Areas of Operation

Appalachian Region View Map of where Atlas Energy Resources drills

The Appalachian Basin includes the states of Kentucky, Maryland, New York, Ohio, Pennsylvania, Virginia, West Virginia and Tennessee. Our affiliated drilling partnerships drill and develop their wells primarily in Ohio, Pennsylvania, New York and Tennessee. As one of the largest operators within this drilling area, we have the bargaining power to obtain priority access to what we believe are the best regional drilling and well-services contractors in the area. These services range from drilling rigs to logging crews to completion specialists.

The Appalachian Basin is the most mature oil and gas producing region in the United States, having established the first oil production in 1860. Because it is located near the high energy-consuming regions of the mid-Atlantic and northeastern United States, Appalachian producers have historically sold their natural gas at a premium to the benchmark price for natural gas on the NYMEX. In addition, most of our natural gas production has a high Btu content, resulting in an additional premium to NYMEX natural gas prices. We further believe that natural gas is becoming America's fuel of choice due to the Federal Clean Air Act Amendments of 1990 and subsequent environmental legislation, which have spurred the increased use of efficient, clean-burning natural gas.

During the first several years of production, Appalachian Basin wells generally experience higher initial production rates and decline rates which are followed by an extended period of significantly lower production rates and decline rates.

Shallow reserves in the Appalachian Basin are typically in blanket formations and have a high degree of step-out development success. This means that as development progresses, reserves from newly completed wells are reclassified from the "proved undeveloped" to the "proved developed" category and additional adjacent locations are added to "proved undeveloped" reserves. As a result, the cumulative amount of total proved reserves tends to increase as development progresses. Wells in the Appalachian Basin generally produce little or no water, contributing to a low cost of operation. In addition, most wells produce dry natural gas, which does not require processing.

Atlas Energy is also well positioned in the emerging Marcellus Shale play, which is a black, organic rich blanket shale formation found throughout much of western Pennsylvania. The Appalachian Basin remains largely unexplored for reserves below 6,000 feet, which we are beginning to target. We employ a number of fracturing (fracing) techniques. Currently we are evaluating the economics of horizontal well drilling to develop the Marcellus Shale and have identified 3,150 future shallow drilling locations.

Atlas Pipeline Partners, LP, an affiliate of Atlas Energy and a subsidiary of our indirect parent company, Atlas America, owns and operates more than 1,600 miles of pipeline in the Appalachian Basin, which is one of the largest active gas-gathering systems in the northeast United States. We transport our natural gas in Appalachia through gathering lines operated by Atlas Pipeline, which are situated throughout the areas in which we drill. They are readily accessible by us and are connected to major regional and interstate utility pipelines. Our relationship with Atlas Pipeline allows us to have reliable access to the natural gas markets we serve and significantly reduces the capital we would otherwise expend to connect our wells to an outside pipeline system.

Northern Michigan View Map of where Atlas Energy Resources drills

In May, 2007, Atlas Energy announced the acquisition of DTE Gas & Oil Company (DGO), a wholly-owned subsidiary of DTE Energy Company for $1.225 billion in cash. DGO, now part of Atlas Energy Michigan, owns interests in approximately 2,150 natural gas wells producing from the Antrim Shale, located in northern Michigan. The Antrim Shale is a mature play characterized by long-lived reserves and predictable production rates and as of June, 2007 has 613 Bcfe (billion cubic feet of natural gas equivalents) of proved reserves on DGO's approximately 228,000 net developed acres and 66,000 net undeveloped acres. Daily production in the Antrim Shale on the date of the transaction was approximately 59 Mmcfe/d (million cubic feet equivalent per day). The transaction closed on June 29, 2007.

Atlas Energy Michigan is the largest operator in Michigan's Antrim Shale, a biogenic shale found between 1,000 and 2,000 feet in northern Michigan, where we drill for our own account. Our reserves in this basin are long-lived and have historically stable production rates. One of the first shale plays to evolve and mature, Antrim has been producing since the 1940's. Although mature, the field continues to expand through development of technology and successful testing of new areas. The natural gas in Antrim exists as absorbed gas on the surface of the shale and within its natural fractures. The use of horizontal wells has opened up new areas of development resulting in approximately 2,200 producing wells, with more than 900 future drilling locations identified. Our technical team in Michigan has a long operating track record in the Antrim Shale which we believe has resulted in our strong operating discipline and our position as one of the lowest-cost producers in the region.