developer as an additional insured party; and
provide that at least thirty (30) days' prior notice of cancellation
and any other adverse material change in the policy shall be given to
the Developer.
Provided, that the Developer shall reimburse Operator for the
additional cost, if any, of including it as an additional insured party
under the Operator's insurance.
Current copies of all policies or certificates thereof shall be
delivered to the Developer upon request. It is understood and agreed
that Operator's insurance coverage may not adequately protect the
interests of the Developer hereunder and that the Developer shall carry
at its expense such excess or additional general public liability,
property damage, and other insurance, if any, as the Developer deems
appropriate.
(b) Operator shall require all of its subcontractors to carry all
required Workmen's Compensation Insurance and to maintain such other
insurance, if any, as Operator in its discretion may require.
(c) Operator's liability to the Developer as Operator hereunder
shall be limited to, and Operator shall indemnify the Developer and
hold it harmless from, claims, penalties, liabilities, obligations,
charges, losses, costs, damages or expenses (including but not limited
to reasonable attorneys' fees) relating to, caused by or arising out
of:
the noncompliance with or violation by Operator, its employees, agents,
or subcontractors of any local, state or federal law, statute,
regulation, or ordinance;
the negligence or misconduct of Operator, its employees, agents or
subcontractors; or
- -------------------------------------------------------------------
<PAGE> 10
the breach of or failure to comply with any provisions of this
Agreement.
11. Internal Revenue Code Election; Relationship of Parties; Right
to Take Production in Kind.
(a) With respect to this Agreement, each of the parties hereto
elects, under the authority of Section 761(a) of the
Internal Revenue Code of 1986, as amended, to be excluded
from the application of all of the provisions of Subchapter
K of Chapter 1 of Sub Title A of the Internal Revenue Code
of 1986, as amended. If the income tax laws of the state or
states in which the property covered hereby is located
contain, or may hereafter contain, provisions similar to
those contained in the Subchapter of the Internal Revenue
Code of 1986, as amended, referred to under which a similar
election is permitted, each of the parties agrees that such
election shall be exercised. Beginning with the first
taxable year of operations hereunder, each party agrees that
the deemed election provided by Section 1.761-2(b)(2)(ii) of
the Regulations under the Internal Revenue Code of 1986, as
amended, will apply; and no party will file an application
under Section 1.761-2 (b)(3)(i) and (ii) of said Regulations
to revoke such election. Each party hereby agrees to execute
such documents and make such filings with the appropriate
governmental authorities as may be necessary to effect such
election.
(b) It is not the intention of the parties hereto to create, nor
shall this Agreement be construed as creating, a mining or
other partnership or association or to render the parties
liable as partners or joint venturers for any purpose.
Operator shall be deemed to be an independent contractor and
shall perform its obligations as set forth herein or as
otherwise directed by the Developer.
(c) Subject to the provisions of Section 8 hereof, the Developer
shall have the exclusive right to sell or dispose of its proportionate
share of all oil and gas produced from the wells to be drilled
hereunder, exclusive of production which may be used in development and
producing operations, production unavoidably lost, and production used
to fulfill any free gas obligations under the terms of the applicable
Lease or Leases; and Operator shall not have any right to sell or
otherwise dispose of such oil and gas. The Developer shall have the
exclusive right to execute all contracts relating to the sale or
disposition of its proportionate share of the production from the wells
drilled hereunder. Developer shall have no interest in any gas purchase
agreements of Operator, except the right to receive Developer's share
of the proceeds received from the sale of any gas or oil from wells
developed hereunder. The Developer agrees to designate Operator or
Operator's designated bank agent as the Developer's collection agent in
any such contract. Upon request, Operator shall render assistance in
arranging such sale or disposition and shall promptly provide the
Developer with all relevant information which comes to Operator's
attention regarding opportunities for sale of production.
In the event Developer shall fail to make the arrangements necessary to
take in kind or separately dispose of its proportionate share of the
oil and gas produced hereunder, Operator shall have the right, subject
to the revocation at will by the Developer, but not the obligation, to
purchase such oil and gas or sell it to others at any time and from
time to time, for the account of the Developer at the best price
obtainable in the area for such production, however, Operator shall
have no liability to Developer should Operator fail to market such
production.
Any such purchase or sale by Operator shall be subject always to the
right of the Developer to exercise at any time its right to take in
kind, or separately dispose of, its share of oil and gas not previously
delivered to a purchaser. Any purchase or sale by Operator of any other
party's share of oil and gas shall be only for such reasonable periods
of time as are consistent with the minimum needs of the Industry under
the particular circumstance, but in no event for a period in excess of
one (1) year.
12. Force Majeure.
(a) If Operator is rendered unable, wholly or in part, by force
majeure (as hereinafter defined) to carry out its obligations under
this Agreement, the Operator shall give to the Developer prompt
written notice of the force majeure with reasonably full particulars
concerning it; thereupon, the obligations of the Operator, so far as it
is affected by the force majeure, shall be suspended during but no
longer than, the continuance of the force majeure. Operator shall use
all reasonable diligence to remove the force majeure as quickly as
possible to the extent the same is within reasonable control.
(b) The term "force majeure" shall mean an act of God, strike,
lockout, or other industrial disturbance, act of the public enemy, war,
blockade, public riot, lightning, fire, storm, flood, explosion,
governmental restraint, unavailability of equipment or materials, plant
shut-downs, curtailments by purchasers and any other causes whether of
the kind specifically enumerated above or otherwise, which directly
precludes Operator's performance hereunder and is not reasonably within
the control of the Operator.
- -------------------------------------------------------------------
<PAGE> 12
(c) The requirement that any force majeure shall be remedied with
all reasonable dispatch shall not require the settlement of strikes,
lockouts, or other labor difficulty affecting the Operator, contrary to
its wishes. The method of handling all such difficulties shall be
entirely within the discretion of the Operator.
13. Term.
This Agreement shall become effective when executed by Operator
and the Developer. Except as provided in sub-section (c) of Section 3,
the Agreement shall continue and remain in full force and effect for
the productive lives of the wells being operated hereunder.
14. Governing Law and Invalidity.
This Agreement shall be governed by, construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania.
The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
15. Integration.
This Agreement, including the Exhibits hereto, constitutes and
represents the entire understanding and agreement of the parties with
respect to the subject matter hereof and supersedes all prior
negotiations, understandings, agreements, and representations relating
to the subject matter hereof.
No change, waiver, modification, or amendment of this Agreement
shall be binding or of any effect unless in writing duly signed by the
party against which such change, waiver, modification, or amendment
is sought to be enforced.
16. Waiver of Default or Breach.
No waiver by any party hereto to any default of or breach by any
other party under this Agreement shall operate as a waiver of any
future default or breach, whether of like or different character or
nature.
17. Notices.
Unless otherwise provided herein, all notices, statements,
requests, or demands which are required or contemplated by this
Agreement shall be in writing and shall be hand-delivered or sent by
registered or certified mail, postage prepaid, to the following
addresses until changed by certified or registered letter so addressed
to the other party:
(i) If to the Operator, to:
Atlas Resources, Inc.
311 Rouser Road
Moon Township, Pennsylvania 15108
Attention: President
(ii) If to Developer, to:
Atlas-Energy for the Nineties-Public #7 Ltd.
c/o Atlas Resources, Inc.
311 Rouser Road
Moon Township, Pennsylvania 15108
Notices which are served by registered or certified mail upon the
parties hereto in the manner provided in this Section shall be deemed
sufficiently served or given for all purposes under this Agreement at
the time such notice shall be mailed as provided herein in any post
office or branch post office regularly maintained by the United States
Postal Service or any successor to the functions thereof. All payments
hereunder shall be hand-delivered or sent by United States mail,
postage prepaid to the addresses set forth above until changed by
certified or registered letter so addressed to the other party.
- ------------------------------------------------------------------
<PAGE> 12
18. Interpretation.
Whenever this Agreement makes reference to "this Agreement" or to
any provision "hereof," or words to similar effect, the reference shall
be construed to refer to the within instrument unless the context
clearly requires otherwise. The titles of the Sections herein have been
inserted as a matter of convenience of reference only and shall not
control or affect the meaning or construction of any of the terms and
provisions hereof. As used in this Agreement, the plural shall include
the singular and the singular shall include the plural whenever
appropriate.
19. Counterparts.
The parties hereto may execute this Agreement in any number of
separate counterparts, each of which, when executed and delivered by
the parties hereto, shall have the force and effect of an original; but
all such counterparts shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under their respective seals as of the day and year first
above written.
Attest ATLAS RESOURCES, INC.
- ------------------------ By /s/ J/R. O'Mara
Secretary President
[Corporate Seal]
ATLAS-ENERGY FOR NINETIES-PUBLIC #7 LTD.
Attest By its Managing General Partner:
- ------------------------ ATLAS RESOURCES, INC.
Secretary
[Corporate Seal] By /s/ J.R. O'Mara
President
- ------------------------------------------------------------------
DESCRIPTION OF LEASES AND INITIAL WELL LOCATIONS
[To be completed as information becomes available]
1. WELL LOCATION
(a) Oil and Gas Lease from ______________________________________
dated _____________________ and recorded in Deed Book Volume
__________, Page __________ in the Recorder's Office of County,
____________, covering approximately _________ acres in
____________________________ Township, ___________________ County,
__________________________.
(b) The portion of the leasehold estate constituting the
____________________________________________ No. __________ Well
Location is described on the map attached hereto as Exhibit A-l.
(c) Title Opinion of _________________________________,
____________________________________,
________________________________________,
________________________________________, dated ___________________,
19_____.
(d) The Developer's interest in the leasehold estate constituting
this Well Location is an undivided % Working Interest to
those oil and gas rights from the surface to the bottom of the
Medina/Whirlpool Formation, subject to the landowner's royalty interest
and Overriding Royalty Interests.
Exhibit A
(Page 1)
- --------------------------------------------------------------------
EXHIBIT B
WELL NAME, TWP.
COUNTY, STATE
ASSIGNMENT OF OIL AND GAS LEASE
STATE OF ________________
COUNTY OF ______________
KNOW ALL MEN BY THESE PRESENTS:
THAT the undersigned
___________________________________________________________
(hereinafter called Assignor), for and in consideration of
One Dollar and other valuable consideration ($1.00 ovc), the receipt
whereof is hereby acknowledged, does hereby sell, assign, transfer and
set over unto
_______________________________________________________________________
_____________________
(hereinafter called Assignee), an undivided ___________________________
in, and to, the oil and gas lease described as follows:
together with the rights incident thereto and the personal property
thereto, appurtenant thereto, or used, or obtained, in connection
therewith.
And for the same consideration, the assignor covenants with the
said assignee his or its heirs, successors, or assigns that assignor is
the lawful owner of said lease and rights and interest thereunder and
of the personal property thereon or used in connection therewith; that
the undersigned has good right and authority to sell and convey the
same, and that said rights, interest and property are free and clear
from all liens and encumbrances, and that all rentals and royalties due
and payable thereunder have been duly paid.
In Witness Whereof, The undersigned owner ____ and assignor ____
ha____ signed and sealed this instrument the ______ day of
_______________, 19____.
Signed and acknowledged in presence of
___________________________________
_________________________________
___________________________________
_________________________________
___________________________________
ACKNOWLEDGEMENT BY INDIVIDUAL
STATE OF ___________________
BEFORE ME, A NOTARY PUBLIC, IN AND FOR SAID
COUNTY OF _________________
County and State, on this day personally appeared
_________________________________who acknowledged to me that ___he___
did sign the foregoing instrument and that the same is ___________ free
act and deed.
In testimony whereof, I have hereunto set my hand and official
seal, at __________________, this _____ day of _____________, A.D.,
19____.
___________________________________
Notary Public
CORPORATION ACKNOWLEDGEMENT
STATE OF ___________________
BEFORE ME, A NOTARY PUBLIC, IN AND FOR SAID
COUNTY OF _________________
County and State, on this day personally appeared
___________________________________ known to me to be the person and
officer whose name is subscribed to the foregoing instrument and
acknowledged that the same was the act of the said
___________________________________________, a corporation, and that he
executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
In testimony whereof, I have herewith set my hand and official
seal at __________________, this ______ day of ____________, A.D.,
19____.
__________________________________________
Notary Public
This instrument prepared by:
Atlas Resources, Inc.
311 Rouser Road
P.O. Box 611
Moon Township, PA 15108
- -------------------------------------------------------------
<PAGE> c-1
EXHIBIT C
ADDENDUM NO. __________
TO DRILLING AND OPERATING AGREEMENT
DATED ___________________ , 1998
THIS ADDENDUM NO. __________ made and entered into this 31 day of
December 1998, by and between ATLAS RESOURCES, INC., a
Pennsylvania corporation (hereinafter referred to as "Operator"),
and
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #7 LTD., a Pennsylvania limited
partnership, (hereinafter referred to as the Developer).
WITNESSETH THAT:
WHEREAS, Operator and the Developer have entered into a Drilling and
Operating Agreement dated December 1 1998, (the "Agreement"),
which Agreement relates to the drilling and operating of
38 natural gas wells on the 38
Initial Well Locations in Mercer County, Pennsylvania,
identified on the maps attached as Exhibits A-l through A38 to
said Agreement, and provides for the development upon the terms and
conditions therein set forth of such Additional Well Locations as the
parties may from time to time designate; and
WHEREAS, pursuant to Section l(c) of said Agreement, Operator and
Developer presently desire to designate 26 Additional
Well Locations hereinafter described to be developed in accordance with
the terms and conditions of said Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Pursuant to Section l(c) of the aforesaid Agreement, the
Developer hereby authorizes Operator to drill, complete (or plug) and
operate, upon the terms and conditions set forth in said Agreement and
this Addendum No1 26 additional natural gas
wells on the 26 Additional Well Locations described on
Exhibit A hereto and on the maps attached hereto as Exhibits A26
through A26
2. Operator, as Developer's independent contractor, agrees to
drill, complete (or plug) and operate said additional natural gas wells
on said Additional Well Locations in accordance with the terms and
conditions of said Agreement and further agrees to use its best efforts
to commence drilling the first such additional well within thirty (30)
days after the date hereof and to commence drilling all said
26 additional wells on or before March 31, 1999.
3. Developer hereby acknowledges that Operator has furnished
Developer with the title opinions identified on Exhibit A hereto, and
such other documents and information which Developer or its counsel has
requested in order to determine the adequacy of the title to the
aforesaid Additional Well Locations. The Developer hereby accepts the
title to the aforesaid Additional Well Locations and leased premises in
accordance with the provisions of Section 5 of the Agreement.
4. The drilling and operation of said 26 additional
natural gas wells on the aforesaid 26 Additional Well
Locations shall be in accordance with and subject to the terms and
conditions set forth in the aforesaid Agreement as supplemented by this
Addendum No. 26 and except as previously supplemented, all
terms and conditions of the aforesaid Agreement shall remain in full
force and effect as originally written.
5. This Addendum No. 1 shall be legally binding upon, and
shall inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors and assigns.
Exhibit C
(Page 1)
- ----------------------------------------------------------------------
<PAGE> c2
WITNESS the due execution hereof on the day and year first above
written.
Attest: ATLAS RESOURCES, INC.
/s/B.M. Wolfs By s/s J.R. O'Mara
Secretary President
[Corporate Seal]
ATLAS ENERGY FOR THE NINETIES-PUBLIC #7 LTD.
By its Managing General Partner:
ATLAS RESOURCES, INC.
Attest:
____/s/B.M. Wolf_____________By J.R. O'Mara
Secretary President
[Corporate Seal]
- -----------------------------------------------------------------------
- ----------------------------------------------------------------
23(a)_Consent of Grant Thornton, L.L.P.
McLAUGHLIN & COURSON
CERTIFIED PUBLIC ACCOUNTANTS
2002 LAW & FINANCE BUILDING
PITTSBURGH, PA 15219
412/261-0630
FAX 412/261-3582
CONSENT OF INDEPENDENT AUDITOR
ATLAS-ENERGY FOR THE NINETIES-PUBLIC 7 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 #7 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 #7 Ltd.
/s/McLaughlin & Courson
Certified Public Accountants
April 9, 1999
Pittsburgh, Pennsylvania
================================================================
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 #7 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: 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): /s/ Charles T. Koval
Charles T. Koval, Chairman of the Board and a Director
Date: April 15, 1999
By (Signature and Title): /s/ James R. O'Mara
James R. O'Mara, President, Chief Executive Officer and
a Director
Date: April 15, 1999
By (Signature and Title): /s/ Bruce M. Wolf
Bruce M. Wolf, General Counsel, Secretary and a Director
Date: April 15, 1999
By (Signature and Title): /s/ Tony C. Banks
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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 29,592
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,592
<PP&E> 15,840,789
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,870,381
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,870,381
<SALES> 0
<TOTAL-REVENUES> 29,592
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 29,592
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,592
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
