U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
AMENDED
(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, 1997
[ ] 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 33-95330
Atlas-Energy for the Nineties-Public #4 Ltd.
(Name of small business issuer in its charter)
Pennsylvania 25-1772474
(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 No _____
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year. $1,094,717
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 ___
- ---------------------------------------------------------------------
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Atlas-Energy for the Nineties-Public #4 Ltd. (the "Partnership")
was formed under the Pennsylvania Revised Uniform Limited Partnership
Act on July 5, 1995, with Atlas Resources, Inc. ("Atlas") as Managing
General Partner. The Partnership had its initial and final closing on
December 27, 1995, and was funded with subscriptions of $6,991,350 to
drill natural gas development wells. Also, on December 27, 1995, the
Managing General Partner was credited with a total capital contribution
of $1,423,652 because of certain expenditures it made on behalf of the
Partnership and certain prospects it contributed to the Partnership.
The Partnership has not filed bankruptcy nor has the Partnership
been involved in any material reclassification, merger, consolidation,
receivership or similar proceeding or purchase or sale of a significant
amount of assets not in the ordinary course of business.
The Partnership was funded to drill natural gas development wells
with the objective being the discovery and production of natural gas in
commercially marketable quantities. Because the initial and final
closing date was December 27, 1995, the Partnership did not conduct
any drilling activities in 1995; however, the Partnership did prepay
the drilling costs pursuant to the Drilling and Operating Agreement
with Atlas on December 27, 1995, in an amount equal to $7,230,399 to
drill 31.5 development wells to the Clinton/Medina geological formation
in Mercer and Venango Counties, Pennsylvania. Atlas and its
affiliates' had sufficient leasehold inventory to provide the prospects
to be developed by the Partnership. See "Properties".
For the next twelve months management believes that the Partnership
has adequate capital in order to conduct its operations. The
Partnership had sufficient capital resources from the closing to drill
and develop approximately 31.5 net wells. No other wells will be
drilled and therefore no additional funds will be required. The payment
of operating and maintenance costs did not begin until the Partnership
wells began to generate revenue. Although management does not
anticipate that the Partnership will have to do so, any additional
funds which may be required will be obtained from production revenues
from Partnership wells or from borrowings by the Partnership from Atlas
or its affiliates. Atlas, however, is not contractually committed to
make such a loan. The amount that may be borrowed by the Partnership
from Atlas and its affiliates, if any amounts are borrowed, may not at
any time exceed 5% of the Partnership subscription. No borrowings will
be obtained from third parties.
With respect to operating and maintenance costs, the Partnership's
commitments pursuant to the drilling and operating agreement are being
fulfilled through revenues generated from the sale of gas. During
producing operations Atlas, as operator, receives 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 are billed
at the invoice cost of materials purchased or third party services
performed. As operator Atlas charges the Partnership at cost for third
party services and materials provided for each well which has been
placed in operation, and a reasonable charge for services performed
directly by Atlas or its affiliates. The drilling and operating
agreement also gives the operator the right at any time after three
years from the date a Partnership well has been placed into production
to retain $200 per month to cover future plugging and abandonment of
such well.
Natural gas 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 is also affected by
numerous factors beyond the control of the Partnership and the effect
of which cannot be accurately predicted. These factors include the
availability and proximity of adequate pipeline or other transportation
facilities; the amount of domestic production and foreign imports of
oil and gas; competition from other energy sources such as coal and
nuclear energy; local, state and federal regulations regarding
production and the cost of complying with applicable environmental
regulations; and fluctuating seasonal supply and demand. For example,
the demand for natural gas is greater in the winter months than in the
summer months, which is reflected in a higher spot market price paid
for such gas. Also, increased imports of oil and natural gas have
occurred and are expected to continue. The free trade agreement
between Canada and the United States has eased restrictions on imports
of Canadian gas to the United States. Additionally, the passage in
November, 1993, of the North American Free Trade Agreement will have
some impact on the American gas industry by eliminating trade and
investment barriers in the United States, Canada and Mexico. In the
past the reduced demand for natural gas and/or an excess supply of gas
has resulted in a lower price paid for the gas. It has also resulted
in some purchasers curtailing or restricting their purchases of
natural gas; renegotiating existing contracts to reduce both take-or-
pay levels and the price paid for delivered gas; and other difficulties
in the marketing of production.
The Clean Air Act Amendments of 1990 contain incentives for the
future development of "clean alternative fuel," which includes natural
gas and liquefied petroleum gas for "clean-fuel vehicles". The
Partnership believes the amendments ultimately will have a beneficial
effect on natural gas markets and prices.
The Managing General Partner is responsible for selling the
Partnership's gas and oil production. Atlas' policy is to treat all
wells in a given geographic area equally. This reduces certain
potential conflicts of interest among the owners of the various wells,
including the Partnership, concerning to whom and at what price the gas
will be sold. Atlas calculates a weighted average selling price for
all the gas sold in the geographic area, such as the Mercer County
area. To arrive at the average weighted selling price the money
received from the sale of all the gas sold to its customers in a
geographic area is divided by the volume of all gas sold from the
wells in the area. On occasion, Atlas has reduced the amount of
production it normally sells on the spot market until the spot market
price increased. Atlas, however, has not voluntarily restricted its
gas production in the past two years.
In the Mercer County area, a portion of the Partnership's gas is
transported through Atlas' own pipeline system and sold directly to
industrial end-users in the area where the wells were drilled. This
will generally result in the Partnership receiving higher prices for
the gas than if the gas were transported a farther distance through
interstate pipelines because of increased transportation charges. The
remainder of the Partnership's gas is transported through Atlas' and
its affiliates' pipelines to the interconnection points maintained with
Tennessee Gas Transmission Co., National Fuel Gas Supply Corporation,
National Fuel Gas Distribution Company, East Ohio Natural Gas Company
and Peoples Natural Gas Company. These delivery points are utilized by
Atlas Gas Marketing, Inc. to service its end-user markets in the
northeast United States which include in excess of 100 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 1998, 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 1998. 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 its programs' gas production which includes the Partnership. To
assure that the financial instruments will be used solely for hedging
price risks and not for speculative purposes, Atlas has established an
Energy Price Risk Committee composed of the President, General Counsel,
Chief Financial Officer (chairperson) and Director of Marketing, whose
responsibility will be to ascertain that all financial trading is done
in compliance with hedging policies and procedures. Atlas does not
intend to contract for positions that it cannot offset with actual
production.
There are many companies, partnerships and individuals engaged in
natural gas exploration, development and operations in the areas where
the Partnership is conducting its activities. The industry is highly
competitive in all phases, including the marketing of natural gas and
oil. With respect to the marketing of the Partnership's gas the
Partnership should, through the use of Atlas' distribution system and
Atlas' experienced marketing staff, be able to sell the Partnership's
gas, although there can be no assurance of the price to be received by
the Partnership for the gas.
The Partnership has not and will not devote any funds to research
and development activities. There are no new products or services and
the Partnership does not have any patents, trademarks, licenses,
franchises, concessions, royalty agreements or labor contracts.
Oil and gas operations are regulated in Pennsylvania by the
Department of Environmental Resources, Division of Oil and Gas, which
imposes a comprehensive statutory and regulatory scheme with respect to
oil and gas operations. Among other things, the regulations involve:
(i) new well permit and well registration requirements, procedures and
fees; (ii) minimum well spacing requirements; (iii) restrictions on
well locations and underground gas storage; (iv) certain well site
restoration, groundwater protection and safety measures; (v)
landowner notification requirements, (vi) certain bonding or other
security measures; (vii) various reporting requirements; (viii) well
plugging standards and procedures; and (ix) broad enforcement powers.
Generally, the regulatory agency in the state where a producing natural
gas well is located supervises production activities and the
transportation of natural gas sold intrastate. Atlas does not expect
that these regulations will have a material adverse impact upon the
operations of the Partnership. The Partnership believes it has
complied in all material respects with applicable state regulations and
will continue to do so.
The Federal Energy Regulatory Commission ("FERC") regulates the
interstate transportation of natural gas and the pricing of natural gas
sold for resale interstate; and under the Natural Gas Policy Act of
1978 ("NGPA") the price of intrastate gas. Price controls for natural
gas production from new wells, however, were deregulated on December
31, 1992. Deregulated gas production may be sold at market prices
determined by supply, demand, BTU content, pressure, location of the
wells, and other factors. 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 May 18,
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.
The Partnership does not expect to sell any oil.
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, the
imposition of new taxes on natural gas and limiting the disposal of
waste water from wells. At the present time, it is impossible to
accurately predict what proposals, if any, will be enacted by Congress
or the legislatures and agencies of various states and what effect any
proposals which are enacted will have on the activities of the
Partnership.
Various federal, state and local laws covering the discharge of
materials into the environment, or otherwise relating to the protection
of the environment, may affect the Partnership's operations and costs.
The Partnership may generally be liable for cleanup costs to the United
States Government under the Federal Clean Water Act for oil or
hazardous substance pollution and under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA" or
Superfund) for hazardous substance contamination. The liability is
unlimited in cases of willful negligence or misconduct. There also is
no limit on liability for environmental cleanup costs or damages with
respect to claims by the state or private persons or entities. In
addition, the Environmental Protection Agency will require the
Partnership to prepare and implement spill prevention control and
countermeasure plans relating to the possible discharge of oil into
navigable waters and will further require permits to authorize the
discharge of pollutants into navigable waters. State and local permits
or approvals will also be needed with respect to wastewater discharges
and air pollutant emissions.
Violations of environment-related lease conditions or environmental
permits can result in substantial civil and criminal penalties as well
as potential court injunctions curtailing operations. Compliance with
these statutes and regulations may cause delays in producing natural
gas and oil from the wells and may increase substantially the cost of
producing 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.
ITEM 2. PROPERTIES
DRILLING ACTIVITY. The Partnership drilled 31.5 net wells, all of
which were productive. All the wells were drilled and completed by the
Partnership as of March 31, 1996. No further drilling activities will
be undertaken.
The following table summarizes the Partnership's drilling activity
since its formation. All of the wells drilled were development wells
which means a well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon known to be
productive. A "dry hole" is an exploratory or a development well found
to be incapable of producing either oil or gas in sufficient quantities
to justify completion as an oil or gas well. A "productive well" is an
exploratory or a development well that is not a dry well.
YEAR ENDED, DECEMBER 31,
1995 1996 1997
GROSS NET GROSS NET GROSS NET
Development Wells:
Oil 0 0 0 0 0 0
Gas 0 0 32 31.5 32 31.5
Dry
Total 0 0 32 31.5 32 31.5
A "gross" well is a well in which the Partnership has a working
interest. A "net" well is deemed to exist when the sum of the
fractional ownership working interests owned by the Partnership in
gross wells equals one. The number of net wells is the sum of the
fractional working interests owned in gross wells expressed as whole
numbers and fractions thereof.
The Partnership has not participated, and will not participate, in
any exploratory wells which means a well drilled to find commercially
productive hydrocarbons in an unproved area, to find a new commercially
productive horizon in a field previously found to be productive of
hydrocarbons at another horizon, or to significantly extend a known
prospect.
PRODUCTION. The following table shows the Partnership's net
production in barrels ("Bbls") of crude oil and in thousands of cubic
feet ("Mcf") of natural gas and the costs and weighted average selling
prices thereof, for the periods indicated.
YEAR ENDED DECEMBER 31,
1995 1996 1997
Production (1):
Oil (Bbls) 0 0 0
Natural Gas (Mcf) 0 523,279 401,575
Total (Equivalent Barrels) (2) 0 87,214 66,929Average
Sales Price:
Per Equivalent Barrel (2)(3) 0 $13.44 14.30Average
Production Cost (lifting cost):
Per Equivalent Barrel (2)(4) 0 $1.44 2.05
(1) The production shown in the table is determined by multiplying
the gross production of properties in which the Partnership has an
interest by the percentage of the leasehold interest owned by the
Partnership less the royalty interests of others. Thirty-one of
the properties owned by the Partnership are subject to a 12.5%
landowner's royalty and the Partnership has an 87.5% net revenue
interest. One property is subject to a 1/32 (3.125%) overriding
royalty interest in addition to a 12.5% landowner's royalty and the
Partnership has an 84.37% net revenue interest.
(2) The ratio of energy content of oil and gas (six Mcf of gas
equals one barrel of oil) was used to convert natural gas
production into equivalent barrels of oil.
(3) The average sales price per Mcf of gas sold by the Partnership
was $2.29 in 1996 and $2.38 in 1997 after deducting all expenses,
including transportation expenses.
(4) Production costs represent oil and gas operating expenses as
reflected in the financial statements of the Partnership plus
depreciation of support equipment and facilities.
SUMMARY OF PRODUCTIVE WELLS. The table below gives the number of
the Partnership's productive gross and net wells at December 31, 1997.
GAS WELLS OIL WELLS TOTAL WELLS
GROSS NET GROSS NET GROSS NET
Pennsylvania 32 31.5 0 0 32 31.5
Total 32 31.5 0 0 32 31.5
"Productive wells" are producing wells and wells capable of
production.
OIL AND GAS RESERVES. All of the Partnership's oil and gas
reserves are located in the United States. Estimates of the
Partnership's net proved developed and undeveloped oil and gas reserves
as of December 31, 1997, and the present value (discounted at 10%) of
estimated future net revenue before income tax from those reserves are
set forth in the following table
AS OF DECEMBER 31, 1997
Oil Gas Total PRESENT VALUE
(BBLS) (MCF) (BOE) OF FUTURE NET
REVENUES
(in thousands)
Proved Developed 0 2,321,941 386,990 $1,867
Proved Undeveloped 0 0 0 0
Total 0 2,321,941 386,990 $1,867
Estimated future net revenues represent estimated future gross
revenues from the production of proved reserves, net of estimated
production and future development costs, using prices and costs in
effect as of December 31, 1997. These prices were held constant
throughout the life of the properties except when different prices were
fixed and determinable from applicable contracts. These price
assumptions resulted in a weighted average price of $2.52 per Mcf for
gas over the life of the properties. Prices used in calculating the
estimated future net revenues attributable to proved reserves do not
necessarily reflect market prices for oil and gas production subsequent
to December 31, 1997. The amounts shown do not reflect non-property
related costs, such as general and administrative expenses, and future
income tax expense, or depreciation, depletion and amortization.
The present value of estimated future net revenues is calculated by
discounting estimated future net revenues by 10% annually. There can
be no assurance that all of the proved reserves will be produced and
sold within the periods assumed, that the assumed prices will actually
be realized for such production, or that existing contracts will be
honored. The values expressed are estimates only, and may not reflect
realizable values or fair market values of the oil and gas ultimately
extracted and recovered. The standardized measure of discounted future
net cash flows may not accurately reflect proceeds of production to be
received in the future from the sale of oil and gas currently owned and
does not necessarily reflect the actual costs that would be incurred to
acquire equivalent oil and gas reserves. For additional information
concerning oil and gas reserves and activities, see Note 9 to the
Financial Statements.
"Proved reserves" means the estimated quantities of crude oil,
natural gas, and natural gas liquids which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions, i.e., prices and costs as of the date the estimate is made.
Prices include consideration of changes in existing prices provided
only by contractual arrangements, but not on escalations based upon
future conditions.
(i) Reservoirs are considered proved if economic producibility
is supported by either actual production or conclusive
formation test. The area of a reservoir considered proved
includes (a) that portion delineated by drilling and defined by
gas-oil and/or oil-water contacts, if any; and (b) the
immediately adjoining portions not yet drilled, but which can
be reasonably judged as economically productive on the basis of
available geological and engineering data. In the absence of
information on fluid contacts, the lowest known structural
occurrence of hydrocarbons controls the lower proved limit of
the reservoir.
(ii) Reserves which can be produced economically through
application of improved recovery techniques (such as fluid
injection) are included in the "proved" classification when
successful testing by a pilot project, or the operation of an
installed program in the reservoir, provides support for the
engineering analysis on which the project or program was based.
(iii) Estimates of proved reserves do not include the
following: (a) oil that may become available from known
reservoirs but is classified separately as "indicated
additional reserves"; (b) crude oil, natural gas, and natural
gas liquids, the recovery of which is subject to reasonable
doubt because of uncertainty as to geology, reservoir
characteristics, or economic factors; (c) crude oil, natural
gas, and natural gas liquids, that may occur in undrilled
prospects; and (d) crude oil, natural gas, and natural gas
liquids, that may be recovered from oil shales, coal, gilsonite
and other such sources.
"Proved developed oil and gas reserves" means reserves that can be
expected to be recovered through existing wells with existing equipment
and operating methods. Additional oil and gas expected to be obtained
through the application of fluid injection or other improved recovery
techniques for supplementing the natural forces and mechanisms of
primary recovery should be included as "proved developed reserves" only
after testing by a pilot project or after the operation of an installed
program has confirmed through production response that increased
recovery will be achieved.
The Partnership does not have any proved undeveloped reserves.
"Proved undeveloped reserves" are reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells
where a relatively major expenditure is required for recompletion.
Reserves on undrilled acreage are limited to those drilling units
offsetting productive units that are reasonably certain of production
when drilled. Proved reserves for other undrilled units can be claimed
only where it can be demonstrated with certainty that there is
continuity of production from the existing productive formation. Under
no circumstances should estimates for proved undeveloped reserves be
attributable to any acreage for which an application of fluid injection
or other improved recovery technique is contemplated, unless such
techniques have been proved effective by actual tests in the area and
in the same reservoir.
No major discovery or other favorable or adverse event which would
cause a significant change in estimated reserves is believed by the
Company to have occurred since December 31, 1997. Reserves cannot be
measured exactly as reserve estimates involve subjective judgment. The
estimates must be reviewed periodically and adjusted to reflect
additional information gained from reservoir performance, new
geological and geophysical data and economic changes. The Partnership
has not filed any estimates (on a consolidated basis) of its oil and
gas reserves with, nor were such estimates included in any reports to,
any Federal or foreign governmental agency other than the Securities
and Exchange Commission within the 12 months prior to the date of this
filing.
ACREAGE. The following table sets forth, as of December 31, 1997,
the acres of developed and undeveloped oil and gas acreage in which the
Partnership had an interest.
DEVELOPED UNDEVELOPED TOTAL
LOCATION
Pennsylvania GROSS NET GROSS NET GROSS NET
Total 1,599.52 1,563.62 0 0 1,599.52 1,563.62
A "gross" acre is an acre in which the Partnership owns a working
interest. A "net" acre is deemed to exist when the sum of the
fractional ownership working interests owned by the Partnership in
gross acres equals one. The number of net acres is the sum of the
fractional working interests owned in gross acres expressed as whole
numbers and fractions thereof. "Undeveloped acreage" is those lease
acres on which wells have not been drilled or completed to a point
that would permit the production of commercial quantities of oil and
gas regardless of whether or not such acreage contains proved reserves.
DELIVERY COMMITMENTS. The Partnership is not obligated to provide
any determinable quantity of gas under any existing contracts or
agreements. The majority of the Partnership's gas production from the
wells was sold pursuant to short term contracts, which are term
contracts for a period of less than one year, with the remainder of the
Partnership gas production sold on the spot market and long term
contracts, which are term contracts for a period longer than one year.
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
RESPONSIBILITIES OF ATLAS. The Partnership has no employees and
relies on Atlas as Managing General Partner of the Partnership. Atlas
also serves as driller/operator of the wells. Atlas has complete and
exclusive discretion and control over the operations and activities of
the Partnership and will make all of the Partnership's decisions
affecting the wells developed by the Partnership. Atlas will provide
continuing review and analysis of all wells developed by the
Partnership and will monitor all expenditures and commitments made on
behalf of the Partnership. In addition, Atlas will perform
administrative services relating to the funding and operation of the
Partnership, Participant reporting, financial budgeting and
recordkeeping.
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. Atlas and Atlas Energy are
wholly owned subsidiaries of AIC, Inc., a corporation formed in July,
1995, which is a wholly owned subsidiary of The Atlas Group, Inc.,
("Atlas Group") that was formerly known as AEG Holdings, Inc., a
corporation which was also formed in July, 1995.
As of December 31, 1997, Atlas and its Affiliates operated
approximately 1,240 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 1,700 natural gas wells,
approximately 1,660 of which were capable of production in commercial
quantities. Atlas' primary offices are located at 311 Rouser Road,
Moon Township, Pennsylvania 15108.
Atlas and its affiliates 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.
The other subsidiaries of AIC, Inc. are: (i) Atlas Gas Marketing,
Inc., a gas marketing company; (ii) Mercer Gas Gathering, Inc., a gas
gathering company which gathers gas from Atlas and its affiliates'
wells in Mercer County, Pennsylvania, and delivers the gas directly to
industrial end-users or to interstate pipelines and local distribution
companies; (iii) Pennsylvania Industrial Energy, Inc., which sells
natural gas to industrial end-users in Pennsylvania; (iv) Transatco,
Inc., which owns a 50% interest in Topico which operates a pipeline in
Ohio; (v) Atlas Energy Corporation, which serves as managing general
partner of exploratory programs and driller and operator; and (vi)
Anthem Securities, Inc., which is a registered broker-dealer and a
member firm of the NASD and serves as dealer-manager of Atlas-sponsored
programs. In addition, Atlas is the sole owner of ARD Investments,
Inc., a corporation formed in July, 1995, and Atlas Energy is the sole
owner of AED Investments, Inc., a corporation formed in July, 1995.
Prior to July, 1995, all of the Atlas companies were wholly owned by
Atlas Energy. The purpose of forming Atlas Group, AIC, Inc., ARD
Investments, Inc. and AED Investments, Inc. was to achieve more
efficient concentration of funds of the Atlas group of companies,
thereby minimizing transaction costs and maximizing returns on
investment vehicles.
Atlas and its affiliates have constructed for their use over 600
miles of gas transmission lines and produce in excess of nine billion
cubic feet of natural gas annually from wells they operate which they
market directly to end-users or to interstate pipelines and local
distribution companies. In addition, Atlas Gas Marketing, Inc. (an
affiliate) purchases for resale an additional eight billion cubic feet
of natural gas annually from third party producers locally and in the
south/southwest United States which is marketed as described in
"Description of Business."
ORGANIZATIONAL DIAGRAM
The Atlas Group, Inc.
|
- -----------------------------AIC, Inc.
|
|-Atlas Resources, Inc. (Managing General Partner of Development
| Drilling Programs, Driller and Operator in Pennyslvania)
| |ARD Investments, Inc.
|
|
|-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)
|
|-Atlas Gas Marketing, Inc. (Markets Natural Gas)
|
|-Anthem Securities Inc. (Registered Broker-Dealer)
|
|-Atlas Energy Group, Inc. (Driller and Operator in Ohio)
| AED Investments, Inc.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES OF ATLAS.
The executive officers, directors and significant employees of Atlas
who are also officers, directors and significant employees of Atlas
Group and Atlas Energy are as follows:
Charles T. Koval 63 Chairman of the Board and a Director
James R. O'Mara 53 President, Chief Executive Officer and a Director
Bruce M. Wolf 48 General Counsel, Secretary and a Director
James J. Kritzo 62 Vice President of the Land Department
Donald P. Wagner 55 Vice President of Operations
Frank P. Carolas 37 Vice President of Geology
Tony C. Banks 42 Vice President of Finance and CFO
Barbara Krasnicki 52 Vice President of Administration
Jacqueline Poloka 46 Controller
John A. Ranieri 37 Director of Gas Marketing
Eric D. Koval 32 President of Anthem Securities, Inc.
Joseph R. Sadowski 66 Director
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.
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.
JAMES J. KRITZO. Vice President of the Land Department. Mr.
Kritzo joined the Land Department of Atlas Energy in 1979.
DONALD P. WAGNER. Vice President of Operations. Mr. Wagner joined
Atlas Energy in 1979.
FRANK P. CAROLAS. Vice President of Geology. Mr. Carolas joined
Atlas Energy in 1981.
TONY C. BANKS. 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.
BARBARA J. KRASNICKI. Vice President of Administration, Ms.
Krasnicki has been with Atlas Energy since its inception in 1971.
JACQUELINE B. POLOKA. Controller. Ms. Poloka joined Atlas Energy
in 1980.
JOHN A. RANIERI. Director of Gas Marketing for Atlas Gas
Marketing, Inc. Mr. Ranieri was promoted to Gas Procurement Manager of
Columbia Gas of Pennsylvania in 1984 and remained with that
organization until joining Atlas in July, 1990.
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.
JOSEPH R. SADOWSKI. A director. He co-founded Atlas Energy. Mr.
Sadowski has served as a director of Dixon Ticonderoga since 1987.
ITEM 4. REMUNERATION OF DIRECTORS AND OFFICERS
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 Atlas' fiscal year
ended July 31, 1997, to the three 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
OR IDENTITY OF CAPACITIES IN WHICH CASH
GROUP(3) REMUNERATION WAS RECEIVED(4) COMPENSATION(1,2)
James R. O'Mara President, Chief Executive Officer $305,300
and a Director
Charles T. Koval Chairman of the Board $296,500
and a Director
Bruce M. Wolf General Counsel, Secretary $217,150
and a Director
Executive Officers $1,383,530
as a Group (8 persons)
(1) The amounts indicated were composed of salaries and all cash
bonuses for services rendered to Atlas and its affiliates during
the last fiscal year, including compensation that would have been
paid in cash but for the fact the payment of such compensation was
deferred.
(2) Atlas has an "ESOP" retirement plan, described below, and has a
401(K) plan which allowed employees to contribute the lesser of 15%
of their compensation or $9,500 for the calendar year 1997 or
$9,500 for the calendar year 1996. Atlas contributed an amount
equal to 50% and 50% of each employee's contribution for the
calendar years July 31, 1997 and 1996, respectively.
(3) There were no stock options granted or exercised during the
fiscal year ended July 31, 1997, to the above individuals.
(4) During the fiscal year ended July 31, 1997, each director was
paid a director's fee of $12,000 for the
year. There are no other arrangements for remuneration of directors.
ITEM 5. SECURITY OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
As of December 31, 1997, the Partnership had issued and outstanding
700 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.
Atlas Group owns 100% of the common stock of AIC, Inc. which owns
100% of the common stock of Atlas and Atlas Energy. The following
table sets forth, as of December 31, 1997, information as to the
beneficial ownership of common stock of Atlas Group by each person
known to Atlas Group to own beneficially 5% or more of the outstanding
common stock of Atlas Group, by directors and nominees, naming them
individually, and by all directors and officers of Atlas Group as a
group:
SHARES OF COMMON PERCENT OF CLASS
Charles T. Koval 109,391 26.445%
Joseph R. Sadowski. 109,142 26.384%
James R. O'Mara 95,164 (1) 23.005%
Bruce M. Wolf 44,710 (2) 10.808%
Directors and Officers
as Group (9 persons) 377,654 (1)(2) 91.344%
(1) Includes 22,164 shares of Atlas Group issuable upon the
exercise of stock options held by Mr. O'Mara.
(2) Includes 14,210 shares of Atlas Group issuable upon the
exercise of stock options held by Mr. Wolf.
Atlas Group has adopted Atlas Energy's existing Employee Stock
Ownership Plan ("ESOP") for the benefit of its employees, other than
Messrs. Koval and Sadowski, to which it will contribute annually
approximately 6% of annual compensation in the form of shares of Atlas
Group. Atlas Group anticipates that it will contribute approximately
3,000 shares of its stock to the ESOP each year.
Pursuant to agreements entered into between Atlas Group and its
shareholders to accommodate the desire of Messrs. Sadowski and Koval to
gradually liquidate a majority of their stock ownership in Atlas Group
in preparation for their respective retirement from Atlas Group it is
anticipated that by the year 2003 the stock ownership of Atlas Group by
Messrs. Koval and Sadowski will be reduced through a series of stock
redemptions to approximately 15% each. The stock ownership of certain
of the remaining officers will be increased to approximately 60%, in
the aggregate; and the stock ownership of the ESOP will be
approximately 10%.
The stock redemptions require Atlas Group to execute promissory
notes, from time to time, in favor of Messrs. Koval and Sadowski, the
first of which, in the original principal amount of $4,974,340 each,
plus interest at 13.5% were executed by Atlas Energy and were assumed
by Atlas Group. These promissory notes are totally subordinated to
Atlas Group's obligations to banks, the ESOP and any and all other
debts or obligations of Atlas Group, including its indemnification
obligations and Atlas' drilling obligation to the Partnership. If
Atlas Group defaults on a promissory note, Messrs. Koval and Sadowski
are entitled to purchase up to approximately an additional 1,500,000
shares of Atlas Group to regain management control.
In 1990, Messrs. Koval and Sadowski entered into five year
employment agreements with Atlas Energy which agreements have been
transferred to Atlas Group, renewable for an additional five year term
and on an annual basis after the first ten years. Mr. Sadowski,
however, retired other than as a director in 1996. The terms and
provisions of the employment agreements with Mr. Koval are subject to
negotiation at the time of each renewal and currently do not provide
for any severance payments. Also, during the terms of the promissory
notes Messrs. Koval and Sadowski have the right to serve as directors
of Atlas Group and as one of the two trustees of the ESOP.
On November 8, 1990, Atlas Energy entered into a Stock Option
Agreement which established a management employee stock option plan to
provide incentive compensation for certain of its key employees to
acquire up to 47,578 shares of common stock of Atlas Energy. Pursuant
to the plan, Messrs. O'Mara and Wolf were granted stock options for
22,164 and 14,210 shares, respectively. The options are 100% vested
with an option price of $1.00 per share and may be exercised when the
promissory notes to Messrs. Koval and Sadowski have been satisfied and
will terminate on August 15, 2012. The issuance of future options will
be determined at a later date. The shareholders are also subject to a
Shareholders Agreement which provides, among other things, that such
shareholders may not transfer their shares in Atlas Group unless the
shares have first been offered to Atlas Group and the other
shareholders.
ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
OIL AND GAS REVENUES. The Managing General Partner is allocated
25% of the oil and gas revenues of the Partnership in return for paying
organization and offering costs equal to 15% of the Partnership
Subscription, 14.6% of tangible costs and contributing all leases to
the Partnership. During the calendar year ending December 31, 1997,
the Managing General Partner received $205,026 from the Partnership's
oil and gas revenues.
LEASES. The Managing General Partner initially contributed (at the
lower of fair market value or the Managing General Partner's cost of
such prospects) 32 undeveloped prospects to the Partnership to drill
approximately 31.5 net wells. With respect to the 32 prospects
contributed for these wells Atlas received a credit in the amount of
$113,400. During 1997, the Managing General Partner did not enter into
any further lease transactions and none are anticipated.
ADMINISTRATIVE COSTS. The Managing General Partner and its
affiliates 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, proportionately
reduced if less than 100% of the working interest in a well is
acquired. With respect to the net wells during the calendar year
ending December 31, 1997, the Managing General Partner received
$27,994.
DIRECT COSTS. The Managing General Partner and its affiliates are
reimbursed for all direct costs expended on behalf of the Partnership.
With respect to the net wells during the calendar year ending December
31, 1997, the Managing General Partner received $34,626.
DRILLING CONTRACTS. On December 27, 1995, the Partnership entered
into a drilling contract with Atlas to drill and complete 31.5 net
wells. The Partnership paid Atlas for drilling and completing the
Partnership wells an amount equal to $36.36 per foot to the depth of
the well at its deepest penetration, proportionately reduced if less
than 100% of the working interest in a well is acquired. With respect
to the 31.5 net wells the total amount received by Atlas was
$6,991,350. During 1997, the Partnership did not enter into any
further drilling transactions and none are anticipated.
PER WELL CHARGES. Atlas, as operator, is reimbursed at actual cost
for all direct expenses incurred on behalf of the Partnership and
receives well supervision fees for operating and maintaining the wells
during producing operations in the amount of $275 per well per month
subject to an annual adjustment for inflation. With respect to the net
wells during the calendar year ending December 31, 1997, Atlas received
$102,575. 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 pays a combined
transportation and marketing charge at a competitive rate, which is
currently 29 cents per MCF, to affiliates of Atlas, with respect to
natural gas produced by the Partnership.
OTHER COMPENSATION. Atlas or an affiliate will be reimbursed by
the Partnership for any loan Atlas or an affiliate may make to or on
behalf of the Partnership, and Atlas or the affiliate will have the
right to charge a competitive rate of interest on any such loan. If
Atlas provides equipment, supplies and other services to the
Partnership it may do so at competitive industry rates. For the
calendar year ending December 31, 1997, Atlas did not advance any funds
nor did it provide any equipment, supplies or other services.
The following discussion relates solely to certain relationships
and related transactions with respect to Atlas and does not relate to
the Partnership. The following discussion has been included because
Atlas has been granted by the Partnership Agreement and the drilling
and operating agreement the exclusive right, power and authority to
control the operations and activities of the Partnership.
Atlas, its officers, directors and affiliates have in the past
invested, and may in the future invest, as participants in oil and gas
programs sponsored by Atlas on the same terms as unrelated investors.
Atlas, its officers, directors and affiliates have also participated in
the past, and may in the future participate, as working interest owners
in wells in which Atlas or its oil and gas programs have an interest.
Frequently, such participation has been on more favorable terms than
the terms which were available to unrelated investors and Atlas Group
has loaned to its officers and directors amounts in excess of $60,000
from time to time as necessary for participation in such wells or
programs. Prior to 1996, such loans were either non-interest bearing
or accrued interest at variable rates, but since 1995 all new loans for
such purpose are required to bear interest. Currently no such loans
are outstanding.
PART II
ITEM 7. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION. There is no established public trading
market for the Investor General Partner interests or the Limited
Partner interests and it is not anticipated that such a market will
develop. The Partnership interests may be transferred only in
accordance with the provisions of Article 6 of the Partnership
Agreement. The principal restrictions on transferability are as
follows: (i) the consent of the Managing General Partner is required;
and (ii) no transfer may be made which would result in materially
adverse tax consequences to the Partnership or the violation of federal
or state securities laws.
An assignee may become a substituted Limited Partner or Investor
General Partner only upon meeting certain further conditions, which
include: (i) the assignor gives the assignee such right; (ii) the
Managing General Partner consents to such substitution, which consent
shall be in the Managing General Partner's absolute discretion; (iii)
the assignee pays to the Partnership all costs and expenses incurred in
connection with such substitution; and (iv) the assignee executes and
delivers such instruments, in form and substance satisfactory to the
Managing General Partner, necessary or desirable to effect such
substitution and to confirm the agreement of the assignee to be bound
by all terms and provisions of the Partnership Agreement. A substitute
Limited Partner or Investor General Partner is entitled to all rights
attributable to full ownership of the assigned Units, including the
right to vote.
HOLDERS. As of December 31, 1997, there were 326 investors.
DIVIDENDS. The Managing General Partner will review the accounts
of the Partnership at least quarterly to determine whether cash
distributions are appropriate and the amount to be distributed, if any.
The Partnership will distribute funds to the Managing General Partner
and the Participants allocated to their accounts which the Managing
General Partner deems unnecessary to be retained by the Partnership.
In no event, however, will funds be advanced or borrowed for purposes
of distributions, if the amount of such distributions would exceed the
Partnership's accrued and received revenues for the previous four
quarters, less paid and accrued operating costs with respect to such
revenues. The determination of the revenues and costs will be made in
accordance with generally accepted accounting principles, consistently
applied. Cash distributions from the Partnership to the Managing
General Partner may only be made in conjunction with distributions to
Participants and only out of funds properly allocated to the Managing
General Partner's account. During the calendar year ending December
31, 1997, the Partnership distributed $788,542 to the Participants and
$235,794 to the Managing General Partner.
ITEM 8. LEGAL PROCEEDINGS
None.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 11. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
There are no equity securities registered pursuant to Section 12 of
the Exchange Act.
ITEM 12. REPORTS ON FORM 8-K
The registrant filed no reports on Form 8-K during the last
quarter of the period covered by this report.
PART F/S
ITEM 13. FINANCIAL STATEMENTS
The Partnership's Financial Statements for the period January 1,
1997, to December 31, 1997, together with the opinion of the
accountants thereon, FOLLOW BELOW.
PART III
ITEM 14. EXHIBITS
(a) Exhibits
See Exhibit BELOW
LOCATION
4(a)
Certificate of Limited Partnership for
Atlas-Energy for the Nineties-Public #4 Ltd.
Previously filed in the Form 10-KSB for the period ending December 31, 1995,
and received on April 1, 1996.
4(b)
Amended and Restated Certificate and Agreement
of Limited Partnership for Atlas-Energy for the Nineties-Public #4 Ltd.
dated December 27, 1995 Previously filed in the Form 10-KSB for
the period ending December 31, 1995, and received on April 1, 1996.
10(a)
Drilling and Operating Agreement with
exhibits
Previously filed in the Form 10-KSB for the period ending December 31, 1996
and received on March 31, 1997.
23(a)
Consent of McLaughlin & Courson
BELOW
- --------------------------------------------------------------------------
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 #4 Ltd.
By: (Signature and Title): Atlas Resources, Inc., Managing
General Partner
By (Signature and Title):
/S/James R. O'Mara, President, Chief Executive Officer and a Director
Date: March __30__, 1998
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, Chairman of the Board and a Director
Date: March _30___, 1998
By (Signature and Title):
/S/James R. O'Mara, President, Chief Executive Officer and a Director
Date: March _30___, 1998
By (Signature and Titla
/S/Bruce M. Wolf, General Counsel,Secretary and a Director
Date: March _30___,1998
By (Signature and Title
/S/Tony C. Banks, Vice President of Finance and CFO
Date: March _30___,1998
Supplemental Information to be furnished with reports filed pursuant
to Section 15(d) of the Exchange Act by Non-reporting Issures
An annual report will be furnished to securitiy holders subsequent
to the filing of this report.
- ------------------------------------------------------------------
Exhibit 23(a)
McLaughlin & Courson
Certified Public Accountants
2002 Law & Finance Building
Pittsburgh, PA 15219
Phone: 412-261-0630
CONSENT OF INDEPENDENT AUDITOR
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #4 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 #4 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 and any amendments thereto for Atlas-Energy for the Nineties-
Public #4 Ltd.
McLaughlin & Courson
Certified Public Accountants
/s/McLaughlin & Courson
March 30, 1998
Pittsburgh, Pennsylvania
McLAUGHLIN & COURSON
CERTIFIED PUBLIC ACCOUNTANTS
2002 LAW & FINANCE BUILDING
PITTSBURGH, PA 15219
412/261-0630
FAX 412/261-3582
INDEPENDENT AUDITORS' REPORT
To the Partners
Atlas-Energy for the Nineties-Public #4 Ltd.
A Pennsylvania Limited Partnership
We have audited the accompanying balance sheets of Atlas-Energy for
the Nineties-Public #4 Ltd., A
Pennsylvania Limited Partnership as of December 31, 1997 and 1996
and the related statements of income and changes
in partners' capital accounts and cash flows for the years then
ended. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an
opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial
position of Atlas-Energy for the Nineties-Public #4 Ltd., A
Pennsylvania Limited Partnership as of December 31, 1997
and 1996 and the results of its operations, changes in partners'
capital accounts and cash flows for the years then
ended in conformity with generally accepted accounting principles.
Pittsburgh, Pennsylvania
February 10, 1998
BALANCE SHEETS
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #4 LTD.
A PENNSYLVANIA LIMITED PARTNERSHIP
ASSETS
DECEMBER 31,
1997 1996
--------- ---------
Cash $ 121,961 $ 204,711
Accounts receivable 189,144 312,953
Accounts receivable Managing General Partner 0 34,584
Oil and gas wells and leases 7,322,715 7,331,715
Less accumulated depletion and depreciation (1,519,648) (869,814)
----------- ----------
5,803,067 6,461,901
Organizational and syndication costs, net of
accumulated amortization of $217,496
and $124,416 respectively 831,207 924,287
----------- ----------
$6,945,379 $7,938,436
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 14,589 $ 25,069
Partners' capital 6,930,790 7,913,367
----------- -----------
$6,945,379 $7,938,436
=========== ===========
STATEMENT OF INCOME AND CHANGES IN PARTNERS CAPITAL
YEAR ENDED DECEMBER 31, 1997
MANAGING
GENERAL OTHER
PARTNER PARTNERS TOTAL
-------- --------- -------
REVENUE
Natural gas sales $ 273,679 $821,038 $1,094,717
Less direct operating costs:
Royalty interests 34,353 103,060 137,413
Other 34,300 102,901 137,201
--------- -------- ----------
68,653 205,961 274,614
--------- -------- ----------
Net production revenues 205,026 615,077 820,103
Interest income 1,086 3,259 4,345
EXPENSES
Depletion and depreciation of oil and
gas wells and leases 32,838 616,996 649,834
Amortization of organizational
and syndication costs 93,080 0 93,080
General and administrative 9,944 29,831 39,775
--------- -------- ---------
TOTAL EXPENSE 135,862 646,827 782,689
--------- -------- ---------
NET INCOME (LOSS) 70,250 (28,491) 41,759
Capital accounts at beginning of year 1,378,492 6,534,875 7,913,367
Distributions (235,794) (788,542) (1,024,336)
--------- --------- ---------
$1,212,948 $5,717,842 $6,930,790
========== ========== ==========
See notes to financial statements
- 2 -
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #4 LTD.
A PENNSYLVANIA LIMITED PARTNERSHIP
YEAR ENDED DECEMBER 31, 1996
MANAGING
GENERAL OTHER
PARTNER PARTNERS TOTAL
--------- ----------- --------
REVENUE
Natural gas sales $ 334,832 $1,004,495 $1,339,327
Less direct operating costs:
Royalty interests 41,889 125,668 167,557
Other 31,293 93,878 125,171
--------- ----------- ----------
73,182 219,546 292,728
--------- ----------- ----------
Net production revenues 261,650 784,949 1,046,599
EXPENSES
Depletion and depreciation of
oil and gas wells and leases 43,893 825,921 869,814
Amortization of organizational
and syndication costs 124,416 0 124,416
General and administrative 8,849 26,547 35,396
--------- ----------- ----------
TOTAL EXPENSE 177,158 852,468 1,029,626
--------- ----------- ----------
NET INCOME (LOSS) 84,492 (67,519) 16,973
Capital accounts at beginning of year1,423,652 7,005,664 8,429,316
Distributions (129,652) (403,270) (532,922)
--------- ----------- ----------
$1,378,492 $6,534,875 $7,913,367
========== ========== ==========
STATEMENTS OF CASH FLOWS
YEAR ENDING
DECEMBER 31,
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 41,759 $ 16,973
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion and depreciation of oil and
gas wells and leases 649,834 869,814
Amortization 93,080 124,416
Decrease (increase) in accounts receivable 123,809 (312,953)
(Decrease) increase in accounts payable (10,480) 25,069
--------- ----------
Net cash provided by operating activities 898,002 723,319
Cash flows from investing activities:
Refund of unused drilling funds 9,000 0
Accounts receivable - Managing General Partner 34,584 0
--------- ---------
Net cash proceeds by investing activities 43,584 0
Cash flows from financing activities:
Capital distributions (1,024,336) (532,922)
----------- ----------
Net (decrease) increase in cash (82,750) 190,397
Cash at beginning of year 204,711 14,314
----------- ----------
Cash at end of year $ 121,961 $ 204,711
=========== ==========
Supplemental cash flow information:
Accounts receivable from Managing General Partner for
adjustments to assets contributed $ 0 $ 34,584
========== ==========
See notes to financial statements
- 3 -
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
- -------------------------------------------
Atlas-Energy for the Nineties-Public #4 Ltd. ("the partnership"),
is a Pennsylvania limited partnership which
includes Atlas Resources, Inc. ("Atlas"), of Pittsburgh,
Pennsylvania, as Managing General Partner and Operator,
and 326 other investors as either Limited Partners or Investor
General Partners. The Partnership was funded to drill
and operate gas wells located primarily in southeastern Mercer and
Venango Counties, Pennsylvania.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------
Financial statements are prepared in accordance with generally
accepted accounting principles.
The Partnership uses the successful efforts method of accounting
for oil and gas producing activities. Costs
to acquire mineral interests in oil and gas properties and to drill
and equip wells are capitalized.
Capitalized costs are expensed at unit cost rates calculated
annually based on the estimated volume of
recoverable gas and the related costs.
Oil and gas properties are periodically assessed for impairment of
value, and losses recognized at the time of
impairment.
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
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. Many provisions of the
federal income tax laws are complex and subject to
various interpretations.
4. PARTICIPATION IN REVENUES AND COSTS
- --------------------------------------
Atlas and the other partners generally participate in revenues and
costs in the following manner:
OTHER
ATLAS PARTNERS
------- ----------
Organization and offering costs 100 % 0 %
Lease costs 100 % 0 %
Revenues 25 % 75 %
Direct operating costs 25 % 75 %
Intangible drilling costs 0 % 100 %
Tangible costs 14.6 % 85.4 %
Tax deductions:
Intangible drilling and development costs 0 % 100 %
Depreciation 14.6 % 85.4 %
Depletion allowances 25 % 75 %
5. TRANSACTIONS WITH ATLAS AND ITS AFFILIATES
- ---------------------------------------------
The Partnership has entered into the following significant
transactions with Atlas and its affiliates.
Drilling contracts to drill and complete Partnership wells at an
anticipated cost of $36.36 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
Reimbursement of gas transportation and marketing charges
6. PURCHASE COMMITMENT
- ----------------------
Subject to certain conditions, investor partners may present their
interests beginning in 1999 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 10% of production revenues of the
Partnership net of related operating costs, costs and well
supervision fees to the receipt by participants
of cash distributions from the Partnership equal to at least 10% of
their agreed subscriptions of $7,000,000, determined
on a cumulative basis, in each of the first five years of
Partnership operations, commencing with the first distribution
of revenues to the Participants (July 1996).
Cash distributions to participants for the subordination year ending
in 1997 subject to the subordination
agreement amounted to $834,362.
Cash distributions to participants in 1997 for the subordination
year ending in 1998 subject to the
subordination agreement amounted to $304,526.
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8. INDEMNIFICATION
- ------------------
In order to limit the potential liability of the investor general
partners, Atlas and formerly
AEG Holdings, Inc. (parent company of Atlas) have agreed to
indemnify each investor general partner from any
liability incurred winch exceeds such partner's share of Partnership
assets.
9. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED)
- -------------------------------------------------------
The supplementary information summarized below presents the results
of natural gas and oil activities in
accordance with SFAS No. 69, "Disclosures About Oil and Gas
Producing Activities."
No consideration has been given in the following information to the
income tax effect of the activities as the
Partnership is not treated as a taxable entity for income tax
purposes.
(1) Production Costs
----------------
The following table presents the costs related to natural gas
and oil production activities:
1997 1996
--------- ----------
Capitalized costs at December 31:
Capitalized costs $7,322,715 $7,331,715
Accumulated depreciation and depletion (1,519,648) (869,814)
----------- -----------
Net capitalized costs $5,803,067 $6,461,901
=========== ==========
Costs incurred during the year:
Property acquisition costs -
proved undeveloped properties $ 0 $ 0
=========== ==========
Development costs $ 0 $7,331,715
=========== ==========
Property acquisition costs include costs to purchase, lease or
otherwise acquire a property. Development costs
include costs to gain access to and prepare development well
locations for drilling, to drill and equip development
wells and to provide facilities to extract, treat, gather and store oil
and gas.
(2) Results of Operations for Producing Activities
----------------------------------------------
The following table presents the results of operations related
to natural gas and oil production for the year
ended December 31, 1997 and 1996.
1997 1996
-------- ---------
Revenues $ 957,304 $1,171,770
Production costs (137,201) (125,171)
Depreciation and depletion (649,834) (869,814)
----------- -----------
Results of operations from producing activities$ 170,269 $ 176,785
========== ===========
Depreciation and depletion of natural gas and oil properties are
expensed at unit cost rates calculated annually
based on the estimated volume of recoverable gas and the related
costs.
(3) Reserve Information
- -----------------------
The information presented below represents estimates of proved
natural gas reserves. Proved developed
reserves represent only those reserves expected to be recovered from
existing wells and support equipment. All
reserves are located in Western Pennsylvania.
1997 1996
---- ----
NATURAL GAS (MCF)
-----------------
Proved developed reserves:
Beginning of period 3,237,761 0
Production (401,575) (523,279)
Revisions of previous estimates (514,245) 0
Purchase of minerals in place 0 3,761,040
--------- ---------
End of period 2,321,941 3,237,761
========= =========
Proved developed reserves:
Beginning of period 3,237,761 0
========= =========
End of period 2,321,941 3,237,761
========= =========
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9. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------
(4) Standard Measure of Discounted Future Cash Flows
------------------------------------------------
Management cautions that the standard measure of discounted
future cash flows should not be viewed as an
indication of the fair market value of natural gas and oil producing
properties, nor of the future cash flows expected to
be generated therefrom. The information presented does not give
recognition to future changes in estimated reserves,
selling prices or costs and has been discounted at an arbitrary rate
of 10%. Estimated future net cash flows from
natural gas and oil reserves based on selling prices and costs at
December 31, 1997 and 1996 price levels are as
follows:
1997 1996
---------- -----------
Future cash inflows $5,839,681 $6,896,433
Future production costs (2,475,692) (2,778,008)
----------- -----------
Future net cash flow 3,363,989 4,118,425
10% annual discount for estimated timing
of cash flows (1,496,982) (1,689,963)
----------- -----------
Standardized measure of discounted future
net cash flows $1,867,007 $2,428,462
========== ==========
Summary of changes in the standardized measure of discounted future
net cash flows:
Sales of gas and oil produced - net $ (792,109) $(1,024,559)
Discoveries and extensions 0 3,453,021
Net changes in prices, production and
development costs 433,963 0
Revisions of previous quantity estimates (413,453) 0
Accretion of discount 210,144 0
----------- -------------
Net (decrease) increase (561,455) 2,428,462
Beginning of period 2,428,462 0
----------- -------------
End of period $1,867,007 $2,428,462
=========== =============
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